Vernon City Council
March 15, 2022

Regular Vernon City Council Meeting Tuesday, March 15, 2022

Agenda
City of Vernon
Regular City Council Meeting
Tuesday, March 15, 2022, 9:00 AM
City Hall, Council Chamber
4305 Santa Fe Avenue
Vernon, California
Melissa Ybarra, Mayor
William Davis, Mayor Pro Tem
Leticia Lopez, Council Member
Crystal Larios, Council Member
Judith Merlo, Council Member

MEETING ATTENDANCE PROTOCOLS
Assembly Bill 361 (AB 361) authorizes public meetings to take place via teleconference because State and Local officials are recommending measures to promote social distancing. Meetings are conducted in a hybrid format that includes both in-person and Zoom public participation.

The public is encouraged to view the meeting at https://www.cityofvernon.org/webinar-cc or by calling (408) 638-0968, Meeting ID 865-3566-6070#. You may address the Council via Zoom or submit comments to [email protected] with the meeting date and item number in the subject line.

CALL TO ORDER

FLAG SALUTE

ROLL CALL

APPROVAL OF THE AGENDA

PUBLIC COMMENT
At this time the public is encouraged to address the City Council on any matter that is within the subject matter jurisdiction of the City Council. The public will also be given a chance to comment on matters which are on the posted agenda during City Council deliberation on those specific matters.

PRESENTATIONS

1. Human Resources
Employee Service Pin Awards for February 2022
Recommendation:

No action required by the City Council. This is a presentation only.

Regular Vernon City Council Meeting Tuesday, March 15, 2022

2. Finance/Treasury
Fiscal Year 2020-2021 Government-wide Audited Financial Results Recommendation:

A. Receive presentation on Government-wide Audited Financial Results for Fiscal Year 2020-2021; and
B. Receive and file Fiscal Year 2020-2021 Government-wide Annual Financial Report.

1. 2021 Audited City-wide Financial Statements

2. 2021 Audited VPU Financial Statements

3. 2021 Audited Water Financial Statements

CONSENT CALENDAR
All matters listed on the Consent Calendar are to be approved with one motion. Items may be removed from the Consent Calendar for individual consideration. Removed items will be considered immediately following the Consent Calendar.

3. City Clerk
Approval of Minutes
Recommendation:

Approve the March 1, 2022 Regular City Council meeting minutes.

1. 20220301 City Council Minutes

4. Finance/Treasury
Operating Account Warrant Register
Recommendation:

Approve Operating Account Warrant Register No. 83, for the period of February 13 through February 26, 2022, totaling $10,359,152.54 and consisting of ratification of electronic payments totaling $10,098,309.85 and ratification of the issuance of early checks totaling $260,842.69.

1. Operating Account Warrant Register No. 83

5. Finance/Treasury
City Payroll Warrant Register
Recommendation:

Approve City Payroll Warrant Register No. 789, for the period of February 1 through February 28, 2022, totaling $2,993,490.97 and consisting of ratification of direct deposits, checks and taxes totaling $2,102,761.38 and ratification of checks and electronic fund transfers (EFT) for payroll related disbursements totaling $890,729.59 paid through operating bank account.

1. City Payroll Account Warrant Register No. 789

6. Fire Department
Fire Department Activity Report
Recommendation:

Receive and file the January 2022 Fire Department Activity Report.

1. Fire Department Activity Report - January 2022
Regular Vernon City Council Meeting Tuesday, March 15, 2022

7. Police Department
Police Department Activity Report
Recommendation:

Receive and file the January 2022 Police Department Activity Report.

1. Police Department Activity Report - January 2022

8. Public Works
Quarterly City Housing Report
Recommendation:

Receive and file the March 2022 City Housing Quarterly Report.

1. March 2022 Quarterly Housing Report

9. Finance/Treasury
Quarterly Report of Cash and Investments
Recommendation:

Receive and file the Cash and Investment Report for the quarters ending September 30, 2021 and December 31, 2021.

1. 2021-12 Quarterly Cash and Investments Report

2. 2021-09 Quarterly Cash and Investments Report

10. Public Works
Right of Way Agreements for the Atlantic Bridge Improvement Project Recommendation:

A. Find that the proposed action is categorically exempt from California Environmental Quality Act (CEQA) review, in accordance with CEQA Guidelines Section 15301, because the project consists of the minor alteration of existing facilities and involves negligible or no expansion of an existing use;
B. Approve and authorize the City Administrator to execute a Possession and Use Agreement with Magellan Atlantic I, LLC, in substantially the same form as submitted, for portions of 3030 Atlantic and deposit an amount of $453,000 in escrow, and authorize the Mayor to execute related Certificates of Acceptance for certain easements;
C. Approve and authorize the City Administrator to execute a Fixtures/Equipment Agreement with Clear Channel Outdoor, in substantially the same form as submitted, for the removal of a billboard located at 5122 S. Atlantic Blvd for an amount of $34,405; and
D. Approve and Authorize the City Administrator to execute a Document Approval Letter with Los Angeles County Flood Control District, in substantially the same form as submitted, for the permanent easements and temporary construction easements over Los Angeles Rivers Parcels for an amount of $1,431,762, and authorize the Mayor to execute related Certificates of Acceptance for certain easements.

1. Magellan Atlantic I, LLC Possession and Use Agreement

2. 3030 Atlantic Preliminary Report

3. Clear Channel Outdoor Fixtures/Equipment Agreement

4. Los Angeles County Flood Control District Document Approval Letter Regular Vernon City Council Meeting Tuesday, March 15, 2022

11. Finance/Treasury
Professional Service Agreement with GovInvest Inc. for Actuarial Consulting and Technology Services
Recommendation:

Approve and authorize the City Administrator to execute a Professional Services Agreement with GovInvest Inc., in substantially the same form as submitted, for actuarial consulting and technology services for a total amount not-to-exceed $116,600, for a three-year term.

1. Agreement with GovInvest

12. Public Works
Amendment No. 2 Janitorial Services Agreement with Priority Building Services Recommendation:

A. Find that the approval of the proposed amendment is exempt from California Environmental Quality Act (CEQA) review, as it is an administrative activity that will not result in direct or indirect physical changes in the environment, and therefore is not a “project” as defined by Section 15378 of the CEQA Guidelines; and
B. Approve and authorize the City Administrator to execute Amendment No. 2 to Services Agreement with Priority Building Services, LLC, in substantially the same form as submitted, for janitorial services, changing the contract total from $398,307 to $436,006.30.

1. Amendment No. 2 - Priority Building Services

13. Public Works
Supplemental to Purchase Contract No. CS-1363 with Mega Renovation, Inc. for the Remodel of 4328 Furlong Place
Recommendation:

A. Find that the proposed action is categorically exempt under the California Environmental Quality Act (CEQA) in accordance with CEQA Guidelines Section 15301, because the project consists of the maintenance, repair or minor alteration of an existing facility and involves negligible or no expansion of an existing use; and
B. Approve and authorize the issuance of a Supplemental to Purchase Contract No. CS-1363 with Mega Renovations, Inc. for the Remodel of CityOwned Residential Property Located at 4328 Furlong Place for an amount not to exceed $19,283.95.

Regular Vernon City Council Meeting Tuesday, March 15, 2022

NEW BUSINESS

14. Finance/Treasury
Fiscal Year 2021-22 Mid-Year Financial Update
Recommendation:

A. Find that approval of the proposed action is exempt from California Environmental Quality Act (CEQA) review, because it is a government fiscal activity that will not result in direct or indirect physical changes in the environment, and therefore does not constitute a “project” as defined by CEQA Guidelines section 15378; and
B. Adopt Resolution No. 2022-05 approving Mid-Year Budget Appropriations and amending the Annual Operating and Capital Budget for Fiscal Year 2021-22.

1. Resolution No. 2022-05

15. City Administration
Reimbursement Agreement for Shelter Beds Within the Salvation Army Bell Shelter Recommendation:

Approve and authorize the Mayor to execute a Reimbursement Agreement for shelter beds within the Salvation Army Bell Shelter with the cities of Bell, Bell Gardens, Commerce, Cudahy, Huntington Park, Maywood, and Southgate, collectively referred to as the Local Coordinating Alliance 1 (LCA1) at an estimated cost of $62,415.50 and not to exceed total of $100,000 for a term beginning March 1, 2022 and ending on June 30, 2023.

1. Joint Agency Reimbursement Agreement for Salvation Army Bell Shelter Beds Regular Vernon City Council Meeting Tuesday, March 15, 2022

16. Public Utilities
Change Order No.16 to the Amended and Restated Services Agreement with Siemens Energy, Inc.

Recommendation:

A. Find that approval of the proposed action is exempt from California Environmental Quality Act (CEQA) review, because it is a government fiscal activity that will not result in direct or indirect physical changes in the environment, and therefore does not constitute a “project” as defined by CEQA Guidelines section 15378; to the extent the Services Agreement with Siemens Energy provides for facility and equipment maintenance or repairs, such work is categorically exempt from CEQA review, in accordance with CEQA Guidelines § 15301, because the project consists of the maintenance, repair or minor alteration of existing structures, facilities, or equipment, and involves negligible or no expansion of an existing use; B. Approve and authorize the City Administrator to execute Change Order No. 16 to the Amended and Restated Services Agreement with Siemens Energy, Inc., (Siemens Energy) in substantially the same form as submitted, to revise the Payment Schedule and amend the termination date of the agreement; and
C. Approve the issuance of a blanket Purchase Contract in an amount not-toexceed $450,000 for maintenance services with Siemens Energy for the remainder of fiscal year 2021-2022.

1. Change Order 16 - Siemens Energy Inc. - Redacted

17. City Clerk
City Council Appointments to Outside Agencies
Recommendation:

Appoint a delegate and alternate to represent the City at the Southern California Association of Government 2022 Regional Conference and General Assembly.

Regular Vernon City Council Meeting Tuesday, March 15, 2022

18. Public Utilities
Labor and Materials Contract with Petrelli Electric, Inc. to Provide High Voltage Electric System Service, Maintenance and Utility Support Recommendation:

A. Approve and authorize the City Administrator to execute a Labor and Materials Contract with Petrelli Electric, Inc. (Petrelli Electric), in substantially the same form as submitted, for a five-year term effective July 18, 2022, with an option to extend for an additional five years after the expiration of the initial term, to provide high voltage electric system service, maintenance, and utility support to Vernon’s Electric and Fiber Optic Systems; and
B. Pursuant to Sections 3.32.220(B) and 3.32.110(B)(3) of the Vernon Municipal Code (VMC), find that it is commercially unreasonable to rebid the proposed contract for high voltage electric system service, maintenance, and utility support every three years due to significant risks to the electric system reliability and responsiveness, as well as added costs to the City and contractor including a steep learning curve in potential frequent transitions in contracted services.

1. Petrelli Electric Inc. - Labor and Materials Contract

ORAL REPORTS
City Administrator Reports on Activities and Other Announcements.

City Council Reports on Activities (including AB 1234), Announcements, or Directives to Staff.

CLOSED SESSION

19. PUBLIC EMPLOYEE PERFORMANCE EVALUATION
Government Code Section 54957(b)(1)
Title: City Administrator

20. CONFERENCE WITH LEGAL COUNSEL – ANTICIPATED LITIGATION Initiation of Litigation
Government Code Section 54956.9(d)(4)
Number of potential cases: 1

CLOSED SESSION REPORT
Regular Vernon City Council Meeting Tuesday, March 15, 2022

ADJOURNMENT
I hereby certify under penalty of perjury under the laws of the State of California, that the foregoing agenda was posted in accordance with applicable legal requirements. Regular and Adjourned Regular meeting agendas may be amended up to 72 hours prior to the meeting.

Dated this 10th day of March, 2022.

By: __________________________________
Sandra Dolson, Administrative Secretary
Regular Vernon City Council Meeting Tuesday, March 15, 2022

Guide to City Council Proceedings
Meetings of the City Council are held the first and third Tuesday of each month at 9:00 a.m. and are conducted in accordance with Rosenberg's Rules of Order (Vernon Municipal Code Section

2.04.020).

Copies of all agenda items and back-up materials are available for review in the City Clerk Department, Vernon City Hall, 4305 Santa Fe Avenue, Vernon, California, and are available for public inspection during regular business hours, Monday through Thursday, 7:00 a.m. to 5:30 p.m.

Agenda reports may be reviewed on the City's website at www.cityofvernon.org or copies may be purchased for $0.10 per page.

Disability-related services are available to enable persons with a disability to participate in this meeting, consistent with the Americans with Disabilities Act (ADA). In compliance with ADA, if you need special assistance, please contact the City Clerk department at [email protected] or (323) 583-8811 at least 48 hours prior to the meeting to assure arrangements can be made.

The Public Comment portion of the agenda is for members of the public to present items, which are not listed on the agenda but are within the subject matter jurisdiction of the City Council. The City Council cannot take action on any item that is not on the agenda but matters raised under Public Comment may be referred to staff or scheduled on a future agenda. Comments are limited to three minutes per speaker unless a different time limit is announced. Speaker slips are available at the entrance to the Council Chamber.

Public Hearings are legally noticed hearings. For hearings involving zoning matters, the applicant and appellant will be given 15 minutes to present their position to the City Council. Time may be set aside for rebuttal. All other testimony shall follow the rules as set for under Public Comment. If you challenge any City action in court, you may be limited to raising only those issues you or someone else raised during the public hearing, or in written correspondence delivered to the City Clerk at or prior to the public hearing.

Consent Calendar items may be approved by a single motion. If a Council Member or the public wishes to discuss an item, it may be removed from the calendar for individual consideration.

Council Members may indicate a negative or abstaining vote on any individual item by so declaring prior to the vote on the motion to adopt the Consent Calendar. Items excluded from the Consent Calendar will be taken up following action on the Consent Calendar. Public speakers shall follow the guidelines as set forth under Public Comment.

New Business items are matters appearing before the Council for the first time for formal action.

Those wishing to address the Council on New Business items shall follow the guidelines for Public Comment.

Closed Session allows the Council to discuss specific matters pursuant to the Brown Act, Government Code Section 54956.9. Based on the advice of the City Attorney, discussion of these matters in open session would prejudice the position of the City. Following Closed Session, the City Attorney will provide an oral report on any reportable matters discussed and actions taken. At the conclusion of Closed Session, the Council may continue any item listed on the Closed Session agenda to the Open Session agenda for discussion or to take formal action as it deems appropriate.

City Council Agenda Item Report
Submitted by: Denise Palomares
Submitting Department: Human Resources
Meeting Date: March 15, 2022

SUBJECT
Employee Service Pin Awards for February 2022
Recommendation:

No action required by the City Council. This is a presentation only.

Background:

The following employees are eligible to receive their service pin based on the number of service years with the City of Vernon:
20 YEARS OF SERVICE
Victor A. Vasquez Jr., Street Maintenance Worker, Lead, Hired February 2002 5 YEARS OF SERVICE
Raymond L. Godoy, Police Officer, Hired February 2017
Fiscal Impact:

There is no fiscal impact associated with this report.

Attachments:

None.

City Council Agenda Item Report
Submitted by: Jessica Alcaraz
Submitting Department: Finance/Treasury
Meeting Date: March 15, 2022

SUBJECT
Fiscal Year 2020-2021 Government-wide Audited Financial Results Recommendation:

A. Receive presentation on Government-wide Audited Financial Results for Fiscal Year 2020-2021; and
B. Receive and file Fiscal Year 2020-2021 Government-wide Annual Financial Report.

Background:

Audits are to be performed in accordance with the standards set forth for financial audits by the Governmental Accounting Standards Board (GASB), in the General Accounting Office (GAO). In addition, Article VIII, Chapter 8.11 of the City Charter requires City Council to appoint a California certified public accounting firm to provide an independent, annual audit of all City accounts, including the accounts of all departments, officers, and employees who receive, handle or disburse public funds.

The City's contracted audit firm, CliftonLarsonAllen (CLA), presented the Electric Fund Financials to Council on January 18, 2022 and will present the City's Government-wide audited financial results for Fiscal Year 2020-2021 to Council at its March 15, 2022 meeting.

Fiscal Impact:

There is no fiscal impact associated with this report.

Attachments:

1. 2021 Audited City-wide Financial Statements

2. 2021 Audited VPU Financial Statements

3. 2021 Audited Water Financial Statements

CITY OF VERNON

ANNUAL COMPREHENSIVE FINANCIAL STATEMENTS

AND SUPPLEMENTARY INFORMATION
YEAR ENDED JUNE 30, 2021

CITY OF VERNON

TABLE OF CONTENTS
YEAR ENDED JUNE 30, 2021

INTRODUCTORY SECTION

LETTER OF TRANSMITTAL I

FINANCIAL SECTION
INDEPENDENT AUDITORS’ REPORT 1
MANAGEMENTS’ DISCUSSION AND ANALYSIS (REQUIRED
SUPPLEMENTARY INFORMATION) 3

FINANCIAL STATEMENTS

GOVERNMENT-WIDE FINANCIAL STATEMENTS
STATEMENT OF NET POSITION 16
STATEMENT OF ACTIVITIES 17

FUND FINANCIAL STATEMENTS
BALANCE SHEET – GOVERNMENTAL FUNDS 19

RECONCILIATION TO THE GOVERNMENTAL FUND BALANCE SHEET
TO THE STATEMENT OF NET POSITION – GOVERNMENTAL
ACTIVITIES 20

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE – GOVERNMENTAL FUNDS 21

RECONCILIATION TO THE STATEMENT OF REVENUES,

EXPENDITURES, AND CHANGES IN FUND BALANCE OF
GOVERNMENTAL FUND TO THE STATEMENT OF ACTIVITIES –
GOVERNMENTAL ACTIVITIES 22
STATEMENT OF NET POSITION – PROPRIETARY FUNDS 23

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET
POSITION – PROPRIETARY FUNDS 25
STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS 26
STATEMENT OF FIDUCIARY NET POSITION – FIDUCIARY FUNDS 28 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION –
FIDUCIARY FUNDS 29
NOTES TO FINANCIAL STATEMENTS 30

CITY OF VERNON

TABLE OF CONTENTS
YEAR ENDED JUNE 30, 2021

REQUIRED SUPPLEMENTARY INFORMATION
BUDGETARY COMPARISON SCHEDULE – GENERAL FUNDS 74
NOTE TO REQUIRED SUPPLEMENTARY INFORMATION 75

SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND
RELATED RATIOS – MISCELLANEOUS PLAN 76
SCHEDULE OF PENSION CONTRIBUTIONS – MISCELLANEOUS PLAN 78

SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION
LIABILITY – SAFETY PLAN 80

SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND
RELATED RATIOS – SAFETY PLAN 81
SCHEDULE OF PENSION CONTRIBUTIONS – SAFETY PLAN 82

SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED
RATIOS 84
SCHEDULE OF OPEB CONTRIBUTIONS 85

INTRODUCTORY SECTION
4305 Santa Fe Avenue, Vernon, California
90058 Telephone (323) 583 8811
(i)
City of Vernon, California
Finance Department
March 3, 2022
To the Honorable Mayor and City Council
Vernon, California
In accordance with the Charter of the City of Vernon (City), please accept submission of the Annual Financial Report for the fiscal year ended June 30, 2021. Responsibility for the accuracy of the data, completeness, and fairness of the presentation, including all disclosures, rests with the City. We believe the data included is accurate in all material aspects, and is presented in a manner designed to fairly set forth the financial position and operational achievements of the City, as measured by the financial activity of its various funds. In addition, all disclosures necessary to enable the reader to gain a maximum understanding of the City’s financial activities have been included.

Vernon’s City Charter requires an annual audit of the City’s financial statements by an independent Certified Public Accountant. Accordingly, this year's audit was completed by CliftonLarsonAllen LLP.

The auditors' report on the basic financial statements is included in the financial section of this report.

Management’s discussion and analysis (MD&A) immediately follows the independent auditors’ report and provides a narrative introduction, overview, and analysis of the City’s basic financial statements.

MD&A complements this letter of transmittal and, as such, should be read in conjunction.

ECONOMIC CONDITION AND OUTLOOK
Since it was founded in 1905, Vernon has maintained a business-friendly environment, thus allowing the City to remain one of Southern California's prime locations for industry of all types. Vernon offers businesses a range of advantages compared to nearby cities in L.A. County. Features such as lower permit fees; lower electricity, water and natural gas utility rates; excellent City services tailored to specific business needs; easy access to major transportation hubs; and proximity to a substantially skilled workforce enable business and industry to thrive in Vernon.

Vernon is the industrial heart of Southern California. Major manufacturers, processors and distributors have made Vernon their home for more than a century. Vernon businesses employ more than 50,000 men and women from nearby communities throughout the Greater Los Angeles area. There are 1,800 businesses that call Vernon home. These include food processors, fashion apparel manufacturers, furniture manufacturers, electronics manufacturers, paper products producers and business logistics companies.
(ii)
Vernon is a key contributor to the diverse Los Angeles County economy. After several years of slow and steady growth, the economy is finally shifting into a higher gear as it continues to recover from the Impact of the most recent recession. Job growth is contributing to the flourishing local economy, as well as at the state and national levels. Vernon is largely industrial and does not maintain an unemployment rate tally of its small population. However, the unemployment rate of adjacent communities is currently 10.5%, which is higher than the State of California's average unemployment rate of 7.7%, and the national average unemployment rate of 5.9%. The occupancy rate of the City ‘s central business district ranges between 96% and 98%.

The City will continue to build on the successes and achievements realized in the current year and remains committed to serving its customers. The City’s main revenue sources consisting of utilities fees, property and parcel taxes, business license taxes, and sales and use tax, have all sustained steady growth this year. As the City moves into fiscal year 2022, we are optimistic about continued growth but will remain attentive to the prevailing economic climate and mindful of managing enhanced services within the limits of our adopted budget.

Additionally, the City continues to make strides in developing its community relationships. With seasonal community outreach events, it is connecting with Vernon residents and those residents in neighboring communities in the southeast region. The City has begun circulating a Resident Newsletter and is also active on its social media platforms, focusing on dissemination of information that is relevant to the community, ensuring that its population is well-informed on City matters. By forging these connections with community members, the City is confident that the bi-directional conversations that result will allow it to better serve the needs of its constituents.

Vernon’s Fashionable Business Resources
Vernon serves a major center for Southern California's fashion industry. Vernon is home to more than 10% of fashion-related jobs in Los Angeles County. The fashion industry accounts for approximately 15% of Vernon's businesses. The availability of specialized office and warehouse space in Vernon makes the City a top site for apparel, textile design, storage and manufacturing companies in the fashion industry.

More than 265 fashion industry companies engaged in design, dyeing, cutting, sewing, importing and distribution are located in Vernon. Fashion industry businesses prosper in Vernon because they do not need to leave Vernon to connect with most of their key business partners. Fashion industry companies have quick access to Los Angeles, Orange County and the Inland Empire for their product distribution channels and can easily utilize national and international trade routes through nearby freeways, railroads and ports. Vernon's low taxes, lower cost power and water rates, and business- friendly municipal services are why the fashion industry calls Vernon its home.

Powering Business Competitiveness
The City of Vernon Public Utilities Department (VPU) serves as an essential resource to the City's business and residential community, providing dependable, high-quality utility services at very competitive rates. VPU offers electricity, natural gas, water, and fiber optic services to Vernon based businesses and residents, often at a cost savings compared to neighboring utility providers. The City- owned electric, natural gas, water, and fiber optic distribution systems have a strong, established history of reliability, capable of efficiently and successfully serving the needs of the City's unique largely industrial community.

The electric utility provides businesses reliable and competitive electrical services. The electric utility has operated for more than 80 years. Its electrical power and distribution system helps guarantee uninterrupted electrical service for Vernon's businesses. Electricity costs for large businesses are comparable and less than power costs from competing utility providers in the Los Angeles region, depending on the customer type and service being provided. (iii)
Vernon's natural gas distribution system offers significant advantages for businesses. Vernon's natural gas transportation rates are less than those offered by a large private natural gas utility in the same service area. Vernon’s natural gas is distributed through a robust network of more than 44 miles gas distribution pipelines.

Vernon has 35 miles of fiber optic cable spanning its five-square miles, offering businesses “dark fiber” and “lit fiber” data services. Vernon's advanced network of fiber optic cable provides businesses new high-speed methods to virtually connect their buildings and offices to the Internet at lower costs with high reliability.

Vernon's water utility offers large industrial users water rates that are among the lowest in Southern California. Vernon maintains reliable water sources to serve a customer base that uses a high volume of water. Vernon supplies most of the water it sells from City-owned wells and purchases the remaining water supplies from regional agencies through agreements with the Metropolitan Water District of Southern California (MWD).

Safeguarding the Environment
Vernon is one of four cities in the State of California with a health department. Vernon's Health and Environmental Control Department regulates industrial operations conducted in the City.

Since Vernon maintains a municipal health authority, local businesses are able to deal directly with the City health department officials to address important environmental issues, which help businesses streamline the monitoring and enforcement of health-related Federal laws, and State, LA County and Municipal ordinances, rules and regulations.

Vernon is focused on protecting the environment. Accordingly, Vernon has in place strict ordinances governing the practices of heavy manufacturers, food processors, garment manufacturers, and hazardous waste storage and disposal. Each function in a manner that allows the City to effectively serve the community in protecting public health.

Vernon manages several special programs and operations to safeguard the public’s health and safety and protect the City's environment. Among these are the following: Certified Unified Program Agency, Accidental Release Prevention, Animal/Vector Control, Food Inspection Program, Garment Manufacturing Program, Hazardous Materials Monitoring, Hazardous Waste, Public/Employee Health Education, Solid Waste Management, Storm Water Control, Above Ground Storage Tank Inspection, Underground Storage Tank Inspection, and Water Quality programs. Each of these programs is designed to ensure a safe environment for residents and the business community.

Public Safety
Creating a safe environment for residents and businesses to thrive is a key factor to Vernon’s success.

The City’s skilled Police and Fire Department personnel are some of the best in their respective fields.

Expeditious response times and community engagement are hallmarks of their exceptional service.

The mission of the Vernon Police Department (VPD) is to provide swift, skillful and responsive law enforcement services to the people and businesses of our community through the application of proactive problem-solving strategies and the development of equal partnerships with the people served. Officers seek to ensure a sense of well-being in the community and they are guided by their commitment to working closely with the industrial population. VPD is dedicated to maintaining the highest degree of professionalism and ethical standards in its pursuit of this mission, ever mindful of the need to safeguard the individual liberties of all members of the community. (iv)
VPD responds to emergency calls in less than four minutes. Vernon police officers are specially trained and outfitted with the latest technology to investigate offenses unique to an industrial community. Using mobile computer terminals in their patrol cars, officers can query criminal databases from the field and connect seamlessly with the Department's advanced communications center, which is fully integrated with its records management and E911 systems. With its specialized units, the VPD maintains an effective community policing strategy.

The Vernon Fire Department continues to be the leader in “exclusively Industrial” firefighting among its peers and has been awarded a Class 1 Public Classification rating by the Insurances Services Office (ISO), an organization that independently evaluates municipal fire protection efforts in communities throughout the United States. The Class 1 rating is the highest possible score that agencies in California can receive. A total of 10 such departments in California and 58 departments nationally have achieved this prestigious, significant ranking. Vernon Fire Department team members are public servant oriented and take immense pride in the superior service provided to the community.

The City maintains four stations within the City's five square-miles that enable its firefighters and paramedics to achieve an average emergency response time of three minutes. Vernon's firefighters are highly trained to manage complex emergency incidents and equipped to deal with industrial fires and toxic hazards. The Fire Department consists of seven main Divisions which are key to its successful operation:

Fire Suppression, Emergency Medical Services (EMS), Emergency Management, Fire Apparatus & Equipment, Training & Safety, Hazardous Materials and Administration. These divisions function in a manner that allows the department to effectively serve the community in emergency and non-emergency situations.

Vernon's Police and Fire Departments serve as a major emergency response and disaster preparedness resource for the Greater Los Angeles region. Vernon works closely with L.A. County and municipal public safety agencies in neighboring cities to offer essential public safety resources and assistance at times of an emergency through mutual aid agreements. Vernon consistently provides more police and fire emergency response mutual aid coverage than that which the City requests through these agreements.

Vernon's specialized emergency service of hazardous materials and search-and-rescue units frequently lend their expertise at major public safety incidents throughout Southern California.

MAJOR INITIATIVES
Under the direction of the Mayor and City Council, City management identifies the priorities that shape the path leading into the City’s future. City initiatives are reevaluated regularly, and new goals are frequently vetted to ensure that City efforts are consistent with the priorities of our policy body and the community.

The City strives each year to better fulfill its mission of delivering outstanding municipal services that are responsive, comprehensive, and beneficial to the entire community by continuing its tradition of fostering innovation, ingenuity, and opportunity within its operations. City staff remains focused on actions that achieve the primary goals of tending to the public’s needs, building neighborhood connections, and governing for results that strengthen our community. The City’s dedication to improvement and modernization has created an environment where City of Vernon residents and businesses are dialed in and able to collaborate with staff, voice their concerns, and have access to a plethora of information on the City and their chosen topic(s) of interest. As these relationships flourish, businesses and residents alike are able to enjoy all that Vernon has to offer while also participating in guiding Vernon down its path into the future.
(v)

1. Vernon is very committed to meeting its debt service coverages. In order to address the budget deficit historically present in the General Fund, the City placed on the ballot a measure to increase the Utility Users Tax from 1% to 6% which passed in April 2019. The passage of this measure will effectively eliminate operating transfers from its enterprise activities to the General Fund. To minimize the burden on the business community, an equivalent discount has been provided to Vernon’s electric, gas, water, and fiber optics utility customers.

2. Vernon has the capacity to expand its services as new businesses emerge and as existing businesses flourish and expand. An attractive, business friendly approach is extended to customers in the form of discounts that are available for large electricity consumers. Revenue sharing mechanisms have also been implemented to help stimulate both growth and retention. The City’s Good Governance and Reform initiatives provide a tangible demonstration of the overarching commitment to sound governance and best business practices.

3. Vernon is a party to a long-term pre-paid natural gas agreement with Citigroup Energy, Inc. (“CEI”), which obligates Vernon to take natural gas for 15 years (from 2006 to 2021). At the end of 2015, the credit rating of Citigroup, Inc., CEI’s parent and guarantor under the pre-paid agreement (“Citigroup”), was downgraded. Vernon believed this downgrade triggered a credit support obligation under the agreement. CEI and Citigroup disagreed. In March 2016, the City brought an action for declaratory relief in federal district court against, among others, Citigroup and CEI, alleging that the defendants had breached the pre-paid agreement. In August 2016, the parties entered into a confidential settlement agreement and ended the litigation. Under the terms of the settlement agreement, Vernon does not believe it has any exposure under the pre-paid agreement should either CEI or Citigroup fail to perform.

4. Based upon the City’s electric debt service schedule, there will be a significant reduction in debt service starting in 2027. With input from business and residential communities, the City continues to evaluate its position and initiatives to ensure that electric rates remain competitive and that infrastructure needs are being addressed.

5. The inherent governance challenges in the City, due to a very small residential population, continues to be addressed by its residents, businesses, Chamber of Commerce, and City Council.

Over the past 5 years, the public has become much more engaged in the political process and continues to keep a watchful eye on all important issues facing the City. The disincorporation controversy raised by assembly bill 46 in 2011 has been addressed with the whole-hearted adoption of key reforms and comprehensive implementation of best practices in all City operations.

6. The State of California Joint Legislative Audit Committee (JLAC) is no longer pursuing the disincorporation of the City. Vernon has addressed all outstanding JLAC recommendations effective July 2018. Emphatically committed to good governance and transparency, the City is proud of its success in satisfying each reform that JLAC recommended. As a result, the City moves forward with clear, concise, and comprehensive policies and procedures that uphold best practices.

7. The shutdown of the Exide recycled battery plant operation has been and will continue to be under State of California oversight. The Department of Toxic Substances Control is completely responsible for monitoring the site and all related cleanup on a continual basis. The State of California has established funding for the Exide plant cleanup effort collected through a fee on each battery recycled along with any restitution from Exide which remains a global company. There is no direct impact on City operations and Exide does not pose a concern to existing Vernon businesses. (vi)

8. Vernon’s electric rates remain competitive, and in many cases, lower than adjacent municipal and investor owned utilities. However, in many respects, Vernon’s electric utility services continue to outperform its neighboring peers thanks to a higher reliability rating and greater customer satisfaction.

In fact, VPU’s electric reliability ranked in the top 10% nationwide in a recent benchmarking study.

FINANCIAL INFORMATION
Management of the City is responsible for establishing and maintaining internal control designed to ensure that the assets of the government are protected from loss, theft, or misuse, and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with U.S. generally accepted accounting principles. Internal control is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management.

This report consists of management’s representations concerning the finances of the City. As a result, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. Management asserts that, to the best of their knowledge and belief, this financial report is complete and reliable in all material respects.

BUDGETARY CONTROLS
The City maintains budgetary controls, the objective of which is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City Council. Activities of all governmental funds and proprietary funds are included in the annual appropriated budget. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is established at the departmental level.

RELEVANT FINANCIAL POLICIES
Over the years, through sound fiscal management, the City has positioned itself well to weather economic downturns, create a positive atmosphere for economic development, and allow flexibility in addressing budgetary challenges. As of June 30, 2021, the City’s overall total net position was $211.9 million. This consisted of a positive governmental net position of $64.5 million and business-type net position of $147.4 million. By continuing to develop sound fiscal management plans, the City intends to maintain an overall positive net position.

ACKNOWLEDGMENTS
The preparation of this report on a timely basis is a team effort involving many dedicated people across the entire organization. I would like to extend a special thanks to the talented finance professionals throughout the City, led by Joaquin Leon, Deputy City Treasurer, Angela Melgar, Finance Manager and Jessica Alcaraz, Financial Services Administrator. Appreciation is also expressed to Carlos Fandino, City Administrator; Zaynah Moussa, Interim City Attorney; Abraham Alemu, General Manager of Public Utilities; Michael Earl, Human Resource Director, and Diana Figueroa, Administrative Analyst. (vii)
In closing, without the leadership and support of the City Council, the preparation and results presented within this report would not have been conceivable. Their steadfast leadership has made possible the implementation of the City’s important, innovative concepts in fiscal management discussed herein.

Should you have any questions regarding the documentation provided, please do not hesitate to contact me.

Respectfully submitted,
Scott Williams
Director of Finance/City Treasurer

FINANCIAL SECTION
CliftonLarsonAllen LLP
CLAconnect.com
CLA is an independent member of Nexia International, a leading, global network of independent accounting and consulting firms. See nexia.com/member firm disclaimer for details. (1)
INDEPENDENT AUDITORS’ REPORT
Honorable Mayor and
Members of the City Council
City of Vernon
Vernon, California
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the City of Vernon, California (the City), as of and for the year ended June 30, 2021, and the related notes to financial statements, which collectively comprise the City’s financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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.

Auditors’ Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements 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 entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Honorable Mayor and
Members of the City Council
City of Vernon
(2)
Opinions
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, 2021, 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.

Other Matter
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, the General Fund budgetary comparison schedule, the schedules of changes in net pension liability and related ratios and schedules of pension contributions related to the City’s miscellaneous and safety pension plans, and the schedule of changes in net OPEB liability and related ratios related to the City’s other postemployment benefits plan, be presented to supplement the financial statements. Such information, although not a part of the financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the financial statements, and other knowledge we obtained during our audit of the financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 3, 2022, 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.

CliftonLarsonAllen LLP
Irvine, California
March 3, 2022

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(3)
As management of the City of Vernon (“the City”), we offer readers of the financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2021.

OVERVIEW OF BASIC FINANCIAL STATEMENTS
This discussion and analysis are intended to serve as an introduction to the City's basic financial statements.

The City's basic financial statements comprise three components: (i) government-wide financial statements, (ii) fund financial statements, and (iii) notes to the basic financial statements.

Government-wide financial statements
The government-wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private-sector business.

The statement of net position presents information on all of the City's total assets and deferred outflows of resources and total liabilities and deferred inflows of resources, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.

The statement of activities presents information showing how the City's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public works, and health services. The business-type activities of the City is administered by the Vernon Public Utilities which consists of the Electric, Gas, Water, and Fiber Optics utilities.

The government-wide financial statements include not only the City of Vernon (known as the primary government), but also blended component units. Certain blended component units, although legally separate entities are, in substance, part of the primary government’s operations and are included as part of the primary government. Fiduciary funds are not presented in the government-wide financial statements as the resources are not available to support City programs.

The government-wide financial statements can be found on pages 16-18 of this report.

Fund financial statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(4)
Governmental funds
Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City adopts an annual appropriated budget for its General Fund. A budgetary comparison schedule has been provided for the General Fund (see page 75).

The basic governmental funds financial statements can be found on pages 19- 22 of this report.

Proprietary funds
The City’s proprietary funds consist of enterprise funds. 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 its Vernon Public Utilities which consists of the Electric, Gas, Water, and Fiber Optics utilities.

Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Vernon Public Utilities. Segment information for each of the Electric, Gas, Water, and Fiber Optics utilities are presented in Note 9 on pages 68-70.

The basic proprietary funds financial statements can be found on pages 23-27 of this report.

Fiduciary funds
Fiduciary funds are used to account for resources held for the benefit of parties outside of the government.

Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support City programs. The accounting used for fiduciary funds is much like that used for proprietary funds.

The basic fiduciary funds financial statements can be found on pages 28-29 of this report.

Notes to the basic financial statements
The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 30-73 of this report.

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(5)

GOVERNMENT-WIDE FINANCIAL ANALYSIS
City’s Net Position
The table below summarizes the City’s net position as of June 30, 2021 and June 30, 2020. The details of the current year’s summary can be found on page 16 of this report.

City of Vernon
Net Position
June 30, 2021 and 2020
2021 2020 2021 2020 2021 2020
Assets:

Current and other assets 15,676,741 $ 8,852,317 $ 174,666,191 $ 193,387,820 $ 190,342,932 $ 202,240,137 $ Restricted assets 5,070,045 3,289,382 56,392,885 66,575,492 61,462,930 69,864,874 Capital assets 165,326,345 172,018,391 257,253,484 249,059,098 422,579,829 421,077,489 Total assets 186,073,131 184,160,090 488,312,560 509,022,410 674,385,691 693,182,500 Deferred Outflows of Resources
Deferred outflows related to pensions 23,952,913 13,918,552 4,901,360 2,547,788 28,854,273 16,466,340 Deferred outflows related to OPEB liability 3,326,931 3,309,587 680,773 605,820 4,007,704 3,915,407 Deferred amount on bond refunding 292,472 3,802,144 292,472 3,802,144 Total deferred outflows of resources 27,279,844 17,228,139 5,874,605 6,955,752 33,154,449 24,183,891 Liabilities:

Current liabilities 3,779,531 3,619,282 21,910,613 19,689,942 25,690,144 23,309,224 Long term liabilities 135,010,934 131,325,331 316,254,536 340,724,893 451,265,470 472,050,224 Total liabilities 138,790,465 134,944,613 338,165,149 360,414,835 476,955,614 495,359,448 Deferred Inflows of Resources
Deferred inflows related to pensions 2,754,345 1,283,734 563,607 234,987 3,317,952 1,518,721 Deferred inflows related to OPEB liability 7,315,776 9,260,506 1,496,988 1,695,132 8,812,764 10,955,638 Deferred gain from sale of generation assets 6,555,916 10,243,685 6,555,916 10,243,685 Total deferred outflows of resources 10,070,121 10,544,240 8,616,511 12,173,804 18,686,632 22,718,044 Net Position:

Net investment in capital assets 165,326,345 170,034,582 148,442,763 159,733,492 313,769,108 329,768,074 Restricted 4,146,007 3,289,382 23,894,665 23,932,142 28,040,672 27,221,524 Unrestricted (deficit) (104,979,963) (117,424,588) (24,931,923) (40,278,582) (129,911,886) (157,703,170) Total net position 64,492,389 $ 55,899,376 $ 147,405,505 $ 143,387,052 $ 211,897,894 $ 199,286,428 $ Governmental Activities Business type Activities Totals The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $211,897,894 (net position).

The category of the City’s net position with the largest balance totaling $313,769,108 represents resources that are invested in capital assets, net of the related debt.

The second-largest category of net position, totaling $28,040,672 represents the City’s restricted assets, which are restricted for employee flexible spending account, grants and debt service.

The last remaining category of net position, totaling ($129,911,886) represents a deficit in unrestricted net position that is expected to be recovered from the City’s future revenues.

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(6)
Governmental activities, net position:

Current and other assets increased by $6,824,424 from the prior year due to increase in cash and cash equivalents of $4,905,979, and internal balances of $2,268,524 offset by a decrease in inventory of $754,900 and taxes receivable of $259,969.

Restricted assets increased by $1,780,663 from the prior year mainly due to an increase in restricted cash and investments balance for streets improvements.

Capital assets decreased by $6,692,046 from the prior year mainly due to depreciation of $5,000,142 offset by the acquisition of machinery and equipment and infrastructure and building upgrades and improvements as well as the liquidation & disposal of fire department’s assets.

Deferred outflows of resources for pension costs increased by $10,034,361 from the prior year mainly due to a change in current year’s contribution to the pension that will be applied as a reduction in net pension liability in the next fiscal year, or other items arising from changes in actuarial assumptions, difference between actual and projected experiences, difference between actual and projected investment gains/losses, or changes in a fund’s proportionate share of the net pension liability.

Deferred outflows of resources for other postemployment benefits (OPEB) increased by $17,344 from the prior year due a change in current year contribution to the OPEB plan that will be applied as a reduction in net OPEB liability in the next fiscal year, or other items arising from changes in actuarial assumptions, difference between actual and projected experiences, difference between actual and projected investment gains/losses, or changes in a fund’s proportionate share of the net OPEB liability.

Current liabilities increased by $160,249 from the prior year mainly due to a increase in accounts payable of $369,212 and unearned revenue of $239,956 offset by a decrease in accrued wages of $460,405
Long-term liability increased by $3,685,603 from the prior year mainly due to increase in net pension liability $10,201,394 offset by a decrease in other postemployment benefit liability and in liabilities due in more than 1 year of $1,748,700 and $2,013,330, respectively.

Deferred inflows of resources for pension actuarial increased by $1,470,611 from the prior year due to changes in total pension liability that are to be recognized as an increase in pension expenses in future fiscal years. These balances arise from changes in actuarial assumptions, the difference between actual and projected experiences, the difference between actual and projected investment gains/losses, or changes in the fund’s proportionate share of the plan’s net pension liability.

Governmental activities, net position (continued):

Deferred inflows of resources for OPEB decreased by $1,944,730 from the prior year mainly due to changes in actuarial assumptions and the difference between actual and expected experience.

Net investment in capital assets decreased by $4,708,237 from the prior year which is equivalent to the decrease in capital assets, net of capital lease obligations during the current year.

Restricted net position increased by $856,625 from the prior year mainly due to a decrease in the restricted designation placed on street improvement account and asset forfeiture account.

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(7)
The unrestricted net deficit decreased by $12,444,625 from the prior year mainly due to the current year’s change in net position of $8,593,013 offset by a decrease in net investment in capital assets of $4,708,237.

Business-type activities, net position:

Current and other assets decreased $18,721,629 from the prior year mainly due to a decrease in prepaid natural gas of $25,646,420 and in advances to other City funds of $2,270,995 offset by an increase in cash and cash equivalents of $8,825,552.

Restricted assets decreased by $10,182,607 from the prior year mainly due to the drawdowns funding the capital improvement projects.

Capital assets increased $8,194,386 from the prior year mainly due to acquisitions of new equipment and facility improvements of $15.9 million, offset by depreciation of $9,486,682 (See Note 5).

Deferred outflows of resources decreased by $1,081,147 due to the decrease in amount on bond refunding of $3,509,672 offset by an increase in deferred pensions of $2,353,572.

Current liabilities increased $2,220,671 mainly due to an increase in accounts payable of $1,995,320 and bond interest payable $160,140.

Long-term liabilities decreased by $24,470,357 from the prior year mainly due to bonds payable (see Note 6).

Deferred inflows of resources decreased by $3,557,293 mainly due to the amortization of deferred gain from sale of generation assets by $3,687,769.

Net investment in capital assets decreased by $11,290,729 from the prior year, which is attributable to the increase in capital assets, net of capital bonds payable.

The unrestricted net deficit decreased by $15,346,659 from the prior year due primarily to an increase in the change in net position by $4,018,453 and the decrease in net investment in capital assets by $11,290,729.

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(8)
Changes in Net Position
The table below summarizes the City’s changes in net position between the current and prior fiscal year. The details of the current year’s changes in net position can be found on page 18 of this report.

City of Vernon
Statement of Activities
Years ended June 30, 2021 and 2020
2021 2020 2021 2020 2021 2020
Revenues:

Program revenues
Charges for services 6,470,901 $ 6,501,983 $ $ 6,470,901 $ 6,501,983 $ Vernon public utilities 212,205,129 206,547,293 212,205,129 206,547,293 Operating and capital grants and contributions 2,103,424 2,103,424 General revenues
Taxes 39,163,804 30,280,868 39,163,804 30,280,868
State allocations 14,445,575 9,557,747 14,445,575 9,557,747 Investment income (loss) 70,480 137,738 69,606 1,018,563 140,086 1,156,301 Gain (loss) on the sale of land and assets (424,922) (424,922) Other revenues 2,531,566 3,535,926 2,531,566 3,535,926
Total revenues 64,785,750 50,014,262 212,274,735 207,140,934 277,060,485 257,155,196 Expenses:

Governmental activities
General government 15,238,548 13,870,221 15,238,548 13,870,221 Public safety 33,919,854 32,482,216 33,919,854 32,482,216 Public works 10,468,302 9,573,948 10,468,302 9,573,948
Health services 1,280,046 291,510 1,280,046 291,510
Interest on long term debt 67,707 76,131 67,707 76,131
Business type activities
Vernon public utilities 203,474,562 196,546,385 203,474,562 196,546,385 Total expenses 60,974,457 56,294,026 203,474,562 196,546,385 264,449,019 252,840,411 Change in net position before transfers 3,811,293 (6,279,764) 8,800,173 10,594,549 12,611,466 4,314,785 Transfers:

Interfund transfers 4,781,720 4,582,784 (4,781,720) (4,582,784) Net Transfers 4,781,720 4,582,784 (4,781,720) (4,582,784) Change in net position 8,593,013 (1,696,980) 4,018,453 6,011,765 12,611,466 4,314,785 Net position beginning of year 55,899,376 57,596,356 143,387,052 137,375,287 199,286,428 194,971,643 Net position end of year $ 55,899,376 64,492,389 $ 147,405,505 $ 143,387,052 $ 211,897,894 $ 199,286,428 $ Governmental Activities Totals Business type Activities

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(9)
Governmental activities, changes in net position:

Governmental activities’ net position increased by $8,593,013 and business-type activities’ net position increased by $4,018,453 for a net increase of $12,611,466 for the City.

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(10)

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(11)
Business-type activities, changes in net position:

Business-type activities increased the City's net position by $8,800,173 before transfers which is a $1,794,376 decrease from the prior year. The key reason for this decrease was due to an increase in the cost of sale by $6,928,177 and offset by an increase in revenues by $5,657,836.

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(12)

FINANCIAL ANALYSIS OF THE GOVERNMENTAL FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements.

Governmental funds
The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, the nonspendable, restricted, committed, assigned, and unassigned fund balances may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year.

At the end of the current fiscal year, the City's governmental funds reported a combined ending fund balances of $16,967,255 (see page 19), an increase of $8,444,838 from the prior year. Approximately

0.03% of the total fund balance amount, $51,672, constitutes nonspendable fund balance, which are amounts that are not in a spendable form or are required to be maintained intact. Approximately 24.5% of the total fund balance amount, $4,146,007, constitutes restricted fund balance, which are amounts that can be spent only for specific purposes stipulated by external resource providers, constitutionally, or through enabling legislation. The remainder of the fund balance amount, $12,769,576 is an unassigned fund balance deficit to indicate that it is the residual classification that is not contained in the other classifications.

The General Fund is the operating fund of the City. At the end of the current fiscal year, the total fund balance was $16,967,255 (see page 21). At the end of the current fiscal year, the total fund balance represents 27.5% of the total expenditures for the year.

Proprietary funds
The City's proprietary funds provide the same type of information found in the government-wide financial statements but in more detail.

Unrestricted net position for the Vernon Public Utilities at the end of the year amounted to a deficit balance of $24,931,923 (see page 24). This deficit balance in unrestricted net position is primarily due to the proprietary funds being heavily invested in capital assets for which it has not yet recovered the cost of capital invested. The proprietary funds expect to eliminate these deficit balances through increased future revenues.

The total increase in net position for the Vernon Public Utilities was $4,018,453 (see page 25). Other factors concerning the finances of these funds have already been addressed in the discussion of the City's business-type activities.

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(13)

GENERAL FUND AND BUDGETARY HIGHLIGHTS
For the current year, the General Fund’s total positive variance between the final budgeted amounts and the actual amount of change in fund balance was $10,010,644. The key reasons for this variance were due to higher actual revenues than projected of $8,919,741 and lower actual expenditures than appropriated by $818,174.

For the current year, the General Fund’s total positive variance between the final budgeted estimated revenues and actual revenues was $8,919,741. The main reason for the variance, overall revenues came in higher than expected in most categories especially taxes by $1,374,948 and $8,935,173 respectively offset by a decrease in other revenues and intergovernmental revenues by $288,926 and $153,981 respectively.

For the current year, the General Fund’s total positive variance between the final budgeted amount and the actual amount for expenditures was $818,174. The key reasons for this variance were due to higher appropriations than actual expenditures of $4,152,475 in capital outlay offset by an increase in public safety of $5,300,440.

For the current year, the General Fund’s total positive variance between the final budgeted amounts and the actual amount for other financing sources was $272,729. The key reason for this variance was due to a gain on sale of asset by $486,009 offset by a lower amount transferred by the Electric Fund by $213,280 than budgeted.

CAPITAL ASSET AND DEBT ADMINISTRATION
Capital assets
The City's investment in capital assets for its governmental and business-type activities as of June 30, 2021, amounts to $313,769,108 (net of accumulated depreciation). This investment in capital assets includes land, construction in progress, building, utility system improvements, machinery and equipment, infrastructure such as roads, and intangible assets such as environmental emission credits.

The total decrease in the City's investment in capital assets for the current fiscal year was $15,998,966, less depreciation of $14,486,824, for a net increase of $1,502,340 (See Note 4).

There were no significant construction commitments outstanding as of June 30, 2021.

Additional information on the City's capital assets can be found in Note 4 on pages 45-47 of this report.

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(14)
Outstanding debt
As of June 30, 2021, the following debt remains outstanding:
$38,840,000 City of Vernon Electric System Revenue Bonds, 2008 Taxable Series A $37,640,000 City of Vernon Electric System Revenue Bonds, 2012 Series A $35,100,000 City of Vernon Electric System Revenue Bonds, 2012 Taxable Series B $111,720,000 City of Vernon Electric System Revenue Bonds, 2015 Taxable Series A $43,335,000 City of Vernon Electric System Revenue Bonds, 2020 Series A $14,840,000 City of Vernon Water System Revenue Bonds, 2020 Series A The City of Vernon Electric System Revenue Bonds, 2008 Taxable Series A were issued to provide funds to (i) finance the cost of certain capital improvements to the City’s Electric System, (ii) fund a deposit to the Debt Service Reserve Fund, and (iii) to pay costs of issuance of the 2008 Bonds.

The City of Vernon Electric System Revenue Bonds, 2012 Series A were issued to provide funds to (i) pay a portion of the costs of certain capital improvements to the City’s Electric System, (ii) to provide for capitalized interest on the 2012 Series A Bonds, and (iii) to pay costs of issuance of the 2012 Series A Bonds.

The City of Vernon Electric System Revenue Bonds, 2012 Taxable Series B were issued to provide funds to (i) refund the $28,680,000 aggregate principal amount of 2009 Bonds maturing on August 1, 2012, (ii) to pay a portion of the Costs of the 2012 Project, and (iii) to pay costs of issuance of the 2012 Taxable Series B Bonds.

The City of Vernon Electric System Revenue Bonds, 2015 Taxable Series A were issued to provide funds to (i) refund a portion of the Outstanding Electric System Revenue Bonds, 2009 Series A; (ii) finance the costs of certain capital improvements to the City’s Electric System by reimbursing the Electric System for the prior payment of such costs from the Light and Power Fund; (iii) fund a deposit to the Debt Service Reserve Fund; and (iv) pay costs of issuance of the 2015 Bonds.

The City of Vernon Electric System Revenue Bonds, 2020 Series A were issued to provide funds to (i) finance the acquisition and construction of certain capital improvements to the Electric System of the City, (ii) to refund all of the City’s outstanding Electric System Revenue Bonds, 2009 Series A, and (iii) to pay costs of issuance of the 2020 Bonds.

The City of Vernon Water System Revenue Bonds, 2020 Series A were issued to provide funds to (i) finance the acquisition and construction of certain capital improvements to the Water System of the City, (ii) purchase a municipal bond debt service reserve insurance policy for deposit in the Reserve Fund in satisfaction of the Reserve Requirement, and (iii) to pay costs of issuance of the 2020 Bonds.

As of June 30, 2021, the ratings on all Electric System Revenue Bonds of the City changed from the prior year to BBB+ rating by S&P and Baa2 rating by Moody’s and the ratings on all Water Revenue Bonds is AA by S&P and not rated by Moody’s.

Additional information on the City's long-term debt can be found in Note 5 on pages 47-53 of this report.

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(15)
ECONOMIC FACTORS AND NEW YEAR’S BUDGET AND RATES
These factors were considered in preparing the VPU and the City’s budget for the 2022 fiscal year.

The City is strictly industrial and does not maintain an unemployment rate study of its small population. However, the unemployment rate of adjacent communities is currently 10.5%, which is higher than the State of California's average unemployment rate of 7.7%, and the national average unemployment rate of 5.9%.

Inflationary trends in the region compare favorably to national indices.

The occupancy rate of the City’s central business district ranges between 96% and 98%.

REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the City's finances for all those with an interest in the City's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Director of Finance, City of Vernon, 4305 Santa Fe Avenue, Vernon, California, 90058.

CITY OF VERNON

STATEMENT OF NET POSITION
JUNE 30, 2021
See accompanying Notes to Financial Statements.
(16)
Governmental Business-Type
Activities Activities Total
ASSETS
Cash and Cash Equivalents 14,406,423 $ 146,360,319 $ 160,766,742 $ Accounts Receivable, Net of Allowance 9,928 7,096,905 7,106,833 Taxes Receivable 3,316,784 - 3,316,784
Notes and Loans Receivable 6,033 - 6,033
Other Receivables 3,894 - 3,894
Accrued Unbilled Revenue - 16,978,805 16,978,805
Accrued Interest Receivable - 2,361 2,361
Internal Balances (2,117,993) 2,117,993 -
Inventories 51,672 - 51,672
Prepaid Expenses - 1,028,714 1,028,714
Deposits - 1,081,094 1,081,094
Restricted Cash and Investments 5,070,045 56,392,885 61,462,930 Capital Assets:

Nondepreciable 64,855,535 64,785,212 129,640,747
Depreciable, Net 100,470,810 192,468,272 292,939,082
Total Assets 186,073,131 488,312,560 674,385,691

DEFERRED OUTFLOWS OF RESOURCES
Deferred Outflows Related to Pensions 23,952,913 4,901,360 28,854,273 Deferred Outflows Related to OPEB Liability 3,326,931 680,773 4,007,704 Deferred Amount on Bond Refunding - 292,472 292,472
Total Deferred Outflows of Resources 27,279,844 5,874,605 33,154,449

LIABILITIES
Accounts Payable 1,109,748 14,079,041 15,188,789
Accrued Wages and Benefits 1,438,922 616,131 2,055,053
Customer Deposits 200,475 504,539 705,014
Bond Interest Payable - 6,710,902 6,710,902
Unearned Revenue 1,030,386 - 1,030,386
Noncurrent Liabilities:

Due Within One Year 2,129,351 25,748,503 27,877,854
Due in More than One Year 3,785,276 264,089,729 267,875,005 Net Other Postemployment Benefit Liability 16,778,544 3,433,306 20,211,850 Net Pension Liability 112,317,763 22,982,998 135,300,761 Total Liabilities 138,790,465 338,165,149 476,955,614

DEFERRED INFLOWS OF RESOURCES
Deferred Inflows Related to Pensions 2,754,345 563,607 3,317,952 Deferred Inflows Related to OPEB Liability 7,315,776 1,496,988 8,812,764 Deferred Gain from Sale of Generation Assets - 6,555,916 6,555,916 Total Deferred Inflows of Resources 10,070,121 8,616,511 18,686,632

NET POSITION
Net Investment in Capital Assets 165,164,750 148,442,763 313,607,513 Restricted for:

Employee Flexible Spending Account 25,090 - 25,090
Street Improvements 3,601,571 - 3,601,571
Asset Forfeiture Funds 519,346 - 519,346
Debt Service - 23,894,665 23,894,665
Unrestricted (Deficit) (104,818,368) (24,931,923) (129,750,291) Total Net Position 64,492,389 $ 147,405,505 $ 211,897,894 $

CITY OF VERNON

STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30, 2021
See accompanying Notes to Financial Statements.
(17)
Program Revenues
Charges Operating Capital
for Grants and Grants and
Function/Program Activities Expenses Services Contributions Contributions

PRIMARY GOVERNMENT
Governmental Activities:

General Government 15,238,548 $ 8,779,549 $ 1,989 $ - $ Public Safety 33,919,854 182,912 1,027,418 -
Public Works 10,468,302 1,647,017 5,460 1,068,557
Health Services 1,280,046 643,143 - -
Interest on Long Term Debt 67,707 - - -
Total Governmental Activities 60,974,457 11,252,621 1,034,867 1,068,557 Business-Type Activities:

Electric 182,725,787 184,828,389 - -
Gas 15,582,691 16,154,140 - -
Water 9,376,922 10,741,694 - -
Fiber Optics 570,882 480,906 - -
Total Business-Type Activities 208,256,282 212,205,129 - - Total Primary Government 269,230,739 $ 223,457,750 $ 1,034,867 $ 1,068,557 $

CITY OF VERNON

STATEMENT OF ACTIVITIES (CONTINUED)
YEAR ENDED JUNE 30, 2021
See accompanying Notes to Financial Statements.
(18)
Function/Program Activities

PRIMARY GOVERNMENT
Governmental Activities:

General Government
Public Safety
Public Works
Health Services
Interest on Long Term Debt
Total Governmental Activities
Business-Type Activities:

Electric
Gas
Water
Fiber Optics
Total Business-Type Activities
Total Primary Government
General Revenues:

Property Taxes
Parcel Taxes
Utility Users Taxes
Franchise Taxes
Business License Taxes
Other Taxes
Investment Income
State Contribution - Sales and
Use Taxes
Other Revenues
Total General Revenues

CHANGE IN NET POSITION
Net Position - Beginning of Year

NET POSITION - END OF YEAR
Net (Expenses) Revenues and
Change in Net Position
Governmental Business-Type
Activities Activities Total
$ - (6,457,010) $ (6,457,010) $
- (32,709,524) (32,709,524)
- (7,747,268) (7,747,268)
- (636,903) (636,903)
- (67,707) (67,707)
- (47,618,412) (47,618,412)
2,102,602 - 2,102,602
571,449 - 571,449
1,364,772 - 1,364,772
(89,976) - (89,976)
3,948,847 - 3,948,847
3,948,847 (47,618,412) (43,669,565)
4,700,085 4,700,085
- 14,651,097 14,651,097
- 12,367,272 12,367,272
- 1,622,649 1,622,649
- 5,810,837 5,810,837
- 11,864 11,864
69,606 70,480 140,086
- 14,445,575 14,445,575
- 2,531,566 2,531,566
69,606 56,211,425 56,281,031
4,018,453 8,593,013 12,611,466
143,387,052 55,899,376 199,286,428
$ 147,405,505 64,492,389 $ 211,897,894 $

CITY OF VERNON
BALANCE SHEET – GOVERNMENTAL FUND
JUNE 30, 2021
See accompanying Notes to Financial Statements.
(19)
General
Fund
ASSETS
Cash and Cash Equivalents 14,406,423 $
Accounts Receivable, Net of Allowance 9,928
Taxes Receivable 3,316,784
Notes and Loans Receivable 6,033
Other Receivables 3,894
Inventories 51,672
Restricted Cash and Investments 5,070,045
Total Assets 22,864,779 $

LIABILITIES AND FUND BALANCE

LIABILITIES
Accounts Payable 1,109,748 $
Accrued Wages and Benefits 1,438,922
Unearned Revenue 1,030,386
Customer Deposits 200,475
Advances from Other Funds 2,117,993
Total Liabilities 5,897,524

FUND BALANCE
Nonspendable:

Inventories 51,672
Restricted for:

Employee Flexible Spending Account 25,090
Street Improvements 3,601,571
Asset Forfeiture Funds 519,346
Unassigned 12,769,576
Total Fund Balance 16,967,255
Total Liabilities and Fund Balance 22,864,779 $

CITY OF VERNON

RECONCILIATION TO THE GOVERNMENTAL FUND BALANCE SHEET
TO THE STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES JUNE 30, 2021
See accompanying Notes to Financial Statements.
(20)
Fund Balance - Governmental Fund 16,967,255 $
Amounts reported for governmental activities in the Statement of Net Position are different because:

Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental fund 165,326,345 Long-term liabilities are not due and payable in the current period and therefore are not reported in the governmental fund
Compensated Absences (2,505,255)
Claims Payable (3,409,372)
Net pension and other post-employment benefit (OPEB) liabilities applicable to the City's governmental activities are not due and payable in the current period and therefore are not reported in the governmental fund. Deferred outflows and inflows of resources related to the pension and OPEB liabilities applicable to the City's governmental activities are only reported in the government-wide financial statements
Deferred Outflows of Resources for Pensions 23,952,913
Deferred Outflows of Resources for OPEB 3,326,931
Deferred Inflows of Resources for Pensions (2,754,345)
Deferred Inflows of Resources for OPEB (7,315,776)
Net Pension Liability (112,317,763)
Net OPEB Liability (16,778,544)
Net Position of Governmental Activities 64,492,389 $

CITY OF VERNON

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES
IN FUND BALANCE – GOVERNMENTAL FUND
YEAR ENDED JUNE 30, 2021
See accompanying Notes to Financial Statements.
(21)
General
Fund

REVENUES
Taxes 53,677,257 $
Special Assessments 1,524,362
Licenses and Permits 2,083,795
Fines, Forfeitures, and Penalties 136,899
Investment Income 70,480
Intergovernmental Revenues 1,364,950
Charges for Services 9,577,442
Other Revenues 1,132,285
Total Revenues 69,567,470

EXPENDITURES
Current:

General Government 15,129,409
Public Safety 34,754,653
Public Works 7,054,990
Health Services 1,357,199
Capital Outlay 3,312,390
Total Expenditures 61,608,641
Excess of Revenues Over Expenditures 7,958,829

OTHER FINANCING SOURCES (USES)
Sale of General Capital Assets 486,009
CHANGE IN FUND BALANCE 8,444,838
Fund Balance - Beginning of Year 8,522,417
FUND BALANCE - END OF YEAR $ 16,967,255

CITY OF VERNON

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUND TO THE STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
YEAR ENDED JUNE 30, 2021
See accompanying Notes to Financial Statements.
(22)
Net Change in Fund Balance - Total Governmental Fund 8,444,838 $ Amounts reported for governmental activities in the Statement of Activities are different because:

Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the costs of those assets are allocated over their estimated useful lives as a depreciation expense. As a result, fund balances decrease by the amount of financial resources expended, whereas net position decreases by the amount of depreciation expense charged for the year.

Capital Outlay 3,312,390
Depreciation Expense (5,000,142)
Loss on Disposal of Capital Assets (5,004,294)
Principal payment of long term debt uses current financial resources but is not reported in the Statement of Activities Principal Payment of Capital Lease Obligation 1,983,809 Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the governmental fund:

Change in Net Pension Liability (10,201,394)
Change in Net OPEB Liability 1,748,700
Change in Deferred Outflows Related to Pensions 10,034,361 Change in Deferred Outflows Related to OPEB 17,344
Change in Deferred Inflows Related to Pensions (1,470,611) Change in Deferred Inflows Related to OPEB 1,944,730
Change in Compensated Absences 2,352,574
Change in Claims Payable 430,708
Change in Net Position of Governmental Activities 8,593,013 $

CITY OF VERNON
STATEMENT OF NET POSITION – PROPRIETARY FUNDS
JUNE 30, 2021
See accompanying Notes to Financial Statements.
(23)
Business-Type Activities
Enterprise Funds
Nonmajor
Electric Gas Water Fiber Optics
Fund Fund Fund Fund Totals
ASSETS
Current Assets
Cash and Cash Equivalents 123,485,481 $ 7,853,003 $ 14,159,051 $ 862,784 $ 146,360,319 $ Accounts Receivable, Net of Allowance 5,723,729 363,909 977,524 31,743 7,096,905 Accrued Unbilled Revenue 14,521,973 1,337,998 1,118,834 - 16,978,805 Accrued Interest Receivable 2,321 - 40 - 2,361
Due from Other Funds 593,486 - - - 593,486
Prepaid Expenses 16,312 - - - 16,312
Total Current Assets 144,343,302 9,554,910 16,255,449 894,527 171,048,188 Noncurrent Assets
Restricted Cash and Investments 45,052,746 - 11,340,139 - 56,392,885 Advances to Other Funds 27,193,955 - 2,117,993 - 29,311,948 Prepaid Expenses 1,012,402 - - - 1,012,402
Deposits 1,081,094 - - - 1,081,094
Capital Assets:

Nondepreciable 59,682,155 - 5,103,057 - 64,785,212
Depreciable, Net 167,558,410 15,830,766 8,041,598 1,037,498 192,468,272 Total Noncurrent Assets 301,580,762 15,830,766 26,602,787 1,037,498 345,051,813 Total Assets 445,924,064 25,385,676 42,858,236 1,932,025 516,100,001

DEFERRED OUTFLOWS OF RESOURCES
Deferred Outflows Related to Pensions 3,468,111 396,660 995,501 41,088 4,901,360 Deferred Outflows Related to OPEB Liability 481,702 55,094 138,270 5,707 680,773 Deferred Amount on Refunding 292,472 - - - 292,472
Total Deferred Outflows of Resources 4,242,285 451,754 1,133,771 46,795 5,874,605

CITY OF VERNON
STATEMENT OF NET POSITION – PROPRIETARY FUNDS (CONTINUED) JUNE 30, 2021
See accompanying Notes to Financial Statements.
(24)
Business-Type Activities
Enterprise Funds
Nonmajor
Electric Gas Water Fiber Optics
Fund Fund Fund Fund Totals

LIABILITIES
Current Liabilities
Accounts Payable 12,570,395 $ 50,606 $ 1,416,554 $ 41,486 $ 14,079,041 $ Accrued Wages and Benefits 449,380 50,090 112,211 4,450 616,131 Due to Other Funds - - 593,486 - 593,486
Customer Deposits 430,597 13,558 60,384 - 504,539
Bond Interest Payable 6,463,412 - 247,490 - 6,710,902
Bonds Payable 24,975,000 - 240,000 - 25,215,000
Note Payable - - 139,535 - 139,535
Compensated Absences 350,799 7,928 34,397 844 393,968
Total Current Liabilities 45,239,583 122,182 2,844,057 46,780 48,252,602 Noncurrent Liabilities
Advances from Other Funds - 23,226,257 - 3,967,698 27,193,955 Bonds Payable 246,925,951 - 15,154,913 - 262,080,864
Note Payable - - 1,220,930 - 1,220,930
Compensated Absences 701,597 15,856 68,794 1,688 787,935 Other Postemployment Benefit Liability 2,429,343 277,852 697,329 28,782 3,433,306 Net Pension Liability 16,262,340 1,859,979 4,668,011 192,668 22,982,998 Total Noncurrent Liabilities 266,319,231 25,379,944 21,809,977 4,190,836 317,699,988 Total Liabilities 311,558,814 25,502,126 24,654,034 4,237,616 365,952,590

DEFERRED INFLOWS OF RESOURCES
Deferred Inflows Related to Pensions 398,798 45,612 114,473 4,724 563,607 Deferred Inflows Related to OPEB Liability 1,059,241 121,149 304,049 12,549 1,496,988 Deferred Gain from Sale of Generation Assets 6,555,916 - - - 6,555,916 Total Deferred Inflows of Resources 8,013,955 166,761 418,522 17,273 8,616,511

NET POSITION
Net Investment in Capital Assets 124,297,278 15,816,827 7,303,813 1,024,845 148,442,763 Restricted for Debt Service 23,894,665 - - - 23,894,665 Unrestricted (Deficit) (17,598,363) (15,648,284) 11,615,638 (3,300,914) (24,931,923) Total Net Position 130,593,580 $ 168,543 $ 18,919,451 $ (2,276,069) $ 147,405,505 $

CITY OF VERNON

STATEMENT OF REVENUES, EXPENSES, AND CHANGES
IN FUND NET POSITION – PROPRIETARY FUNDS
YEAR ENDED JUNE 30, 2021
See accompanying Notes to Financial Statements.
(25)
Business-Type Activities
Enterprise Funds
Nonmajor
Electric Gas Water Fiber Optics
Fund Fund Fund Fund Totals

OPERATING REVENUES
Charges for Services 184,828,389 $ 16,154,140 $ 10,741,694 $ 480,906 $ 212,205,129 $ Total Operating Revenue 184,828,389 16,154,140 10,741,694 480,906 212,205,129

OPERATING EXPENSES
Cost of Sales 155,820,170 14,857,233 8,413,559 377,814 179,468,776 Depreciation 8,178,971 725,458 389,185 193,068 9,486,682 Total Operating Expenses 163,999,141 15,582,691 8,802,744 570,882 188,955,458 OPERATING INCOME (LOSS) 571,449 20,829,248 1,938,950 (89,976) 23,249,671

NONOPERATING REVENUES
(EXPENSES)
Investment Income 57,190 5,334 6,660 422 69,606
Net Decrease in Fair Value of Investments (3,033) - - - (3,033) Interest Expense (18,723,613) - (574,178) - (19,297,791) Total Nonoperating Revenues
(Expenses) (18,669,456) 5,334 (567,518) 422 (19,231,218) CHANGE IN NET POSITION 576,783 2,159,792 1,371,432 (89,554) 4,018,453 Net Position (Deficit) - Beginning of Year 128,433,788 (408,240) 17,548,019 (2,186,515) 143,387,052

NET POSITION (DEFICIT) - END
OF YEAR $ 168,543 130,593,580 $ 18,919,451 $ (2,276,069) $ 147,405,505 $

CITY OF VERNON
STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS
YEAR ENDED JUNE 30, 2021
See accompanying Notes to Financial Statements.
(26)
Business-Type Activities
Enterprise Funds
Nonmajor
Electric Gas Water Fiber Optics
Fund Fund Fund Fund Totals

CASH FLOWS FROM OPERATING

ACTIVITIES
Cash Received from Customers 184,984,914 $ 16,007,270 $ 10,472,143 $ 476,112 $ 211,940,439 $ Cash Paid to Suppliers for Goods and Services (122,185,221) (14,273,190) (6,447,917) (302,427) (143,208,755) Cash Paid to Employees for Services (3,850,277) (279,866) (1,260,208) (30,821) (5,421,172) Cash Paid to City for Services (4,781,720) - - - (4,781,720) Net Cash Provided by
Operating Activities 54,167,696 1,454,214 2,764,018 142,864 58,528,792

CASH FLOWS FROM CAPITAL AND

RELATED FINANCING ACTIVITIES
Repayment of Bonds (29,520,000) - - - (29,520,000)
Bond Interest Paid (15,208,498) - (437,232) - (15,645,730) Proceeds from Note Payable - - 761,280 - 761,280
Payment of Note Payable - - (139,535) - (139,535)
Net Acquisition of Capital Assets (14,976,512) (19,492) (2,685,064) - (17,681,068) Net Cash Used by Capital and
Related Financing Activities (59,705,010) (19,492) (2,500,551) - (62,225,053)

CASH FLOWS FROM NONCAPITAL

FINANCING ACTIVITIES
Advance (from) to Other Funds 185,639 14,361 2,270,995 (200,000) 2,270,995 Net Cash Provided (Used) by Noncapital
Financing Activities 185,639 14,361 2,270,995 (200,000) 2,270,995

CASH FLOWS FROM INVESTING

ACTIVITIES
Investment Income 55,712 5,334 6,743 422 68,211
Cash Provided by Investing Activities 55,712 5,334 6,743 422 68,211

CHANGE IN CASH AND CASH
EQUIVALENTS 1,454,417 (5,295,963) 2,541,205 (56,714) (1,357,055) Cash and Cash Equivalents - Beginning of Year 173,834,190 6,398,586 22,957,985 919,498 204,110,259

CASH AND CASH EQUIVALENTS -
END OF YEAR $ 7,853,003 168,538,227 $ 25,499,190 $ 862,784 $ 202,753,204 $

COMPOSITION OF CASH AND CASH

EQUIVALENTS
Cash and Cash Equivalents 123,485,481 $ 7,853,003 $ 14,159,051 $ 862,784 $ 146,360,319 $ Restricted Cash and Investments 45,052,746 - 11,340,139 - 56,392,885 Total 168,538,227 $ 7,853,003 $ 25,499,190 $ 862,784 $ 202,753,204 $

CITY OF VERNON
STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS (CONTINUED) YEAR ENDED JUNE 30, 2021
See accompanying Notes to Financial Statements.
(27)
Business-Type Activities
Enterprise Funds
Nonmajor
Electric Gas Water Fiber Optics
Fund Fund Fund Fund Totals

RECONCILIATION OF OPERATING

INCOME (LOSS) TO NET CASH

PROVIDED (USED) BY OPERATING

ACTIVITIES
Operating Income (Loss) 20,829,248 $ 571,449 $ 1,938,950 $ (89,976) $ 23,249,671 $ Adjustments To Reconcile Operating Income
(Loss) to Net Cash Provided by
Operating Activities:

Depreciation 8,178,971 725,458 389,185 193,068 9,486,682 Change in Operating Assets and Liabilities:

Accounts Receivable (761,728) 255,444 (208,130) (4,794) (719,208) Accrued Unbilled Revenue 901,103 (402,314) (60,621) - 438,168 Due from Other Funds (588,100) - - - (588,100)
Prepaid Expenses and Deposits (90,832) - - - (90,832)
Prepaid Natural Gas 25,646,420 - - - 25,646,420
Deferred Outflows of Resources (1,723,107) (219,034) (464,944) (21,440) (2,428,525) Accounts Payable 1,996,698 (11,141) (9,391) 19,154 1,995,320 Accrued Wages and Benefits 54,690 2,425 (8,559) 305 48,861 Due to Other Funds (2,161) (310) 588,100 - 585,629
Customer Deposits 17,150 - (800) - 16,350
Compensated Absences 203,182 (262) (90,688) 895 113,127 Other Postemployment Benefit Liability 34,730 27,585 (21,932) 1,515 41,898 Net Pension Liability 3,063,985 480,585 703,672 42,382 4,290,624 Deferred Inflows of Resources (3,592,553) 24,329 9,176 1,755 (3,557,293) Net Cash Provided by Operating
Activities 54,167,696 $ 1,454,214 $ 2,764,018 $ 142,864 $ 58,528,792 $

CITY OF VERNON
STATEMENT OF FIDUCIARY NET POSITION – FIDUCIARY FUND
YEAR ENDED JUNE 30, 2021
See accompanying Notes to Financial Statements.
(28)
Redevelopment
Successor
Agency
Trust Fund
ASSETS
Other Receivable 119 $
Restricted Cash and Investments 20,667,571
Total Assets 20,667,690

LIABILITIES
Customer Deposits 42,968
Bond Interest Payable 807,400
Long-Term Debt:

Due Within One Year 3,385,000
Due in More than One Year 38,712,761
Total Liabilities 42,948,129

NET POSITION (DEFICIT)
Total Net Position Held in Trust for Dissolution of
Former Redevelopment Agency (22,280,439) $

CITY OF VERNON
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION – FIDUCIARY FUND YEAR ENDED JUNE 30, 2021
See accompanying Notes to Financial Statements.
(29)
Redevelopment
Successor
Agency
Trust Fund

ADDITIONS
Property Tax Increment 6,176,105 $
Investment Earnings 2,635
Total Additions 6,178,740

DEDUCTIONS
Community Development 699,618
Interest on Long-Term Debt 2,489,555
Total Deductions 3,189,173
CHANGE IN NET POSITION 2,989,567
Net Position (Deficit) Held in Trust- Beginning of Year (25,270,006) NET POSITION (DEFICIT) HELD IN TRUST- END OF YEAR $ (22,280,439)

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the City of Vernon, California (City) have been prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP). The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the City’s accounting policies are described below.

A. Reporting Entity
The City was incorporated on September 16, 1905 as a General Law City. Effective July 1, 1988, the City became a Charter City. The City operates under a Council-City Administrator form of government. As required by generally accepted accounting principles, the accompanying financial statements present the City of Vernon (primary government) and its component units, entities for which the primary government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government’s operations and so data from these units are combined with the data of the primary government. For the fiscal year ended June 30, 2021, the City transferred its fire department operations to Los Angeles County, California. See Note 4 and Note 7 for further details on how the transfer impacted the City's capital assets and safety pension plan, respectively.

B. Basis of Presentation
Government-Wide Financial Statements
The statement of net position and statement of activities display information about the primary government (the City). These statements include the financial activities of the overall government. It is the City’s policy to make eliminations to minimize the double counting of internal activities, except for services rendered by governmental activities to business-type activities. These statements distinguish between the governmental and business-type activities of the City. Governmental activities, which normally are supported by taxes, are reported separately from business-type activities, which rely to a significant extent on fees charged to external parties. Effective February 1, 2012, due to AB 1X 26, the dissolution of Redevelopment Agencies throughout California, the activities of the dissolved Vernon Redevelopment Agency are recorded in the Vernon Redevelopment Successor Agency trust fund which is a component unit of the City.

The statement of activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the City and for each function of the City’s governmental activities. Direct expenses are those that are specifically associated with a program or function; and therefore, are clearly identifiable to a particular function. Program revenues include (i) charges paid by the recipients of goods or services offered by the programs and (ii) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program.

Revenues that are not classified as program revenues, including all taxes, are presented instead as general revenues.

CITY OF VERNON

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Basis of Presentation (Continued)
Government-Wide Financial Statements (Continued)
Separate financial statements are provided for governmental fund, proprietary funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. The major individual governmental fund and the major individual enterprise funds are reported as separate columns in the fund financial statements.

Fund Financial Statements
The fund financial statements provide information about the City’s funds and blended component units. Separate statements for each fund category – governmental and proprietary – are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. 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. Operating expenses include the cost of sales and services, administrative expenses and depreciation on capital assets. All expenses not meeting this definition are reported as nonoperating expenses.

The City reports one major governmental fund:

The General Fund is the City’s primary operating fund. It is used to account for all revenues and expenditures necessary to carry out basic governmental activities of the City that are not accounted for through other funds. For the City, the General Fund includes such activities as general government, public safety, health services, and public works.

The City reports three major enterprise funds:

The Electric Fund accounts for the maintenance and operations of the City’s electric utility plant. Revenues for this fund are primarily from charges for services.

The Gas Fund accounts for the maintenance and operations of the City’s gas utility plant. Revenues for this funds are primarily from charges for services.

The Water Fund accounts for the maintenance and operations of the City’s water utility plant. Revenues for this fund are primarily from charges for services.

The City also reports a fiber optics nonmajor enterprise fund for the maintenance and operation of the City’s fiber optics utility plant.

CITY OF VERNON

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Basis of Presentation (Continued)
Fund Financial Statements (Continued)
The City reports one fiduciary fund:

Vernon Redevelopment Successor Agency Private-Purpose Trust Fund – This is a fiduciary fund type used by the City to report trust arrangements under which principal and income benefit other governments. This fund reports the assets, liabilities and activities of the Successor Agency to the Dissolved Vernon Redevelopment Agency. Unlike the limited reporting typically utilized for Agency Funds, the Private-Purpose Trust Fund reports a statement of fiduciary net position and a statement of changes in fiduciary net position.

The government-wide and proprietary fund financial statements are reported using the economic resources measurement focus and the 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. Nonexchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange, include property and sales taxes, grants, entitlements and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenues from sales taxes are recognized when the underlying transactions take place. Revenues from grants, entitlements and donations are recognized in the fiscal year in which all eligible requirements have been satisfied.

Governmental fund type financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues and other governmental fund type financial resources are recognized when they become susceptible to accrual – that is, when they become both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period.

Property, sales, and other taxes are considered available and are accrued when received within 60 days after fiscal year-end. Additionally, all other revenue sources are considered available and are accrued when received within 60 days of year-end.

Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. General capital assets acquisitions are reported as expenditures in governmental fund statements.

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Basis of Presentation (Continued)
Fund Financial Statements (Continued)
Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The City maintains a separate fund to report the activities of the Successor Agency to the Dissolved Redevelopment Agency. These assets do not belong to the City. The accounting used for fiduciary funds is much like that used for proprietary funds.

Because the governmental fund financial statements are presented on a different measurement focus and basis of accounting than the government-wide financial statements for governmental activities, reconciliations are presented which briefly explain the adjustments necessary to reconcile the fund financial statements to the governmental-wide statements.

C. Cash and Investments
The City follows the practice of pooling cash and investments of all funds to maximize returns for all funds, except for funds held by trustees or fiscal agents.

For purposes of the statement of cash flows, the City considers amounts on deposit in the City’s cash and investment pool and all highly liquid investments (including restricted cash and investments) with an original maturity of three months or less when purchased to be cash equivalents. Investment transactions are recorded on the trade date.

Investments in nonparticipating interest-earning investment contracts are reported at cost and all other investments are reported at fair value. Fair value is defined as the amount that the City could reasonably expect to receive for an investment in a current sale between a willing buyer and a seller and is generally measured by quoted market prices.

D. Receivables/Payables
Short-term interfund receivables and payables are classified as “due from other funds” and “due to other funds”, respectively, on the balance sheet and as internal balances on the statement of net position. Long-term interfund receivables and payables are classified as “advances to/from other funds,” respectively, on the balance sheet and as internal balances on the statement of net position.

Proprietary fund trade receivables are shown net of an allowance for uncollectible accounts. Allowances for uncollectible were $1,072,323 as of June 30, 2021. Utility customers are billed monthly. The estimated value of services provided, but unbilled at year-end, has been included in the accompanying financial statements.

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) E. Inventories
All inventories are valued at cost, or estimated historical costs when historical information is unavailable, using the first-in/first-out (FIFO) method. Inventory costs in the governmental funds are recorded as an expenditure when used and are reported under the consumption method of accounting. Inventory costs in the proprietary funds are recorded as an expense or capitalized into capital assets when used.

F. Prepaid Items
The City entered into an agreement for the purchase and sale of natural gas in 2006 with Citigroup Energy Inc. for a specified quantity of gas to be delivered to the Electric Fund in accordance with the terms of the agreement. As full compensation for the total contract quantity to be delivered, the City made a prepayment which is amortized over the life of the agreement based on the monthly contract quantities to be delivered. The agreement was in effect until May 31, 2021. As of June 30, 2021, the prepayment was fully amortized.

The City also made a prepayment to Southern California Public Power Authority (SCPPA) for the City’s share of SCPPA’s payoff of the Hoover Center and Air Slots debt.

This prepaid amount is amortized over the life of the debt based on the annual debt service obligations. See Note 9 for further information regarding SCPPA.

G. Capital Assets
Capital assets (including infrastructure) are recorded at historical cost or at estimated historical cost if the actual historical cost is not available. Contributed capital assets are valued at their acquisition value on the date contributed. Capital assets include intangible assets with indefinite lives and public domain (infrastructure) general capital assets consisting of certain improvements including roads and bridges, sidewalks, curbs and gutters, and traffic light systems. The capitalization threshold for all capital assets is $5,000. Capital assets used in operations are depreciated using the straight-line method over their estimated useful lives in the government-wide and proprietary funds statements.

The estimated useful lives are as follows:

Infrastructure 10 to 50 Years
Utility Plant and Buildings 25 to 50 Years
Improvements 10 to 20 Years
Machinery and Equipment 3 to 35 Years

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) G. Capital Assets (Continued)
Maintenance and repairs are charged to operations when incurred. Betterments and major improvements, which significantly increase values, change capacities or extend useful lives, are capitalized. Upon sale or retirement of capital assets, the cost and related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in the changes in net financial position.

H. Compensated Absences
Accumulated vacation is accrued when incurred in the government-wide, proprietary and fiduciary fund financial statements. A liability for accrued vacation is recorded in the governmental fund only to the extent that such amounts have matured (i.e., as a result of employee resignations and retirements). Upon termination of employment, the City will pay the employee all accumulated vacation leave at 100% of the employee’s base hourly rate.

I. Deferred Outflows and Inflows of Resources
The statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and will not be recognized as an outflow of resources (expense/expenditure) until that time.

The City has the following items that qualify for reporting as deferred outflows of resources:

Deferred outflows related to pension and OPEB plans equal to employer contributions made after the measurement date of the pension and OPEB liabilities.

Deferred outflows related to pension and OPEB plans for differences between expected and actual experiences and for changes in employer’s proportion and differences between employer’s contributions and the proportionate share of employer contributions. These amounts are amortized over a closed period equal to the average of the expected remaining service lives of all employees that are provided with pensions and OPEB benefits through the plans.

Deferred outflows related to OPEB plans for changes in assumptions. These amounts are amortized over a closed period equal to the average of the expected remaining service lives of all employees that are provided with OPEB benefits through the plans.

Deferred outflows related to pension and OPEB plans resulting from the net difference between projected and actual earnings on plan investments. These amounts are amortized over five years.

CITY OF VERNON

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. Deferred Outflows and Inflows of Resources (Continued) Deferred amount on bond refunding which is amortized over the life of refunding debt.

The statement of net position and the governmental fund balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and will not be recognized as an inflow of resources (revenue) until that time. The City has the following items that qualify for reporting in this category:

Deferred inflows related to pension and OPEB plans for changes in assumptions.

These amounts are amortized over a closed period equal to the average of the expected remaining service lives of all employees that are provided with pensions and OPEB benefits through the plans.

Deferred inflows related to OPEB plans for differences between expected and actual experiences. These amounts are amortized over a closed period equal to the average of the expected remaining service lives of all employees that are provided with OPEB benefits through the plans.

Deferred inflows related to pension plans for changes in employer’s proportion and differences between employer’s contributions and the proportionate share of employer contributions. These amounts are amortized over a closed period equal to the average of the expected remaining service lives of all employees that are provided with pension benefits through the plans.

Deferred inflows related to the deferred gain from the sale of generation assets.

These amounts are amortized over the lives of the related sale agreements.

J. Long-Term Obligations
Certain of the City’s governmental fund obligations not currently due and payable at year-end are reported in the government-wide statement of net position. Long-term debt and other obligations financed by proprietary funds and the fiduciary fund are reported as liabilities in the appropriate proprietary fund, fiduciary fund and government-wide statement of net position, respectively. Bond discounts and premiums, and deferred amounts on refunding are amortized over the life of the bonds using the straight-line method, which approximates the effective interest method.

K. Net Position
The government-wide financial statements and proprietary fund financial statements utilize a net position presentation. Net position is categorized as follows:

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) K. Net Position (Continued)
Net Investment in Capital Assets – This category groups all capital assets, including infrastructure, into one component of net position. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construction or improvement of these assets reduce the balance in this category.

Restricted Net Position – This category presents external restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation.

Unrestricted Net Position – This category represents the net position of the City not reported in other categories.

The City’s policy regarding whether to first apply restricted or unrestricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available is to use restricted resources first.

L. Fund Balance
In the fund financial statements, the governmental fund balance is classified in the following categories:

Nonspendable Fund Balance – includes amounts that are (a) not in spendable form, or (b) legally or contractually required to be maintained intact. The “not in spendable form” criterion includes items that are not expected to be converted to cash, for example, inventories, prepaid amounts, and long-term notes receivable.

Restricted Fund Balance – includes amounts that are restricted for specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers.

Committed Fund Balance – includes amounts that can only be used for the specific purposes determined by formal action of the City’s highest level of decision-making authority, its City Council. Commitments may be changed or lifted only by the City taking the same formal action that imposed the constraint originally (for example, ordinance).

Unassigned Fund Balance – includes the residual classification for the General Fund and includes all amounts not contained in the other classifications.

In circumstances when an expenditure is made for a purpose for which amounts are available in multiple fund balance classifications, fund balance is depleted in the order of restricted, committed, assigned, and unassigned.

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) M. Encumbrances
The City establishes encumbrances to record the amount of purchase orders, contracts, and other obligations, which have not yet been fulfilled, canceled or discharged.

Encumbrances outstanding at year-end do not constitute expenditures or liabilities.

Encumbrances outstanding at year-end are reported as a component of unassigned fund balance. Unencumbered appropriations lapse at year-end.

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

O. Property Taxes
The County of Los Angeles (County) levies, collects and apportions property taxes for all taxing jurisdictions within the County. Property taxes are determined by applying approved rates to the properties’ assessed values. The County remits property taxes applicable to the City less an administrative fee throughout the year.

Article XIIIA of the state of California Constitution limits the property tax levy to support general government services of the various taxing jurisdictions to $1.00 per $100 of assessed value. Taxes levied to service voter-approved debt prior to June 30, 1978, are excluded from this limitation.

Secured property taxes are levied in two installments, November 1 and February 1. They become delinquent with penalties after December 10 and April 10, respectively. The lien date is January 1 of each year for secured and unsecured property taxes and the levy date occurs on the 4th Monday of September of the tax year. Unsecured property taxes on the tax roll as of July 31 become delinquent with penalties on August 31.

P. 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’s California Public Employees’ Retirement System (CalPERS) and PARS plan and additions to/deductions from the Plans’ fiduciary net position have been determined on the same basis as they are reported by CalPERS and PARS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Q. 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’s OPEB 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. Investments are reported at fair value.

NOTE 2 CASH AND INVESTMENTS
Cash and Investments
Cash and investments as of June 30, 2021, are classified in the accompanying financial statements as follows:

Primary Fiduciary
Government Fund Total
Cash and Cash Equivalents 160,766,742 $ - $ 160,766,742 $ Restricted Cash and Cash Equivalents 61,462,930 20,667,571 82,130,501 Total Cash and Cash
Equivalents 222,229,672 $ 20,667,571 $ 242,897,243 $
Cash and investments as of June 30, 2021, consist of the following:

Cash on Hand 1,300 $
Deposits with Financial Institutions 123,417,314
Investments 119,478,629
Total Cash and Investments 242,897,243 $
The City’s Investment Policy
The City’s Investment Policy sets forth the investment guidelines for all funds of the City.

The Investment Policy conforms to the California Government Code Section 53600 et. seq.

The authority to manage the City’s investment program is derived from the City Council.

Pursuant to Section 53607 of the California Government Code, the City Council annually, appoints the City Treasurer to manage the City’s investment program and approves the City’s Investment Policy. The Treasurer is authorized to delegate this authority as deemed appropriate. No person may engage in investment transactions except as provided under the terms of the Investment Policy and the procedures established by the Treasurer.

This Investment Policy requires that the investments be made with the prudent person standard, that is, when investing, reinvesting, purchasing, acquiring, exchanging, selling or managing public funds, the trustee (Treasurer and staff) will act with care, skill, prudence, and diligence under the circumstances then prevailing, including but not limited to, the general economic conditions and the anticipated needs of the City.

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NOTE 2 CASH AND INVESTMENTS (CONTINUED)
The City’s Investment Policy (Continued)
The Investment Policy also requires that when following the investing actions cited above, the primary objective of the trustee be to safeguard the principal, secondarily meet the liquidity needs of depositors, and then achieve a return on the funds under the trustee’s control. Further, the intent of the Investment Policy is to minimize the risk of loss on the City’s held investments from:

A. Credit risk
B. Custodial credit risk
C. Concentration of credit risk
D. Interest rate risk
Investments Authorized by the California Government Code and the City’s Investment Policy
The table below identifies the investment types that are authorized for the City by the California Government Code and the City’s Investment Policy. The table also identifies certain provisions of the California Government Code that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investment of debt proceeds held by the bond trustee that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City’s Investment Policy.

Maximum Maximum
Authorized Maximum Percentage Investment Minimum
Investment Type Maturity of Portfolio* in One Issuer Rating U.S. Treasury Obligations 5 Years None None None
U.S. Agency Securities 5 Years None None None
Local Agency Bonds 5 Years None None AA
CA State and Local Agency Bonds 5 Years 30% None None
Bankers’ Acceptances 180 Days 40% 30% None
Commercial Paper 270 Days 25% 10% (1)
Negotiable Certificates of Deposit 5 Years 30% None None Repurchase Agreements 1 year None None None
Reverse Repurchase Agreements 92 Days 20% None None
Medium-Term Notes 5 Years 30% None A
Mutual Funds Investing in Eligible Securities N/A 20% 10% AAA Money Market Mutual Funds N/A 20% 10% AAA
Mortgage Pass-Through Securities 5 Years 20% None AA
State Administered Pool Investment N/A None None None
(1) Highest letter and numerical rating by a nationally recognized statistical ratings organization. * Excluding amounts held by bond trustee that are not subject to California Government Code restrictions.

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NOTE 2 CASH AND INVESTMENTS (CONTINUED)
Investments Authorized by Debt Agreements
Investments of debt proceeds held by bond trustees 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. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk.

Maximum Maximum
Authorized Maximum Percentage Investment Minimum
Investment Type Maturity of Portfolio in One Issuer Rating U.S. Treasury Obligations None None None None
U.S. Agency Securities None None None None
Certificates of Deposit None None None None
Bankers’ Acceptances 1 Year None None None
Commercial Paper None None None (1)
Money Market Mutual Funds N/A None None AAA
State Administered Pool Investment N/A None $50 Million None Investment Contracts None None None None
(1) Highest letter and numerical rating by a nationally recognized statistical ratings organization.

Disclosure Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will 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 changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is 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. The City monitors the interest rate risk inherent in its portfolio by measuring the weighted average maturity of its portfolio. The City has no specific limitations with respect to this metric.

Investment Maturities
Fair Value (in Months)
as of Less than 13 to 25 to
Investment Type 6/30/2021 12 Months 24 Months 60 Months Investments:

Local Agency Investment Fund 633,506 $ 633,506 $ - $ - $ Investments with Fiscal Agent:

Money Market Mutual Funds 118,845,123 118,845,123 - -
Total Investments 119,478,629 $ 119,478,629 $ - $ - $

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NOTE 2 CASH AND INVESTMENTS (CONTINUED)
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by the California Government Code, the City’s Investment Policy, or debt agreements, and the actual rating as of the year-end for each investment type.

Concentration of Credit Risk
The City’s Investment Policy places no limit on the amount the City may invest in any one issuer excluding a 10% limitation on commercial paper, mutual funds, and money market mutual funds and a 30% limitation on bankers’ acceptances. The City’s Investment Policy also places no limit on the amount of debt proceeds held by a bond trustee that the trustee may invest in one issuer that is governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City’s Investment Policy. As of June 30, 2021, there were no investments held by the City that exceeded 5% in any one issuer, excluding the investments in money market mutual funds.

Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City’s Investment Policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments. Under the California Government Code, a financial institution is required to secure deposits, in excess of the FDIC insurance amount of $250,000, made by state or local governmental units by pledging government securities held in the form of an undivided collateral pool. The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. Such collateral is held by the pledging financial institution’s trust department or agent in the City’s name.

At year-end, the carrying amounts of the City’s deposits were $123,417,314. The bank balances were $123,572,101, respectively. The difference between the bank balances and the carrying amounts represents outstanding checks and deposits in transit. As of June 30, 2021, the City’s deposits with financial institutions were either FDIC-insured or collateralized by the pledging financial institution as required by Section 53652 of the California Government Code.

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NOTE 2 CASH AND INVESTMENTS (CONTINUED)
Local Agency Investment Fund (LAIF)
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the state of California. The fair value of the City’s investment in this pool is reported in the accompanying financial statements at amounts based upon the City’s pro rata share of the fair value provided by LAIF for the entire LAIF portfolio. The balance available for withdrawal is based on the accounting records maintained by LAIF. LAIF is not rated.

Fair Value Measurement
The City categorizes its fair value measurement within the fair value hierarchy established by accounting principles generally accepted in the United States of America. The hierarchy is based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets, Level 2 inputs are quoted prices of similar assets in active markets, and Level 3 inputs are significant unobservable inputs.

The fair value of the City’s investments in the Local Agency Investment Fund and the money market mutual funds are not subject to the fair value hierarchy requirement.

Minimum Fair Value
Required Credit Rating as of
Investment Type Rating Moody's / S&P June 30, 2020
Investments:

Local Agency Investment Fund Not Rated Not Rated 633,506 $ Investments with Fiscal Agent:

Money Market Mutual Funds Aaa / AAA Aaa / AAA 118,845,123 Total Investments 119,478,629 $
NOTE 3 INTERFUND TRANSACTIONS
Interfund receivables and payables were as follows at June 30, 2021:

Due to/from Other Funds
Due from Other Funds Due to Other Funds Amount
Electric Enterprise Fund Water Enterprise Fund 593,486 $

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NOTE 3 INTERFUND TRANSACTIONS (CONTINUED)
Due to/from Other Funds (Continued)
The interfund balances resulted from borrowing of cash for temporary purposes. All balances are expected to be reimbursed within the subsequent year.

Advances to/from Other Funds
Receivable Fund Payable Fund Amount
Electric Enterprise Fund Gas Enterprise Fund 23,226,257 $ Fiber Optics Enterprise Fund 3,967,698
Water Enterprise Fund General Fund 2,117,993
Total 29,311,948 $
The advance between the Electric Enterprise Fund and the Gas and Fiber Optics Enterprise Funds do not accrue interest due to the nature of the City’s operational relationship and capital projects funded by the Electric Enterprise Fund that benefit all City operations. On November 6, 2012, the City adopted Resolution No. 2012-215 extending the repayment term of the advance from 15 months to a period of over 10 years.

The advance between the Water Enterprise Fund and the General Fund does not accrue interest due to the nature of the City’s operational relationship and capital projects funded by the Water Fund that benefit both. On November 6, 2012, the City adopted Resolution No. 2012-215 extending the repayment term of the advance from 15 months to a period of over 10 years.

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NOTE 4 CAPITAL ASSETS
Capital asset activity of governmental activities for the fiscal year ended June 30, 2021, was as follows:

Balance Balance
June 30, 2020 Additions Deletions June 30, 2021
Governmental Activities:

Capital Assets, Not Being Depreciated:

Land 62,140,108 $ 1,429,000 $ - $ 63,569,108 $
Construction in Progress 1,226,404 170,807 (110,784) 1,286,427 Total Capital Assets, Not
Being Depreciated 63,366,512 1,599,807 (110,784) 64,855,535 Capital Assets, Being Depreciated:

Infrastructure 158,949,660 18,367 - 158,968,027
Building and Improvements 16,711,672 - - 16,711,672
Improvements Other than Buildings 11,433,237 580,684 (33,672) 11,980,249 Machinery and Equipment 32,641,910 1,131,900 (13,494,263) * 20,279,547 Total Capital Assets, Being
Depreciated 219,736,479 1,730,951 (13,527,935) 207,939,495 Less: Accumulated Depreciation for:

Infrastructure (71,567,687) (3,567,204) - (75,134,891)
Building and Improvements (8,821,597) (394,249) - (9,215,846) Improvements Other than Buildings (5,946,979) (322,589) 40,826 (6,228,742) Machinery and Equipment (24,748,337) (716,100) 8,575,231 (16,889,206) Total Accumulated Depreciation (111,084,600) (5,000,142) 8,616,057 (107,468,685) Total Capital Assets, Being Depreciated,
Net:

Infrastructure 87,381,973 (3,548,837) - 83,833,136
Building and Improvements 7,890,075 (394,249) - 7,495,826 Improvements Other than Buildings 5,486,258 258,095 7,154 5,751,507 Machinery and Equipment 7,893,573 415,800 (4,919,032) 3,390,341 Total 108,651,879 (3,269,191) (4,911,878) 100,470,810
Governmental Activities Capital
Assets, Net 172,018,391 $ (1,669,384) $ (5,022,662) $ 165,326,345 $ * On October 1, 2020, the City transferred its fire department operations to Los Angeles County, California. As a result, $13,433,110 of machinery and equipment related to the Vernon Fire Department was donated or sold during fiscal year 2021. See Note 10 for further information.

Depreciation expense was charged to governmental functions as follows:

General Government 677,381 $
Public Safety 371,892
Public Works 3,950,869
Total Depreciation Expense - Governmental
Functions 5,000,142 $

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(46)
NOTE 4 CAPITAL ASSETS (CONTINUED)
Capital asset activity of business-type activities for the fiscal year ended June 30, 2021, was as follows:

Balance Balance
June 30, 2020 Additions Deletions June 30, 2021
Business-Type Activities:

Capital Assets, Not Being Depreciated:

Electric Utility - Land 4,240,129 $ - $ 8,953,465 $ 13,193,594 $ Water Utility - Water 467,640 - - 467,640
Electric Utility - Intangibles -
Environmental Credits 1,163,811 - - 1,163,811
Electric Utility - Construction in
Progress 54,130,254 147,961 (8,953,465) 45,324,750
Water Utility - Construction in Progress 3,668,700 1,633,512 (666,795) 4,635,417 Total Capital Assets, Not
Being Depreciated 63,670,534 1,781,473 (666,795) 64,785,212 Capital Assets, Being Depreciated
Electric Utility - Production Plant 16,189,303 - - 16,189,303 Electric Utility - Transmission Plant 4,888,113 - - 4,888,113 Electric Utility - Distribution Plant 243,879,181 14,571,998 - 258,451,179 Electric Utility - General Plant 9,258,248 256,553 73,132 9,587,933 Water Utility Plant 22,025,313 1,104,609 635,431 23,765,353 Gas Utility Plant 26,954,200 19,492 - 26,973,692
Fiber Optic Utility Plant 4,161,378 - - 4,161,378
Total Capital Assets, Being
Depreciated 327,355,736 15,952,652 708,563 344,016,951
Less: Accumulated Depreciation for:

Electric Utility - Production Plant (10,295,956) (461,537) - (10,757,493) Electric Utility - Transmission Plant (3,332,436) (92,145) - (3,424,581) Electric Utility - Distribution Plant (94,007,029) (7,220,094) - (101,227,123) Electric Utility - General Plant (5,670,594) (405,195) (73,132) (6,148,921) Water Utility Plant (15,312,877) (389,185) (21,693) (15,723,755) Gas Utility Plant (10,417,468) (725,458) - (11,142,926) Fiber Optic Utility Plant (2,930,812) (193,068) - (3,123,880) Total Accumulated Depreciation (141,967,172) (9,486,682) (94,825) (151,548,679) Total Capital Assets, Being Depreciated,
Net:

Electric Utility - Production Plant 5,893,347 (461,537) - 5,431,810 Electric Utility - Transmission Plant 1,555,677 (92,145) - 1,463,532 Electric Utility - Distribution Plant 149,872,152 7,351,904 - 157,224,056 Electric Utility - General Plant 3,587,654 (148,642) - 3,439,012 Water Utility Plant 6,712,436 715,424 613,738 8,041,598 Gas Utility Plant 16,536,732 (705,966) - 15,830,766
Fiber Optic Utility Plant 1,230,566 (193,068) - 1,037,498 Total 185,388,564 6,465,970 613,738 192,468,272
Business-Type Activities Capital
Assets, Net 249,059,098 $ 8,247,443 $ (53,057) $ 257,253,484 $

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(47)
NOTE 4 CAPITAL ASSETS (CONTINUED)
Depreciation expense was charged to the business-type functions as follows:

Electric Fund 8,178,971 $
Gas Fund 725,458
Water Fund 389,185
Fiber Optics Fund 193,068
Total Depreciation Expense - Business-
Type Functions 9,486,682 $
NOTE 5 LONG-TERM OBLIGATIONS
As of June 30, 2021, outstanding debt obligations consisted of the following:
$43,765,000 Electric System Revenue Bonds (2008 Taxable Series A) At June 30, 2021, $38,840,000 remained outstanding. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The debt service remaining on the bonds is $76,291,541, payable through fiscal year 2039. For the current year, debt service and net electric revenues were $4,238,508 and $33,789,939, respectively. Under the Bond Indenture of Trust, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Light and Power Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Electric System Revenue Bonds, 2008 Taxable Series A were issued to provide funds to (i) finance the cost of certain capital improvements to the City’s Electric System, (ii) fund a deposit to the Debt Service Reserve Fund, and (iii) to pay costs of issuance of the 2008 Bonds. $37,640,000 Electric System Revenue Bonds (2012 Series A) At June 30, 2021, $37,640,000 remained outstanding. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The debt service remaining on the bonds is $71,100,228, payable through fiscal year 2042. For the current year, debt service and net electric revenues were $2,031,394 and $33,789,939, respectively. Under the Bond Indenture of Trust, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Light and Power Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Electric System Revenue Bonds, 2012 Series A were issued to provide funds to (i) pay a portion of the costs of certain capital improvements to the City’s Electric System, (ii) to provide for capitalized interest on the 2012 Series A Bonds, and (iii) to pay costs of issuance of the 2012 Series A Bonds.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(48)
NOTE 5 LONG-TERM OBLIGATIONS (CONTINUED)
$35,100,000 Electric System Revenue Bonds (2012 Taxable Series B) At June 30, 2021, $35,100,000 remained outstanding. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The debt service remaining on the bonds is $43,205,713, payable through fiscal year 2027. For the current year, debt service and net electric revenues were $2,222,900 and $33,789,939, respectively. Under the Bond Indenture of Trust, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Light and Power Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Electric System Revenue Bonds, 2012 Taxable Series B were issued to provide funds to (i) refund the $28,680,000 aggregate principal amount of 2009 Bonds maturing on August 1, 2012, (ii) to pay a portion of the Costs of the 2012 Project, and (iii) to pay costs of issuance of the 2012 Taxable Series B Bonds.
$111,720,000 Electric System Revenue Bonds (2015 Taxable Series A) At June 30, 2021, $111,720,000 remained outstanding. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The debt service remaining on the bonds is $129,227,536, payable through fiscal year 2027. For the current year, debt service and net electric revenues were $5,087,518 and $33,789,939, respectively. Under the Bond Indenture of Trust, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Light and Power Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Electric System Revenue Bonds, 2015 Taxable Series A were issued to provide funds to (i) refund a portion of the Outstanding Electric System Revenue Bonds, 2009 Series A; (ii) finance the Costs of certain Capital Improvements to the City’s Electric System by reimbursing the Electric System for the prior payment of such Costs from the Light and Power Fund; (iii) fund a deposit to the Debt Service Reserve Fund; and (iv) pay costs of issuance of the 2015 Bonds. $71,990,000 Electric System Revenue Bonds (2020 Series A) At June 30, 2021, $43,335,000 remained outstanding. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The debt service remaining on the bonds is $55,915,875, payable through fiscal year 2038. For the current year, debt service and net electric revenues were $31,148,179 and $33,789,939, respectively. Under the Indenture of Trust dated September 1, 2008, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Light and Power Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Electric System Revenue Bonds, 2020 Series A were issued to provide funds to (i) to finance the acquisition and construction of certain capital improvements to the Electric System of the City, (ii) to refund all of the City’s outstanding Electric System Revenue Bonds, 2009 Series A, and (iii) to pay costs of issuance of the 2020 Bonds.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(49)
NOTE 5 LONG-TERM OBLIGATIONS (CONTINUED)
$14,840,000 Water System Revenue Bonds (2020 Series A)
At June 30, 2021, $14,840,000 remained outstanding. The bonds are special obligation bonds which are secured by an irrevocable pledge of water revenues payable to bondholders. The debt service remaining on the bonds is $25,868,013, payable through fiscal 2051. For the current year, debt service and net water revenues were $437,232 and $2,328,135, respectively. Under the Indenture of Trust dated May 6, 2020, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Water Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Water System Revenue Bonds, 2020 Series A were issued to provide funds to (i) finance the acquisition and construction of certain capital improvements to the Water System of the City, (ii) purchase a municipal bond debt service reserve insurance policy for deposit in the Reserve Fund in satisfaction of the Reserve Requirement, and (iii) to pay costs of issuance of the 2020 Bonds.

A summary of bonds payable for business-type activities is as follows:

Fixed Annual Original
Interest Principal Issue Outstanding
Bonds Maturity Rates Installments Amount June 30, 2021
City of Vernon 07/01/38 7.40% - To begin 07/01/10: 43,765,000 $ 38,840,000 $ Electric System Revenue Bonds, 8.59% $265,000 -
2008 Taxable Series A $4,065,000
City of Vernon 08/01/41 5.00% - To begin 08/01/27: 37,640,000 37,640,000 Electric System Revenue Bonds, 5.50% $1,075,000 -
2012 Taxable Series A $7,120,000
City of Vernon 08/01/26 6.25% - To begin 08/01/22: 35,100,000 35,100,000 Electric System Revenue Bonds, 6.50% $6,165,000 -
2012 Taxable Series B $7,940,000
City of Vernon 08/01/26 4.05% - To begin 08/01/23: 111,720,000 111,720,000 Electric System Revenue Bonds, 4.85% $15,925,000 -
2015 Taxable Series A $22,540,000
City of Vernon 08/01/50 5.00% To begin 08/03/20: 71,990,000 43,335,000 Electric System Revenue Bonds, $1,525,000 -
2020 Taxable Series A $28,655,000
Premiums 7,189,882
Discounts (1,923,931)
Total Electric System
Revenue Bonds 271,900,951
Water System:

City of Vernon 08/01/50 5.00% To begin 08/01/21: 14,840,000 14,840,000 Water System Revenue Bonds, $240,000 -
2020 Taxable Series A $3,785,000
Premium 554,913
Total Water System
Revenue Bonds 15,394,913
Total Revenue Bonds 287,295,864 $

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(50)
NOTE 5 LONG-TERM OBLIGATIONS (CONTINUED)
Note Payable – Direct Borrowing
In May 2019, the City entered into an agreement with Water Replenishment District of Southern California (WRD) for assistance with the construction of a new groundwater well or rehabilitation of an existing groundwater well. The promissory note is unsecured and has no interest basis for an amount not to exceed $1,500,000. As of June 30, 2021, WRD has disbursed all of the funds under the agreement to the City. The note is payable in quarterly principal payments commencing September 1, 2020, in an amount which, together with all quarterly payments, will be sufficient to fully amortize the principal balance of the note by the maturity date of April 1, 2031.

Upon an event of default, WRD may declare any or all of the outstanding and unpaid principal balance immediately due and payable, without presentment, demand, protest, notice of protest, notice of acceleration or of intention to accelerate or any other notice, declaration or act of any kind, all of which are hereby expressly waived by the City.

Business-Type Activities Debt Service Requirements
As of June 30, 2021, annual debt service requirements of business-type activities to maturity are as follows:

Electric System Revenue Bonds
2008 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
2022 945,000 $ 3,295,768 $
2023 1,025,000 3,211,157
2024 1,120,000 3,119,029
2025 1,220,000 3,018,526
2026 1,330,000 2,909,004
2027-2031 8,670,000 12,525,079
2032-2036 13,315,000 7,872,520
2037-2040 11,215,000 1,500,458
Total Requirements 38,840,000 $ 37,451,541 $
Electric System Revenue Bonds
2012 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
2022 - $ 2,031,394 $
2023 - 2,031,394
2024 - 2,031,394
2025 - 2,031,394
2026 - 2,031,394
2027-2031 4,645,000 9,707,094
2032-2036 7,315,000 8,086,266
2037-2041 18,560,000 5,314,100
2042-2045 7,120,000 195,800
Total Requirements 37,640,000 $ 33,460,228 $

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(51)
NOTE 5 LONG-TERM OBLIGATIONS (CONTINUED)
Business-Type Activities Debt Service Requirements (Continued) Electric System Revenue Bonds
2012 Taxable Series B
Fiscal Year Ending June 30, Principal Interest
2022 - $ 2,222,900 $
2023 6,165,000 2,030,244
2024 6,565,000 1,632,431
2025 6,990,000 1,208,838
2026 7,440,000 753,250
2027-2030 7,940,000 258,050
Total Requirements 35,100,000 $ 8,105,713 $
Electric System Revenue Bonds
2015 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
2022 - $ 5,087,518 $
2023 22,540,000 4,580,368
2024 23,520,000 3,596,938
2025 24,585,000 2,530,618
2026 25,780,000 1,341,193
2027-2030 15,295,000 370,904
Total Requirements 111,720,000 $ 17,507,536 $
Electric System Revenue Bonds
2020 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
2022 24,030,000 $ 1,566,000 $
2023 - 965,250
2024 - 965,250
2025 - 965,250
2026 - 965,250
2027-2031 4,815,000 4,473,125
2032-2036 9,820,000 2,444,250
2037-2040 4,670,000 236,500
Total Requirements 43,335,000 $ 12,580,875 $

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(52)
NOTE 5 LONG-TERM OBLIGATIONS (CONTINUED)
Business-Type Activities Debt Service Requirements (Continued) Water System Revenue Bonds
2020 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
2022 240,000 $ 587,975 $
2023 250,000 575,725
2024 265,000 562,850
2025 275,000 549,350
2026 - 542,475
2027-2031 1,985,000 2,662,750
2032-2036 2,180,000 2,161,625
2037-2041 2,680,000 1,625,900
2042-2046 3,180,000 1,163,225
2047-2051 3,785,000 596,138
Total Requirements 14,840,000 $ 11,028,013 $
Note Payable
Fiscal Year Ending June 30, Principal Interest
2022 139,535 $ - $
2023 139,535 -
2024 139,535 -
2025 139,535 -
2026 139,535 -
2027-2031 662,791 -
Total Requirements 1,360,465 $ - $
Changes in Long-Term Liabilities
The following is a summary of long-term liabilities transactions for the fiscal year ended June 30, 2021:

Amounts
Balance Balance Due Within
June 30, 2020 Additions Reductions June 30, 2021 One Year Governmental Activities:

Claims Payable (Note 6) 3,840,080 $ 836,537 $ (1,267,245) $ 3,409,372 $ 1,294,266 $ Compensated Absences 4,857,829 114,653 (2,467,227) * 835,085 2,505,255 Capital Lease Obligation (Note 12) 1,983,809 - (1,983,809) - - Total 10,681,718 $ 951,190 $ (5,718,281) $ 5,914,627 $ 2,129,351 $ Business-Type Activities:

Other Debt:

Bonds Payable 310,995,000 $ - $ (29,520,000) $ 281,475,000 $ 25,215,000 $ Bond Premium 8,209,211 - (464,416) 7,744,795 -
Bond Discount (2,370,596) - 446,665 (1,923,931) -
Notes Payable - Direct Borrowing 738,720 761,280 (139,535) 1,360,465 139,535 Compensated Absences 1,068,776 648,598 (535,471) 1,181,903 393,968 Total 318,641,111 $ 1,409,878 $ (30,212,757) $ 289,838,232 $ 25,748,503 $ * $974,651 represents the cash-out portion of remaining leave hours after transferring the City’s fire department to Los Angeles County. See Note 10 for further details.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(53)
NOTE 5 LONG-TERM OBLIGATIONS (CONTINUED)
Expense Stabilization Fund
The City maintains an Expense Stabilization Fund held by a Trustee in such amounts, at such times and from sources as shall be determined by the City in its sole discretion. In the event of default under the Indenture shall have occurred and is continuing, the Trustee shall transfer all moneys in the fund to the debt service funds as provided in the Indenture.

Moneys on deposit in this fund may be withdrawn by the City at any time no event of default exists under the Indenture. As at June 30, 2021, this fund has a balance of $13,917,555.

Right to Accelerate Upon Default
Notwithstanding anything contrary in the Indenture or in the Bonds, upon the occurrence of an Event of Default, the Trustee may, with the consent of each Credit Provider whose consent is required by a Supplemental Indenture or a Credit Support Agreement, and shall, at the direction of the Owners of a majority in principal amount of Outstanding Bonds (other than Bonds owned by or on behalf of the City) by written notice to the City, declare the principal of the Outstanding Bonds and the interest thereon to be immediately due and payable, whereupon such principal and interest shall, without further action, become and be immediately due and payable.

Credit Ratings
As of June 30, 2021, the ratings on all Electric System Revenue Bonds is BBB+ by S&P and Baa2 by Moody’s and the ratings on all Water System Revenue Bonds is AA by S&P and not rated by Moody’s.

Line of Credit
As at June 30, 2021, the City does not have a line of credit with a financial institution.

NOTE 6 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; injuries to employees, and natural disasters.

The City utilizes insurance policy(s) to transfer these risks. Each policy has either selfinsured retention or deductible, which are parts of our Risk Financing Program. There have been no significant settlements or reductions in insurance coverage during the past three fiscal years.

Starting in Fiscal 2010, the City chose to establish the Risk Financing Program in the General Fund, whereby assets are set aside for claim-litigation settlements associated with the above-mentioned risks up to their self-insured retentions or policy deductibles. Athens Administrators Inc. is our Third Party Administrator for the City’s workers’ compensation program and they provide basic services for general liability claims and litigation.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(54)
NOTE 6 RISK MANAGEMENT (CONTINUED)
The insurance limits for the fiscal year 2021 are as follows (amounts in thousands):

Deductible/SIR
Insurance Type Program Limits (Self-Insured Retention)
Excess Liability Insurance $20,000,000 $2,000,000 SIR per occurrence D and O Employment Practice $2,000,000 $150,000 SIR non-safety; $150,000 SIR safety Excess Workers Compensation $50,000,000 $1,500,000 SIR per occurrence for presumptive loss Employer's Liability $1,000,000 $1,000,000 SIR per occurrence for all employees Commercial Property Insurance $100,000,000 $25,000 except:
$25,000,000 Flood Sublimit $250,000 power stations
$1.5/kVA transfers, subject to a $250,000 minimum
$500,000 named transformers
Employee Dishonest - Crime $1,000,000 $25,000
Pollution - Site Owned $5,000,000 $25,000 for non-utility locations, divested locations and scheduled storage tanks
$50,000 for utility locations
$100,000 for natural gas pipeline
Cyber Liability $3,000,000 $100,000
Contractors Equipment/Auto $10,000,000 Maximum Loss Per Occurrence $5,000 Physical Damage $1,000,000 Equipment Limit-loss or damage to any one piece
Residential Property Insurance $8,023,126 Blanket Building Limit $2,500 $89,013 Blanket Business Personal Property Limit
Terrorism and Sabotage $100,000,000 Policy Aggregate N/A $5,000,000 Active Shooter and Malicious Attack
Per Occurrence/Aggregate
$5,000,000 Terrorism and Sabotage Liability
Per Occurrence/Aggregate
The City has numerous claims and pending litigations, which generally involve accidents and/or liability or damage to City property. The balance of claims/litigations against the City is in the opinion of management, ordinary routine matters, incidental to the normal business conducted by the City. In the opinion of management, such proceedings are substantially covered by insurance, and the ultimate dispositions of such proceedings are not expected to have a material adverse effect on the City’s financial position, results of operations or cash flows.

Changes in the balance of claims liabilities for the past two fiscal years for all self-insurance activities combined are as follows:
2021 2020
Claims Payable, Beginning of Fiscal Year 3,840,080 $ 3,214,775 $ Incurred Claims and Change in Estimates 836,537 1,309,962 Claims Payments (1,267,245) (684,657)
Claims Payable, End of Fiscal Year 3,409,372 $ 3,840,080 $

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(55)
NOTE 7 PENSION PLANS
The following is a summary of pension related items for the year ended June 30, 2021:

Deferred Deferred
Pension Outflows Inflows Pension
Liability of Resources of Resources Expense
Miscellaneous 46,618,461 $ 9,272,328 $ (49,948) $ 8,691,162 $ Safety 88,682,300 19,581,945 (3,268,004) 3,903,316
Total 135,300,761 $ 28,854,273 $ (3,317,952) $ 12,594,478 $ A. General Information About the Pension Plans
On October 1, 2020, the City transferred its fire department operations to Los Angeles County, California. The City’s full-time safety (police and fire personnel) employees were converted from the City’s agent multiple-employer defined benefit pension plan to a costsharing defined benefit pension plan during the fiscal year ended June 30, 2021. See Note 10 for further information.

Plan Descriptions
All full-time safety (police and fire personnel) and miscellaneous personnel and temporary or part-time employees who have worked a minimum of 1,000 hours in a fiscal year are eligible to participate in the City’s cost-sharing and agent multipleemployer defined benefit pension Safety and Miscellaneous Plans, respectively, administered by the California Public Employees’ Retirement System (CalPERS) that acts as a common investment and administrative agent for participating public entities within the state of California. Benefits vest after five years of service. Employees who retire at the minimum retirement age with five years of credited service are entitled to retirement benefits. Monthly retirement benefits are based on a percentage of an employee’s average compensation for his or her highest consecutive 12 or 36 months of compensation for each year of credited service.

Benefits Provided
Miscellaneous members hired prior to January 1, 2013, with five years of credited service may retire at age 55 based on a benefit factor derived from the 2.7% at 55 Miscellaneous formula or may retire between ages 50 and 54 with reduced retirement benefits. New Miscellaneous members (PEPRA) with five years of credited service may retire at age 62 based on a benefit factor derived from the 2% at 62 Miscellaneous formula or may retire between age 52 and 61 with reduced retirement benefits. The benefit factor increases to a maximum of 2.5% at age 67. Safety members with five years of credited service may retire at age 50 based on a benefit factor derived from the 3% at 50 Safety formula for sworn Police and Fire Department employees. New Safety members (PEPRA) with five years of credited service may retire at age 57 based on a benefit factor derived from the 2.7% at 57 Safety (PEPRA) formula or may retire between age 50 and 56 with reduced retirement benefits for new Safety (PEPRA) members of both Police and Fire Departments. CalPERS also provides death and disability benefits. These benefit provisions and all other requirements are established by State statute provided through a contract between the City and CalPERS.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(56)
NOTE 7 PENSION PLAN (CONTINUED)
A. General Information About the Pension Plans (Continued) Benefits Provided (Continued)
The Plans’ provisions and benefits in effect as of the measurement date of June 30, 2020, are summarized as follows:

Miscellaneous
Prior to On or After
Hire Date January 1, 2013 January 1, 2013
Benefit Formula 2.7%@55 2%@62
Benefit Vesting Schedule 5 Years of Service 5 Years of Service Benefit Payments Monthly for Life Monthly for Life
Retirement Age 50 52
Monthly Benefits, as a % of Eligible Compensation 2.0% to 2.7% 1.0% to 2.5% Required Employee Contribution Rates 8.000% 6.250%
Required Employer Contribution Rates:

Normal Cost Rate 11.758% 11.758%
Payment of Unfunded Liability 3,185,676 $ - $
Safety
Prior to On or After
Hire Date January 1, 2013 January 1, 2013
Benefit Formula 3.0%@50 2.7%@57
Benefit Vesting Schedule 5 Years of Service 5 Years of Service Benefit Payments Monthly for Life Monthly for Life
Retirement Age 50 50
Monthly Benefits, as a % of Eligible Compensation 3% 2.0% to 2.7% Required Employee Contribution Rates 9.000% 12.750%
Required Employer Contribution Rates:

Normal Cost Rate 23.164% 23.164%
Payment of Unfunded Liability 5,885,793 $ - $
Employees Covered
At June 30, 2021, the following employees were covered by the benefit terms for each Plan:

Miscellaneous Safety
Inactive Employees or Beneficiaries Currently
Receiving Benefits 221 248
Inactive Employees Entitled to But Not Yet
Receiving Benefits 211 148
Active Employees 154 42
Total 586 438

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(57)
NOTE 7 PENSION PLAN (CONTINUED)
A. General Information About the Pension Plans (Continued) Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on July 1 following notice of a change in the rate.

Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute to the difference between the actuarially determined rate and the contribution rate of employees.

Contributions for the fiscal year ended June 30, 2021, included $9,071,469 for the UAL and $3,559,021 for the normal cost rate resulting in a total amount paid of $12,630,490.

B. 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, 2020, using an annual actuarial valuation as of June 30, 2019, rolled forward to June 30, 2020, 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, 2020 actuarial valuations were determined using the following actuarial assumptions:

Miscellaneous Safety
Valuation Date June 30, 2019 June 30, 2019
Measurement Date June 30, 2020 June 30, 2020
Actuarial Cost Method Entry Age Normal Entry Age Normal Actuarial Assumptions:

Discount Rate 7.15% 7.15%
Inflation 2.625% 2.625%
Payroll Growth 2.875% 2.875%
Projected Salary Increase (1) (1)
Mortality Rate Table (2) (2)
Post-Retirement Benefit Increase (3) (3)
(1) Varies by entry age and service.
(2) The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and Post-retirement mortality rates includes 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from December 2017 that can be found on the CalPERS website.
(3) The lessor of contract COLA or 2.50% until Purchasing Power Protection Allowance Floor on purchasing power applies, 2.50% thereafter.

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JUNE 30, 2021
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NOTE 7 PENSION PLAN (CONTINUED)
B. Net Pension Liability (Continued)
Long-Term Expected Rate of Return
The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long term expected rate of return, CalPERS took into account both short term and long term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short term (first 10 years) and the long-term (11+ years) using a building block approach. Using the expected nominal returns for both short term and long term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short term and long term returns. The expected 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 Real Return Real Return
Asset Years Years
Asset Class (a) Allocation 1 - 10 (b) 11+ (c)
Global Equity 50.00% 4.80% 5.98%
Fixed Income 28.00 1.00% 2.62%
Inflation Assets 0.00 0.77% 1.81%
Private Equity 8.00 6.30% 7.23%
Real Assets 13.00 3.75% 4.93%
Liquidity 1.00 0.00% -0.92%
Total 100.00%
(a)
(b) An expected inflation of 2.0% used for this period. (c) An expected inflation of 2.92% used for this period.

In the CalPERS ACFR, Fixed Income is included in Global Debt Securities; Liquidity is included in Short-term Investments; Inflation Assets are included in both Global Equity Securities and Global Debt Securities.

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NOTE 7 PENSION PLAN (CONTINUED)
B. Net Pension Liability (Continued)
Discount Rate
The discount rate used to measure the total pension liability was 7.15%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Subsequent Events
There were no subsequent events that would materially affect the results in this disclosure.

C. Changes in the Net Pension Liability
The changes in the Net Pension Liability for the Miscellaneous Plan over the measurement period follows:

Increase (Decrease)
Total Plan Net Pension
Pension Fiduciary Liability
Liability Net Position (Asset)
Miscellaneous Plan:

Balance at June 30, 2019
(Measurement Date) 175,949,364 $ 133,986,834 $ 41,962,530 $ Changes in the Year:

Service Cost 2,905,980 - 2,905,980
Interest on the Total Pension Liability 12,502,379 - 12,502,379 Changes in Assumptions - - -
Differences Between Expected and
Actual Experience 1,316,307 - 1,316,307
Contribution - Employer - 4,501,532 (4,501,532)
Contribution - Employee - 1,271,580 (1,271,580)
Net Investment Income - 6,484,512 (6,484,512)
Benefit Payments, Including Refunds
of Employee Contributions (7,720,453) (7,720,453) -
Administrative Expenses - (188,889) 188,889
Net Changes 9,004,213 4,348,282 4,655,931
Balance at June 30, 2020
(Measurement Date) 184,953,577 $ 138,335,116 $ 46,618,461 $

CITY OF VERNON

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JUNE 30, 2021
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NOTE 7 PENSION PLAN (CONTINUED)
C. Changes in the Net Pension Liability (Continued)
The City reported a net pension liability for its proportionate share of the net pension liability of the safety plan as of June 30, 2021, in the amount of $88,682,300.

The City’s net pension liability for the safety plan is measured as the proportionate share of the net pension liability of the CalPERS cost sharing pool. The City’s net pension liability of the Plan is measured as of June 30, 2020, and the total pension liability for the safety plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2019, rolled forward to June 30, 2020, using standard update procedures. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined.

The City’s proportionate share of the net pension liability for the safety plan as of June 30, 2019 and 2020 measurement dates was as follows:

Safety
Proportion - June 30, 2019 0.00000%
Proportion - June 30, 2020 1.33110%
Change - Increase (Decrease) 1.33110%
Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the City for each Plan, calculated using the discount rate for each Plan, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is a one percentage point lower or a one percentage point higher than the current rate:

Miscellaneous Safety
1% Decrease 6.15% 6.15%
Net Pension Liability 73,079,036 $ 133,481,479 $
Current Discount Rate 7.15% 7.15%
Net Pension Liability 46,618,461 $ 88,682,300 $
1% Increase 8.15% 8.15%
Net Pension Liability 24,971,929 $ 51,920,851 $

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JUNE 30, 2021
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NOTE 7 PENSION PLAN (CONTINUED)
C. Changes in the Net Pension Liability (Continued)
Pension Plan Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

D. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
For the measurement period ended June 30, 2020, the City recognized pension expense of $8,691,162 related to the miscellaneous plan and $3,903,316 related to the safety plan. At June 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Miscellaneous Plan Safety Plan Total
Deferred Deferred Deferred Deferred Deferred Deferred
Outflows of Inflows of Outflows of Inflows of Outflows of Inflows of Resources Resources Resources Resources Resources Resources Pension Contributions
Subsequent to
Measurement Date 4,979,905 $ - $ 7,650,585 $ - $ 12,630,490 $ - $ Differences Between
Expected and
Actual Experience 2,667,104 - 6,876,885 - 9,543,989 -
Change in Assumptions - (49,948) - (295,403) - (345,351) Net Differences Between
Projected and Actual
Earnings on Plan
Investments 1,625,319 - 1,927,446 - 3,552,765 -
Change in Employer's Proportion and
Differences Between the Employer's
Contributions and the Employer's - -
Proportionate Share of Contributions - - 3,127,029 (2,972,601) 3,127,029 (2,972,601) Total 9,272,328 $ (49,948) $ 19,581,945 $ (3,268,004) $ 28,854,273 $ (3,317,952) $ The $12,630,490 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, 2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Fiscal Year Ended June 30, Miscellaneous Safety Total
2022 1,486,131 $ 2,096,792 $ 3,582,923 $
2023 1,280,583 3,266,604 4,547,187
2024 875,442 2,272,431 3,147,873
2025 600,319 996,643 1,596,962
2026 - 30,887 30,887
E. Payable to the Pension Plan
At June 30, 2021, the City had no outstanding amount of contributions to the pension plans required for the year ended June 30, 2021.

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JUNE 30, 2021
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NOTE 8 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) A. General Information About the OPEB Plan
Plan Description
Retiree medical and dental benefits are established through the City’s Fringe Benefits and Salary Resolution as well as individual memoranda of understanding between the City and the City’s various employee bargaining groups.

Benefits Provided
Generally, the City will provide a postemployment benefit plan for the employee only to those who retire at age sixty (60) or later with twenty (20) years of continuous uninterrupted service up to the age of sixty-five (65). Alternatively, employees who retire before the age of sixty (60) with twenty (20) years of continuous uninterrupted service, will be permitted to pay their medical and dental premium cost and upon reaching the age of fifty (50), the City will pay the premium for the medical and dental plans until they reach the age of sixty-five (65).

Resolution 2011-129 provided lifetime medical benefits to Police Management employees and their spouses, who have been employed as sworn safety personnel for a minimum of twenty (20) years and a minimum of ten (10) years of that services have been with the City of Vernon. Resolution 2011-127 sets forth the Memorandum of Understanding of the Vernon Police Officers’ Benefit Association, provided lifetime medical benefits to those employees and their spouses, who have been employed as sworn safety personnel for a minimum of twenty (20) years and a minimum of ten (10) years of that service has been with the City of Vernon. Resolution 2012-217 granted specific retiree medical benefits to employees who retire during the 2012-2013 fiscal year in order to provide an incentive for early retirement whereby the City authorized the payment of medical and dental insurance premiums for eligible retiring employees and their eligible dependents with at least ten (10) years of service plus 5% for each additional full year of service above the ten (10) years of service, and that this offer be extended as an option to safety and safety management groups, at their discretion, in addition to the related options provided in the Vernon Firefighters Association Memorandum of Understanding and the Vernon Police Officers’ Benefit Association Memorandum of Understanding. Resolution 2013-06 declared that the retiree medical benefits which had not been a vested right for employees will continue to be non-vested right for employees who continue to be employed by the City on or after July 1, 2013, but will become a vested right for those who retire during the 2012-2013 fiscal year. The City’s plan is considered a substantive OPEB plan and the City recognizes cost in accordance with GASB Statement No 75. The City may terminate its unvested OPEB in the future.

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JUNE 30, 2021
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NOTE 8 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) A. General Information About the OPEB Plan (Continued)
Funding Policy and Contributions
The City has established an irrevocable OPEB trust with assets dedicated to paying future retiree medical benefits. The City intends to contribute 100% or more of the actuarially determined contribution for the explicit subsidy liability only. The portion of the liability due to the implicit subsidy is not prefunded but is paid as benefits come due.

For the year ended June 30, 2021, the City contributed $1,931,700 to the trust, paid $853,133 for retiree premiums, and the estimated implied subsidy was $346,693, resulting in a total contribution of $3,131,526.

Employees Covered by Benefit Terms
At June 30, 2021, the following employees were covered by the benefit terms:

Category Count
Active Employees 208
Inactive Employees or Beneficiaries Currently
Receiving Benefit Payments 115
B. Net OPEB Liability
The City’s net OPEB liability is measured as of June 30, 2020, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of June 30, 2020. A summary of the principal assumptions and methods used to determine the total OPEB liability is shown below.

Actuarial Assumptions
The valuation has been prepared on a closed group basis. Assumptions such as agerelated healthcare claims, healthcare trends, retiree participation rates, and spouse coverage, were selected based on demonstrated plan experience and the best estimate of expected future experience.

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NOTE 8 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) B. Net OPEB Liability (Continued)
Actuarial Assumptions (Continued)
The total OPEB liability in the June 30, 2019, actuarial valuation was rolled forward to the June 30, 2020, measurement date using standard actuarial techniques. Explicit subsidy benefit payments by employee group were allocated based on expected benefit payments. The following actuarial assumptions, applied to all periods included in the measurement unless otherwise specified:

Funding Method Entry age normal level percent of pay cost method Inflation 2.25%
Salary Increases 2.75% annual increases
Long-Term Return on Assets 6.25% net of investment expenses Discount Rate 6.25%
Healthcare Cost Trend Rates
Mortality

6.7% for FY2021, gradually decreasing over several
decades to ultimate rate of 3.8% in FY76 and later years 2017 CalPERS Experience Study. Tables include 15
years of static mortality improvement using 90% of scale MP-2016
Long-Term Expected Rate of Return
The long-term expected rate of return was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the OPEB plan’s target asset allocation as of June 30, 2020 are summarized in the following table:

Long-Term
Target Expected Real
Asset Class Allocation Rate of Return
CERBT Strategy 1:

Equity 59.00% 4.90%
Fixed Income 25.00 1.40%
TIPS 5.00 0.57%
Commodities 3.00 1.88%
REITs 8.00 4.43%
Total 100.00%

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NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
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NOTE 8 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) B. Net OPEB Liability (Continued)
Discount Rate
The discount rate used to measure the total OPEB liability was 6.25%. The projection of cash flows used to determine the discount rate assumed that City’s contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries.

Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

Change in the Net OPEB Liability
Increase (Decrease)
Total Plan Net OPEB
OPEB Fiduciary Liability
Liability Net Position (Asset)
Balance at June 30, 2019
(Measurement Date) 26,186,840 $ 4,268,189 $ 21,918,651 $ Changes in the Year:

Service Cost 565,922 - 565,922
Interest on the Total OPEB Liability 1,699,197 - 1,699,197 Differences Between Actual and
Expected Experience 206,148 - 206,148
Changes in Assumptions 579,724 - 579,724
Changes of Benefit Terms (800,265)
Investment Income - 44,684 (44,684)
Contribution - Employer - 3,915,406 (3,915,406)
Benefit Payments (1,222,538) (1,222,538) -
Administrative Expenses - (2,563) 2,563
Net Changes 1,028,188 2,734,989 (1,706,801)
Balance at June 30, 2020
(Measurement Date) 27,215,028 $ 7,003,178 $ 20,211,850 $ Change of Assumptions
There were no changes of assumptions.

Change of Benefit Terms
There were no changes of benefit terms.

Subsequent Events
There were no subsequent events that would materially affect the results presented in this disclosure.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
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NOTE 8 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) B. Net OPEB Liability (Continued)
Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the City’s net OPEB liability if it were calculated using a discount rate that is 1% point lower or 1% point higher than the current rate:

Discount Rate
One Percent One Percent
Decrease Current Rate Increase
(5.25%) (6.25%) (7.25%)
Net OPEB liability 23,467,948 $ 20,211,850 $ 17,497,742 $ Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates The following presents the City’s net OPEB liability if it were calculated using a healthcare cost trend rates that are 1% point lower (5.7% decreasing to an ultimate rate of 3.8%) or 1% point higher (7.7% decreasing to an ultimate rate of 5.8 %) than the current rate:

Healthcare Trend Rate
One Percent One Percent
Decrease Current Rate Increase
Net OPEB liability 19,135,252 $ 20,211,850 $ 21,309,202 $ OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB For the year ended June 30, 2021, the City recognized OPEB expense(revenue) of $(810,447). At June 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Deferred
Outflows Inflows
of Resources of Resources
Contributions Between Measurement Date and
Reporting Date 3,131,526 $ - $
Difference Between Expected and Actual Experience 172,464 (3,881,457) Changes in Assumptions 484,998 (4,931,307)
Net Differences Between Projected and Actual
Earnings on Investments 218,716 -
Total 4,007,704 $ (8,812,764) $

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NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
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NOTE 8 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) B. Net OPEB Liability (Continued)
OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB (Continued)
The $3,131,526 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, 2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as OPEB expense as follows:

Deferred
Outflows
(Inflows)
Fiscal Year Ending June 30, of Resources
2022 (1,930,214) $
2023 (1,930,624)
2024 (1,939,275)
2025 (1,925,483)
2026 (223,615)
Thereafter 12,624
Payable to the OPEB Plan
At June 30, 2021, the City had no outstanding amount of contributions to the OPEB plan required for the year ended June 30, 2021.

NOTE 9 VERNON PUBLIC UTILITIES OPERATIONS AND COMMITMENTS Bicent Agreements
Asset Sale
On December 13, 2007, the City entered into an Amended and Restated Purchase and Sale Agreement (the Bicent Agreement), with Bicent (California) Power LLC (Bicent), which is an affiliate of Bicent Holdings and Natural Gas Partners, to sell to Bicent the Malburg Generating Station (MGS) and the economic burdens and benefits of the City’s interests in 22 MW from the Hoover Dam Uprating Project for $287,500,000. This transaction closed on April 10, 2008.

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JUNE 30, 2021
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NOTE 9 VERNON PUBLIC UTILITIES OPERATIONS AND COMMITMENTS (CONTINUED) Bicent Agreements (Continued)
Asset Sale (Continued)
Bicent has agreed to sell the capacity and the energy of the MGS to the City on the terms set forth in a Power Purchase Tolling Agreement, by and between the City and Bicent, dated as of April 10, 2008 (the PPTA). In addition, Bicent has acquired the benefits and burdens of the City’s interest in the Hoover Uprating Project (described below) on the terms set forth in the Hoover Contract for Differences (CFD), between Bicent (California) Hoover LLC, a Delaware limited liability company (BCH) and the City, dated as of April 10, 2008 (the Hoover Differences Contract). Pursuant to the Bicent Agreement, Bicent has assigned its rights and obligations with respect to the MGS to its affiliate, Bicent (California) Malburg LLC, a Delaware limited liability company (BCM).

Pursuant to the Bicent Agreement, Bicent has assigned its rights and obligations with respect to the economic benefits and burdens of the Hoover Uprating Project to its affiliate, BCH. The City treated the PPTA as an asset lease-back transaction due to a 30-year ground lease between the City and BCM by deferring most of the gain from the sale of MGS to be amortized over the 15-year life of the PPTA. The City also deferred the gain from the CFD to be amortized over the 10-year life of the CFD. As of June 30, 2021, a deferred gain of $6,555,916 remains to be amortized, which will be amortized in proportion to the capacity payments the City will be making under the PPTA and CFD (See Note 10 for disclosure on uncertainties).

Power Purchase Commitments
As of June 30, 2021, under the Bicent Agreements, the City had the following long-term commitments to purchase power subject to certain conditions:

Fiscal Year Ending June 30, Amount*
2022 34,904,231 $
2023 27,146,619
Total 62,050,850 $
* Commitments under the PPTA and CFD, net of amortization of deferred gain.

Southern California Public Power Authority
In 1980, the City entered into a joint powers agreement with nine (9) Southern California cities and an irrigation district to form the Southern California Public Power Authority (the Authority). The Authority’s purpose is the planning, financing, acquiring, constructing, and operating of projects that generate or transmit electric energy for sale to its participants. The joint powers agreement has a term expiring in 2030 or such later date as all bonds and notes of SCPPA and interest thereon have been paid in full or adequate provisions for payments have been made. A copy of SCPPA’s audited financial statements can be reviewed on their website at www.scppa.org or can be obtained by written request at 225 South Lake Avenue, Suite 1250, Pasadena, CA 91101.

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JUNE 30, 2021
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NOTE 9 VERNON PUBLIC UTILITIES OPERATIONS AND COMMITMENTS (CONTINUED) Southern California Public Power Authority (Continued)
Take or Pay Contract
The Authority’s interests or entitlements in natural gas, generation, and transmission projects are jointly owned with other utilities. Under these arrangements, a participating member has an undivided interest in a utility plant and is responsible for its proportionate share of the costs of construction and operation and is entitled to its proportionate share of the energy, available transmission capacity, or natural gas produced. Each joint plant participant, including the Authority, is responsible for financing its share of construction and operating costs. The City has the following “take or pay” contract with the Authority:

Palo Verde Project
The Authority purchased a 5.91% interest in the Palo Verde Nuclear Generating Station (the Station), a nuclear-fired generating station near Phoenix, Arizona, from the Salt River Project Agricultural Improvement and Power District, and a 6.55% share of the right to use certain portions of the Arizona Nuclear Power Project Valley Transmission System. The City has a 4.9% entitlement share of the Authority’s interest in the station.

Between 1983 and 2008, the Authority issued $3.266 billion in debt of Power Project Revenue Bonds for the Station to finance the bonds and the purchase of the Authority’s share of the Station and related transmission rights. The bonds are not obligations of any member of the Authority or public agency other than the Authority.

Under a power sales contract with the Authority, the City is obligated on a “take or pay” basis for its proportionate share of power generated, as well as to make payments for its proportionate share of the operating and maintenance expenses of the Station, debt service on the bonds and any other debt, whether or not the project or any part thereof or its output is suspended, reduced or terminated. The City took its proportionate share of the power generated and its proportionate share of costs during the fiscal year 2021 was $2,771,758. The City expects no significant increases in costs related to its nuclear resources.

Power Purchase Commitments
The Authority has entered into power purchase agreements with project participants.

These agreements are substantially “take-and-pay” contracts where there may be other obligations not associated with the delivery of energy. The City has entered into power purchase agreements with the Authority related to the following projects:

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JUNE 30, 2021
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NOTE 9 VERNON PUBLIC UTILITIES OPERATIONS AND COMMITMENTS (CONTINUED) Southern California Public Power Authority (Continued)
Power Purchase Commitments (Continued)
Astoria 2 Solar Project
On July 23, 2014, the Authority entered into a power purchase agreement with Recurrent Energy for solar energy from the Astoria 2 Solar Project. SCPPA is entitled to 35 MW of photovoltaic generating capacity from commercial operation to December 31, 2021 and 45 MW of generating capacity from January 1, 2022 until the expected expiration date of December 31, 2036. The commercial operation date was December 2016. Power and Water Resources Pooling Authority, Lodi, Corona, Moreno Valley, and Rancho Cucamonga, are each buying the output of a separate portion of the facility, which is located in Kern County, California. SCPPA has purchase options in the 10th, 15th, and 20th Contract Years. The project is forecasted to start at a capacity factor of 31% with a 0.5% annual degradation. ACES Power Marketing is the third-party scheduling coordinator for the project. The City contracted to purchase 57.1429% until December 31, 2021, and 66.6667% thereafter, of the output. The City’s proportionate share of costs during the current fiscal year was $2,276,622.

Puente Hills Landfill Gas-to-Energy Project
On June 25, 2014, the Authority entered into a power purchase agreement with County Sanitation District No. 2 of Los Angeles County for 46 MW of the electric generation from a landfill gas to energy facility, located at Whittier, California. The project began deliveries to the Authority on January 1, 2017 for a term of 10 years.

The City contracted to purchase 23.2558% of the output. The City’s proportionate share of costs during the current fiscal year was $1,585,536.

Antelope DSR 1 Solar Project
On July 16, 2015, the Authority, entered into a power purchase agreement with Antelope DSR 1, LLC for 50 MW solar photovoltaic generating capacity from the Antelope DSR 1 Solar Facility. The facility is located near Lancaster, California, and commercial operation occurred on December 16, 2016 for a term of 20 years. The City contracted to purchase 50.00% of the output. The City’s proportionate share of costs during the current fiscal year was $1,689,552.

NOTE 10 COMMITMENTS AND CONTINGENCIES
Sale of Generation and Transmission Assets
The financial and operational effects of the 2008 sale of generation and transmission assets described in Note 9, Bicent Agreements, while reducing the electric system’s debt burden and providing liquidity, puts the utility at some risks in terms of increased fixed-charge obligations and long-term power resource uncertainty.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(71)
NOTE 10 COMMITMENTS AND CONTINGENCIES (CONTINUED)
Contract with Los Angeles County Fire Department
The City contracted with the County of Los Angeles (“LA County”) for Fire services on May 20, 2020, setting forth the terms and conditions under which LA county will provide fire protection, paramedic, and incidental services in the City for the next ten years. The City is to pay LA County the annual fee on a monthly basis. During the initial five-year period, the annual fee limitation shall not exceed four percent per fiscal year, during the sixth year of the agreement the annual fee limitation shall be the average of the preceding four years’ percentage increases plus one percent. During the seventh year of the agreement and each subsequent fiscal year, the annual fee limitation shall be the average of the immediately preceding five years’ percentage increases in the Annual Fee plus one percent. Additionally, there are conversion costs that will be paid in thirty-six equal payments. The agreement shall remain in effect for a minimum of ten years, subsequently it will ne renewed for oneyear periods. Either party may terminate this agreement any time after the expiration of the initial ten-year period term upon one year’s written notice.

The following was the contract cost for the fiscal year ending June 30, 2021 totaled $10,869,276.

NOTE 11 SUCCESSOR AGENCY DISCLOSURES
The accompanying financial statements also include the Private-Purpose Trust Fund for the Successor Agency to the City’s former Redevelopment Agency (Successor Agency). The City, as the Successor Agency, serves in a fiduciary capacity, as the custodian for the assets and to wind down the affairs of the former Redevelopment Agency. Its assets are held in trust for the benefit of the taxing entities within the former Redevelopment Agency’s boundaries and as such, are not available for the use of the City.

Disclosures related to the certain assets and long-term liabilities of the Successor Agency are as follows:

Capital Assets
Effective February 1, 2012, due to AB 1X 26, Redevelopment Agencies throughout California has been dissolved. The activities of the dissolved Vernon Redevelopment Agency have been recorded in the Vernon Redevelopment Successor Agency fiduciary fund. In accordance with the Successor Agency’s long-range plan to wind down the affairs of the Successor Agency, all capital assets of the Successor Agency were either written-off or transferred over to the City restricted for government purpose use.

Long-Term Liabilities
The long-term liabilities of the Successor Agency at June 30, 2021, were as follows:

Amounts
Balance Balance Due Within
June 30, 2020 Additions Reductions June 30, 2021 One Year Bonds Payable 45,405,000 $ - $ (3,105,000) $ 42,300,000 $ 3,385,000 $ Bond Premium 281,211 - (44,345) 236,866 -
Bond Discount (483,015) - 43,910 (439,105) -
Total 45,203,196 $ - $ (3,105,435) $ 42,097,761 $ 3,385,000 $

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(72)
NOTE 11 SUCCESSOR AGENCY DISCLOSURES (CONTINUED)
$49,420,000 Industrial Redevelopment Project Tax Allocation Bonds, Series 2005 At June 30, 2021, $32,535,000 remained outstanding. The bonds are special obligation bonds and are payable from the pledged tax revenues and amounts on deposit in the reserve account. The debt service remaining on the bonds is $48,130,831, payable through fiscal 2036. For the current year, debt service amounted to $3,337,888. The bonds were issued to (i) finance various redevelopment projects, in or benefiting the Agency’s Industrial Redevelopment Project area, (ii) fund the reserve requirement for the Series 2005 Bonds, and (iii) pay costs of issuance of the Series 2005 Bonds. Debt service was calculated at the actual fixed rates of the coupons ranging from 3.25% to 5.25%. $19,490,000 Industrial Redevelopment Project Tax Allocation Bonds, Series 2011 At June 30, 2021, $9,765,000 remained outstanding. The bonds are special obligation bonds and are payable from the pledged tax revenues and amounts on deposit in the reserve account. The debt service remaining on the bonds is $14,334,688, payable through fiscal 2031. For the current year, debt service amounted to $2,323,225. The bonds were issued to (i) finance the acquisition of one or more parcels of land, and certain redevelopment projects, in or benefiting the Agency’s Industrial Redevelopment Project area, (ii) fund a deposit to the reserve account sufficient to meet the reserve requirement, and (iii) pay costs of issuance of the Series 2011 Bonds. Debt service was calculated at the actual fixed rates of the coupons ranging from 3.00% to 9.25%.

The following schedule shows the debt service requirements to maturity for the bonds as of June 30, 2021:

Fiscal Year Ending June 30, Principal Interest Total
2022 3,385,000 $ 2,344,225 $ 5,729,225 $
2023 1,845,000 2,174,497 4,019,497
2024 2,015,000 2,053,091 4,068,091
2025 2,195,000 1,922,319 4,117,319
2026 2,385,000 1,781,719 4,166,719
2027 - 2031 15,260,000 7,876,794 23,136,794
2032 - 2036 15,215,000 2,012,875 17,227,875
Total 42,300,000 $ 20,165,519 $ 62,465,519 $
NOTE 12 CAPITAL LEASE OBLIGATIONS
On July 24, 2015, the City entered into a 10-year lease agreement to finance two Pierce PUC Triple Combo Pumpers for the fire department. Lease payments of $158,059 are due annually. In addition, on August 9, 2017, the City entered into a 10-year lease agreement to finance a Pierce Aerial Mounted Apparatus for the fire department. Lease payments of $165,146 are due annually.

On August 4, 2020, the City paid the termination value of the leases totaling $1,780,160 in order to transfer the equipment to Los Angeles County Fire Department free and clear of any encumbrances.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(73)
NOTE 13 SUBSEQUENT EVENT
In December 2021, the City issued $183,815,000 in Electric System Revenue Bonds, 2021 Series A and $52,070,000 in Electric System Revenue Bonds, 2022 Series A. The 2021 Series A bonds provide funds to finance the acquisition of Malburg Generating Station (MGS), the deposit to the Debt Service Reserve Fund, and the cost of issuance of the 2021 Bonds. The City made the determination to reacquire MGS on December 15, 2021 to achieve potential costs savings and other resource management benefits. In addition to any potential savings, the City expects there to other benefits associated with the acquisition of the MGS, which includes having control of the facility and the site, providing the City with flexibility with respect to MGS operations and MGS’s role in the City’s resource portfolio. The 2022 Series A bonds provide funds to refund and defease all of the outstanding 2012A Bonds, a portion of the 2012B bonds and pay the cost of issuance of the 2022 bonds. The defeasance of the 2012 A Bonds and portion of the 2021 Series B bonds will result in total debt service cash flow savings of $18,509,369 and an economic gain of $15,309,641.

REQUIRED SUPPLEMENTARY INFORMATION

CITY OF VERNON
BUDGETARY COMPARISON SCHEDULE – GENERAL FUND
YEAR ENDED JUNE 30, 2021
See accompanying Note to Required Supplementary Information. (74)
Variance with
Final Budget
Budgeted Amounts Positive
Original Final Actual (Negative)

REVENUES
Taxes 44,742,084 $ 44,742,084 $ 53,677,257 $ 8,935,173 $ Special Assessments 1,205,000 1,205,000 1,524,362 319,362 Licenses and Permits 1,774,966 1,774,966 2,083,795 308,829 Fines, Forfeitures, and Penalties 189,288 189,288 136,899 (52,389) Investment Income 86,700 86,700 70,480 (16,220)
Intergovernmental Revenues 1,518,931 1,518,931 1,364,950 (153,981) Charges for Services 9,922,829 9,922,829 9,577,442 (345,387) Other Revenues 1,421,211 1,421,211 1,132,285 (288,926)
Total Revenues 60,861,009 60,861,009 69,567,470 8,706,461

EXPENDITURES
Current:

General Government 15,106,014 15,503,015 15,129,409 373,606 Public Safety 29,417,913 29,454,213 34,754,653 (5,300,440) Public Works 8,513,947 8,513,947 7,054,990 1,458,957
Health Services 1,490,775 1,490,775 1,357,199 133,576
Capital Outlay 6,332,360 7,464,865 3,312,390 4,152,475
Total Expenditures 60,861,009 62,426,815 61,608,641 818,174 Excess (Deficiency) of Revenues
Over Expenditures - (1,565,806) 7,958,829 9,524,635

OTHER FINANCING SOURCES
Gain on Sale of Assets - - 486,009 486,009
Total Other Financing Sources - - 486,009 486,009
CHANGE IN FUND BALANCE (1,565,806) - 8,444,838 10,010,644 Fund Balance (Deficit) - Beginning of Year 8,522,417 8,522,417 8,522,417 - FUND BALANCE - END OF YEAR $ 6,956,611 8,522,417 $ 16,967,255 $ 10,010,644 $

CITY OF VERNON

NOTE TO REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2021
(75)
NOTE 1 BUDGET
The City adheres to the following general procedures in establishing its annual budget, which is reflected in the accompanying General Fund budgetary comparison schedule.

An annual budget is adopted by the City Council that provides for the general operation of the City. The budget includes authorized expenditures and estimated revenues of the General Fund.

The budget is adopted on a modified accrual basis and formally integrated into the accounting system and employed as a management control device during the year.

Encumbrances, which are commitments related to executory contracts for goods and services, are recorded to assure effective budgetary control and accountability.

Encumbrances outstanding at year-end do not constitute expenditures or liabilities.

Encumbrances outstanding at year-end are reported as committed fund balance for subsequent year expenditures. Unencumbered appropriations lapse at year-end.

Excess expenditures over appropriations are financed by beginning fund balance.

The final budgeted amounts used in the accompanying General Fund budgetary comparison schedule include any amendments made during the fiscal year 2019.

Encumbrances carried forward from the prior year are reflected in the original budget.

For the current year, the General Fund’s total positive variance between the final budgeted amounts and the actual amount of change in fund balance was $10,010,644. The key reason for this variance was due to higher-than-expected taxes of $8,935,173 and a favorable variance in actual expenditures than projected by $818,174.

For the current year, the General Fund’s total positive variance between the final budgeted estimated revenues and actual revenues was $8,919,741. There were several reasons for the variance, overall revenues came in higher than expected in most categories especially taxes and other revenues offset by a decrease in license and permits and intergovernmental revenues.

For the current year, the General Fund’s total positive variance between the final budgeted amount and the actual amount for expenditures was $818,174. The key reasons for this variance were due to higher appropriations than actual expenditures of $4,152,475 in capital outlay, $1,458,957 in public works, $373,606 in general government, $133,576 in health services, and $(5,300,440) in public safety.

For the current year, the General Fund’s total positive variance between the final budgeted amounts and the actual amount for other financing sources was $272,729. The key reason for this variance was due to a gain on sale of assets of $486,009.

CITY OF VERNON

SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY
AND RELATED RATIOS – MISCELLANEOUS PLAN
LAST TEN FISCAL YEARS *
(76)
Fiscal Year Ended June 30, 2021 June 30, 2020 June 30, 2019 June 30, 2018 Measurement Period June 30, 2020 June 30, 2019 June 30, 2018 June 30, 2017 Total Pension Liability:

Service Cost 2,905,980 $ 2,991,388 $ 2,826,440 $ 2,432,788 $ Interest on Total Pension Liability 12,502,379 11,863,069 11,053,679 10,383,859 Changes of Assumptions - - (549,432) 9,321,776
Differences Between Expected and
Actual Experience 1,316,307 3,767,030 3,059,775 (711,339) Benefit Payments, Including Refunds
of Employee Contributions (7,720,453) (6,652,881) (6,166,082) (6,145,366) Net Change in Total Pension
Liability 9,004,213 11,968,606 10,224,380 15,281,718
Total Pension Liability - Beginning of Year 175,949,364 163,980,758 153,756,378 138,474,660 Total Pension Liability -
End of Year (a) 184,953,577 $ 175,949,364 $ 163,980,758 $ 153,756,378 $ Plan Fiduciary Net Position:

Contributions - Employer 4,501,532 $ 3,908,165 $ 3,380,432 $ 3,629,603 $ Contributions - Employee 1,271,580 1,357,537 1,214,616 1,245,990 Net Investment Income 6,484,512 8,077,977 9,803,260 11,857,647 Benefit Payments, Including Refunds
of Employee Contributions (7,720,453) (6,652,881) (6,166,082) (6,145,366) Plan to Plan Resource Movement - - (296) 1,118
Administrative Expenses (188,889) (90,906) (186,518) (161,327) Other Miscellaneous Income (1) - 296 (354,202) -
Net Change in Plan
Fiduciary Net Position 4,348,282 6,600,188 7,691,210 10,427,665 Plan Fiduciary Net Position -
Beginning of Year 133,986,834 127,386,646 119,695,436 109,267,771 Plan Fiduciary Net Position -
End of Year (b) 138,335,116 $ 133,986,834 $ 127,386,646 $ 119,695,436 $ Net Pension Liability - Ending (a)-(b) 46,618,461 $ 41,962,530 $ 36,594,112 $ 34,060,942 $ Plan Fiduciary Net Position as a
Percentage of the Total Pension Liability 74.79% 76.15% 77.68% 77.85% Covered Employee Payroll 15,399,491 $ 15,996,725 $ 15,146,241 $ 13,440,076 $ Net Pension Liability as Percentage of
Covered - Employee Payroll 302.73% 262.32% 241.61% 253.43% Notes to Schedule:

Benefit Changes:

There were no changes in benefits.

Changes in Assumptions:

From fiscal year June 30, 2015 to June 30, 2016:

From fiscal year June 30, 2016 to June 30, 2017:

There were no changes in assumptions.

From fiscal year June 30, 2017 to June 30, 2018:

The discount rate was reduced from 7.65% to 7.15%.

From fiscal year June 30, 2018 to June 30, 2019:

From fiscal year June 30, 2019 to June 30, 2020:

There were no changes in assumptions.

From fiscal year June 30, 2020 to June 30, 2021:

There were no changes in assumptions.
* Fiscal year 2015 was the first year of implementation and therefore only seven years are shown.

GASB 68, paragraph 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense. The discount rate of 7.50% used for the June 30, 2014 measurement date was net of administrative expenses. The discount rate of 7.65% used for the June 30, 2015 measurement date is without reduction of pension plan administrative expense.

Demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Assumptions December 2017

CITY OF VERNON

SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY
AND RELATED RATIOS – MISCELLANEOUS PLAN (CONTINUED)
LAST TEN FISCAL YEARS *
(77)
Fiscal Year Ended
Measurement Period
Total Pension Liability:

Service Cost
Interest on Total Pension Liability
Changes of Assumptions
Differences Between Expected and
Actual Experience
Benefit Payments, Including Refunds
of Employee Contributions
Net Change in Total Pension
Liability
Total Pension Liability - Beginning of Year
Total Pension Liability -
End of Year (a)
Plan Fiduciary Net Position:

Contributions - Employer
Contributions - Employee
Net Investment Income
Benefit Payments, Including Refunds
of Employee Contributions
Plan to Plan Resource Movement
Administrative Expenses
Other Miscellaneous Income (1)
Net Change in Plan
Fiduciary Net Position
Plan Fiduciary Net Position -
Beginning of Year
Plan Fiduciary Net Position -
End of Year (b)
Net Pension Liability - Ending (a)-(b)
Plan Fiduciary Net Position as a
Percentage of the Total Pension Liability
Covered Employee Payroll
Net Pension Liability as Percentage of
Covered - Employee Payroll
June 30, 2017 June 30, 2016 June 30, 2015
June 30, 2016 June 30, 2015 June 30, 2014
$ 1,962,270 2,129,659 $ 1,955,694 $
9,447,012 9,969,103 9,609,274
(2,466,126) - -
(9,700,904) 1,046,363 -
(5,680,624) (5,748,657) (2,388,449)
(6,438,372) 7,396,468 9,176,519
137,516,564 131,078,192 128,340,045
$ 131,078,192 138,474,660 $ 137,516,564 $
$ 2,340,002 3,140,644 $ 1,825,732 $
1,054,426 1,095,824 1,015,741
2,337,855 583,692 16,045,243
(5,680,624) (5,748,657) (2,388,449)
18 (780) -
(124,052) (67,200) -
- - -
(72,375) (996,477) 16,498,267
110,336,623 110,264,248 93,838,356
$ 110,264,248 109,267,771 $ 110,336,623 $
$ 20,813,944 29,206,889 $ 27,179,941 $

78.91% 84.12% 80.24%
$ 11,708,057 13,150,103 $ 11,084,188 $
222.10% 177.77% 245.21%
Notes to Schedule:

Benefit Changes:

There were no changes in benefits.

Changes in Assumptions:

From fiscal year June 30, 2015 to June 30, 2016:

From fiscal year June 30, 2016 to June 30, 2017:

There were no changes in assumptions.

From fiscal year June 30, 2017 to June 30, 2018:

The discount rate was reduced from 7.65% to 7.15%.

From fiscal year June 30, 2018 to June 30, 2019:

From fiscal year June 30, 2019 to June 30, 2020:

There were no changes in assumptions.

From fiscal year June 30, 2020 to June 30, 2021:

There were no changes in assumptions.
* Fiscal year 2015 was the first year of implementation and therefore only seven years are shown.

GASB 68, paragraph 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense. The discount rate of 7.50% used for the June 30, 2014 measurement date was net of administrative expenses. The discount rate of 7.65% used for the June 30, 2015 measurement date is without reduction of pension plan administrative expense.

Demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Assumptions December 2017

CITY OF VERNON
SCHEDULE OF PENSION CONTRIBUTIONS – MISCELLANEOUS PLAN
LAST TEN FISCAL YEARS *
(78)
Fiscal Year Ended June 30, 2021 June 30, 2020 June 30, 2019 June 30, 2018 Contractually Required Contribution
(Actuarially Determined) 4,979,905 $ 4,500,718 $ 3,908,165 $ 3,380,432 $ Contributions in Relation to
the Actuarially Determined
Contributions (4,979,905) (4,500,718) (3,908,165) (3,380,432) Contribution Deficiency (Excess) - $ - $ - $ - $
Covered Payroll 15,355,968 $ 15,399,491 $ 15,996,725 $ 15,146,241 $ Contributions as a Percentage
of Covered Payroll 32.43% 29.23% 24.43% 22.32%
Notes to Schedule:

Valuation Date 6/30/2018 6/30/2017 6/30/2016 6/30/2015
Methods and Assumptions Used
to Determine Contribution Rates:

Actuarial Cost Method Entry Age Entry Age Entry Age Entry Age Amortization Method (1) (1) (1) (1)
Asset Valuation Method Fair Value Fair Value Fair Value Fair Value Inflation 2.625% 2.625% 2.75% 2.75%
Salary Increases (2) (2) (2) (2)
Investment Rate of Return 7.25% (3) 7.25% (3) 7.375% (3) 7.50% (3) Retirement Age (4) (4) (4) (4)
Mortality (5) (5) (5) (5)
(1) Level percentage of payroll, closed
(2) Depending on age, service, and type of employment
(3) Net of pension plan investment expense, including inflation (4) 2.0% at 55, 2.7% at 55, 2% at 60, and 2.0% at 62
(5) Mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board.
* Fiscal year 2015 was the first year of implementation and therefore only seven years are shown.

CITY OF VERNON
SCHEDULE OF PENSION CONTRIBUTIONS – MISCELLANEOUS PLAN (CONTINUED) LAST TEN FISCAL YEARS *
(79)
Fiscal Year Ended
Contractually Required Contribution
(Actuarially Determined)
Contributions in Relation to
the Actuarially Determined
Contributions
Contribution Deficiency (Excess)
Covered Payroll
Contributions as a Percentage
of Covered Payroll
Notes to Schedule:

Valuation Date
Methods and Assumptions Used
to Determine Contribution Rates:

Actuarial Cost Method
Amortization Method
Asset Valuation Method
Inflation
Salary Increases
Investment Rate of Return
Retirement Age
Mortality
June 30, 2017 June 30, 2016 June 30, 2015
$ 3,140,644 3,629,603 $ 2,340,002 $
(3,140,644) (3,629,603) (2,340,002)
$ - - $ - $
$ 13,150,103 13,440,076 $ 11,708,057 $

27.01% 23.88% 19.99%
6/30/2014 6/30/2013 6/30/2012
Entry Age Entry Age Entry Age
(1) (1) (1)
Fair Value Fair Value 15 Year
Smoothed
Market Method

2.75% 2.75% 2.75%
(2) (2) (2)

7.50% (3) 7.50% (3) 7.50% (3)
(4) (4) (4)
(5) (5) (5)
(1) Level percentage of payroll, closed
(2) Depending on age, service, and type of employment
(3) Net of pension plan investment expense, including inflation (4) 2.0% at 55, 2.7% at 55, 2% at 60, and 2.0% at 62
(5) Mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board.
* Fiscal year 2015 was the first year of implementation and therefore only seven years are shown.

CITY OF VERNON
SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY – SAFETY PLAN LAST TEN FISCAL YEARS *
(80)
Safety
Fiscal Year Ended 2021
Measurement Period June 30, 2020
Plan's Proportion of the Net
Pension Liability 1.331100%
Plan's Proportionate Share of
the Net Pension Liability 88,682,300 $
Plan's Covered Payroll 11,770,766 $
Plan's Proportionate Share of
the Net Pension Liability as a
Percentage of Covered Payroll 753.41%
Plan's Proportionate Share of
the Fiduciary Net Position as a
Percentage of the Plan's Total
Pension Liability 69.13%
Plan's Proportionate Share of
Aggregate Employer Contributions 10,280,295 $
Notes to Schedule:
*Fiscal year 2021 was the first year the City's Safety Plan was converted from an Agent Multiple Plan to a Cost Sharing Plan therefore only one year is shown.

CITY OF VERNON

SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY
AND RELATED RATIOS – SAFETY PLAN
LAST TEN FISCAL YEARS *
(81)
Fiscal Year Ended June 30, 2020 June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 Measurement Period June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2014 Total Pension Liability:

Service Cost 4,287,003 $ 4,414,740 $ 4,144,398 $ 3,454,025 $ 3,388,157 $ 3,448,760 $ Interest on Total Pension Liability 18,414,262 17,691,261 16,898,830 16,325,879 15,777,736 15,255,372 Changes of Benefit Terms - - - - - -
Changes of Assumptions - (1,533,898) 14,134,794 - (3,878,396) - Differences Between Expected and
Actual Experience (364,199) 2,008,618 (1,380,683) (2,430,394) (2,400,883) - Benefit Payments, Including Refunds
of Employee Contributions (12,139,668) (10,992,416) (10,147,899) (9,736,302) (9,470,058) (9,639,123) Net Change in Total Pension
Liability 10,197,398 11,588,305 23,649,440 7,613,208 3,416,556 9,065,009 Total Pension Liability - Beginning of Year 261,832,661 250,244,356 226,594,916 218,981,708 215,565,152 206,500,143 Total Pension Liability -
End of Year (a) 272,030,059 $ 261,832,661 $ 250,244,356 $ 226,594,916 $ 218,981,708 $ 215,565,152 $ Plan Fiduciary Net Position:

Contributions - Employer 7,011,540 $ 6,109,373 $ 5,476,196 $ 5,116,412 $ 4,147,441 $ 3,234,539 $ Contributions - Employee 1,239,891 1,302,308 1,212,646 1,222,561 1,167,329 1,092,012 Net Investment Income 12,275,401 14,666,919 17,760,401 760,559 3,525,241 24,855,525 Benefit Payments, Including Refunds
of Employee Contributions (12,139,668) (10,992,416) (10,147,899) (9,736,302) (9,470,058) (9,639,123) Plan to Plan Resource Movement - (431) (1,118) 780 24 - Administrative Expenses (131,969) (272,124) (237,068) (99,525) (191,323) - Other Miscellaneous Income (1) 431 (516,768) - - - -
Net Change in Plan
Fiduciary Net Position 8,255,626 10,296,861 14,063,158 (2,735,515) (821,346) 19,542,953 Plan Fiduciary Net Position - Beginning
of Year 184,928,220 174,631,359 160,568,201 163,303,716 164,125,062 144,582,109 Plan Fiduciary Net Position -
End of Year (b) 193,183,846 $ 184,928,220 $ 174,631,359 $ 160,568,201 $ 163,303,716 $ 164,125,062 $ Net Pension Liability - Ending (a)-(b) 78,846,213 $ 76,904,441 $ 75,612,997 $ 66,026,715 $ 55,677,992 $ 51,440,090 $ Plan Fiduciary Net Position as a
Percentage of the Total Pension Liability 71.02% 70.63% 69.78% 70.86% 74.57% 76.14% Covered - Employee Payroll 13,737,311 $ 14,292,273 $ 13,879,896 $ 12,971,888 $ 12,740,785 $ 12,510,920 $ Net Pension Liability as Percentage of
Covered - Employee Payroll 573.96% 538.08% 544.77% 509.00% 437.01% 411.16% Notes to Schedule:

Benefit Changes:

There were no changes in benefits.

Changes in Assumptions:

From fiscal year June 30, 2015 to June 30, 2016:

From fiscal year June 30, 2016 to June 30, 2017:

There were no changes in assumptions.

From fiscal year June 30, 2017 to June 30, 2018:

The discount rate was reduced from 7.65% to 7.15%.

From fiscal year June 30, 2018 to June 30, 2019:

From fiscal year June 30, 2019 to June 30, 2020:

There were no changes in assumptions.

GASB 68, paragraph 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense. The discount rate of 7.50% used for the June 30, 2014 measurement date was net of administrative expenses. The discount rate of 7.65% used for the June 30, 2015 measurement date is without reduction of pension plan administrative expense.

Demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Assumptions December 2017
* Fiscal year 2015 was the first year of implementation. Additionally, fiscal year 2021 was the first year the City's Safety Plan was converted from an Agent

CITY OF VERNON
SCHEDULE OF PENSION CONTRIBUTIONS – SAFETY PLAN
LAST TEN FISCAL YEARS *
(82)
Fiscal Year Ended June 30, 2021 June 30, 2020 June 30, 2019 June 30, 2018 Contractually Required Contribution
(Actuarially Determined) 7,650,585 $ 7,834,050 $ 7,011,540 $ 6,109,373 $ Contributions in Relation to
the Actuarially Determined
Contributions (7,650,585) (7,834,050) (7,011,540) (6,109,373) Contribution Deficiency (Excess) - $ - $ - $ - $
Covered Payroll 7,618,673 $ 11,770,766 $ 13,737,311 $ 14,292,273 $ Contributions as a Percentage
of Covered Payroll 100.42% 66.56% 51.04% 42.75%
Notes to Schedule:

Valuation Date 6/30/2018 6/30/2017 6/30/2016 6/30/2015
Methods and Assumptions Used
to Determine Contribution Rates:

Actuarial Cost Method Entry Age Entry Age Entry Age Entry Age Amortization Method (1) (1) (1) (1)
Asset Valuation Method Fair Value Fair Value Fair Value Fair Value Inflation 2.625% 2.625% 2.75% 2.75%
Salary Increases (2) (2) (2) (2)
Investment Rate of Return 7.25% (3) 7.25% (3) 7.375% (3) 7.50% (3) Retirement Age (4) (4) (4) (4)
Mortality (5) (5) (5) (5)
(1) Level percentage of payroll, closed
(2) Depending on age, service, and type of employment
(3) Net of pension plan investment expense, including inflation (4) 3.0% at 50, 3.0% at 55, and 2.7% at 57
(5) Mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board.
* Fiscal year 2015 was the first year of implementation and therefore only seven years are shown.

CITY OF VERNON
SCHEDULE OF PENSION CONTRIBUTIONS – SAFETY PLAN (CONTINUED) LAST TEN FISCAL YEARS *
(83)
Fiscal Year Ended
Contractually Required Contribution
(Actuarially Determined)
Contributions in Relation to
the Actuarially Determined
Contributions
Contribution Deficiency (Excess)
Covered Payroll
Contributions as a Percentage
of Covered Payroll
Notes to Schedule:

Valuation Date
Methods and Assumptions Used
to Determine Contribution Rates:

Actuarial Cost Method
Amortization Method
Asset Valuation Method
Inflation
Salary Increases
Investment Rate of Return
Retirement Age
Mortality
June 30, 2017 June 30, 2016 June 30, 2015
$ 5,116,412 5,476,196 $ 4,147,441 $
(5,116,412) (5,476,196) (4,147,441)
$ - - $ - $
$ 12,971,888 13,879,896 $ 12,740,785 $

39.45% 39.44% 32.55%
6/30/2014 6/30/2013 6/30/2012
Entry Age Entry Age Entry Age
(1) (1) (1)
Fair Value Fair Value 15 Year
Smoothed
Market Method

2.75% 2.75% 2.75%
(2) (2) (2)

7.50% (3) 7.50% (3) 7.50% (3)
(4) (4) (4)
(5) (5) (5)
(1) Level percentage of payroll, closed
(2) Depending on age, service, and type of employment
(3) Net of pension plan investment expense, including inflation (4) 3.0% at 50, 3.0% at 55, and 2.7% at 57
(5) Mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board.
* Fiscal year 2015 was the first year of implementation and therefore only seven years are shown.

CITY OF VERNON

SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS LAST TEN FISCAL YEARS *
(84)
Fiscal Year End June 30, 2021 June 30, 2020 June 30, 2019 June 30, 2018 Measurement Date June 30, 2020 June 30, 2019 June 30, 2018 June 30, 2017 Total OPEB Liability:

Service Cost 565,922 $ 549,137 $ 1,204,747 $ 1,166,825 $ Interest on Total OPEB Liability 1,699,197 1,641,230 2,063,052 1,879,025 Differences Between Expected and Actual Experience 206,148 - (6,680,583) - Assumption Changes 579,724 (124,861) (7,657,196) (770,716) Change of Benefit Terms (800,265) - - -
Benefit Payments (1,222,538) (1,158,450) (1,006,087) (838,818) Net Change in Total OPEB Liability 1,028,188 907,056 (12,076,067) 1,436,316 Total OPEB Liability - Beginning of Year 26,186,840 25,279,784 37,355,851 35,919,535 Total OPEB Liability - End of Year (a) 27,215,028 $ 26,186,840 $ 25,279,784 $ 37,355,851 $ Plan Fiduciary Net Position:

Contributions - Employer 3,915,406 $ 2,989,393 $ 2,065,407 $ 1,898,138 $ Net Investment Income 44,684 258,220 65,276 (2,049)
Benefit Payments
and the Implied Subsidy Benefit Payments (1,222,538) (1,158,450) (1,006,087) (838,818) Administrative Expenses (2,563) (629) (808) (4)
Other Deductions - - (1,400) -
Net Change in Plan Fiduciary Net Position 2,734,989 2,088,534 1,122,388 1,057,267 Plan Fiduciary Net Position - Beginning of Year 4,268,189 2,179,655 1,057,267 - Plan Fiduciary Net Position - End of Year (b) 7,003,178 $ 4,268,189 $ 2,179,655 $ 1,057,267 $ Net OPEB Liability - Ending (a)-(b) 20,211,850 $ 21,918,651 $ 23,100,129 $ 36,298,584 $ Plan Fiduciary Net Position as a Percentage of the
Total OPEB Liability 25.73% 16.30% 8.62% 2.83%
Covered - Employee Payroll 31,958,957 $ 35,182,647 $ 33,496,565 $ 33,511,114 $ Net OPEB Liability as Percentage of
Covered - Employee Payroll 85.16% 74.43% 75.47% 111.47% Notes to Schedule:

Benefit Changes:

There were no changes in benefits.

Changes in Assumptions:
* Fiscal year 2018 was the first year of implementation and therefore only four years are shown.

Fiscal year end June 30, 2020: Medical trend rates were updated to exclude Affordable Care Act's Excise Tax on high-cost health insurance plan due to its repeal.

Fiscal year end June 30, 2018 is the first year of implementation; therefore, there are no previous GASB 75 actuarial reports for comparison.

Fiscal year end June 30, 2019: Discount rate for the implicit subsidy liability was changed from 3.56% to 6.5% based on updated expectations of long-term returns on trust assets and updated valuation methods.

Fiscal year end June 30, 2021: Discount rate for the implicit subsidy liability was changed from 6.5% to 6.25% based on updated expectations of long-term returns on trust assets and updated valuation methods. Inflation rate changed from 2.50% to 2.25%.

CITY OF VERNON

SCHEDULE OF OPEB CONTRIBUTIONS
LAST TEN FISCAL YEARS *
(85)
Fiscal Year Ended June 30, 2021 June 30, 2020 June 30, 2019 June 30, 2018 Actuarially Determined Contribution 1,538,693 $ 1,931,700 $ 2,692,868 $ 2,692,868 $ Contributions in Relation to the Actuarially Determined Contributions (3,131,526) (3,915,406) (2,989,393) (2,065,407) Contribution Deficiency (Excess) (1,592,833) $ (1,983,706) $ (296,525) $ 627,461 $ Covered - Employee Payroll 31,702,877 $ 31,958,957 $ 35,182,647 $ 33,496,565 $ Contributions as a Percentage of Covered - Employee
Payroll 9.88% 12.25% 8.50% 6.17%
Notes to Schedule:

Valuation Date 6/30/2019 6/30/2018 6/30/2018 6/30/2017
Methods and Assumptions Used to Determine
Contribution Rates:

Actuarial Cost Method Entry Age Entry Age Entry Age Entry Age Amortization Method (1) (1) (1) (1)
Amortization Period 27 Years 27 Years 27 Years 29 Years Asset Valuation Method Market Value Market Value Market Value Market Value Inflation 2.25% 2.50% 2.50% 2.75%
Healthcare Trend Rates (4) (3) (3) (2)
Investment Rate of Return 6.25% 6.50% 7.00% 7.00%
Mortality (6) (6) (6) (5)
(1) Level percentage of payroll, closed.
(2) 8.50% trending down to 5.00%.
(3) 6.90% trending down to 4.00%.
(4) 6.70% trending down to 3.8%.
(5) CalPERS December 2014 experience study
(6) CalPERS December 2017 experience study
* Fiscal year 2018 was the first year of implementation and therefore four years are shown.

VERNON PUBLIC UTILITIES
(THE ELECTRIC, GAS, WATER, AND

FIBER OPTICS ENTERPRISE FUNDS OF THE

CITY OF VERNON)

FINANCIAL STATEMENTS AND

SUPPLEMENTARY INFORMATION
YEAR ENDED JUNE 30, 2021

CITY OF VERNON

VERNON PUBLIC UTILITIES

TABLE OF CONTENTS
YEAR ENDED JUNE 30, 2021

INTRODUCTORY SECTION

A MESSAGE FROM THE GENERAL MANAGER OF VERNON PUBLIC
UTILITIES i
FY 2020-2021 VERNON PUBLIC UTILITIES AT A GLANCE ii
MAJOR INITIATIVES AND ACCOMPLISHMENTS iii

FINANCIAL SECTION
INDEPENDENT AUDITORS’ REPORT 1
MANAGEMENTS’ DISCUSSION AND ANALYSIS (Required Supplementary Information – Unaudited) 4

BASIC FINANCIAL STATEMENTS
STATEMENT OF NET POSITION 11

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET
POSITION 13
STATEMENT OF CASH FLOWS 14
NOTES TO BASIC FINANCIAL STATEMENTS 16

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION
LIABILITY – CITY’S MISCELLANEOUS AND SAFETY COST SHARING PLAN 49
SCHEDULE OF PLAN CONTRIBUTIONS – CITY’S MISCELLANEOUS AND SAFETY COST SHARING PLAN 50
SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY 51 SCHEDULE OF OPEB CONTRIBUTIONS 52

SUPPLEMENTARY INFORMATION
COMBINING STATEMENT OF NET POSITION 53

COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION 55
COMBINING STATEMENT OF CASH FLOWS 56

INTRODUCTORY SECTION
(i)
Introduction
A message from Abraham Alemu, General Manager of Vernon Public Utilities While the past couple of years have presented historic challenges on a global scale, the City of Vernon and Vernon Public Utilities (VPU) have exhibited strength and resilience by continuing to provide safe, reliable and affordable services during the challenges caused by the COVID-19 pandemic. VPU seamlessly provided the electric, water, gas and fiber utilities to its residents and business community who are vital in manufacturing and distributing goods throughout the region. Recently, VPU established an impressive goal of providing the lowest electric rates in the State of California by 2030 in order to support customer competitiveness and enable community businesses to thrive as the economic engine in Southeast Los Angeles.

In the past year, VPU has continued to complete major infrastructure upgrade projects to meet the increasing needs of its business and industrial community – many of whom manufacture essential goods and products throughout the United States, such as cold storage, food packaging and steel production. These necessary enhancements to the VPU infrastructure foster improvement projects, which increased reliability and help the utility to meet system adequacy requirements, including substation equipment upgrades, automated metering, voltage upgrades, and proactive utility pole replacement and financing initiatives. In addition, the electric infrastructure upgrades support the utility’s Water Division Capital Improvement Projects (CIPs) aimed at creating sustainable water affordability and independence for Vernon residential and business customers. During the past year, the Department was able to drastically reduce its need to purchase water from imported sources and is serving water from the City’s groundwater sources, which results in significant cost savings for the utility and to its customers.

As VPU enters its third year of a 4-year voter-approved electric rate increase, the utility will continue to use this funding to promote programs and projects that will support increased reliability, resilience, and low rates. VPU will also consider and analyze new technologies in an evolving energy landscape to bring renewable, environmentally conscious programs to businesses and residents. Moving forward, VPU has wide-scale transportation electrification plans to help advance customer adoption and play a role in the utility’s long-term energy resources planning and deployment of green offerings.

VPU is well-positioned to maintain a strong financial performance into the long-term future and has made notable strides towards achieving and exceeding its Renewable Portfolio Standard (RPS) and greenhouse gas (GHG) reduction goals. VPU is actively considering a Solar plus Energy Storage Purchase Power Agreement (PPA), which will be the largest PPA in its portfolio.

Additionally, the City recently re-acquired the Malburg Generating Station, a 134-megawatt natural gas-fired, combined-cycle facility. With this resource back within the utility’s ownership and operation, VPU now has the control and capability to reduce ongoing operating costs and address the City’s long-term needs for local power generation. Both projects play a critical role in achieving the long-term goals established in Integrated Resource Plan (IRP).

As part of the repurchase, the utility’s electric financial ratings were reassessed by Moody’s and S&P. VPU received an upgraded credit rating from Moody’s and both agencies gave VPU a stable/positive outlook. This rating upgrade is a testament, among other factors, to the utility’s commitment to foster strong management fundamentals and maintain fiscal strength. (ii)
FY 2020 2021 Vernon Public Utilities at a Glance

ELECTRIC
Service area 5 square miles
Service meters 2,011 meters
Number of poles 4,144
Number of substations 8
Peak load 191.37 MW (August 2020)
WATER
Service area 4.2 square miles
Service meters 1,840 meters
Number of miles of water mains 49
Number of active wells 8
Number of reservoirs 8
Total reservoir capacity (gallons) 16.375 MG
Number of booster stations 3
Average day demand 18.73-acre feet
Maximum day peak factor 1.67
GAS
Service area 5 square miles
Service meters 118
Number of miles of gas distribution 44
Number of miles of gas transmission 7.3
Number of regulating stations 2
Peak month in decatherms (Month Year) 803,433 (October, 2020) Average month in decatherms 722,600
(iii)
Major Initiatives and Accomplishments
Department Wide
Earned the American Public Power Association (APPA) RP3 Diamond Level Recognition of Operational Excellence in the key areas of Reliability, Safety, Workforce Development, System Improvement
Served as an elected Board Member on the California Utilities Emergency Association Board of Directors
Annual benchmarking study ranks VPU electric reliability top 10% nationwide Secured Electric System Revenue Bonds at low rates to fund Capital Improvement Projects and to refund existing outstanding bonds
Successful implementation of a Utility Operations Trainee program, which ensures robust crosstraining and a strong succession plan.

Electric Division
Completed replacement of the 7kV Leonis Substation Number 3 Bank, which has been in service from 1957, to 16kV Substation Distribution Transformer.

Completed replacement of the Leonis Substation Number 4 Bank transformer, which in service since the 1960’s.

Completed replacement of Vernon Substation #1 Bank 6.9kV circuit breaker and #7 aux bank 480v circuit breaker.

Work in progress for 16kV re-configuration with balanced load and 4 new circuits Work in progress for 7kV to 16kV Conversion
Established 9-year Electric Meter Replacement Program and have made a significant advancement to meet department goals.

Resource Division
Vernon Power Plant’s maximum output was increased from 134MW to 139MW Completed agreements with 3 new gas counterparties
Sold excess capacity rights at Mead-Adelanto Transmission Line Water Division
Completed major rehabilitation of Wells 15 and 17, and minor rehabilitation of Well 21 Imported water was not purchased in Calendar Year 2021
Replaced the main on 50th Street between Soto Street and Boyle Avenue to enable pumping the full capacity of new Well 22, which is currently under construction Rehabilitation of the 3 – 1 MG reservoirs located at Pumping Plant 3 is halfway to completion, with one tank complete and back in service, and the second tank is well underway.

Continued implementation of a program to automate the efficient and safe operation of water production, storage, and conveyance facilities
Ongoing investment into Advanced Metering Infrastructure (AMI) Completed a Water Master Plan
(iv)
Gas Division
Increased staff count to safely respond to emergencies and give the ability to proactively perform preventative maintenance on gas infrastructure
The 5-member VPU Gas Division was honored as one of American Public Gas Association’s (APGA) Safety Contest winners for 2020.
5 new Vernon businesses connected to the Vernon Gas System, for a total of 130 customers.

Customer Service
Placed a moratorium on late fees, halted disconnections, and helped customers with outstanding balances as part of COVID-19 relief program for customers.

Working towards integrating a new CIS billing system that will provide automation to several manual processes and connectivity to the City’s financial system Compliance
Served in APPA’s Reliable Public Power Provider grading panel Reliability Metrics benchmarked among the highest in the country in 2020 o System Average Interruption Duration Index (SAIDI) in the top quartile across the US (38 min v. 101 min)
o System Average Interruption Frequency Index (SAIFI in the second quartile in the US (0.71 vs 1.03)
o Customer Average Interruption Frequency Index (CAIDI) in the top decile across the US (54 min vs 105 min)
Developed an Electric Physical Security Plan approved by Vernon Police Department and adopted by City Council in alignment with California Public Utilities Commission Decision 19-01- 018.

Completed Risk and Resilience Assessment of the Water Division in compliance with the US Environmental Protection Agency’s America’s Water Infrastructure Act of 2018.

Updated VPU’s Emergency Response Plan.

Performed an internal reliability assessment of the electric utility using the American Public Power Association’s Reliable Public Power Provider program in the key areas of safety, reliability, workforce development, and system improvement.

Implemented a Compliance Management Software for utility-wide compliance deadlines Successfully advocated for proposed rule amendments with the South Coast Air Quality Management District.

In conjunction with the Publics Works department, developed a 4-year City-wide Heavy Duty Vehicle Replacement Program.

FINANCIAL SECTION
CliftonLarsonAllen LLP
CLAconnect.com
CLA is an independent member of Nexia International, a leading, global network of independent accounting and consulting firms. See nexia.com/member firm disclaimer for details. (1)
INDEPENDENT AUDITORS’ REPORT
Honorable Mayor and the Members of the City Council
City of Vernon, California
Report on the Financial Statements
We have audited the accompanying financial statements of Vernon Public Utilities (VPU), of the City of Vernon, California (City), as of and for the year ended June 30, 2021, and the related notes to the financial statements, as listed in the table of contents.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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.

Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements 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 entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Honorable Mayor and the Members of the City Council
City of Vernon, California
(2)
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of Vernon Public Utilities of the City of Vernon, California, as of June 30, 2021, and the changes in its financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter
As discussed in Note 1 to the financial statements, the financial statements present only the Vernon Public Utilities and do not purport to, and do not, present fairly the financial position of the City of Vernon, California as of June 30, 2021, and the changes in its financial position and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, schedule of proportionate share of the City’s net pension liability, schedule of plan contributions, schedule of proportionate share of the City’s net OPEB liability, and schedule of OPEB contributions, identified as required supplementary information (RSI) 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 information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information
Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the VPU’s financial statements. The supplementary information consisting of combining statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated in all material respects in relation to the basic financial statements as a whole.

Honorable Mayor and the Members of the City Council
City of Vernon, California
(3)
The introduction section has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 3, 2022, on our consideration of the City’s internal control over the 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.

CliftonLarsonAllen LLP
Irvine, California
March 3, 2022

CITY OF VERNON

VERNON PUBLIC UTILITIES

MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(4)
The management of the Vernon Public Utilities (VPU), the electric, gas, water, and fiber optics utilities of the City of Vernon (“the City”), offers the following overview and analysis of the basic financial statements of the VPU for the fiscal year ended June 30, 2021. Management encourages readers to utilize information in the Management’s Discussion and Analysis (MD&A) in conjunction with the accompanying basic financial statements.

OVERVIEW OF BASIC FINANCIAL STATEMENTS
The MD&A is intended to serve as an introduction to the VPU’s basic financial statements. Included as part of the financial statements are three separate statements.

The statement of net position presents information on the VPU’s total assets and deferred outflows of resources and total liabilities and deferred inflows of resources, with the difference between the two reported as net position.

The statement of revenues, expenses and changes in net position presents information showing how the VPU's net position changed during the most recent fiscal year. Financial results are recorded using the accrual basis of accounting. Under this method, all changes in net position are reported as soon as the underlying events occur, regardless of the timing of cash flows. Thus, revenues and expenses reported in this statement for some items may affect cash flows in a future fiscal period (examples include billed but uncollected revenues and employee earned but unused vacation leave).

The statement of cash flows reports cash receipts, cash payments, and net changes in cash and cash equivalents from operations, noncapital financing, capital, and related financing, and investing activities.

The notes to the basic financial statements provide additional information that is essential to fully understand the data provided in the financial statements.

CITY OF VERNON

VERNON PUBLIC UTILITIES

MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(5)

FINANCIAL HIGHLIGHTS
Net Position
The table below summarizes the VPU’s net position as of the current fiscal year ended June 30, 2021 and prior fiscal year ended June 30, 2020. The details of the current year’s summary can be found on pages 11- 12 of this report.

City of Vernon
Vernon Public Utilities
Net Position
June 30, 2021 and 2020
2021 2020 Change %
Assets:

Current and other assets 174,666,191 $ 193,387,820 $ (18,721,629) $ 10% Restricted assets 56,392,885 66,575,492 (10,182,607) 15% Capital assets 257,253,484 249,059,098 8,194,386 3%
Total assets 488,312,560 509,022,410 (20,709,850) 4%
Deferred Outflows of Resources 5,874,605 6,955,752 (1,081,147) 16% Liabilities:

Current liabilities 47,659,116 49,637,390 (1,978,274) 4% Long term liabilities 290,506,033 310,779,916 (20,273,883) 7% Total liabilities 338,165,149 360,417,306 (22,252,157) 6% Deferred Inflows of Resources 8,616,511 12,173,804 (3,557,293) 29% Net Position:

Net investment in capital assets 148,442,763 159,733,492 (11,290,729) 7% Restricted for debt services 23,894,665 23,932,142 (37,477) 0% Unrestricted (deficit) (24,931,923) (40,278,582) 15,346,659 38% Total net position 147,405,505 $ 143,387,052 $ 4,018,453 $ 3% Change

CITY OF VERNON

VERNON PUBLIC UTILITIES

MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(6)
The assets and deferred outflows of resources of the VPU exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $147,405,505 (net position).

The category of the VPU’s net position with the largest balance totaling $148,442,763 represents resources that are invested in capital assets, net of related debt.

The second category restricted for debt services totaling $23,894,665 represents resources that are subject to external restrictions on how they can be used, in this case bond debt.

The remaining category of net position, totaling $(24,931,923) represents a deficit in unrestricted net position that is expected to be recovered from the VPU’s future revenues.

Activities, net position:

Current and other assets decreased $18,721,629 from the prior year mainly due to a decrease in prepaid natural gas of $25,646,420 and in advances to other City funds of $2,270,995 offset by an increase in cash and cash equivalents of $8,825,552.

Restricted assets decreased by $10,182,607 from the prior year mainly due to the drawdowns funding the capital improvement projects.

Capital assets increased $8,194,386 from the prior year mainly due to acquisitions of new equipment and facility improvements of $17.7 million, offset by depreciation of $9,486,682 (See Note 5).

Deferred outflows of resources decreased by $1,081,147 due to a decrease in amortization of deferred bond refunding costs by $3,509,672 offset by an increase in deferred outflow related to pension of $2,353,572.

Current liabilities decreased $1,978,274 mainly due to a decrease in bonds payable by $4,305,000 offset by an increase in accounts payable of $1,995,320 and bond interest payable $160,140.

Long-term liabilities decreased by $20,273,883 from the prior year mainly due to bonds payable of $29,520,000 (see Note 6) and partially offset by an increase in net pension liability (see Note 8).

Deferred inflows of resources decreased by $3,557,293 mainly due to the amortization of deferred gain from sale of generation assets by $3,687,769.

Net investment in capital assets decreased by $11,290,729 from the prior year, which is attributable to the increase in capital assets, net of capital bonds payable and use of restricted bond proceeds for construction of capital assets.

The unrestricted net deficit decreased by $15,346,659 from the prior year due primarily to an increase in the change in net position by $4,018,453 and the decrease in net investment in capital assets by $11,290,729.

CITY OF VERNON

VERNON PUBLIC UTILITIES

MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(7)
Changes in Net Position
The table below summarizes the VPU’s changes in net position over the current and prior fiscal years. The details of the current year’s changes in net position can be found on page 13 of this report.

City of Vernon
Vernon Public Utilities
Net Position
June 30, 2021 and 2020
2021 2020 Change %
Operating Revenues:

Charges for services 212,205,129 $ 206,547,293 $ 5,657,836 $ 3% Operating Expenses:

Cost of sales 179,468,776 172,638,405 6,830,371 4%
Depreciation and amortization 9,486,682 9,179,733 306,949 3% Total operating expenses 188,955,458 181,818,138 7,137,320 4% Operating income 23,249,671 24,729,155 (1,479,484) 6%
Nonoperating revenues (expenses):

Investment income 69,606 1,016,527 (946,921) 93%
Net increase/(decrease) in fair value of investments (3,033) 2,036 (5,069) 249% Interest expense (19,297,791) (19,311,031) 13,240 0%
Gain (loss) on sale of assets (424,922) 424,922 100%
Net nonoperating revenues (expenses) (19,231,218) (18,717,390) (513,828) 3% Change in net position 4,018,453 6,011,765 (1,993,312) 33% Net position beginning of year 143,387,052 137,375,287 6,011,765 4% Net position end of year $ 143,387,052 147,405,505 $ 4,018,453 $ 3% Change

CITY OF VERNON

VERNON PUBLIC UTILITIES

MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(8)
The VPU’s income before transfers of $28,031,391, less allocations to the City of $4,781,720, resulted in an increase in net position of $4,018,453 during the current year. The VPU expects to eliminate the deficit balance in unrestricted net position through future rate increases, cost reductions, and revenues from renewable energy projects.

The VPU’s activities increased net position by $4,018,453 which is $1,993,312 lower than the prior year.

The key reason for this change was due to a decrease in operating income.

CITY OF VERNON

VERNON PUBLIC UTILITIES

MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(9)

CAPITAL ASSET AND DEBT ADMINISTRATION
Capital assets
The VPU’s investment in capital assets as of June 30, 2021 amounted to $249,059,098 (net of accumulated depreciation). This investment in capital assets includes land, intangible assets, construction in progress, building, utilities system improvements, and machinery and equipment. The total increase in the VPU's investment in capital assets for the current fiscal year was $17,681,068, offset by depreciation of $9,486,682, for a net increase of $8,194,386.

Additional information on the VPU's capital assets can be found in Note 5 of this report.

Outstanding debt
As of June 30, 2021, the following debt remains outstanding:
$38,840,000 City of Vernon Electric System Revenue Bonds, 2008 Taxable Series A $37,640,000 City of Vernon Electric System Revenue Bonds, 2012 Series A $35,100,000 City of Vernon Electric System Revenue Bonds, 2012 Taxable Series B $111,720,000 City of Vernon Electric System Revenue Bonds, 2015 Taxable Series A $43,335,000 City of Vernon Electric System Revenue Bonds, 2020 Series A The City of Vernon Electric System Revenue Bonds, 2008 Taxable Series A were issued to provide funds to (i) finance the cost of certain capital improvements to the City’s Electric System, (ii) fund a deposit to the Debt Service Reserve Fund, and (iii) to pay costs of issuance of the 2008 Bonds.

The City of Vernon Electric System Revenue Bonds, 2012 Series A were issued to provide funds to pay a portion of the costs of certain capital improvements to the City’s Electric System, (ii) to provide for capitalized interest on the 2012 Series A Bonds, and (iii) to pay costs of issuance of the 2012 Series A Bonds.

The City of Vernon Electric System Revenue Bonds, 2012 Taxable Series B were issued to provide funds to (i) refund the $28,680,000 aggregate principal amount of 2009 Bonds maturing on August 1, 2012, (ii) to pay a portion of the Costs of the 2012 Project, and (iii) to pay costs of issuance of the 2012 Taxable Series B Bonds.

The City of Vernon Electric System Revenue Bonds, 2015 Taxable Series A were issued to provide funds to (i) refund a portion of the Outstanding Electric System Revenue Bonds, 2009 Series A; (ii) finance the costs of certain capital improvements to the City’s Electric System by reimbursing the Electric System for the prior payment of such costs from the Light and Power Fund; (iii) fund a deposit to the Debt Service Reserve Fund; and (iv) pay costs of issuance of the 2015 Bonds.

The City of Vernon Electric System Revenue Bonds, 2020 Series A were issued to provide funds to (i) finance the acquisition and construction of certain capital improvements to the Electric System of the City, (ii) to refund all of the City’s outstanding Electric System Revenue Bonds, 2009 Series A, and (iii) to pay costs of issuance of the 2020 Bonds.

CITY OF VERNON

VERNON PUBLIC UTILITIES

MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(10)
The City of Vernon Water System Revenue Bonds, 2020 Series A were issued to provide funds to (i) finance the acquisition and construction of certain capital improvements to the Water System of the City, (ii) purchase a municipal bond debt service reserve insurance policy for deposit in the Reserve Fund in satisfaction of the Reserve Requirement, and (iii) to pay costs of issuance of the 2020 Bonds.

As of June 30, 2021, the ratings on all Electric System Revenue Bonds of the City changed from the prior year to BBB+ rating by S&P and Baa2 rating by Moody’s and the ratings on all Water Revenue Bonds is AA by S&P and not rated by Moody’s.

Additional information on the VPU's long-term debt can be found in Note 6 of this report.

ECONOMIC FACTORS AND NEW YEAR’S BUDGET AND RATES
These factors were considered in preparing the VPU and the City’s budget for the 2022 fiscal year.

The City is strictly industrial and does not maintain an unemployment rate study of its small population. However, the unemployment rate of adjacent communities is currently 10.5%, which is higher than the State of California's average unemployment rate of 7.7%, and the national average unemployment rate of 5.9%.

Inflationary trends in the region compare favorably to national indices.

The occupancy rate of the City’s central business district ranges between 96% and 98%.

REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the VPU's finances for all those with an interest in the VPU's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Director of Finance, City of Vernon, 4305 Santa Fe Avenue, Vernon, California, 90058.

CITY OF VERNON

VERNON PUBLIC UTILITIES

STATEMENT OF NET POSITION
JUNE 30, 2021
See accompanying Notes to Basic Financial Statements.
(11)
Vernon
Public
Utilities
ASSETS
Current Assets:

Cash and Cash Equivalents 146,360,319 $
Accounts Receivable, Net of Allowance 7,096,905
Accrued Unbilled Revenue 16,978,805
Accrued Interest Receivable 2,361
Prepaid Items 16,312
Total Current Assets 170,454,702
Noncurrent Assets:

Restricted Cash and Cash Equivalents 56,392,885
Advances to Other City Funds 2,117,993
Prepaid Items 1,012,402
Deposits 1,081,094
Capital Assets:

Nondepreciable 64,785,212
Depreciable, Net 192,468,272
Total Noncurrent Assets 317,857,858
Total Assets 488,312,560

DEFERRED OUTFLOWS OF RESOURCES
Deferred Outflows Related to OPEB Liability 680,773
Deferred Outflows Related to Pensions 4,901,360
Deferred Amount on Refunding 292,472
Total Deferred Outflows of Resources 5,874,605

CITY OF VERNON

VERNON PUBLIC UTILITIES

STATEMENT OF NET POSITION (CONTINUED)
JUNE 30, 2021
See accompanying Notes to Basic Financial Statements.
(12)
Vernon
Public
Utilities

LIABILITIES
Current Liabilities:

Accounts Payable 14,079,041 $
Accrued Wages and Benefits 616,131
Customer Deposits 504,539
Bond Interest Payable 6,710,902
Bonds Payable 25,215,000
Note Payable 139,535
Compensated Absences 393,968
Total Current Liabilities 47,659,116
Noncurrent Liabilities:

Bonds Payable 262,080,864
Note Payable 1,220,930
Compensated Absences 787,935
Other Postemployment Benefit Liability 3,433,306
Net Pension Liability 22,982,998
Total Noncurrent Liabilities 290,506,033
Total Liabilities 338,165,149

DEFERRED INFLOWS OF RESOURCES
Deferred Inflows Related to OPEB Liability 1,496,988
Deferred Inflows Related to Pensions 563,607
Deferred Gain from Sale of Generation Assets 6,555,916
Total Deferred Inflows of Resources 8,616,511

NET POSITION
Net Investment in Capital Assets 148,442,763
Restricted for Debt Service 23,894,665
Unrestricted (Deficit) (24,931,923)
Total Net Position 147,405,505 $

CITY OF VERNON

VERNON PUBLIC UTILITIES

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION YEAR ENDED JUNE 30, 2021
See accompanying Notes to Basic Financial Statements.
(13)
Vernon
Public
Utilities

OPERATING REVENUES
Charges for Services 212,205,129 $
Total Operating Revenues 212,205,129

OPERATING EXPENSES
Cost of Sales 179,468,776
Depreciation 9,486,682
Total Operating Expenses 188,955,458
OPERATING INCOME 23,249,671

NONOPERATING REVENUES (EXPENSES)
Investment Income 69,606
Net Decrease in Fair Value of Investments (3,033)
Interest Expense (19,297,791)
Total Nonoperating Expenses (19,231,218)
CHANGE IN NET POSITION 4,018,453
Net Position - Beginning of Year 143,387,052
NET POSITION - END OF YEAR $ 147,405,505

CITY OF VERNON

VERNON PUBLIC UTILITIES

STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 2021
See accompanying Notes to Basic Financial Statements.
(14)
Vernon
Public
Utilities

CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers 211,940,439 $
Cash Paid to Suppliers for Goods and Services (143,796,855) Cash Paid to Employees for Services (5,421,172)
Cash Paid to City for Services (4,781,720)
Net Cash Provided by Operating Activities 57,940,692

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Repayment of Bonds (29,520,000)
Bond Interest Paid (15,645,730)
Proceeds from Note Payable 761,280
Payment of Note Payable (139,535)
Net Acquisition of Capital Assets (17,681,068)
Net Cash Used by Capital and Related Financing Activities (62,225,053)

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Payment from (Provided to) Other City Funds 2,859,095
Net Cash Provided by Noncapital Financing Activities 2,859,095

CASH FLOWS FROM INVESTING ACTIVITIES
Investment Income 68,211
Net Cash Provided by Investing Activities 68,211
CHANGE IN CASH AND CASH EQUIVALENTS (1,357,055)
Cash and Cash Equivalents - Beginning of Year 204,110,259 CASH AND CASH EQUIVALENTS - END OF YEAR $ 202,753,204

COMPOSITION OF CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents 146,360,319 $
Restricted Cash and Investments 56,392,885
Total 202,753,204 $

CITY OF VERNON

VERNON PUBLIC UTILITIES

STATEMENT OF CASH FLOWS (CONTINUED)
YEAR ENDED JUNE 30, 2021
See accompanying Notes to Basic Financial Statements.
(15)
Vernon
Public
Utilities

RECONCILIATION OF OPERATING INCOME TO NET CASH

PROVIDED (USED) BY OPERATING ACTIVITIES
Operating Income 23,249,671 $
Adjustments to Reconcile Operating Income
to Net Cash Provided (Used) by Operating Activities:

Depreciation 9,486,682
Change in Operating Assets and Liabilities:

Accounts Receivable (719,208)
Accrued Unbilled Revenue 438,168
Due from Other Funds (588,100)
Prepaid Expenses and Deposits (90,832)
Prepaid Natural Gas 25,646,420
Deferred Outflows of Resources (2,428,525)
Accounts Payable 1,995,320
Accrued Wages and Benefits 48,861
Due to Other City Funds (2,471)
Customer Deposits 16,350
Compensated Absences 113,127
Other Postemployment Benefit Liability 41,898
Net Pension Liability 4,290,624
Deferred Inflows of Resources (3,557,293)
Net Cash Provided by Operating Activities 57,940,692 $

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(16)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements present only the Vernon Public Utilities (VPU) of the City of Vernon, California (the City), and do not present fairly the financial position and results of the operations of the City. The VPU accounts for the independent operations and the maintenance of the City’s electric, gas, water, and fiber optics utilities. A fund, or utility, administered by the VPU is an independent fiscal and accounting entity with a self-balancing set of accounts recording resources, related liabilities, obligations, reserves, and equities, segregated for the purpose of carrying out specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations.

For additional information regarding the City of Vernon, refer to the City’s annual financial report.

Ordinance No. 1242, adopted May 16, 2017, requires each utility of the City to be independent with its assets, liabilities, and equities segregated, budgeted, and accounted for in separate funds. Ordinance No. 1240, adopted March 21, 2017, consolidates all utilitiesrelated services under the management of the stand-alone entity “Vernon Public Utilities” for better oversight and management of the day-to-day activities of such independent utilities.

Each of the City’s utilities, namely the electric, gas, water, and fiber optics utilities, were established by the City under and by virtue of the City Charter and the City Code enacted in 1988. Prior to July 1, 2016, the electric and gas utilities were consolidated and reported as the Light & Power Enterprise for financial reporting purposes. Ordinance No. 1242 continues to require each utility to be independent with its assets, liabilities, and equities segregated, budgeted, and accounted for in separate funds, while Ordinance No. 1240 enables the consolidated financial reporting of those independent utilities for better oversight and management.

The financial statements of the VPU have been prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP). The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The VPU’s significant accounting policies are described below.

A. Basis of Presentation
The VPU’s financial statements are reported using the economic resources measurement focus and the 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.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(17)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A. Basis of Presentation (Continued)
The VPU distinguishes operating revenues and expenses from nonoperating items.

Operating revenues, such as charges for services, result from exchange transactions associated with the sale of electricity, gas, and water. 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. Operating expenses include the cost of sales and services, administrative expenses and depreciation on capital assets. All expenses not meeting this definition are reported as nonoperating expenses.

B. Pooled Cash
Part of the VPU’s operating cash balance is pooled with other City funds for deposit purposes. The share of each fund in the pooled cash account is recorded in each of the funds’ books of accounts, and interest income is apportioned to the participating funds based on the relationship of their average monthly balances to the total of the pooled cash.

C. Cash Deposits and Investments
For purposes of the statement of cash flows, the VPU considers all highly liquid investments (including restricted cash and investments) with an original maturity of three months or less when purchased to be cash equivalents. Investment transactions are recorded on the settlement date. Investments in nonparticipating interest-earning investment contracts are reported at cost and all other investments are reported at fair value. Fair value is defined as the amount that the VPU could reasonably expect to receive for an investment in a current sale between a willing buyer and a seller and is generally measured by quoted market prices.

D. Receivables/Payables
Short-term City interfund receivables and payables are classified as “due from other City funds” and “due to other City funds”, respectively, on the statement of net position. Longterm City interfund receivables and payables are classified as “advances to/from other City funds,” respectively, on the statement of net position.

Trade receivables are shown net of an allowance for uncollectible accounts. Allowances for uncollectible accounts were $1,072,323 as of June 30, 2021. Utility customers are billed monthly. The estimated value of services provided, but unbilled at year-end has been included in the accompanying statement of net position.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(18)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) E. Prepaid Items
The VPU entered into an agreement for the purchase and sale of natural gas in 2006 with Citigroup Energy Inc. for a specified quantity of gas to be delivered to the VPU in accordance with the terms of the agreement. As full compensation for the total contract quantity to be delivered, VPU made a prepayment which is amortized over the life of the agreement based on the monthly contract quantities to be delivered. The agreement was in effect until May 31, 2021. As of June 30, 2021, the prepayment was fully amortized.

The VPU also made a prepayment to Southern California Public Power Authority (SCPPA) for the VPU’s share of SCPPA’s payoff of the Hoover Center and Air Slots debt. This prepaid amount is amortized over the life of the debt based on the annual debt service obligations. See Note 10 for further information regarding SCPPA.

F. Deposits
The VPU has deposits in SCPPA’s Project Stabilization Fund for use within SCPPA’s project purposes at the VPU’s discretion. At June 30, 2021, the amount of deposits totaled $1,081,094.

G. Capital Assets
Capital assets (including infrastructure) are recorded at historical cost or at estimated historical cost if the actual historical cost is not available. Contributed capital assets are recorded at their estimated acquisition value at the date contributed. Capital assets include land, intangible assets, construction in progress, and plant assets including building, improvements, and machinery and equipment. The capitalization threshold for all capital assets is $5,000. Capital assets used in operations are depreciated using the straight-line method over their estimated useful lives. Intangible assets with an indefinite useful life are not amortized but are evaluated annually for any impairment.

The estimated useful lives are as follows:

Utility Plant 3 to 50 Years
Maintenance and repairs are charged to operations when incurred. Betterments and major improvements, which significantly increase values, change capacities or extend useful lives, are capitalized. Upon sale or retirement of capital assets, the cost and related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in the statement of revenues, expenses, and changes in net position.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(19)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. Compensated Absences
Accumulated vacation is accrued when incurred. Upon termination of employment, the VPU will pay the employee all accumulated vacation leave at 100% of the employee’s base hourly rate.

I. Deferred Outflows and Inflows of Resources
The VPU recognizes deferred outflows and inflows of resources. A deferred outflow of resource is defined as consumption of net position by the VPU that is applicable to a future reporting period. A deferred inflow of resources is defined as an acquisition of net position by the VPU that is applicable to a future reporting period. On June 30, 2021, the VPU has deferred outflows of resources representing deferred amounts on bond refunding, pension-related transactions, and other postemployment benefit-related transactions, and deferred inflows of resources representing the deferred gain from the sale of generation assets, pension-related transactions, and other postemployment benefit-related transactions.

J. Long-Term Obligations
Bond discounts and premiums and deferred amounts on refunding are amortized over the life of the bonds using the straight-line method.

K. Net Position
The VPU financial statements utilize a net position presentation. Net position is categorized as invested in capital assets (net of related debt), restricted and unrestricted.

Net Investment in Capital Assets – This category groups all capital assets into one component of net position. Accumulated depreciation and the outstanding balances of liabilities that are attributable to the acquisition, construction or improvement of these assets reduce the balance in this category.

Restricted Net Position – This category presents external restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation.

Unrestricted Net Position – This category represents net position of the VPU not restricted for any project or other purpose.

The VPU’s policy regarding whether to first apply restricted or unrestricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available is to use restricted resources first.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(20)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) L. Use of Estimates
The preparation of basic financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

M. 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’s California Public Employees’ Retirement System (CalPERS) plan and additions to/deductions from the Pension 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 the benefit terms. Investments are reported at fair value.

N. 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’s OPEB Plan and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined on the same basis as they are reported by the OPEB Plan. For this purpose, the OPEB Plan recognizes benefit payments when due and payable in accordance with the benefit terms. Investments are reported at fair value.

NOTE 2 CASH AND CASH EQUIVALENTS
Cash and cash equivalents as of June 30, 2021, are classified in the accompanying statement of net position as follows:

Cash and Cash Equivalents 146,360,319 $
Restricted Cash and Cash Equivalents 56,392,885
Total Cash and Cash Equivalents 202,753,204 $
Cash and cash equivalents as of June 30, 2021, consist of the following:

Equity in the City's Pooled Cash 33,418,587 $
Deposits with Financial Institutions 55,422,686
Short-Term Investments 113,911,931
Total Cash and Cash Equivalents 202,753,204 $

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(21)
NOTE 2 CASH AND CASH EQUIVALENTS (CONTINUED)
Equity in the Cash Pool of the City of Vernon
The VPU has equity in the cash pool managed by the City. The VPU is a voluntary participant in that pool and the pool is governed by and under the regulatory oversight of the Investment Policy adopted by the City Council of the City. The VPU has not adopted an investment policy separate from that of the City. The amount of the VPU’s cash in this pool is reported in the accompanying financial statements based upon the VPU’s pro rata share of the amount calculated by the City. The balance available for withdrawal is based on the accounting records maintained by the City.

The City’s Investment Policy
The City’s Investment Policy sets forth the investment guidelines for all funds of the City.

The Investment Policy conforms to the California Government Code Section 53600 et. seq.

The authority to manage the City’s investment program is derived from the City Council.

Pursuant to Section 53607 of the California Government Code, the City Council annually, appoints the City Treasurer to manage the City’s investment program and approves the City’s investment policy. The Treasurer is authorized to delegate this authority as deemed appropriate. No person may engage in investment transactions except as provided under the terms of the Investment Policy and the procedures established by the Treasurer.

This Investment Policy requires that the investments be made with the prudent person standard, that is, when investing, reinvesting, purchasing, acquiring, exchanging, selling or managing public funds, the trustee (Treasurer and staff) will act with care, skill, prudence, and diligence under the circumstances then prevailing, including but not limited to, the general economic conditions and the anticipated needs of the City.

The Investment Policy also requires that when following the investing actions cited above, the primary objective of the trustee be to safeguard the principal, secondarily meet the liquidity needs of depositors, and then achieve a return on the funds under the trustee’s control. Further, the intent of the Investment Policy is to minimize the risk of loss on the City’s held investments from:

A. Credit risk
B. Custodial credit risk
C. Concentration of credit risk
D. Interest rate risk

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(22)
NOTE 2 CASH AND CASH EQUIVALENTS (CONTINUED)
Investments Authorized by the California Government Code and the City’s Investment Policy
The table below identifies the investment types that are authorized for the City by the California Government Code and the City’s Investment Policy. The table also identifies certain provisions of the California Government Code that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investment of debt proceeds held by the bond trustee that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City’s Investment Policy.

Maximum Maximum
Authorized Maximum Percentage Investment Minimum
Investment Type Maturity of Portfolio* in One Issuer Rating U.S. Treasury Bonds 5 Years None None None
State and Local Agency Bonds 5 Years None None None
Securities of the U.S. Government, or
its Agencies 5 Years None None None
Certain Asset-Backed Securities 5 Years 20% None AA
Negotiable Certificates of Deposit 5 Years 30% None None Bankers' Acceptances 180 Days 40% 30% None
Commercial Paper 270 Days 25% 10% P-1
Repurchase Agreements 1 year None None None
Reverse Repurchase Agreements 92 Days 20% None None
Medium-Term Notes 5 Years 30% None A
Mutual Funds Investing in Eligible Securities N/A 20% 10% AAA Money Market Mutual Funds N/A 20% 10% AAA
Mortgage Pass-Through Securities 5 Years 20% None AA
State Administered Pool Investment N/A None $75 Million None * Excluding amounts held by bond trustee that are not subject to California Government Code restrictions.

Investments Authorized by Debt Agreements
Investments of debt proceeds held by bond trustees 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. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk.

Maximum Maximum
Authorized Maximum Percentage Investment Minimum
Investment Type Maturity of Portfolio in One Issuer Rating Securities of the U.S. Government, or
its Agencies None None None None
Certain Asset-Backed Securities None None None AA
Certificates of Deposit None None None None
Bankers' Acceptances 1 Year None None None
Commercial Paper None None None P-1
Money Market Mutual Funds N/A None None AAA
State Administered Pool Investment N/A None $75 Million None Investment Contracts None None None None

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(23)
NOTE 2 CASH AND CASH EQUIVALENTS (CONTINUED)
Disclosure Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will 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 changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is 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. The City has no specific limitations with respect to this metric. Information about the sensitivity of the fair values of the VPU’s investments (including investments held by bond trustee) to market interest rate fluctuations is provided in the following table that shows the distribution of the VPU’s investments by maturity:

Investment Maturities
Fair Value (in Months)
as of Less than 13 to 25 to
Investment Type 6/30/2021 12 Months 24 Months 60 Months Local Agency Investment Fund 633,506 $ 633,506 $ - $ - $ Held by Trustee:

Money Market Mutual Funds 113,278,425 113,278,425 - -
Total investments 113,911,931 $ 113,911,931 $ - $ - $
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by the California Government Code, the City’s Investment Policy, or debt agreements, and the actual rating as of the year-end for each investment type.

Minimum Actual Fair Value
Required Credit Rating as of
Investment Type Rating Moody's / S&P June 30, 2021
Local Agency Investment Fund Not Rated Not Rated 633,506 $ Held by Trustee:

Money Market Mutual Funds Aaa / AAA Aaa / AAA 113,278,425 Total investments 113,911,931 $
Concentration of Credit Risk
The City’s Investment Policy places no limit on the amount the City may invest in any one issuer excluding a 10% limitation on commercial paper, mutual funds, and money market mutual funds and a 30% limitation on bankers’ acceptances. The City’s Investment Policy also places no limit on the amount of debt proceeds held by the bond trustee that the trustee may invest in one issuer that is governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City’s Investment Policy. As of June 30, 2021, there were no investments held by the VPU that exceeded 5% in any one issuer, excluding money market mutual funds.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(24)
NOTE 2 CASH AND CASH EQUIVALENTS (CONTINUED)
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City’s Investment Policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments. Under the California Government Code, a financial institution is required to secure deposits, in excess of the FDIC insurance amount of $250,000, made by state or local governmental units by pledging government securities held in the form of an undivided collateral pool. The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. Such collateral is held by the pledging financial institution’s trust department or agent in the City’s name.

At June 30, 2021, all of the VPU’s deposits were insured or collateralized as required by Section 53652 of the California Government Code.

Local Agency Investment Fund (LAIF)
The VPU also maintained cash balances with the state of California Local Agency Investment Fund (LAIF). LAIF is an external investment pool sponsored by the state of California. The administration of LAIF is provided by the California State Treasurer and regulatory oversight is provided by the Pooled Money Investment Board and the Local Investment Advisory Board. The value of the pool shares in LAIF, which may be withdrawn, is determined on an amortized cost basis, which is different than the fair value of VPU’s position in the pool.

Fair Value Measurement
The VPU 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.

Level 1 inputs are quoted prices for identical assets or liabilities in active markets that the government can access at the measurement date.

Level 2 inputs are other than quoted prices included in Level 1 that are observable for an asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs for an asset or liability.

The VPU’s investments in money market mutual funds and LAIF are not subject to categorization in the fair value hierarchy.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(25)
NOTE 3 ACCOUNTS RECEIVABLES
The VPU’s receivables at June 30, 2021, are as follows:

Accounts Receivables 8,169,228 $
Less: Allowance for Uncollectible Accounts (1,072,323)
Total Receivables, Net 7,096,905 $
NOTE 4 INTERNAL TRANSACTIONS
Transactions between the VPU and the City commonly occur in the normal course of business for services received or furnished (accounting, management, engineering, legal services, and capital projects).

Advances to Other City Funds
The following table summarizes the VPU’s advances to the other City funds at June 30, 2021:

Advances to Other City Funds - July 1, 2020 4,388,988 $ Advance Repaid by City Funds During the Year (2,270,995) Advances to Other City Funds - June 30, 2021 2,117,993 $ The advances between the other City funds and the VPU does not accrue interest due to the nature of the City’s operational relationship and capital projects funded by the VPU that benefits both. On November 6, 2012, the City adopted Resolution No. 2012-215 extending the repayment term of the loan to the City from 15 months to a period of over 10 years.

The City’s General Fund allocates certain administrative and overhead costs to the VPU which the VPU financial statements include as part of the cost of sales. The allocated costs for the year ended June 30, 2021, were $3,738,862.

Transfers from (to) City
The VPU’s electric retail rates are established by the City Council and are not subject to regulation by the California Public Utility Commission or any other state agency. The retail rates include a 3% surcharge for payments in lieu of franchise tax to the City’s General Fund. For the current year, the VPU transferred to the City’s General Fund $4,781,720 in lieu of franchise tax. This amount is reported in the accompanying financial statements as part of operating expenses.

Under the City Charter and the VPU’s electric revenue bond indentures, the VPU’s electric utility is allowed to transfer up to 11.5% of its retail sales after meeting debt service obligations and certain debt coverage ratios. However, no additional transfers were made for the year ended June 30, 2021.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(26)
NOTE 5 CAPITAL ASSETS
Capital asset activity of the VPU for the fiscal year ended June 30, 2021, was as follows:

Balance Balance
June 30, 2020 Additions Deletions Transfers June 30, 2021 Capital Assets, Not Being Depreciated:

Electric Utility - Land 4,240,129 $ - $ - $ - $ 4,240,129 $ Water Utility - Water 467,640 - - - 467,640
Electric Utility - Intangibles - Environmental Credits 1,163,811 - - - 1,163,811 Electric Utility - Construction in Progress 54,130,254 147,961 - - 54,278,215 Water Utility - Construction in Progress 3,668,700 1,633,512 (53,057) (613,738) 4,635,417 Total Capital Assets, Not Being
Depreciated 63,670,534 1,781,473 (53,057) (613,738) 64,785,212 Capital Assets, Being Depreciated:

Electric Utility - Production Plant 16,189,303 - - - 16,189,303 Electric Utility - Transmission Plant 4,888,113 - - - 4,888,113 Electric Utility - Distribution Plant 243,879,181 14,571,998 - - 258,451,179 Electric Utility - General Plant 9,258,248 256,553 - 73,132 9,587,933 Water Utility Plant 22,025,313 1,104,609 635,431 23,765,353 Gas Utility Plant 26,954,200 19,492 - - 26,973,692
Fiber Optic Utility Plant 4,161,378 - - - 4,161,378
Total Capital Assets, Being Depreciated 327,355,736 15,952,652 - 708,563 344,016,951 Less Accumulated Depreciation for:

Electric Utility - Production Plant (10,295,956) (461,537) - - (10,757,493) Electric Utility - Transmission Plant (3,332,436) (92,145) - - (3,424,581) Electric Utility - Distribution Plant (94,007,029) (7,219,909) - - (101,226,938) Electric Utility - General Plant (5,670,594) (405,380) - (73,132) (6,149,106) Water Utility Plant (15,312,877) (389,185) - (21,693) (15,723,755) Gas Utility Plant (10,417,468) (725,458) - - (11,142,926) Fiber Optic Utility Plant (2,930,812) (193,068) - - (3,123,880) Total Accumulated Depreciation (141,967,172) (9,486,682) - (94,825) (151,548,679) Total Capital Assets, Being Depreciated, Net:

Electric Utility - Production Plant 5,893,347 (461,537) - - 5,431,810 Electric Utility - Transmission Plant 1,555,677 (92,145) - - 1,463,532 Electric Utility - Distribution Plant 149,872,152 7,352,089 - - 157,224,241 Electric Utility - General Plant 3,587,654 (148,827) - - 3,438,827 Water Utility Plant 6,712,436 715,424 613,738 - 8,041,598 Gas Utility Plant 16,536,732 (705,966) - - 15,830,766
Fiber Optic Utility Plant 1,230,566 (193,068) - - 1,037,498 Total 185,388,564 6,465,970 - 613,738 192,468,272
Total Capital Assets, Net 249,059,098 $ 8,247,443 $ (53,057) $ - $ 257,253,484 $ The VPU’s total depreciation expense for the year was $9,486,682, broken down as follows:

Electric Fund 8,178,971 $
Gas Fund 725,458
Water Fund 389,185
Fiber Optics Fund 193,068
Total Depreciation Expense 9,486,682 $

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(27)
NOTE 6 LONG-TERM OBLIGATIONS
As of June 30, 2021, outstanding debt obligations consisted of the following:
$43,765,000 Electric System Revenue Bonds (2008 Taxable Series A) At June 30, 2021, $38,840,000 remained outstanding. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The debt service remaining on the bonds is $76,291,541, payable through fiscal year 2039. For the current year, debt service and net electric revenues were $4,238,508 and $33,789,939, respectively. Under the Indenture of Trust dated September 1, 2008, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Light and Power Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Electric System Revenue Bonds, 2008 Taxable Series A were issued to provide funds to (i) finance the cost of certain capital improvements to the City’s Electric System, (ii) fund a deposit to the Debt Service Reserve Fund, and (iii) to pay costs of issuance of the 2008 Bonds. $37,640,000 Electric System Revenue Bonds (2012 Series A) At June 30, 2021, $37,640,000 remained outstanding. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The debt service remaining on the bonds is $71,100,228, payable through fiscal year 2042. For the current year, debt service and net electric revenues were $2,031,394 and $33,789,939, respectively. Under the Indenture of Trust dated September 1, 2008, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Light and Power Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Electric System Revenue Bonds, 2012 Series A were issued to provide funds to (i) pay a portion of the costs of certain capital improvements to the City’s Electric System, (ii) to provide for capitalized interest on the 2012 Series A Bonds, and (iii) to pay costs of issuance of the 2012 Series A Bonds.
$35,100,000 Electric System Revenue Bonds (2012 Taxable Series B) At June 30, 2021, $35,100,000 remained outstanding. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The debt service remaining on the bonds is $43,205,713, payable through fiscal year 2027. For the current year, debt service and net electric revenues were $2,222,900 and $33,789,939, respectively. Under the Indenture of Trust dated September 1, 2008, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Light and Power Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Electric System Revenue Bonds, 2012 Taxable Series B were issued to provide funds to (i) refund the $28,680,000 aggregate principal amount of 2009 Bonds maturing on August 1, 2012, (ii) to pay a portion of the Costs of the 2012 Project, and (iii) to pay costs of issuance of the 2012 Taxable Series B Bonds.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(28)
NOTE 6 LONG-TERM OBLIGATIONS (CONTINUED)
$111,720,000 Electric System Revenue Bonds (2015 Taxable Series A) At June 30, 2021, $111,720,000 remained outstanding. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The debt service remaining on the bonds is $129,227,536, payable through fiscal year 2027. For the current year, debt service and net electric revenues were $5,087,518 and $33,789,939, respectively. Under the Indenture of Trust dated September 1, 2008, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Light and Power Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Electric System Revenue Bonds, 2015 Taxable Series A were issued to provide funds to (i) refund a portion of the Outstanding Electric System Revenue Bonds, 2009 Series A; (ii) finance the Costs of certain Capital Improvements to the City’s Electric System by reimbursing the Electric System for the prior payment of such Costs from the Light and Power Fund; (iii) fund a deposit to the Debt Service Reserve Fund; and (iv) pay costs of issuance of the 2015 Bonds.
$71,990,000 Electric System Revenue Bonds (2020 Series A) At June 30, 2021, $43,335,000 remained outstanding. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The debt service remaining on the bonds is $55,915,875, payable through fiscal year 2038. For the current year, debt service and net electric revenues were $31,148,179 and $33,789,939, respectively. Under the Indenture of Trust dated September 1, 2008, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Light and Power Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Electric System Revenue Bonds, 2020 Series A were issued to provide funds to (i) to finance the acquisition and construction of certain capital improvements to the Electric System of the City, (ii) to refund all of the City’s outstanding Electric System Revenue Bonds, 2009 Series A, and (iii) to pay costs of issuance of the 2020 Bonds. $14,840,000 Water System Revenue Bonds (2020 Series A)
At June 30, 2021, $14,840,000 remained outstanding. The bonds are special obligation bonds which are secured by an irrevocable pledge of water revenues payable to bondholders. The debt service remaining on the bonds is $25,868,013, payable through fiscal 2051. For the current year, debt service and net water revenues were $437,232 and $2,328,135, respectively. Under the Indenture of Trust dated May 6, 2020, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Water Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Water System Revenue Bonds, 2020 Series A were issued to provide funds to (i) finance the acquisition and construction of certain capital improvements to the Water System of the City, (ii) purchase a municipal bond debt service reserve insurance policy for deposit in the Reserve Fund in satisfaction of the Reserve Requirement, and (iii) to pay costs of issuance of the 2020 Bonds.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(29)
NOTE 6 LONG-TERM OBLIGATIONS (CONTINUED)
A summary of bonds payable under the VPU is as follows:

Fixed Annual Original
Interest Principal Issue Outstanding
Bonds Maturity Rates Installments Amount June 30, 2021
Electric System:

City of Vernon 07/01/38 7.40% - To begin 07/01/10: 43,765,000 $ 38,840,000 $ Electric System Revenue Bonds, 8.59% $265,000 -
2008 Taxable Series A $4,065,000
City of Vernon 08/01/41 5.00% - To begin 08/01/27: 37,640,000 37,640,000 Electric System Revenue Bonds, 5.50% $1,075,000 -
2012 Taxable Series A $7,120,000
City of Vernon 08/01/26 6.25% - To begin 08/01/22: 35,100,000 35,100,000 Electric System Revenue Bonds, 6.50% $6,165,000 -
2012 Taxable Series B $7,940,000
City of Vernon 08/01/26 4.05% - To begin 08/01/23: 111,720,000 111,720,000 Electric System Revenue Bonds, 4.85% $15,925,000 -
2015 Taxable Series A $22,540,000
City of Vernon 08/01/50 5.00% To begin 08/03/20: 71,990,000 43,335,000 Electric System Revenue Bonds, $1,525,000 -
2020 Taxable Series A $28,655,000
Premiums 7,189,882
Discounts (1,923,931)
Total Electric System
Revenue Bonds 271,900,951
Water System:

City of Vernon 08/01/50 5.00% To begin 08/01/21: 14,840,000 14,840,000 Water System Revenue Bonds, $240,000 -
2020 Taxable Series A $3,785,000
Premium 554,913
Total Water System
Revenue Bonds 15,394,913
Total Revenue Bonds 287,295,864 $
Note Payable – Direct Borrowing
In May 2019, the City entered into an agreement with Water Replenishment District of Southern California (WRD) for assistance with the construction of a new groundwater well or rehabilitation of an existing groundwater well. The promissory note is unsecured and has no interest basis for an amount not to exceed $1,500,000. As of June 30, 2021, WRD has disbursed all of the funds under the agreement to the City. The note is payable in quarterly principal payments commencing September 1, 2020, in an amount which, together with all quarterly payments, will be sufficient to fully amortize the principal balance of the note by the maturity date of April 1, 2031.

Upon an event of default, WRD may declare any or all of the outstanding and unpaid principal balance immediately due and payable, without presentment, demand, protest, notice of protest, notice of acceleration or of intention to accelerate or any other notice, declaration or act of any kind, all of which are hereby expressly waived by the City.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(30)
NOTE 6 LONG-TERM OBLIGATIONS (CONTINUED)
Debt Service Requirements
As of June 30, 2021, annual debt service requirements of the VPU to maturity are as follows:

Electric System Revenue Bonds
2008 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
2022 945,000 $ 3,295,768 $
2023 1,025,000 3,211,157
2024 1,120,000 3,119,029
2025 1,220,000 3,018,526
2026 1,330,000 2,909,004
2027-2031 8,670,000 12,525,079
2032-2036 13,315,000 7,872,520
2037-2040 11,215,000 1,500,458
Total Requirements 38,840,000 $ 37,451,541 $
Electric System Revenue Bonds
2012 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
2022 - $ 2,031,394 $
2023 - 2,031,394
2024 - 2,031,394
2025 - 2,031,394
2026 - 2,031,394
2027-2031 4,645,000 9,707,094
2032-2036 7,315,000 8,086,266
2037-2041 18,560,000 5,314,100
2042-2045 7,120,000 195,800
Total Requirements 37,640,000 $ 33,460,228 $
Electric System Revenue Bonds
2012 Taxable Series B
Fiscal Year Ending June 30, Principal Interest
2022 - $ 2,222,900 $
2023 6,165,000 2,030,244
2024 6,565,000 1,632,431
2025 6,990,000 1,208,838
2026 7,440,000 753,250
2027-2030 7,940,000 258,050
Total Requirements 35,100,000 $ 8,105,713 $

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(31)
NOTE 6 LONG-TERM OBLIGATIONS (CONTINUED)
Debt Service Requirements (Continued)
Electric System Revenue Bonds
2015 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
2022 - $ 5,087,518 $
2023 22,540,000 4,580,368
2024 23,520,000 3,596,938
2025 24,585,000 2,530,618
2026 25,780,000 1,341,193
2027-2030 15,295,000 370,904
Total Requirements 111,720,000 $ 17,507,536 $
Electric System Revenue Bonds
2020 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
2022 24,030,000 $ 1,566,000 $
2023 - 965,250
2024 - 965,250
2025 - 965,250
2026 - 965,250
2027-2031 4,815,000 4,473,125
2032-2036 9,820,000 2,444,250
2037-2040 4,670,000 236,500
Total Requirements 43,335,000 $ 12,580,875 $
Water System Revenue Bonds
2020 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
2022 240,000 $ 587,975 $
2023 250,000 575,725
2024 265,000 562,850
2025 275,000 549,350
2026 - 542,475
2027-2031 1,985,000 2,662,750
2032-2036 2,180,000 2,161,625
2037-2041 2,680,000 1,625,900
2042-2046 3,180,000 1,163,225
2047-2051 3,785,000 596,138
Total Requirements 14,840,000 $ 11,028,013 $

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(32)
NOTE 6 LONG-TERM OBLIGATIONS (CONTINUED)
Debt Service Requirements (Continued)
Note Payable- Direct Borrowing
Fiscal Year Ending June 30, Principal Interest
2022 139,535 $ - $
2023 139,535 -
2024 139,535 -
2025 139,535 -
2026 139,535 -
2027-2031 662,791 -
Total Requirements 1,360,465 $ - $
Changes in Long-Term Liabilities
The following is a summary of long-term liabilities transactions for the fiscal year ended June 30, 2021:

Amounts
Balance Balance Due Within
June 30, 2020 Additions Reductions June 30, 2021 One Year Other Debt - Bonds Payable 310,995,000 $ - $ (29,520,000) $ 281,475,000 $ 25,215,000 $ Bond Premium 8,209,211 - (464,416) 7,744,795 -
Bond Discount (2,370,596) - 446,665 (1,923,931) -
Note Payable- Direct Borrowing 738,720 761,280 (139,535) 1,360,465 139,535 Compensated Absences (Note 1) 1,068,776 648,598 (535,471) 1,181,903 393,968 Total 318,641,111 $ 1,409,878 $ (30,212,757) $ 289,838,232 $ 25,748,503 $ Expense Stabilization Fund
The VPU maintains an Expense Stabilization Fund held by a Trustee in such amounts, at such times and from sources as shall be determined by the City in its sole discretion. If an Event of Default under the Indenture has occurred and is continuing, the Trustee shall transfer all moneys in this fund to the debt service funds as provided in the Indenture.

Moneys on deposit in this Fund may be withdrawn by the City at any time that no Event of Default exists under the Indenture. As at June 30, 2021, this fund has a balance of $13,917,555.

Right to Accelerate Upon Default
Notwithstanding anything contrary in the Indenture or in the Bonds, upon the occurrence of an Event of Default, the Trustee may, with the consent of each Credit Provider whose consent is required by a Supplemental Indenture or a Credit Support Agreement, and shall, at the direction of the Owners of a majority in principal amount of Outstanding Bonds (other than Bonds owned by or on behalf of the City) by written notice to the City, declare the principal of the Outstanding Bonds and the interest thereon to be immediately due and payable, whereupon such principal and interest shall, without further action, become and be immediately due and payable.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(33)
NOTE 6 LONG-TERM OBLIGATIONS (CONTINUED)
Credit Ratings
As of June 30, 2021, the ratings on all Electric System Revenue Bonds is BBB+ by S&P and Baa2 by Moody’s and the ratings on all Water System Revenue Bonds is AA by S&P and not rated by Moody’s.

NOTE 7 RISK MANAGEMENT
The VPU is in the City’s self-insurance program as part of its policy to self-insure certain levels of risk within separate lines of coverage to maximize cost savings.

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

The City utilizes insurance policy(s) to transfer these risks. Each policy has either selfinsured retention or deductible, which are parts of the City’s Risk Financing Program. These expenses are paid on a cash basis as they are incurred. There have been no significant settlements or reductions in insurance coverage during the past three fiscal years.

Starting in Fiscal 2010, the City chose to establish Risk Financing in the General Fund, whereby assets are set aside for claim-litigation settlements associated with the abovementioned risks up to their self-insured retentions or policy deductibles. Athens Administrators Inc. is the Third-Party Administrator for the City’s workers’ compensation program and they provide basic services for general liability claims and litigation.

The insurance limits for the fiscal year 2021 are as follows:

Deductible/SIR
Insurance Type Program Limits (Self-Insured Retention)
Excess Liability Insurance $20,000,000 $2,000,000 SIR per occurrence D and O Employment Practice $2,000,000 $150,000 SIR non-safety; $150,000 SIR safety Excess Workers Compensation $50,000,000 $1,500,000 SIR per occurrence for presumptive loss Employer's Liability $1,000,000 $1,000,000 SIR per occurrence for all employees Commercial Property Insurance $100,000,000 $25,000 except:
$25,000,000 Flood Sublimit $250,000 power stations
$1.5/kVA transfers, subject to a $250,000 minimum
$500,000 named transformers
Employee Dishonest - Crime $1,000,000 $25,000
Pollution - Site Owned $5,000,000 $25,000 for non-utility locations, divested locations and scheduled storage tanks
$50,000 for utility locations
$100,000 for natural gas pipeline
Cyber Liability $3,000,000 $100,000
Contractors Equipment/Auto $10,000,000 Maximum Loss Per Occurrence $5,000 Physical Damage $1,000,000 Equipment Limit-loss or damage to any one piece
Residential Property Insurance $8,023,126 Blanket Building Limit $2,500 $89,013 Blanket Business Personal Property Limit
Terrorism and Sabotage $100,000,000 Policy Aggregate N/A $5,000,000 Active Shooter and Malicious Attack
Per Occurrence/Aggregate
$5,000,000 Terrorism and Sabotage Liability
Per Occurrence/Aggregate

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(34)
NOTE 7 RISK MANAGEMENT (CONTINUED)
The City has numerous claims and pending litigations, which generally involve accidents and/or liability or damage to City property. The balance of claims/litigations against the City is in the opinion of management, ordinary routine matters, incidental to the normal business conducted by the City. In the opinion of management, such proceedings are substantially covered by insurance, and the ultimate dispositions of such proceedings are not expected to have a material adverse effect on the VPU’s financial position, results of operations or cash flows. Further information regarding the City’s self-insurance program may be found in the City’s Annual Financial Report.

NOTE 8 PENSION PLAN
A. General Information about the Pension Plans
Plan Descriptions
All full-time safety (police and fire personnel) and miscellaneous personnel and temporary or part-time employees who have worked a minimum of 1,000 hours in a fiscal year are eligible to participate in the City’s agent multiple-employer defined benefit pension Safety and Miscellaneous Plans administered by the California Public Employees’ Retirement System (CalPERS) that acts as a common investment and administrative agent for participating public entities within the state of California. The City allocates the costs of these Plans across all City departments. The VPU’s proportionate share of the net pension liability of these Plans is reported as a cost-sharing plan in the financial statements. Benefits vest after five years of service. Employees who retire at the minimum retirement age with five years of credited service are entitled to retirement benefits. Monthly retirement benefits are based on a percentage of an employee’s average compensation for his or her highest consecutive 12 or 36 months of compensation for each year of credited service.

Benefits Provided
Miscellaneous members hired prior to January 1, 2013, with five years of credited service may retire at age 55 based on a benefit factor derived from the 2.7% at 55 Miscellaneous formula or may retire between ages 50 and 54 with reduced retirement benefits. New Miscellaneous members (PEPRA) with five years of credited service may retire at age 62 based on a benefit factor derived from the 2% at 62 Miscellaneous formula or may retire between age 52 and 61 with reduced retirement benefits. The benefit factor increases to a maximum of 2.5% at age 67. Safety members with five years of credited service may retire at age 50 based on a benefit factor derived from the 3% at 50 Safety formula for sworn Police and Fire Department employees. New Safety members (PEPRA) with five years of credited service may retire at age 57 based on a benefit factor derived from the 2.7% at 57 Safety (PEPRA) formula or may retire between age 50 and 56 with reduced retirement benefits for new Safety (PEPRA) members of both Police and Fire Departments. CalPERS also provides death and disability benefits. These benefit provisions and all other requirements are established by State statute provided through a contract between the City and CalPERS.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(35)
NOTE 8 PENSION PLAN (CONTINUED)
A. General Information about the Pension Plans (Continued) Benefits Provided (Continued)
The Plans’ provisions and benefits in effect for the measurement date of June 30, 2020, are summarized as follows:

Miscellaneous
Prior to On or After
Hire Date January 1, 2013 January 1, 2013
Benefit Formula 2.7%@55 2%@62
Benefit Vesting Schedule 5 Years of Service 5 Years of Service Benefit Payments Monthly for Life Monthly for Life
Retirement Age 50 52
Monthly Benefits, as a % of Eligible Compensation 2.0% to 2.7% 1.0% to 2.5% Required Employee Contribution Rates 8.000% 6.250%
Required Employer Contribution Rates:

Normal Cost Rate 11.758% 11.758%
Payment of Unfunded Liability 3,185,676 $ - $
Safety
Prior to On or After
Hire Date January 1, 2013 January 1, 2013
Benefit Formula 3.0%@50 2.7%@57
Benefit Vesting Schedule 5 Years of Service 5 Years of Service Benefit Payments Monthly for Life Monthly for Life
Retirement Age 50 50
Monthly Benefits, as a % of Eligible Compensation 3.000% 2.0% to 2.7% Required Employee Contribution Rates 9.000% 12.750%
Required Employer Contribution Rates:

Normal Cost Rate 23.164% 23.164%
Payment of Unfunded Liability 5,885,793 $ 12,792 $
Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on July 1 following notice of a change in the rate.

Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute to the difference between the actuarially determined rate and the contribution rate of employees. For the year ended June 30, 2021, the VPU’s share of employer contributions made to the plans was $2,127,550.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(36)
NOTE 8 PENSION PLAN (CONTINUED)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions
Actuarial Assumptions
The net pension liability of each of the Plans is measured as of June 30, 2020, using an annual actuarial valuation as of June 30, 2019, rolled forward to June 30, 2020, using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

Miscellaneous Safety
Valuation Date June 30, 2019 June 30, 2019
Measurement Date June 30, 2020 June 30, 2020
Actuarial Cost Method Entry Age Normal Entry Age Normal Actuarial Assumptions:

Discount Rate 7.15% 7.15%
Inflation 2.625% 2.625%
Payroll Growth 2.875% 2.875%
Projected Salary Increase (1) (1)
Mortality Rate Table (2) (2)
Post-Retirement Benefit Increase (3) (3)
(1) Varies by entry age and service.
(2) The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and Post-retirement mortality rates includes 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from December 2017 that can be found on the CalPERS website.
(3) The lessor of contract COLA or 2.50% until Purchasing Power Protection Allowance Floor on purchasing power applies, 2.50% thereafter.

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

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(37)
NOTE 8 PENSION PLAN (CONTINUED)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Long-Term Expected Rate of Return (Continued)
In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected 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 Real Return Real Return
Asset Years Years
Asset Class (a) Allocation 1 - 10 (b) 11+ (c)
Global Equity 50.00 % 4.80% 5.98%
Fixed Income 28.00 1.00% 2.62%
Inflation Assets - 0.77% 1.81%
Private Equity 8.00 6.30% 7.23%
Real Assets 13.00 3.75% 4.93%
Liquidity 1.00 0.00% -0.92%
Total 100.00 %
(a)
(b) An expected inflation of 2.0% used for this period. (c) An expected inflation of 2.92% used for this period.

In 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
Discount Rate
The discount rate used to measure the total pension liability was 7.15%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(38)
NOTE 8 PENSION PLAN (CONTINUED)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Proportionate Share of Net Pension Liability – Allocation of the City’s Pension Plans to the VPU
The VPU’s net pension liability for the Plans is measured as the proportionate share of the combined net pension liability of the City’s miscellaneous and safety agent multipleemployer plans. The VPU’s proportionate share of the combined net pension liability was based on the VPU’s current year share of contributions to the pension plans relative to the City’s total current year contributions to the pension plans.

The VPU’s proportionate share of the combined net pension liability for the pension plans as of the measurement date ended June 30, 2019 and 2020 were as follows:

Increase (Decrease)
Total Plan Net Pension
Pension Fiduciary Liability Proportionate
Liability Net Position (Asset) Share
Balance at June 30, 2019 (MD) 69,314,512 $ 50,622,138 $ 18,692,374 $ 15.47% Balance at June 30, 2020 (MD) 87,452,632 64,469,634 22,982,998 16.99% Net Changes during 2019-20 18,138,120 $ 13,847,496 $ 4,290,624 $ 1.52% Pension Expense and Deferred Outflows and Inflows of Resources For the measurement period ended June 30, 2020, the VPU recognized its proportionate share of the combined pension expense of the Plans which totaled, $2,265,671. At June 30, 2021, the VPU reported its proportionate share of the Plans’ combined deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred
Outflows Inflows
of Resources of Resources
Pension Contributions Subsequent
to Measurement Date 2,145,491 $ - $
Differences Between Actual and
Expected Experience 1,621,199 -
Change in Assumptions - (58,663)
Net Differences Between Projected and
Actual Earnings on Plan Investments 603,494 -
Differences Between Employer Contributions
And Proportionate Share of Contributions - (306,183)
Change in Employer's Proportion 531,176 (198,761)
Total 4,901,360 $ (563,607) $

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(39)
NOTE 8 PENSION PLAN (CONTINUED)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Pension Expense and Deferred Outflows and Inflows of Resources (Continued) $2,145,491 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 ending June 30, 2022. Differences between projected and actual investment earnings are amortized on a five-year straight-line basis and all other amounts are amortized over the expected average remaining service lives of all members that are provided with benefits. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Fiscal Year Ended June 30, Miscellaneous Safety Total
2022 252,442 $ 356,173 $ 608,615 $
2023 217,527 554,884 772,411
2024 148,707 386,008 534,715
2025 101,973 169,295 271,268
2026 - 5,253 5,253
Thereafter - - -
Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the VPU’s proportionate share of the Plans’ combined net pension liability, calculated using a discount rate of 7.15%, as well as what the VPU’s proportionate share of the Plans’ combined net pension liability would be if it were calculated using a discount rate that is a 1-percentage point lower or a 1-percentage point higher than the current rate:

Total
1% Decrease 6.15%
Net Pension Liability 35,087,609 $
Current Discount Rate 7.15%
Net Pension Liability 22,982,998 $
1% Increase 8.15%
Net Pension Liability 13,061,469 $
Pension Plan Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(40)
NOTE 8 PENSION PLAN (CONTINUED)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Subsequent Events
There were no subsequent events that would materially affect the results of this disclosure.

Payable to the Pension Plan
At June 30, 2021, the VPU had no outstanding amount of contributions to the pension plans required for the year ended June 30, 2021.

NOTE 9 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) The other postemployment benefits (OPEB) described in the following paragraphs relate to the City’s OPEB plan. The VPU’s share of the net pension liability of the City’s OPEB Plan is reported as a cost-sharing plan in these financial statements since the VPU’s operations are handled by City employees who are eligible to participate in the City’s OPEB plan.

Benefits Provided
Retiree medical and dental benefits are established through the City’s Fringe Benefits and Salary Resolution as well as individual memoranda of understanding between the City and the City’s various employee bargaining groups. Generally, the City will provide postemployment benefit plan for the employee only to those who retire at age sixty (60) or later with twenty (20) years of continuous uninterrupted service, up to the age of sixty-five (65). Alternatively, employees who retire before the age of sixty (60) with twenty (20) years of continuous uninterrupted service, will be permitted to pay their medical and dental premium cost and upon reaching the age of sixty (60), the City will pay the premium for the medical and dental plans until they reach the age of sixty-five (65).

Resolution 2012-217 granted specific retiree medical benefits to employees who retired during the 2012-2013 fiscal year in order to provide an incentive for early retirement whereby the City authorized the payment of medical and dental insurance premiums for eligible retiring employees and their eligible dependents with at least ten (10) years of service plus 5% for each additional full year of service above the ten (10) years of service.

Resolution 2013-06 declared that the retiree medical benefits which had not been a vested right for employees will continue to be a nonvested right for employees who continue to be employed by the City on or after July 1, 2013, but will be a vested right for those who retire during the 2012-2013 fiscal year. The City’s plan is considered a substantive OPEB plan and the City recognizes costs in accordance with GASB Statement No 45. The City may terminate its unvested OPEB in the future.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(41)
NOTE 9 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) Funding Policy and Contributions
The City has established an irrevocable OPEB trust with assets dedicated to paying future retiree medical benefits. The City intends to contribute 100% or more of the actuarially determined contribution for the explicit subsidy liability only. The portion of the liability due to the implicit subsidy is not prefunded but is paid as benefits come due. For the fiscal year ended June 30, 2021, the VPU’s proportionate share of contributions made was $531,940 ($328,130 contributed to the OPEB trust, $144,918 paid for retiree premiums, and the estimated implied subsidy of $58,892).

Net OPEB Liability
The City’s net OPEB liability is measured as of June 30, 2020, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of June 30, 2020. A summary of the principal assumptions and methods used to determine the total OPEB liability is shown on the next page.

Actuarial Assumptions
The valuation has been prepared on a closed group basis. Assumptions such as age-related healthcare claims, healthcare trends, retiree participation rates, and spouse coverage, were selected based on demonstrated plan experience and the best estimate of expected future experience.

Explicit subsidy benefit payments by employee group were allocated based on expected benefit payments. The following actuarial assumptions, applied to all periods included in the measurement unless otherwise specified:

Funding Method Entry age normal level percent of pay cost method Inflation 2.25%
Salary Increases 2.75% annual increases
Long-Term Return on Assets 6.25% net of investment expenses Discount Rate 6.25%
Healthcare Cost Trend Rates 6.7% for FY2021, gradually decreasing over several decades to ultimate rate of 3.8% in FY76 and later
years
Mortality 2017 CalPERS Experience Study. Tables include 15 years of static mortality improvement using 90%
of scale MP-2016

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(42)
NOTE 9 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) Long-Term Expected Rate of Return
The long-term expected rate of return was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class.

These ranges are combined to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the OPEB plan’s target asset allocation as of June 30, 2020 are summarized in the following table:

Long-Term
Target Expected Real
Asset Class Allocation Rate of Return
CERBT Strategy 1:

Equity 59.00 % 4.90%
Fixed Income 25.00 1.40%
TIPS 5.00 0.57%
Commodities 3.00 1.88%
REITs 8.00 4.43%
Total 100.00 %
Discount Rate
The discount rate used to measure the total OPEB liability was 6.25%. The projection of cash flows used to determine the discount rate assumed that City’s contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

Change of Assumptions
Medical trend rates were updated to exclude the Affordable Care Act’s Excise Tax on highcost health insurance plan due to its repeal.

Allocation of the Net OPEB Liability
The VPU’s proportionate share of the net OPEB liability as of the measurement dates ended June 30, 2019 and 2020 was as follows:

Increase (Decrease)
Total Plan Net OPEB
OPEB Fiduciary Liability Proportionate
Liability Net Position (Asset) Share
Balance at June 30, 2019 (MD) 4,051,812 $ 660,404 $ 3,391,408 $ 15.47% Balance at June 30, 2020 (MD) 4,622,908 1,189,602 3,433,306 16.99% Net Changes during FY 2019-20 571,096 $ 529,198 $ 41,898 $ 1.52%

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(43)
NOTE 9 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the VPU’s proportionate share of the net OPEB liability if it were calculated using a discount rate that is 1% point lower or 1% point higher than the current rate:

Discount Rate
1% Decrease Current Rate 1% Increase
(5.50%) (6.50%) (6.50%)
Net OPEB Liability 3,986,406 $ 3,433,306 $ 2,972,271 $
Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates The following presents the VPU’s proportionate share of the net OPEB liability if it were calculated using a healthcare cost trend rates that are 1% point lower (5.9% decreasing to an ultimate rate of 3.0%) or 1% point higher (7.9% decreasing to an ultimate rate of 5.0%) than the current rate:

Healthcare Trend Rate
1% Decrease Current Rate 1% Increase
Net OPEB Liability 3,250,429 $ 3,433,306 $ 3,619,709 $
OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB For the year ended June 30, 2021, the VPU recognized its proportionate share of the OPEB expense(revenue) of $(231,199). At June 30, 2021, the VPU reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Deferred
Outflows Inflows
of Resources of Resources
Contributions Between Measurement Date and
Reporting Date 531,940 $ - $
Difference Between Expected and Actual Liability 29,296 (659,328) Changes of Assumptions 82,385 (837,660)
Net Differences Between Projected and Actual
Earnings on Investments 37,152 -
Total 680,773 $ (1,496,988) $

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(44)
NOTE 9 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB (Continued)
The $531,940 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, 2022. Differences between projected and actual investment earnings are amortized on a five-year straight-line basis and all other amounts are amortized over the expected average remaining service lives of all members that are provided with benefits. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as OPEB expense as follows:

Deferred
Outflows
(Inflows)
Fiscal Year Ending June 30, of Resources
2022 (327,878) $
2023 (327,878)
2024 (328,017)
2025 (328,544)
2026 (37,985)
Thereafter 2,147
Subsequent Events
There were no subsequent events that would materially affect the results presented in this disclosure.

Payable to the OPEB Plan
At June 30, 2021, the VPU had no outstanding amount of contributions to the OPEB plan required for the year ended June 30, 2021.

NOTE 10 VERNON PUBLIC UTILITIES OPERATIONS AND COMMITMENTS Bicent Agreements
Asset Sale
On December 13, 2007, the City entered into an Amended and Restated Purchase and Sale Agreement (the Bicent Agreement), with Bicent (California) Power LLC (Bicent), which is an affiliate of Bicent Holdings and Natural Gas Partners, to sell to Bicent the Malburg Generating Station (MGS) and the economic burdens and benefits of the City’s interests in 22 MW from the Hoover Dam Uprating Project for $287,500,000. This transaction closed on April 10, 2008.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(45)
NOTE 10 VERNON PUBLIC UTILITIES OPERATIONS AND COMMITMENTS (CONTINUED) Bicent Agreements (Continued)
Asset Sale (Continued)
Bicent has agreed to sell the capacity and the energy of the MGS to the City on the terms set forth in a Power Purchase Tolling Agreement, by and between the City and Bicent, dated as of April 10, 2008 (the PPTA). In addition, Bicent has acquired the benefits and burdens of the City’s interest in the Hoover Uprating Project (described below) on the terms set forth in the Hoover Contract for Differences (CFD), between Bicent (California) Hoover LLC, a Delaware limited liability company (BCH) and the City, dated as of April 10, 2008 (the Hoover Differences Contract). Pursuant to the Bicent Agreement, Bicent has assigned its rights and obligations with respect to the MGS to its affiliate, Bicent (California) Malburg LLC, a Delaware limited liability company (BCM).

Pursuant to the Bicent Agreement, Bicent has assigned its rights and obligations with respect to the economic benefits and burdens of the Hoover Uprating Project to its affiliate, BCH. The City treated the PPTA as an asset lease-back transaction due to a 30-year ground lease between the City and BCM by deferring most of the gain from the sale of MGS to be amortized over the 15-year life of the PPTA. The City also deferred the gain from the CFD to be amortized over the 10-year life of the CFD. As of June 30, 2021, a deferred gain of $6,555,916 remains to be amortized over the life of the PPTA and CFD, which will be amortized in proportion to the capacity payments the City will be making under the PPTA and CFD (See Note 11 for disclosure on uncertainties).

Power Purchase Commitments
As of June 30, 2021, under the Bicent Agreements, the City had the following long-term commitments to purchase power subject to certain conditions:

Fiscal Year Ending June 30, Amount*
2022 34,904,231 $
2023 27,146,619
Total 62,050,850 $
* Commitments under the PPTA and CFD, net of amortization of deferred gain.

Southern California Public Power Authority
In 1980, the City entered into a joint powers agreement with nine (9) Southern California cities and an irrigation district to form the Southern California Public Power Authority (the Authority). The Authority’s purpose is the planning, financing, acquiring, constructing, and operating of projects that generate or transmit electric energy for sale to its participants. The joint powers agreement has a term expiring in 2030 or such later date as all bonds and notes of SCPPA and interest thereon have been paid in full or adequate provisions for payments have been made. A copy of SCPPA’s audited financial statements can be reviewed on their website at www.scppa.org or can be obtained by written request at 225 South Lake Avenue, Suite 1250, Pasadena, CA 91101.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(46)
NOTE 10 VERNON PUBLIC UTILITIES OPERATIONS AND COMMITMENTS (CONTINUED) Southern California Public Power Authority (Continued)
Take or Pay Contract
The Authority’s interests or entitlements in natural gas, generation, and transmission projects are jointly owned with other utilities. Under these arrangements, a participating member has an undivided interest in a utility plant and is responsible for its proportionate share of the costs of construction and operation and is entitled to its proportionate share of the energy, available transmission capacity, or natural gas produced. Each joint plant participant, including the Authority, is responsible for financing its share of construction and operating costs. The City has the following “take or pay” contract with the Authority:

Palo Verde Project
The Authority purchased a 5.91% interest in the Palo Verde Nuclear Generating Station (the Station), a nuclear-fired generating station near Phoenix, Arizona, from the Salt River Project Agricultural Improvement and Power District, and a 6.55% share of the right to use certain portions of the Arizona Nuclear Power Project Valley Transmission System. The City has a 4.9% entitlement share of the Authority’s interest in the station.

Between 1983 and 2008, the Authority issued $3.266 billion in debt of Power Project Revenue Bonds for the Station to finance the bonds and the purchase of the Authority’s share of the Station and related transmission rights. The bonds are not obligations of any member of the Authority or public agency other than the Authority.

Under a power sales contract with the Authority, the City is obligated on a “take or pay” basis for its proportionate share of power generated, as well as to make payments for its proportionate share of the operating and maintenance expenses of the Station, debt service on the bonds and any other debt, whether or not the project or any part thereof or its output is suspended, reduced or terminated. The City took its proportionate share of the power generated and its proportionate share of costs during the fiscal year 2021 was $2,771,758. The City expects no significant increases in costs related to its nuclear resources.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(47)
NOTE 10 VERNON PUBLIC UTILITIES OPERATIONS AND COMMITMENTS (CONTINUED) Southern California Public Power Authority (Continued)
Power Purchase Commitments
The Authority has entered into power purchase agreements with project participants.

These agreements are substantially “take-and-pay” contracts where there may be other obligations not associated with the delivery of energy. The City has entered into power purchase agreements with the Authority related to the following projects:

Astoria 2 Solar Project
On July 23, 2014, the Authority entered into a power purchase agreement with Recurrent Energy for solar energy from the Astoria 2 Solar Project. SCPPA is entitled to 35 MW of photovoltaic generating capacity from commercial operation to December 31, 2021 and 45 MW of generating capacity from January 1, 2022 until the expected expiration date of December 31, 2036. The commercial operation date was December 2016. Power and Water Resources Pooling Authority, Lodi, Corona, Moreno Valley, and Rancho Cucamonga, are each buying the output of a separate portion of the facility, which is located in Kern County, California. SCPPA has purchase options in the 10th, 15th, and 20th Contract Years. The project is forecasted to start at a capacity factor of 31% with a 0.5% annual degradation. ACES Power Marketing is the third-party scheduling coordinator for the project. The City contracted to purchase 57.1429% until December 31, 2021, and 66.6667% thereafter, of the output. The City’s proportionate share of costs during the current fiscal year was $2,276,622.

Puente Hills Landfill Gas-to-Energy Project
On June 25, 2014, the Authority entered into a power purchase agreement with County Sanitation District No. 2 of Los Angeles County for 46 MW of the electric generation from a landfill gas to energy facility, located at Whittier, California. The project began deliveries to the Authority on January 1, 2017 for a term of 10 years.

The City contracted to purchase 23.2558% of the output. The City’s proportionate share of costs during the current fiscal year was $1,585,536.

Antelope DSR 1 Solar Project
On July 16, 2015, the Authority, entered into a power purchase agreement with Antelope DSR 1, LLC for 50 MW solar photovoltaic generating capacity from the Antelope DSR 1 Solar Facility. The facility is located near Lancaster, California, and commercial operation occurred on December 16, 2016 for a term of 20 years. The City contracted to purchase 50.00% of the output. The City’s proportionate share of costs during the current fiscal year was $1,689,552.

CITY OF VERNON

VERNON PUBLIC UTILITIES

NOTES TO BASIC FINANCIAL STATEMENTS
JUNE 30, 2021
(48)
NOTE 11 CONTINGENCIES
Sale of Generation and Transmission Assets
The financial and operational effects of the 2008 sale of generation and transmission assets, while reducing the electric system’s debt burden and providing liquidity, puts the utility at some risks in terms of increased fixed-charge obligations and long-term power resource uncertainty.

NOTE 12 SUBSEQUENT EVENTS
In December 2021, the City issued $183,815,000 in Electric System Revenue Bonds, 2021 Series A and $52,070,000 in Electric System Revenue Bonds, 2022 Series A. The 2021 Series A bonds provide funds to finance the acquisition of Malburg Generating Station (MGS), the deposit to the Debt Service Reserve Fund, and the cost of issuance of the 2021 Bonds. The City made the determination to reacquire MGS on December 15, 2021 to achieve potential costs savings and other resource management benefits. In addition to any potential savings, the City expects there to other benefits associated with the acquisition of the MGS, which includes having control of the facility and the site, providing the City with flexibility with respect to MGS operations and MGS’s role in the City’s resource portfolio. The 2022 Series A bonds provide funds to refund and defease all of the outstanding 2012A Bonds, a portion of the 2012B bonds and pay the cost of issuance of the 2022 bonds. The defeasance of the 2012 A Bonds and portion of the 2021 Series B bonds will result in total debt service cash flow savings of $18,509,369 and an economic gain of $15,309,641.

REQUIRED SUPPLEMENTARY INFORMATION

CITY OF VERNON

VERNON PUBLIC UTILITIES

SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY CITY’S MISCELLANEOUS AND SAFETY COST SHARING PLAN
LAST TEN FISCAL YEARS *
(49)
Fiscal Year Ended 6/30/2021 6/30/2020 6/30/2019 6/30/2018 6/30/2017 Measurement Date 6/30/2020 6/30/2019 6/30/2018 6/30/2017 6/30/2016 Plan’s Proportion of the
Net Pension Liability 16.99% 15.47% 14.86% 15.55% 15.41% Plan’s Proportionate Share of the
Net Pension Liability 22,982,998 $ 18,692,374 $ 16,866,107 $ 17,052,279 $ 14,675,830 $ Plan’s Covered Payroll 4,203,972 4,418,536 4,577,147 4,210,103 2,026,477 Plan’s Proportionate Share of the
Net Pension Liability as a
Percentage of Covered Payroll 546.70% 423.04% 368.49% 405.03% 724.20% Plan Fiduciary Net Position as a
Percentage of the Total
Pension Liability 74.79% 76.15% 77.68% 77.85% 78.91%
Notes to Schedule:

Benefit Changes:

There were no changes in benefits.

Changes in Assumptions:

From fiscal year June 30, 2017 to June 30, 2018:

The discount rate was reduced from 7.65% to 7.15%.

From fiscal year June 30, 2018 to June 30, 2019:

There were no significant changes in assumptions.

From fiscal year June 30, 2019 to June 30, 2020:

There were no significant changes in assumptions.

From fiscal year June 30, 2020 to June 30, 2021:

The inflation rate was increased from 2.5% to 2.625%
The payroll growth rate was reduced from 3.00% to 2.875%. * Fiscal year 2017 was the first year the City allocated a portion of the net pension liability to the VPU, therefore only five years are shown.

CITY OF VERNON

VERNON PUBLIC UTILITIES

SCHEDULE OF PLAN CONTRIBUTIONS
CITY’S MISCELLANEOUS AND SAFETY COST SHARING PLAN
LAST TEN FISCAL YEARS *
(50)
Fiscal Year Ended 6/30/2021 6/30/2020 6/30/2019 6/30/2018 6/30/2017 Actuarially Determined
Contribution 2,145,491 $ 1,908,522 $ 1,622,690 $ 1,475,490 $ 1,403,235 $ Contributions in Relation to the
Actuarially Determined
Contribution (2,145,491) (1,908,522) (1,622,690) (1,475,490) (1,403,235) Contribution:

Deficiency (Excess) - $ - $ - $ - $ - $
Covered Payroll 3,902,610 $ 4,203,972 $ 4,418,536 $ 4,577,147 $ 4,210,103 $ Contributions as a Percentage
of Covered Payroll 54.98% 45.40% 36.72% 32.24% 33.33%
Notes to Schedule:

Valuation Date 6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014 Methods and Assumptions Used to
Determine Contribution Rates:

Actuarial Cost Method Entry Age Entry Age Entry Age Entry Age Entry Age Amortization Method (1) (1) (1) (1) (1)
Asset Valuation Method Fair Value Fair Value Fair Value Fair Value Fair Value Inflation 2.625% 2.625% 2.75% 2.75% 2.75%
Salary Increases (2) (2) (2) (2) (2)
Investment Rate of Return 7.25% (3) 7.25% (3) 7.375% (3) 7.50% (3) 7.50% (3) Mortality (4) (4) (4) (4) (4)
(1) Level percentage of payroll, closed
(2) Depending on age, service, and type of employment
(3) Net of pension plan investment expense, including inflation (4) Mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board.
* Fiscal year 2017 was the first year the City allocated a portion of the net pension liability to the VPU, therefore only five years are shown.

CITY OF VERNON

VERNON PUBLIC UTILITIES

SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY LAST TEN FISCAL YEARS *
(51)
Fiscal Year Ended 6/30/2021 6/30/2020 6/30/2019 6/30/2018 Measurement Date 6/30/2020 6/30/2019 6/30/2018 6/30/2017 Plan’s Proportion of the
Net OPEB Liability 16.99% 15.47% 14.86% 10.71%
Plan’s Proportionate Share of the
Net OPEB Liability 3,433,306 $ 3,391,408 $ 3,432,725 $ 3,887,475 $ Plan’s Covered-Employee Payroll 4,944,915 5,228,211 3,587,387 3,588,945 Plan’s Proportionate Share of the
Net OPEB Liability as a Percentage
of Covered-Employee Payroll 69.43% 64.87% 95.69% 108.32% Plan Fiduciary Net Position as a
Percentage of the Total OPEB Liability 25.70% 16.30% 8.62% 2.83% Notes to Schedule:

Changes in Assumptions:
* Fiscal year 2018 was the first year of implementation, therefore only four years are shown.

The discount rate was changed from 2.85% to 3.58% for the measurement period ended June 30, 2017. The discount rate for the measurement periods ended June 30, 2018 and 2019 was 6.50%. The discount rate for the measurement period ended June 30, 2020 was reduced to 6.25%.

The mortality, retirement, disability, and termination rates for the measurement periods ended June 30, 2017 and 2018 were based on the CalPERS 1997-2011 Experience Study and CalPERS 1997-2015 Experience Study, respectively.

The mortality improvement rates for the measurement periods ended June 30, 2017 and 2018 were based on the Scale MP-2016 and Scale-2018, respectively.

In the June 30, 2018 measurement period, the pre-65 waived retiree re-election was updated to be 10% after age 65.

CITY OF VERNON

VERNON PUBLIC UTILITIES

SCHEDULE OF OPEB CONTRIBUTIONS
LAST TEN FISCAL YEARS *
(52)
Fiscal Year Ended 6/30/2021 6/30/2020 6/30/2019 6/30/2018 Actuarially Determined
Contribution 328,130 $ 298,886 $ 400,166 $ 288,398 $
Contributions in Relation to the
Actuarially Determined
Contribution (531,940) (605,820) (444,230) (221,199)
Contribution:

Deficiency (Excess) (203,810) $ (306,934) $ (44,064) $ 67,199 $ Covered Payroll 5,385,241 $ 4,944,915 $ 5,228,211 $ 3,587,387 $ Contributions as a Percentage
of Covered Payroll 6.09% 6.04% 7.65% 8.04%
Notes to Schedule:

Valuation Date 6/30/2018 6/30/2018 6/30/2016 6/30/2016
Methods and Assumptions Used to
Determine Contribution Rates:

Actuarial Cost Method Entry Age Entry Age Entry Age Entry Age Amortization Method (1) (1) (1) (1)
Amortization Period 28 years 27 years 27 Years 29 Years Asset Valuation Method Market Value Market Value Market Value Market Value Inflation 2.25% 2.50% 2.50% 2.75%
Healthcare Trend Rates (6) (3) (3) (2)
Investment Rate of Return 6.25% 6.50% 7.00% 7.00%
Mortality (5) (5) (5) (4)
(1) Level percentage of payroll, closed.
(2) 8.50% trending down to 5.00%.
(3) 6.90% trending down to 4.00%.
(4) CalPERS December 2014 experience study
(5) CalPERS December 2017 experience study
(6) 6.70% trending down to 3.80%.
* Fiscal year 2018 was the first year of implementation, therefore four years year are shown.

SUPPLEMENTARY INFORMATION

CITY OF VERNON

VERNON PUBLIC UTILITIES

COMBINING STATEMENT OF NET POSITION
JUNE 30, 2021
(53)
Electric Gas Water Fiber Optics Eliminating
Fund Fund Fund Fund Entry Totals
ASSETS
Current Assets:

Cash and Cash Equivalents 123,485,481 $ 7,853,003 $ 14,159,051 $ 862,784 $ - $ 146,360,319 $ Accounts Receivable, Net of
Allowance 5,723,729 363,909 977,524 31,743 - 7,096,905
Accrued Unbilled Revenue 14,521,973 1,337,998 1,118,834 - - 16,978,805 Accrued Interest Receivable 2,321 - 40 - - 2,361
Due from Other City Funds 593,486 - - - (593,486) -
Prepaid Items 16,312 - - - - 16,312
Total Current Assets 144,343,302 9,554,910 16,255,449 894,527 (593,486) 170,454,702 Noncurrent Assets:

Restricted Cash and Cash
Equivalents 45,052,746 - 11,340,139 - - 56,392,885
Advances to Other City Funds 27,193,955 - 2,117,993 - (27,193,955) 2,117,993 Prepaid Items 1,012,402 - - - - 1,012,402
Deposits 1,081,094 - - - - 1,081,094
Capital Assets:

Nondepreciable 59,682,155 - 5,103,057 - - 64,785,212
Depreciable, Net 167,558,410 15,830,766 8,041,598 1,037,498 - 192,468,272 Total Noncurrent Assets 301,580,762 15,830,766 26,602,787 1,037,498 (27,193,955) 317,857,858 Total Assets 445,924,064 25,385,676 42,858,236 1,932,025 (27,787,441) 488,312,560

DEFERRED OUTFLOWS OF

RESOURCES
Deferred Outflows Related to OPEB
Liability 481,702 55,094 138,270 5,707 - 680,773
Deferred Outflows Related to Pensions 3,468,111 396,660 995,501 41,088 - 4,901,360 Deferred Amount on Refunding 292,472 - - - - 292,472
Total Deferred Outflows of
Resources 4,242,285 451,754 1,133,771 46,795 - 5,874,605

CITY OF VERNON

VERNON PUBLIC UTILITIES

COMBINING STATEMENT OF NET POSITION (CONTINUED)
JUNE 30, 2021
(54)
Electric Gas Water Fiber Optics Eliminating
Fund Fund Fund Fund Entry Totals

LIABILITIES
Current Liabilities:

Accounts Payable 12,570,395 $ 50,606 $ 1,416,554 $ 41,486 $ - $ 14,079,041 $ Accrued Wages and Benefits 449,380 50,090 112,211 4,450 - 616,131 Due to Other City Funds - - 593,486 - (593,486) -
Customer Deposits 430,597 13,558 60,384 - - 504,539
Bond Interest Payable 6,463,412 - 247,490 - - 6,710,902 Bonds Payable 24,975,000 - 240,000 - - 25,215,000
Note Payable - - 139,535 - - 139,535
Compensated Absences 350,799 7,928 34,397 844 - 393,968 Total Current Liabilities 45,239,583 122,182 2,844,057 46,780 (593,486) 47,659,116 Noncurrent Liabilities:

Advances from Other City Funds - 23,226,257 - 3,967,698 (27,193,955) - Bonds Payable 246,925,951 - 15,154,913 - - 262,080,864
Note Payable - - 1,220,930 - - 1,220,930
Compensated Absences 701,597 15,856 68,794 1,688 - 787,935 Net Other Postemployment Benefit
Liability 2,429,343 277,852 697,329 28,782 - 3,433,306
Net Pension Liability 16,262,340 1,859,979 4,668,011 192,668 - 22,982,998 Total Noncurrent Liabilities 266,319,231 25,379,944 21,809,977 4,190,836 (27,193,955) 290,506,033 Total Liabilities 311,558,814 25,502,126 24,654,034 4,237,616 (27,787,441) 338,165,149

DEFERRED INFLOWS OF

RESOURCES
Deferred Inflows Related to OPEB
Liability 1,059,241 121,149 304,049 12,549 - 1,496,988
Deferred Inflows Related to Pensions 398,798 45,612 114,473 4,724 - 563,607 Deferred Gain from Sale of
Generation Assets 6,555,916 - - - - 6,555,916
Total Deferred Inflows of
Resources 8,013,955 166,761 418,522 17,273 - 8,616,511

NET POSITION
Net Investment in Capital Assets 124,297,278 15,816,827 7,303,813 1,024,845 - 148,442,763 Restricted for Debt Service 23,894,665 - - - - 23,894,665 Unrestricted (Deficit) (17,598,363) (15,648,284) 11,615,638 (3,300,914) - (24,931,923) Total Net Position 130,593,580 $ 168,543 $ 18,919,451 $ (2,276,069) $ - $ 147,405,505 $

CITY OF VERNON

VERNON PUBLIC UTILITIES

COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION YEAR ENDED JUNE 30, 2021
(55)
Electric Gas Water Fiber Optics
Fund Fund Fund Fund Totals

OPERATING REVENUES
Charges for Services 184,828,389 $ 16,154,140 $ 10,741,694 $ 480,906 $ 212,205,129 $ Total Operating Revenues 184,828,389 16,154,140 10,741,694 480,906 212,205,129

OPERATING EXPENSES
Cost of Sales 155,820,170 14,857,233 8,413,559 377,814 179,468,776 Depreciation 8,178,971 725,458 389,185 193,068 9,486,682 Total Operating Expenses 163,999,141 15,582,691 8,802,744 570,882 188,955,458 OPERATING INCOME (LOSS) 571,449 20,829,248 1,938,950 (89,976) 23,249,671

NONOPERATING REVENUES
(EXPENSES)
Investment Income 57,190 5,334 6,660 422 69,606
Net Decrease in Fair Value of
Investments (3,033) - - - (3,033)
Interest Expense (18,723,613) - (574,178) - (19,297,791) Total Nonoperating
Revenues (Expenses) (18,669,456) 5,334 (567,518) 422 (19,231,218) CHANGE IN NET POSITION 576,783 2,159,792 1,371,432 (89,554) 4,018,453 Net Position (Deficit) - Beginning
of Year 128,433,788 (408,240) 17,548,019 (2,186,515) 143,387,052

NET POSITION (DEFICIT) -
END OF YEAR $ 168,543 130,593,580 $ 18,919,451 $ (2,276,069) $ 147,405,505 $

CITY OF VERNON

VERNON PUBLIC UTILITIES

COMBINING STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 2021
(56)
Electric Gas Water Fiber Optics
Fund Fund Fund Fund Totals

CASH FLOWS FROM OPERATING

ACTIVITIES
Cash Received from Customers 184,984,914 $ 16,007,270 $ 10,472,143 $ 476,112 $ 211,940,439 $ Cash Paid to Suppliers for Goods and Services (122,185,221) (14,273,190) (7,036,017) (302,427) (143,796,855) Cash Paid to Employees for Services (3,850,277) (279,866) (1,260,208) (30,821) (5,421,172) Cash Paid to City for Services (4,781,720) - - - (4,781,720) Net Cash Provided by Operating
Activities 54,167,696 1,454,214 2,175,918 142,864 57,940,692

CASH FLOWS FROM CAPITAL AND

RELATED FINANCING ACTIVITIES
Repayment of Bonds (29,520,000) - - - (29,520,000)
Bond Interest Paid (15,208,498) - (437,232) - (15,645,730) Proceeds from Note Payable - - 761,280 - 761,280
Payment of Note Payable - - (139,535) - (139,535)
Net Acquisition of Capital Assets (14,976,512) (19,492) (2,685,064) - (17,681,068) Net Cash Provided (Used) by Capital
and Related Financing Activities (59,705,010) (19,492) (2,500,551) - (62,225,053)

CASH FLOWS FROM NONCAPITAL

FINANCING ACTIVITIES
Payment from (Provided to) Other City Funds 185,639 14,361 2,859,095 (200,000) 2,859,095 Net Cash Provided (Used) by
Noncapital Financing Activities 185,639 14,361 2,859,095 (200,000) 2,859,095

CASH FLOWS FROM INVESTING

ACTIVITIES
Investment Income 55,712 5,334 6,743 422 68,211
Cash Provided by Investing Activities 55,712 5,334 6,743 422 68,211

CHANGE IN CASH AND CASH
EQUIVALENTS 1,454,417 (5,295,963) 2,541,205 (56,714) (1,357,055) Cash and Cash Equivalents - Beginning of Year 173,834,190 6,398,586 22,957,985 919,498 204,110,259

CASH AND CASH EQUIVALENTS -
END OF YEAR $ 7,853,003 168,538,227 $ 25,499,190 $ 862,784 $ 202,753,204 $

COMPOSITION OF CASH AND CASH

EQUIVALENTS
Cash and Cash Equivalents 123,485,481 $ 7,853,003 $ 14,159,051 $ 862,784 $ 146,360,319 $ Restricted Cash and Investments 45,052,746 - 11,340,139 - 56,392,885 Total 168,538,227 $ 7,853,003 $ 25,499,190 $ 862,784 $ 202,753,204 $

CITY OF VERNON

VERNON PUBLIC UTILITIES

COMBINING STATEMENT OF CASH FLOWS (CONTINUED)
YEAR ENDED JUNE 30, 2021
(57)
Electric Gas Water Fiber Optics
Fund Fund Fund Fund Totals

RECONCILIATION OF OPERATING

INCOME (LOSS) TO NET CASH

PROVIDED BY (USED IN) OPERATING

ACTIVITIES
Operating Income (Loss) 20,829,248 $ 571,449 $ 1,938,950 $ (89,976) $ 23,249,671 $ Adjustments to Reconcile Operating Income
(Loss) to Net Cash Provided (Used) by
Operating Activities:

Depreciation 8,178,971 725,458 389,185 193,068 9,486,682 Change in Operating Assets and Liabilities:

Accounts Receivable (761,728) 255,444 (208,130) (4,794) (719,208) Accrued Unbilled Revenue 901,103 (402,314) (60,621) - 438,168 Due from Other Funds (588,100) - - - (588,100)
Prepaid Expenses and Deposits (90,832) - - - (90,832)
Prepaid Natural Gas 25,646,420 - - - 25,646,420
Deferred Outflows of Resources (1,723,107) (219,034) (464,944) (21,440) (2,428,525) Accounts Payable 1,996,698 (11,141) (9,391) 19,154 1,995,320 Accrued Wages and Benefits 54,690 2,425 (8,559) 305 48,861 Due to Other City Funds (2,161) (310) - - (2,471)
Customer Deposits 17,150 - (800) - 16,350
Compensated Absences 203,182 (262) (90,688) 895 113,127 Other Postemployment Benefit Liability 34,730 27,585 (21,932) 1,515 41,898 Net Pension Liability 3,063,985 480,585 703,672 42,382 4,290,624 Deferred Inflows of Resources (3,592,553) 24,329 9,176 1,755 (3,557,293) Net Cash Provided by Operating
Activities 54,167,696 $ 1,454,214 $ 2,175,918 $ 142,864 $ 57,940,692 $

CITY OF VERNON

WATER FUND
(AN ENTERPRISE FUND OF THE

CITY OF VERNON)

FINANCIAL STATEMENTS AND

SUPPLEMENTARY INFORMATION
YEAR ENDED JUNE 30, 2021

CITY OF VERNON

WATER FUND

TABLE OF CONTENTS
YEAR ENDED JUNE 30, 2021

INTRODUCTORY SECTION

A MESSAGE FROM THE GENERAL MANAGER OF VERNON PUBLIC
UTILITIES i
FY 2020-2021 VERNON PUBLIC UTILITIES AT A GLANCE ii
MAJOR INITIATIVES AND ACCOMPLISHMENTS iii

FINANCIAL SECTION
INDEPENDENT AUDITORS’ REPORT 1
MANAGEMENTS’ DISCUSSION AND ANALYSIS (REQUIRED
SUPPLEMENTARY INFORMATION – UNAUDITED) 4

BASIC FINANCIAL STATEMENTS
STATEMENT OF NET POSITION 9

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET
POSITION 11
STATEMENT OF CASH FLOWS 12
NOTES TO FINANCIAL STATEMENTS 13

REQUIRED SUPPLEMENTARY INFORMATION

SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION
LIABILITY – CITY’S MISCELLANEOUS AND SAFETY COST SHARING PLAN 37
SCHEDULE OF PLAN CONTRIBUTIONS – CITY’S MISCELLANEOUS AND SAFETY COST SHARING PLAN 38
SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY 39 SCHEDULE OF OPEB CONTRIBUTIONS 40

INTRODUCTORY SECTION
(i)
Water Division
Introduction
A message from Abraham Alemu, General Manager of Vernon Public Utilities While the past couple of years have presented historic challenges on a global scale, the City of Vernon and Vernon Public Utilities (VPU) have exhibited strength and resilience by continuing to provide safe, reliable and affordable services during the challenges caused by the COVID-19 pandemic. VPU seamlessly provided the electric, water, gas and fiber utilities to its residents and business community who are vital in manufacturing and distributing goods throughout the region. Recently, VPU established an impressive goal of providing the lowest electric rates in the State of California by 2030 in order to support customer competitiveness and enable community businesses to thrive as the economic engine in Southeast Los Angeles.

In the past year, VPU has continued to complete major infrastructure upgrade projects to meet the increasing needs of its business and industrial community – many of whom manufacture essential goods and products throughout the United States, such as cold storage, food packaging and steel production. These necessary enhancements to the VPU infrastructure foster improvement projects, which increased reliability and help the utility to meet system adequacy requirements, including substation equipment upgrades, automated metering, voltage upgrades, and proactive utility pole replacement and financing initiatives. In addition, the electric infrastructure upgrades support the utility’s Water Division Capital Improvement Projects (CIPs) aimed at creating sustainable water affordability and independence for Vernon residential and business customers. During the past year, the Department was able to drastically reduce its need to purchase water from imported sources and is serving water from the City’s groundwater sources, which results in significant cost savings for the utility and to its customers.

As VPU enters its third year of a 4-year voter-approved electric rate increase, the utility will continue to use this funding to promote programs and projects that will support increased reliability, resilience, and low rates. VPU will also consider and analyze new technologies in an evolving energy landscape to bring renewable, environmentally conscious programs to businesses and residents. Moving forward, VPU has wide-scale transportation electrification plans to help advance customer adoption and play a role in the utility’s long-term energy resources planning and deployment of green offerings.

VPU is well-positioned to maintain a strong financial performance into the long-term future and has made notable strides towards achieving and exceeding its Renewable Portfolio Standard (RPS) and greenhouse gas (GHG) reduction goals. VPU is actively considering a Solar plus Energy Storage Purchase Power Agreement (PPA), which will be the largest PPA in its portfolio. Additionally, the City recently re-acquired the Malburg Generating Station, a 134-megawatt natural gas-fired, combined-cycle facility. With this resource back within the utility’s ownership and operation, VPU now has the control and capability to reduce ongoing operating costs and address the City’s long-term needs for local power generation. Both projects play a critical role in achieving the long-term goals established in Integrated Resource Plan (IRP).

As part of the repurchase, the utility’s electric financial ratings were reassessed by Moody’s and S&P. VPU received an upgraded credit rating from Moody’s and both agencies gave VPU a stable/positive outlook. This rating upgrade is a testament, among other factors, to the utility’s commitment to foster strong management fundamentals and maintain fiscal strength.
(ii)
FY 2020 2021 Vernon Public Utilities At A Glance
WATER
Service area 4.2 square miles
Service meters 1,840 meters
Number of miles of water mains 49
Number of active wells 8
Number of reservoirs 8
Total reservoir capacity (gallons) 16.375 MG
Number of booster stations 3
Average day demand 18.73-acre feet
Maximum day peak factor 1.67
(iii)
Major Initiatives and Accomplishments
Water Division
Completed major rehabilitation of Wells 15 and 17, and minor rehabilitation of Well 21 Imported water was not purchased in Calendar Year 2021
Replaced the main on 50th Street between Soto Street and Boyle Avenue to enable pumping the full capacity of new Well 22, which is currently under construction Rehabilitation of the 3 – 1 MG reservoirs located at Pumping Plant 3 is halfway to completion, with one tank complete and back in service, and the second tank is well underway.

Continued implementation of a program to automate the efficient and safe operation of water production, storage, and conveyance facilities
Ongoing investment into Advanced Metering Infrastructure (AMI) Completed a Water Master Plan

FINANCIAL SECTION
CliftonLarsonAllen LLP
CLAconnect.com
CLA is an independent member of Nexia International, a leading, global network of independentaccounting and consulting firms. See nexia.com/member firm disclaimer for details. (1)
INDEPENDENT AUDITORS’ REPORT
Honorable Mayor and the Members of the City Council
City of Vernon, California
Report on the Financial Statements
We have audited the accompanying financial statements of the Water Fund of the City of Vernon, (Water Fund), an enterprise fund of the City of Vernon, California (City), as of June 30, 2021, and the related notes to the financial statements, as listed in the table of contents.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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.

Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements 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 entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Honorable Mayor and the Members of the City Council
City of Vernon, California
(2)
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Water Fund of the City of Vernon, California, as of June 30, 2021, and the changes in its financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter
As discussed in Note 1 to the financial statements, the financial statements present only the City’s Water Fund and do not purport to, and do not, present fairly the financial position of the City of Vernon, California as of June 30, 2021, and the changes in its financial position and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, schedule of proportionate share of the City’s net pension, schedule of plan contributions, schedule of proportionate share of the City’s net OPEB liability, and schedule of OPEB contributions, identified as required supplementary information (RSI) 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 information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information
The introductory section has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it.

Honorable Mayor and the Members of the City Council
City of Vernon, California
(3)
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 3, 2022, on our consideration of the City’s internal control over the 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.

CliftonLarsonAllen LLP
Irvine, California
March 3, 2022

CITY OF VERNON

WATER FUND

MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(4)
The management of the Water Fund of the City of Vernon (“the City”) offers the following overview and analysis of the basic financial statements of the Water Fund for the fiscal year ended June 30, 2021.

Management encourages readers to utilize information in the Management’s Discussion and Analysis (MD&A) in conjunction with the accompanying basic financial statements.

OVERVIEW OF BASIC FINANCIAL STATEMENTS
The MD&A is intended to serve as an introduction to the Water Fund’s basic financial statements.

Included as part of the financial statements are three separate statements.

The statement of net position presents information on the Water Fund’s total assets and deferred outflows of resources and total liabilities and deferred inflows of resources, with the difference between the two reported as net position.

The statement of revenues, expenses and changes in net position presents information showing how the Water Fund's net position changed during the most recent fiscal year. Financial results are recorded using the accrual basis of accounting. Under this method, all changes in net position are reported as soon as the underlying events occur, regardless of the timing of cash flows. Thus, revenues and expenses reported in this statement for some items may affect cash flows in a future fiscal period (examples include billed but uncollected revenues and employee earned but unused vacation leave).

The statement of cash flows reports cash receipts, cash payments, and net changes in cash and cash equivalents from operations, noncapital financing, capital and related financing, and investing activities.

The notes to the financial statements provide additional information that is essential to fully understand the data provided in the financial statements.

CITY OF VERNON

WATER FUND

MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(5)

FINANCIAL HIGHLIGHTS
Fund Net Position
The table below summarizes the Water Fund’s net position as of the current fiscal year ended June 30, 2021 and prior fiscal year ended June 30, 2020. The details of the current year’s summary can be found on page 9-10 of this report.

City of Vernon
Water Fund
Fund Net Position
June 30, 2021 and 2020
2021 2020 Amount %
Assets:

Current and other assets 16,255,449 $ 9,780,247 $ 6,475,202 $ 66% Restricted assets 11,340,139 15,005,468 (3,665,329) 24% Advances to other City funds 2,117,993 4,388,988 (2,270,995) 52% Capital assets 13,144,655 10,848,776 2,295,879 21%
Total assets 42,858,236 40,023,479 2,834,757 7%
Deferred Outflows of Resources 1,133,771 668,827 464,944 70% Liabilities:

Current liabilities 2,844,057 1,838,093 1,005,964 55%
Long term liabilities 21,809,977 20,896,848 913,129 4%
Total liabilities 24,654,034 22,734,941 1,919,093 8%
Deferred Inflows of Resources 418,522 409,346 9,176 2%
Net Position:

Net investment in capital assets 7,303,813 9,273,640 (1,969,827) 21% Unrestricted (deficit) 11,615,638 8,274,379 3,341,259 40% Total net position 18,919,451 $ 17,548,019 $ 1,371,432 $ 8% Change
The assets and deferred outflows of resources of the Water Fund exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $17,548,019 (net position).

The category of the Water Fund’s net position with the largest balance totaling $11,615,638 represents the unrestricted net position that is expected to be used for future projects or other purposes.

The remaining category of net position, totaling $8,274,379, represents resources that are invested in capital assets, net of related debt.

CITY OF VERNON

WATER FUND

MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(6)
Activities, Net Position:

Current assets increased by $6.5 million from the prior year mainly due to increases in cash by $6.2 million, accounts receivable by $208 thousand and accrued unbilled revenue by $60 thousand.

Restricted assets decreased by $3.7 million in 2021 as we drew down on the Water System Revenue Bonds 2020 Series A to fund capital projects.

Capital assets increased $2.3 million from the prior year mainly due to additional construction expenses and purchase of equipment totaling $2.7 million, net of depreciation of $389 thousand (See Note 5).

Deferred outflows of resources increased by $465 thousand in 2021 primarily due to the increase in deferred outflow related to pension.

Current liabilities increased by $1 million from the prior year mainly due to increases in the amount due to other city funds balance by $588 thousand, bond interest payable by $156 thousand, bond payable by $240 thousand and notes payable by $71 thousand.

Long-term liabilities increased by $913 thousand from the prior year mainly due to increases in the note payable by $551 thousand, in the net pension liability by $703 thousand offset by a decrease in bonds payable by $259 thousand.

Deferred inflows of resources increased by $9 thousand due to the increase in the pension related deferred inflows of resources balance of $65 thousand and an increase in the deferred inflow related to OPEB of $55 thousand.

The net investments in capital assets, net of related debt decreased by $1.9 million while the unrestricted net position increased by $3.3 million causing an increase of the total net position of $1.4 million.

CITY OF VERNON

WATER FUND

MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(7)
Changes in Fund Net Position
The table below summarizes the Water Fund’s changes in net position over the current and prior fiscal years. The details of the current year’s changes in net position can be found on page 11 of this report.

City of Vernon
Water Fund
Changes in Fund Net Position
June 30, 2021 and 2020
2021 2020 Amount %
Operating Revenues:

Charges for services 10,741,694 $ 10,460,467 $ 281,227 $ 3% Operating Expenses:

Cost of sales 8,413,559 8,937,475 (523,916) 6%
Depreciation 389,185 356,509 32,676 9%
Total operating expenses 8,802,744 9,293,984 (491,240) 5% Operating income 1,938,950 1,166,483 772,467 66%
Nonoperating revenues (expenses):

Investment income 6,660 41,717 (35,057) 84%
Interest expense (574,178) (88,284) (485,894) 550%
Net nonoperating revenues (expenses) (567,518) (46,567) (520,951) 1119% Change in net position 1,371,432 1,119,916 251,516 22%
Net position beginning of year 17,548,019 16,428,103 1,119,916 7% Net position end of year $ 17,548,019 18,919,451 $ 1,371,432 $ 8% Change
The Water Fund’s operating income of $1.9 million o f f s e t by n o n - o p e r a t in g e x p e n s e s o f $ 56 7 t h o u s a n d resulted in the increase in net position o f $ 1. 34 m il li o n during the current year.

The key reason for this change was due to the increase in operating income by $772 thousand because of a 3% increase in charges for services and a 6% decrease in operating expenses.

CITY OF VERNON

WATER FUND

MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2021
(8)

CAPITAL ASSET
The Water Fund’s investment in capital assets as of June 30, 2021 amounted to $13.1 million (net of accumulated depreciation). This investment in capital assets includes land, construction in progress, building, utilities system improvements, and machinery and equipment. The total increase in the Water Fund's investment in capital assets for the current fiscal year was $2.7 million, offset by depreciation of $357 thousand, for a net increase of $2.3 million.

Additional information on the Water Fund's capital assets can be found in Note 5 of this report.

Outstanding debt
As of June 30, 2021, the following debt remains outstanding:
$14,840,000 City of Vernon Water System Revenue Bonds, 2020 Series A $1,360,465 City of Vernon agreement with Water Replenishment District of Southern California The City of Vernon Water System Revenue Bonds, 2020 Series A were issued to provide funds to (i) finance the acquisition and construction of certain capital improvements to the Water System of the City, (ii) purchase a municipal bond debt service reserve insurance policy for deposit in the Reserve Fund in satisfaction of the Reserve Requirement, and (iii) to pay costs of issuance of the 2020 Bonds.

As of June 30, 2021, the ratings on all Water System Revenue Bonds is AA by S&P and not rated by Moody’s.

Additional information on the Water Fund's long-term debt can be found in Note 6 of this report.

ECONOMIC FACTORS AND NEW YEAR’S BUDGET AND RATES
These factors were considered in preparing the Water Fund’s budget for the 2022 fiscal year.

The City is strictly industrial and does not maintain an unemployment rate study of its small population. However, the unemployment rate of adjacent communities is currently 10.5%, which is higher than the State of California's average unemployment rate of 7.7%, and the national average unemployment rate of 5.9%.

Inflationary trends in the region compare favorably to national indices.

The occupancy rate of the City’s central business district ranges between 96% and 98%.

REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the Water Fund's finances for all those with an interest in the Water Fund's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Director of Finance, City of Vernon, 4305 Santa Fe Avenue, Vernon, California, 90058.

CITY OF VERNON

WATER FUND

STATEMENT OF NET POSITION
JUNE 30, 2021
See accompanying Notes to Financial Statements.
(9)
ASSETS
Current Assets:

Cash and Cash Equivalents 14,159,051 $
Accounts Receivable, Net of Allowance of $54,334 977,524 Accrued Unbilled Revenue 1,118,834
Accrued Interest Receivable 40
Total Current Assets 16,255,449
Noncurrent Assets:

Restricted Cash and Cash Equivalents 11,340,139
Advances to Other City Funds 2,117,993
Capital Assets:

Nondepreciable 5,103,057
Depreciable, Net 8,041,598
Total Noncurrent Assets 26,602,787
Total Assets 42,858,236

DEFERRED OUTFLOWS OF RESOURCES
Deferred Outflows Related to Pensions 995,501
Deferred Outflows Related to OPEB Liability 138,270
Total Deferred Outflows of Resources 1,133,771

CITY OF VERNON

WATER FUND

STATEMENT OF NET POSITION (CONTINUED)
JUNE 30, 2021
See accompanying Notes to Financial Statements.
(10)

LIABILITIES
Current Liabilities:

Accounts Payable 1,416,554 $
Accrued Wages and Benefits 112,211
Due to Other City Funds 593,486
Customer Deposits 60,384
Bond Interest Payable 247,490
Bonds Payable 240,000
Note Payable 139,535
Compensated Absences 34,397
Total Current Liabilities 2,844,057
Noncurrent Liabilities:

Bonds Payable 15,154,913
Note Payable 1,220,930
Compensated Absences 68,794
Net Other Postemployment Benefit Liability 697,329
Net Pension Liability 4,668,011
Total Noncurrent Liabilities 21,809,977
Total Liabilities 24,654,034

DEFERRED INFLOWS OF RESOURCES
Deferred Inflows Related to Pensions 114,473
Deferred Inflows Related to OPEB Liability 304,049
Total Deferred Inflows of Resources 418,522

NET POSITION
Net Investment in Capital Assets 7,303,813
Unrestricted (Deficit) 11,615,638
Total Net Position 18,919,451 $

CITY OF VERNON

WATER FUND

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION YEAR ENDED JUNE 30, 2021
See accompanying Notes to Financial Statements.
(11)

OPERATING REVENUES
Charges for Services 10,741,694 $
Total Operating Revenue 10,741,694

OPERATING EXPENSES
Cost of Sales 8,413,559
Depreciation 389,185
Total Operating Expenses 8,802,744
OPERATING INCOME 1,938,950

NONOPERATING REVENUES (EXPENSES)
Investment Income 6,660
Interest Expense (574,178)
Total Nonoperating Revenues (Expenses) (567,518)
CHANGE IN NET POSITION 1,371,432
Net Position - Beginning Of Year 17,548,019
NET POSITION - END OF YEAR $ 18,919,451

CITY OF VERNON

WATER FUND

STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 2021
See accompanying Notes to Financial Statements.
(12)

CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers 10,472,143 $
Cash Paid to Suppliers for Goods and Services (7,036,017) Cash Paid to Employees for Services (1,260,208)
Net Cash Provided by Operating Activities 2,175,918

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Bond Interest Paid (437,232)
Proceeds from Note Payable 761,280
Payment of Note Payable (139,535)
Net Acquisition of Capital Assets (2,685,064)
Net Cash Used by Capital and Related Financing Activities (2,500,551)

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Payment from (Provided to) Other City Funds 2,859,095
Net Cash Provided by Noncapital Financing Activities 2,859,095

CASH FLOWS FROM INVESTING ACTIVITIES
Investment Income 6,743
Net Cash Provided by Investing Activities 6,743
CHANGE IN CASH AND CASH EQUIVALENTS 2,541,205
Cash and Cash Equivalents - Beginning of Year 22,957,985 CASH AND CASH EQUIVALENTS - END OF YEAR $ 25,499,190

COMPOSITION OF CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents 14,159,051 $
Restricted Cash and Investments 11,340,139
Total 25,499,190 $

RECONCILIATION OF OPERATING INCOME TO NET CASH

PROVIDED BY OPERATING ACTIVITIES
Operating Income 1,938,950 $
Adjustments to Reconcile Operating Income
to Net Cash Provided by Operating Activities:

Depreciation 389,185
Change in Operating Assets and Liabilities:

Accounts Receivable (208,130)
Accrued Unbilled Revenue (60,621)
Deferred Outflows of Resources (464,944)
Accounts Payable (9,391)
Accrued Wages and Benefits (8,559)
Customer Deposits (800)
Compensated Absences (90,688)
Other Postemployment Benefit Liability (21,932)
Net Pension Liability 703,672
Deferred Inflows of Resources 9,176
Net Cash Provided by Operating Activities 2,175,918 $

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(13)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements present only the Water Enterprise Fund (the Water Fund) of the City of Vernon, California (the City), and do not present fairly the financial position and results of the operations of the City. The Water Fund accounts for the independent operations and the maintenance of the City’s Water utility. The Water Fund is administered as an independent fiscal and accounting entity with a self-balancing set of accounts recording resources, related liabilities, obligations, reserves, and equities, segregated for the purpose of carrying out specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations.

For additional information regarding the City of Vernon, refer to the City’s annual financial report.

The financial statements of the Water Fund have been prepared in conformity with the U.S. generally accepted accounting principles (U.S. GAAP). The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The Water Fund’s significant accounting policies are described below.

A. Basis of Presentation
The Water Fund’s financial statements are reported using the economic resources measurement focus and the 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.

The Water Fund distinguishes operating revenues and expenses from nonoperating items. Operating revenues, such as charges for services, result from exchange transactions associated with the sale of Water. 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. Operating expenses include the cost of sales and services, administrative expenses and depreciation on capital assets. All expenses not meeting this definition are reported as nonoperating expenses.

B. Pooled Cash
Part of the Water Fund’s operating cash balance is pooled with various other City funds for deposit purposes. The share of each fund in the pooled cash account is recorded in each of the fund’s books of accounts, and interest income is apportioned to the participating funds based on the relationship of their average monthly balances to the total of the pooled cash.

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(14)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. Cash Deposits and Investments
For purposes of the statement of cash flows, the Water Fund considers all highly liquid investments (including restricted cash and investments) with an original maturity of three months or less when purchased to be cash equivalents. Investment transactions are recorded on the settlement date. Investments in nonparticipating interest-earning investment contracts are reported at cost and all other investments are reported at fair value. Fair value is defined as the amount that the Water Fund could reasonably expect to receive for an investment in a current sale between a willing buyer and a seller and is generally measured by quoted market prices.

D. Receivables/Payables
Short-term City interfund receivables and payables are classified as “due from other City funds” and “due to other City funds”, respectively, on the statement of net position. Longterm City interfund receivables and payables are classified as “advances to/from other City funds,” respectively, on the statement of net position.

Trade receivables are shown net of an allowance for uncollectible accounts. Allowances for uncollectible accounts were $54,334 as of June 30, 2021. The Water Fund’s customers are billed monthly. The estimated value of services provided, but unbilled at year-end has been included in the accompanying financial statements.

E. Capital Assets
Capital assets (including infrastructure) are recorded at historical cost or at estimated historical cost if the actual historical cost is not available. Contributed capital assets are recorded at their estimated acquisition value at the date contributed. Capital assets include land, construction in progress, and plant assets including building, improvements, and machinery and equipment. The capitalization threshold for all capital assets is $5,000. Capital assets used in operations are depreciated using the straightline method over their estimated useful lives.

The estimated useful lives are as follows:

Utility Plant 3 to 50 Years
Maintenance and repairs are charged to operations when incurred. Betterments and major improvements, which significantly increase values, change capacities or extend useful lives, are capitalized. Upon sale or retirement of capital assets, the cost and related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in the statement of revenues, expenses, and changes in net position.

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(15)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Compensated Absences
Accumulated vacation is accrued when incurred. Upon termination of employment, the Water Fund will pay the employee all accumulated vacation leave at 100% of the employee’s base hourly rate.

G. Deferred Outflows and Inflows of Resources
The Water Fund recognizes deferred outflows and inflows of resources. A deferred outflow of resource is defined as a consumption of net position by the Water Fund that is applicable to a future reporting period. A deferred inflow of resources is defined as an acquisition of net position by the Water Fund that is applicable to a future reporting period. On June 30, 2021, the Water Fund has deferred outflows of resources representing deferred amounts on pension-related transactions and postemployment benefit-related transactions and deferred inflows of resources representing pensionrelated transactions and postemployment benefit-related transactions.

H. Long-Term Obligations
Bond discounts and premiums are amortized over the life of the bonds using the straight-line method.

I. Net Position
The Water Fund financial statements utilize a net position presentation. Net position is categorized as invested in capital assets (net of related debt), restricted, and unrestricted.

Net Investment in Capital Assets – This category groups all capital assets into one component of net position. Accumulated depreciation and the outstanding balances of liabilities that are attributable to the acquisition, construction or improvement of these assets reduce the balance in this category.

Restricted Net Position – This category presents external restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. The Water Fund does not have any restricted net position.

Unrestricted Net Invested in Capital Assets or Position – This category represents the net position of the Water Fund not restricted for any project or other purposes.

The Water Fund’s policy regarding whether to first apply restricted or unrestricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available is to use restricted resources first.

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(16)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) J. Use of Estimates
The preparation of the basic financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

K. 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’s California Public Employees’ Retirement System (CalPERS) plan and additions to/deductions from the Pension 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 the benefit terms. Investments are reported at fair value.

L. 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’s OPEB 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. Investments are reported at fair value.

NOTE 2 CASH AND CASH EQUIVALENTS
Cash and cash equivalents as of June 30, 2021, are classified in the accompanying statement of net position as follows:

Cash and Cash Equivalents 14,159,051 $
Restricted Cash and Cash Equivalents 11,340,139
Total Cash and Cash Equivalents 25,499,190 $
Cash and cash equivalents as of June 30, 2021 consist of the following:

Equity in the City's Pooled Cash 8,118,960 $
Deposits with Financial Institutions 6,040,091
Money Market Mutual Funds 11,340,139
Total Cash and Cash Equivalents 25,499,190 $

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(17)
NOTE 2 CASH AND CASH EQUIVALENTS (CONTINUED)
Equity in the Cash Pool of the City of Vernon
The Water Fund has equity in the cash pool managed by the City. The Water Fund is a voluntary participant in that pool and the pool is governed by and under the regulatory oversight of the Investment Policy adopted by the City Council of the City. The Water Fund has not adopted an investment policy separate from that of the City. The amount of the Water Fund’s cash in this pool is reported in the accompanying financial statements based upon the Water Fund’s pro rata share of the amount calculated by the City. The balance available for withdrawal is based on the accounting records maintained by the City.

The City’s Investment Policy
The City’s Investment Policy sets forth the investment guidelines for all funds of the City.

The Investment Policy conforms to the California Government Code Section 53600 et. seq.

The authority to manage the City’s investment program is derived from the City Council.

Pursuant to Section 53607 of the California Government Code, the City Council annually, appoints the City Treasurer to manage the City’s investment program and approves the City’s investment policy. The Treasurer is authorized to delegate this authority as deemed appropriate. No person may engage in investment transactions except as provided under the terms of the Investment Policy and the procedures established by the Treasurer.

This Investment Policy requires that the investments be made with the prudent person standard, that is, when investing, reinvesting, purchasing, acquiring, exchanging, selling or managing public funds, the trustee (Treasurer and staff) will act with care, skill, prudence, and diligence under the circumstances then prevailing, including but not limited to, the general economic conditions and the anticipated needs of the City.

The Investment Policy also requires that when following the investing actions cited above, the primary objective of the trustee be to safeguard the principal, secondarily meet the liquidity needs of depositors, and then achieve a return on the funds under the trustee’s control. Further, the intent of the Investment Policy is to minimize the risk of loss on the City’s held investments from:

A. Credit Risk
B. Custodial Credit Risk
C. Concentration of Credit Risk
D. Interest Rate Risk

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(18)
NOTE 2 CASH AND CASH EQUIVALENTS (CONTINUED)
Investments Authorized by the California Government Code and the City’s Investment Policy
The table below identifies the investment types that are authorized for the City by the California Government Code and the City’s Investment Policy. The table also identifies certain provisions of the California Government Code that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investment of debt proceeds held by the bond trustee that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City’s Investment Policy.

Maximum Maximum
Authorized Maximum Percentage Investment Minimum
Investment Type Maturity of Portfolio* in One Issuer Rating U.S. Treasury Bonds 5 Years None None None
State and Local Agency Bonds 5 Years None None None
Securities of the U.S. Government, or
its Agencies 5 Years None None None
Certain Asset-Backed Securities 5 Years 20% None AA
Negotiable Certificates of Deposit 5 Years 30% None None Bankers' Acceptances 180 Days 40% 30% None
Commercial Paper 270 Days 25% 10% P-1
Repurchase Agreements 1 year None None None
Reverse Repurchase Agreements 92 Days 20% None None
Medium-Term Notes 5 Years 30% None A
Mutual Funds Investing in Eligible Securities N/A 20% 10% AAA Money Market Mutual Funds N/A 20% 10% AAA
Mortgage Pass-Through Securities 5 Years 20% None AA
State Administered Pool Investment N/A None $75 Million None * Excluding amounts held by bond trustee that are not subject to California Government Code restrictions.

Investments Authorized by Debt Agreements
Investments of debt proceeds held by bond trustees 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. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk.

Maximum Maximum
Authorized Maximum Percentage Investment Minimum
Investment Type Maturity of Portfolio in One Issuer Rating Securities of the U.S. Government, or
its Agencies None None None None
Certain Asset-Backed Securities None None None AA
Certificates of Deposit None None None None
Bankers' Acceptances 1 Year None None None
Commercial Paper None None None P-1
Money Market Mutual Funds N/A None None AAA
State Administered Pool Investment N/A None $75 Million None Investment Contracts None None None None

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(19)
NOTE 2 CASH AND CASH EQUIVALENTS (CONTINUED)
Disclosure Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will 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 changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is 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. The City has no specific limitations with respect to this metric. Information about the sensitivity of the fair values of the Water Fund’s investments (including investments held by bond trustee) to market interest rate fluctuations is provided in the following table that shows the distribution of the Water Fund’s investments by maturity:

Investment Maturities
Fair Value (in Months)
as of Less than 13 to 25 to
Investment Type 6/30/2021 12 Months 24 Months 60 Months Held by Trustee:

Money Market Mutual Funds 11,340,139 $ 11,340,139 $ - $ - $ Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by the California Government Code, the City’s Investment Policy, or debt agreements, and the actual rating as of the year-end for each investment type.

Minimum Actual Fair Value
Required Credit Rating as of
Investment Type Rating Moody's / S&P June 30, 2021
Held by Trustee:

Money Market Mutual Funds Aaa / AAA Aaa / AAA 11,340,139 $ Concentration of Credit Risk
The City’s Investment Policy places no limit on the amount the City may invest in any one issuer excluding a 10% limitation on commercial paper, mutual funds, and money market mutual funds and a 30% limitation on bankers’ acceptances. The City’s Investment Policy also places no limit on the amount of debt proceeds held by the bond trustee that the trustee may invest in one issuer that is governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City’s Investment Policy. As of June 30, 2021, there were no investments held by the Water Fund that exceeded 5% in any one issuer, excluding money market mutual funds.

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(20)
NOTE 2 CASH AND CASH EQUIVALENTS (CONTINUED)
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City’s Investment Policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments. Under the California Government Code, a financial institution is required to secure deposits, in excess of the FDIC insurance amount of $250,000, made by state or local governmental units by pledging government securities held in the form of an undivided collateral pool. The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. Such collateral is held by the pledging financial institution’s trust department or agent in the City’s name.

At June 30, 2021, all of the Water Fund’s deposits were insured or collateralized as required by Section 53652 of the California Government Code.

Fair Value Measurement
The Water Fund 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.

Level 1 inputs are quoted prices for identical assets or liabilities in active markets that the government can access at the measurement date.

Level 2 inputs are other than quoted prices included in Level 1 that are observable for an asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs for an asset or liability.

The Water Fund’s investments in money market mutual funds is not subject to categorization in the fair value hierarchy.

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(21)
NOTE 3 ACCOUNTS RECEIVABLES
The Water Fund’s accounts receivable at June 30, 2021, are as follows:

Accounts Receivable 1,031,858 $
Less: Allowance for Uncollectible Accounts (54,334)
Total Receivables, Net 977,524 $
NOTE 4 INTRA-ENTITY TRANSACTIONS
Transactions between the Water Fund and the other City funds commonly occur in the normal course of business for services received or furnished (accounting, management, engineering, legal services, and capital projects).

Due to and Due From Other City Funds
The Water Fund has a due to the City’s Electric Enterprise Fund of $593,486 for capital outlay.

Advances to Other City Funds
The following table summarizes the Water Fund’s advances to the other City funds at June 30, 2021:

Advances to Other City Funds - July 1, 2020 4,388,988 $ Advance Repaid by City Funds During the Year (2,270,995) Advances to Other City Funds - June 30, 2021 2,117,993 $ The advances between the other City funds and the Water Fund does not accrue interest due to the nature of the City’s operational relationship and capital projects funded by the Water Fund that benefits the both. On November 6, 2012, the City adopted Resolution No. 2012-215 extending the repayment term of the advance to the other City funds from 15 months to a period of over 10 years.

The City’s General Fund allocates certain administrative and overhead costs to the Water Fund which is included as part of the cost of sales. The allocated costs for the year ended June 30, 2021, were $598,230.

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(22)
NOTE 5 CAPITAL ASSETS
Capital asset activities of the Water Fund for the fiscal year ended June 30, 2021, were as follows:

Balance Balance
June 30, 2020 Additions Deletions Transfers June 30, 2021 Capital Assets, Not Being Depreciated:

Land 467,640 $ - $ - $ - $ 467,640 $
Construction in Progress 3,668,700 1,633,512 (53,057) (613,738) 4,635,417 Total Capital Assets, Not Being
Depreciated 4,136,340 1,633,512 (53,057) (613,738) 5,103,057 Capital Assets, Being Depreciated:

Water Utility Plant 22,025,313 1,104,609 - 635,431 23,765,353 Total Capital Assets, Being Depreciated 22,025,313 1,104,609 - 635,431 23,765,353 Less Accumulated Depreciation for:

Water Utility Plant (15,312,877) (389,185) - (21,693) (15,723,755) Total Accumulated Depreciation (15,312,877) (389,185) - (21,693) (15,723,755) Total Capital Assets, Being Depreciated, Net
Water Utility Plant 6,712,436 715,424 - 613,738 8,041,598 Total 6,712,436 715,424 - 613,738 8,041,598
Total Capital Assets, Net 10,848,776 $ 2,348,936 $ (53,057) $ - $ 13,144,655 $ The Water Fund’s total depreciation expense for the year was $389,185.Transfers include vehicles that were contributed to the Water Fund from the City’s Fire Department.

NOTE 6 LONG-TERM OBLIGATIONS
As of June 30, 2021, outstanding debt obligations consisted of the following:
$14,840,000 Water System Revenue Bonds (2020 Series A)
At June 30, 2021, $14,840,000 remained outstanding. The bonds are special obligation bonds which are secured by an irrevocable pledge of water revenues payable to bondholders. The debt service remaining on the bonds is $25,868,013, payable through fiscal 2051. For the current year, debt service and net water revenues were $437,232 and $2,328,135, respectively. Under the Indenture of Trust dated May 6, 2020, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Water Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Water System Revenue Bonds, 2020 Series A were issued to provide funds to (i) finance the acquisition and construction of certain capital improvements to the Water System of the City, (ii) purchase a municipal bond debt service reserve insurance policy for deposit in the Reserve Fund in satisfaction of the Reserve Requirement, and (iii) to pay costs of issuance of the 2020 Bonds.

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(23)
NOTE 6 LONG-TERM OBLIGATIONS (CONTINUED)
A summary of the bonds payable under the Water Fund is as follows:

Fixed Annual Original
Interest Principal Issue Outstanding
Bonds Maturity Rates Installments Amount June 30, 2021
City of Vernon 08/01/50 5.00% To begin 08/01/21: 14,840,000 $ 14,840,000 $ Water System Revenue Bonds, $240,000 -
2020 Taxable Series A $3,785,000
Premium 554,913
Total Revenue Bonds 15,394,913 $
Note Payable – Direct Borrowing
In May 2019, the City entered into an agreement with Water Replenishment District of Southern California (WRD) for assistance with the construction of a new groundwater well or rehabilitation of an existing groundwater well. The promissory note is unsecured and has no interest basis for an amount not to exceed $1,500,000. As of June 30, 2021, WRD has disbursed all of the funds under the agreement to the City. The note is payable in quarterly principal payments commencing September 1, 2020, in an amount which, together with all quarterly payments, will be sufficient to fully amortize the principal balance of the note by the maturity date of April 1, 2031.

Upon an event of default, WRD may declare any or all of the outstanding and unpaid principal balance immediately due and payable, without presentment, demand, protest, notice of protest, notice of acceleration or of intention to accelerate or any other notice, declaration or act of any kind, all of which are hereby expressly waived by the City.

Debt Service Requirements
As of June 30, 2021, annual debt service requirements of the Water Fund to maturity are as follows:

Water System Revenue Bonds
2020 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
2022 240,000 $ 587,975 $
2023 250,000 575,725
2024 265,000 562,850
2025 275,000 549,350
2026 - 542,475
2027-2031 1,985,000 2,662,750
2032-2036 2,180,000 2,161,625
2037-2041 2,680,000 1,625,900
2042-2046 3,180,000 1,163,225
2047-2051 3,785,000 596,138
Total Requirements 14,840,000 $ 11,028,013 $

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(24)
NOTE 6 LONG-TERM OBLIGATIONS (CONTINUED)
Debt Service Requirements (Continued)
Note Payable - Direct Borrowing
Fiscal Year Ending June 30, Principal Interest
2022 139,535 $ - $
2023 139,535 -
2024 139,535 -
2025 139,535 -
2026 139,535 -
2027-2031 662,791 -
Total Requirements 1,360,465 $ - $
Changes in Long-Term Liabilities
The following is a summary of long-term liabilities transactions for the fiscal year ended June 30, 2021:

Amounts
Balance Balance Due Within
June 30, 2020 Additions Reductions June 30, 2021 One Year Other Debt - Bonds Payable 14,840,000 $ - $ - $ 14,840,000 $ 240,000 $ Bond Premium 573,993 - (19,080) 554,913 -
Note Payable - Direct Borrowing 738,720 761,280 (139,535) 1,360,465 139,535 Compensated Absences 193,879 27,070 (117,758) 103,191 34,397 Total 16,346,592 $ 788,350 $ (276,373) $ 16,858,569 $ 413,932 $ Credit Ratings
As of June 30, 2021, the ratings on all Water System Revenue Bonds is AA by S&P and not rated by Moody’s.

NOTE 7 RISK MANAGEMENT
The Water Fund is in the City’s self-insurance program as part of its policy to self-insure certain levels of risk within separate lines of coverage to maximize cost savings.

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

The City utilizes insurance policy(s) to transfer these risks. Each policy has either selfinsured retention or deductible, which are parts of the City’s Risk Financing Program. These expenses are paid on a cash basis as they are incurred. There have been no significant settlements or reductions in insurance coverage during the past three fiscal years.

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(25)
NOTE 7 RISK MANAGEMENT (CONTINUED)
Starting in Fiscal 2010, the City chose to establish Risk Financing in the General Fund, whereby assets are set aside for claim-litigation settlements associated with the abovementioned risks up to their self-insured retentions or policy deductibles. Athens Administrators Inc. is the Third-Party Administrator for the City’s workers’ compensation program, and they provide basic services for general liability claims and litigation.

The insurance limits for the fiscal year 2021 are as follows:

Deductible/SIR
Insurance Type Program Limits (Self-Insured Retention)
Excess Liability Insurance $20,000,000 $2,000,000 SIR per occurrence D and O Employment Practice $2,000,000 $150,000 SIR non-safety; $150,000 SIR safety Excess Workers Compensation $50,000,000 $1,500,000 SIR per occurrence for presumptive loss Employer's Liability $1,000,000 $1,000,000 SIR per occurrence for all employees Commercial Property Insurance $100,000,000 $25,000 except:
$25,000,000 Flood Sublimit $250,000 power stations
$1.5/kVA transfers, subject to a $250,000 minimum
$500,000 named transformers
Employee Dishonest - Crime $1,000,000 $25,000
Pollution - Site Owned $5,000,000 $25,000 for non-utility locations, divested locations and scheduled storage tanks
$50,000 for utility locations
$100,000 for natural gas pipeline
Cyber Liability $3,000,000 $100,000
Contractors Equipment/Auto $10,000,000 Maximum Loss Per Occurrence $5,000 Physical Damage $1,000,000 Equipment Limit-loss or damage to any one piece
Residential Property Insurance $8,023,126 Blanket Building Limit $2,500 $89,013 Blanket Business Personal Property Limit
Terrorism and Sabotage $100,000,000 Policy Aggregate N/A $5,000,000 Active Shooter and Malicious Attack
Per Occurrence/Aggregate
$5,000,000 Terrorism and Sabotage Liability
Per Occurrence/Aggregate
The City has numerous claims and pending litigations, which generally involve accidents and/or liability or damage to City property. The balance of claims/litigations against the City is in the opinion of management, ordinary routine matters, incidental to the normal business conducted by the City. In the opinion of management, such proceedings are substantially covered by insurance, and the ultimate dispositions of such proceedings are not expected to have a material adverse effect on the Water Fund’s financial position, results of operations or cash flows. Further information regarding the City’s self-insurance program may be found in the City’s Annual Financial Report.

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(26)
NOTE 8 PENSION PLAN
A. General Information About the Pension Plans
Plan Descriptions
All full-time safety (police and fire personnel) and miscellaneous personnel and temporary or part-time employees who have worked a minimum of 1,000 hours in a fiscal year are eligible to participate in the City’s cost-sharing and agent multipleemployer defined benefit pension Safety and Miscellaneous Plans, respectively, administered by the California Public Employees’ Retirement System (CalPERS) that acts as a common investment and administrative agent for participating public entities within the state of California. The City allocates the costs of these Plans across all City departments. The Water Fund’s proportionate share of the net pension liability of these Plans is reported as a cost-sharing plan in the financial statements. Benefits vest after five years of service. Employees who retire at the minimum retirement age with five years of credited service are entitled to retirement benefits. Monthly retirement benefits are based on a percentage of an employee’s average compensation for his or her highest consecutive 12 or 36 months of compensation for each year of credited service.

Benefits Provided
Miscellaneous members hired prior to January 1, 2013, with five years of credited service may retire at age 55 based on a benefit factor derived from the 2.7% at 55 Miscellaneous formula or may retire between ages 50 and 54 with reduced retirement benefits. New Miscellaneous members (PEPRA) with five years of credited service may retire at age 62 based on a benefit factor derived from the 2% at 62 Miscellaneous formula or may retire between age 52 and 61 with reduced retirement benefits. The benefit factor increases to a maximum of 2.5% at age 67. Safety members with five years of credited service may retire at age 50 based on a benefit factor derived from the 3% at 50 Safety formula for sworn Police and Fire Department employees. New Safety members (PEPRA) with five years of credited service may retire at age 57 based on a benefit factor derived from the 2.7% at 57 Safety (PEPRA) formula or may retire between age 50 and 56 with reduced retirement benefits for new Safety (PEPRA) members of both Police and Fire Departments. CalPERS also provides death and disability benefits. These benefit provisions and all other requirements are established by state statute provided through a contract between the City and CalPERS.

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(27)
NOTE 8 PENSION PLAN (CONTINUED)
A. General Information About the Pension Plans (Continued) Benefits Provided (Continued)
The Plans’ provisions and benefits in effect as of the measurement date of June 30, 2020, are summarized as follows:

Miscellaneous
Prior to On or After
Hire Date January 1, 2013 January 1, 2013
Benefit Formula 2.7%@55 2%@62
Benefit Vesting Schedule 5 Years of Service 5 Years of Service Benefit Payments Monthly for Life Monthly for Life
Retirement Age 50 52
Monthly Benefits, as a % of Eligible Compensation 2.0% to 2.7% 1.0% to 2.5% Required Employee Contribution Rates 8.000% 6.250%
Required Employer Contribution Rates:

Normal Cost Rate 11.758% 11.758%
Payment of Unfunded Liability 3,185,676 $ - $
Safety
Prior to On or After
Hire Date January 1, 2013 January 1, 2013
Benefit Formula 3.0%@50 2.7%@57
Benefit Vesting Schedule 5 Years of Service 5 Years of Service Benefit Payments Monthly for Life Monthly for Life
Retirement Age 50 50
Monthly Benefits, as a % of Eligible Compensation 3.000% 2.0% to 2.7% Required Employee Contribution Rates 9.000% 12.750%
Required Employer Contribution Rates:

Normal Cost Rate 23.164% 23.164%
Payment of Unfunded Liability 5,885,793 $ - $
Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on July 1 following notice of a change in the rate.

Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute to the difference between the actuarially determined rate and the contribution rate of employees. For the year ended June 30, 2021, the Water Fund’s share of employer contributions made to the Plans was $432,119.

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(28)
NOTE 8 PENSION PLAN (CONTINUED)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions
Actuarial Assumptions
The net pension liability of each of the Plans is measured as of June 30, 2020, using an annual actuarial valuation as of June 30, 2019, rolled forward to June 30, 2020, using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

Miscellaneous Safety
Valuation Date June 30, 2019 June 30, 2019
Measurement Date June 30, 2020 June 30, 2020
Actuarial Cost Method Entry Age Normal Entry Age Normal Actuarial Assumptions:

Discount Rate 7.15% 7.15%
Inflation 2.625% 2.625%
Payroll Growth 2.875% 2.875%
Projected Salary Increase (1) (1)
Mortality Rate Table (2) (2)
Post-Retirement Benefit Increase (3) (3)
(1) Varies by entry age and service.
(2) The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and Post-retirement mortality rates includes 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from December 2017 that can be found on the CalPERS website.
(3) The lessor of contract COLA or 2.50% until Purchasing Power Protection Allowance Floor on purchasing power applies, 2.50% thereafter.

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

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(29)
NOTE 8 PENSION PLAN (CONTINUED)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Long-Term Expected Rate of Return (Continued)
In determining the long term expected rate of return, CalPERS took into account both short term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short term (first 10 years) and the long-term (11+ years) using a building block approach. Using the expected nominal returns for both short term and long term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short term and long-term returns. The expected 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 Real Return Real Return
Asset Years Years
Asset Class (a) Allocation 1 - 10 (b) 11+ (c)
Global Equity 50.00% 4.80% 5.98%
Fixed Income 28.00 1.00% 2.62%
Inflation Assets 0.00 0.77% 1.81%
Private Equity 8.00 6.30% 7.23%
Real Assets 13.00 3.75% 4.93%
Liquidity 1.00 0.00% -0.92%
Total 100.00%
(a)
(b) An expected inflation of 2.0% used for this period. (c) An expected inflation of 2.92% used for this period.

In 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.

Discount Rate
The discount rate used to measure the total pension liability was 7.15%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(30)
NOTE 8 PENSION PLAN (CONTINUED)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Proportionate Share of Net Pension Liability – Allocation of the City’s Pension Plans to the Water Fund
The Water Fund’s net pension liability for the Plans is measured as the proportionate share of the combined net pension liability of the City’s miscellaneous and safety agent multiple-employer plans. The Water Fund’s proportionate share of the combined net pension liability was based on the Water Fund’s current year share of contributions to the pension plans relative to the City’s total current year contributions to the pension plans.

The Water Fund’s proportionate share of the combined net pension liability for the pension plans as of the measurement date ended June 30, 2019 and 2020 were as follows:

Increase (Decrease)
Total Plan Net Pension
Pension Fiduciary Liability Proportionate
Liability Net Position (Asset) Share
Balance at June 30, 2019 (MD) 14,700,445 $ 10,736,106 $ 3,964,339 $ 3.28% Balance at June 30, 2020 (MD) 17,762,255 13,094,244 4,668,011 3.45% Net Changes during 2019-20 3,061,810 $ 2,358,138 $ 703,672 $ 0.17% Pension Expense and Deferred Outflows and Inflows of Resources For the measurement period ended June 30, 2020, the Water Fund recognized its proportionate share of the combined pension expense of the Plans, totaling $313,150. At June 30, 2021, the Water Fund reported its proportionate share of the Plans’ deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred
Outflows Inflows
of Resources of Resources
Pension Contributions Subsequent
to Measurement Date 435,752 $ - $
Differences Between Actual and
Expected Experience 329,268 -
Change in Assumptions - (11,914)
Net Differences Between Projected and
Actual Earnings on Plan Investments 122,571 -
Differences Between Employer Contributions
And Proportionate Share of Contributions - (62,186)
Change in Employer's Proportion 107,910 (40,373)
Total 995,501 $ (114,473) $

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(31)
NOTE 8 PENSION PLAN (CONTINUED)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Pension Expense and Deferred Outflows and Inflows of Resources (Continued) $435,752 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 ending June 30, 2022. Differences between projected and actual investment earnings are amortized on a five-year straight-line basis and all other amounts are amortized over the expected average remaining service lives of all members that are provided with benefits. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Fiscal Year Ended June 30, Total
2022 123,611 $
2023 156,878
2024 108,602
2025 55,095
2026 1,090
Thereafter -
Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the Water Fund’s proportionate share of the Plans’ combined net pension liability, calculated using a discount rate of 7.15%, as well as what the Water Fund’s proportionate share of the Plans’ combined net pension liability would be if it were calculated using a discount rate that is a 1-percentage point lower or a 1-percentage point higher than the current rate:

Total
1% Decrease 6.15%
Net Pension Liability 7,126,338 $
Current Discount Rate 7.15%
Net Pension Liability 4,668,011 $
1% Increase 8.15%
Net Pension Liability 2,652,801 $
Pension Plan Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(32)
NOTE 8 PENSION PLAN (CONTINUED)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Subsequent Events
There were no subsequent events that would materially affect the results of this disclosure.

Payable to the Pension Plan
At June 30, 2021, the Water Fund had no outstanding amount of contributions to the pension plans required for the year ended June 30, 2021.

NOTE 9 OTHER POSTEMPLOYMENT BENEFITS (OPEB)
The other postemployment benefits (OPEB) described in the following paragraphs relate to the City’s OPEB plan. The Water Fund’s share of the net pension liability of the City’s OPEB Plan is reported as a cost-sharing plan in these financial statements since the Water Fund’s operations are handled by City employees who are eligible to participate in the City’s OPEB Plan.

Benefits Provided
Retiree medical and dental benefits are established through the City’s Fringe Benefits and Salary Resolution as well as individual memoranda of understanding between the City and the City’s various employee bargaining groups. Generally, the City will provide postemployment benefit plan for the employee only to those who retire at age sixty (60) or later with twenty (20) years of continuous uninterrupted service, up to the age of sixty-five (65). Alternatively, employees who retire before the age of sixty (60) with twenty (20) years of continuous uninterrupted service, will be permitted to pay their medical and dental premium cost and upon reaching the age of sixty (60), the City will pay the premium for the medical and dental plans until they reach the age of sixty-five (65).

Resolution 2012-217 granted specific retiree medical benefits to employees who retired during the 2012 2013 fiscal year in order to provide an incentive for early retirement whereby the City authorized the payment of medical and dental insurance premiums for eligible retiring employees and their eligible dependents with at least ten (10) years of service plus 5% for each additional full year of service above the ten (10) years of service.

Resolution 2013-06 declared that the retiree medical benefits which had not been a vested right for employees will continue to be a nonvested right for employees who continue to be employed by the City on or after July 1, 2013, but will be a vested right for those who retire during the 2012-2013 fiscal year. The City’s plan is considered a substantive OPEB plan and the City recognizes costs in accordance with GASB Statement No 75. The City may terminate its unvested OPEB in the future.

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(33)
NOTE 9 OTHER POSTEMPLOYMENT BENEFITS (OPEB) (CONTINUED) Funding Policy and Contributions
The City has established an irrevocable OPEB trust with assets dedicated to paying future retiree medical benefits. The City intends to contribute 100% or more of the actuarially determined contribution for the explicit subsidy liability only. The portion of the liability due to the implicit subsidy is not prefunded but is paid as benefits come due. For the measurement date period June 30, 2020, the Water Fund’s proportionate share of contributions made was $108,041 ($66,646 contributed to the OPEB trust, $29,434 paid for retiree premiums, and the estimated implied subsidy of $11,961).

Net OPEB Liability
The City’s net OPEB liability is measured as of June 30, 2020, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of June 30, 2020. A summary of the principal assumptions and methods used to determine the total OPEB liability is shown on the next page.

Actuarial Assumptions
The valuation has been prepared on a closed group basis. Assumptions such as age-related healthcare claims, healthcare trends, retiree participation rates, and spouse coverage, were selected based on demonstrated plan experience and the best estimate of expected future experience.

Explicit subsidy benefit payments by employee group were allocated based on expected benefit payments. The following actuarial assumptions, applied to all periods included in the measurement unless otherwise specified:

Funding Method: Entry age normal level percent of pay cost method Inflation: 2.25%
Salary Increases: 2.75% annual increases
Long-Term Return on Assets: 6.25% net of investment expenses Discount Rate: 6.25%
Healthcare Cost Trend Rates: 6.7% for FY2021, gradually decreasing over several decades to ultimate rate of 3.8% in FY76 and later
years
Mortality: 2017 CalPERS Experience Study. Tables include 15 years of static mortality improvement using 90%
of scale MP-2016

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(34)
NOTE 9 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) Long-Term Expected Rate of Return
The long-term expected rate of return was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class.

These ranges are combined to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the OPEB plan’s target asset allocation as of June 30, 2020 are summarized in the following table:

Long-Term
Target Expected Real
Asset Class Allocation Rate of Return
CERBT Strategy 1:

Equity 59.00% 4.90%
Fixed Income 25.00 1.40%
TIPS 5.00 0.57%
Commodities 3.00 1.88%
REITs 8.00 4.43%
Total 100.00%
Discount Rate
The discount rate used to measure the total OPEB liability was 6.25%. The projection of cash flows used to determine the discount rate assumed that City’s contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

Change of Assumptions
Medical trend rates were updated to exclude the Affordable Care Act’s Excise Tax on highcost health insurance plan due to its repeal.

Allocation of the Net OPEB Liability
The Water Fund’s proportionate share of the net OPEB liability as of the measurement dates ended June 30, 2019 and 2020 was as follows:

Increase (Decrease)
Total Plan Net OPEB
OPEB Fiduciary Liability Proportionate
Liability Net Position (Asset) Share
Balance at June 30, 2019 (MD) 859,322 $ 140,061 $ 719,261 $ 3.28% Balance at June 30, 2020 (MD) 938,946 241,617 697,329 3.45% Net Changes during FY 2019-20 79,624 $ 101,556 $ (21,932) $ 0.17%

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(35)
NOTE 9 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the Water Fund’s proportionate share of the net OPEB liability if it were calculated using a discount rate that is 1% point lower or 1% point higher than the current rate:

Discount Rate
1% Decrease Current Rate 1% Increase
(5.50%) (6.50%) (6.50%)
Net OPEB Liability 809,668 $ 697,329 $ 603,690 $
Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates The following presents the Water Fund’s proportionate share of the net OPEB liability if it were calculated using a healthcare cost trend rates that are 1% point lower (5.7% decreasing to an ultimate rate of 2.8%) or 1% point higher (7.7% decreasing to an ultimate rate of 4.8%) than the current rate:

Healthcare Trend Rate
1% Decrease Current Rate 1% Increase
Net OPEB Liability 660,185 $ 697,329 $ 735,189 $
OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB For the year ended June 30, 2021, the Water Fund recognized its proportionate share of the OPEB expense(revenue) of $(27,961). At June 30, 2021, the Water Fund reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Deferred
Outflows Inflows
of Resources of Resources
Contributions Between Measurement Date and
Reporting Date 108,041 $ - $
Difference Between Expected and Actual Liability 5,950 (133,914) Changes of Assumptions 16,733 (170,135)
Net Differences Between Projected and Actual
Earnings on Investments 7,546 -
Total 138,270 $ (304,049) $

CITY OF VERNON

WATER FUND

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2021
(36)
NOTE 9 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB (Continued)
The $108,041 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, 2022. Differences between projected and actual investment earnings are amortized on a five-year straight-line basis and all other amounts are amortized over the expected average remaining service lives of all members that are provided with benefits. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as OPEB expense as follows:

Deferred
Outflows
(Inflows)
Fiscal Year Ending June 30, of Resources
2022 (66,594) $
2023 (66,594)
2024 (66,623)
2025 (66,730)
2026 (7,715)
Thereafter 436
Subsequent Events
There were no subsequent events that would materially affect the results presented in this disclosure.

Payable to the OPEB Plan
At June 30, 2021, the Water Fund had no outstanding amount of contributions to the OPEB plan required for the year ended June 30, 2021.

REQUIRED SUPPLEMENTARY INFORMATION

CITY OF VERNON

WATER FUND

SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY

CITY'S MISCELLANEOUS AND SAFETY COST SHARING PLAN
LAST TEN FISCAL YEARS *
(37)
Fiscal Year Ended 6/30/2021 6/30/2020 6/30/2019 6/30/2018 6/30/2017 Measurement Date 6/30/2020 6/30/2019 6/30/2018 6/30/2017 6/30/2016 Plan’s Proportion of the
Net Pension Liability 3.45% 3.28% 3.11% 3.74% 3.80%
Plan’s Proportionate Share of the
Net Pension Liability 4,668,011 $ 3,964,339 $ 3,533,209 $ 4,100,788 $ 3,619,851 $ Plan’s Covered Payroll 891,592 925,620 1,100,727 1,038,438 499,838 Plan’s Proportionate Share of the
Net Pension Liability as a
Percentage of Covered Payroll 523.56% 428.29% 320.99% 394.90% 724.20% Plan Fiduciary Net Position as a
Percentage of the Total
Pension Liability 74.79% 76.15% 77.68% 77.85% 78.91%
Notes to Schedule:

Benefit Changes:

There were no changes in benefits.

Changes in Assumptions:

From fiscal year June 30, 2017 to June 30, 2018:

The discount rate was reduced from 7.65% to 7.15%.

From fiscal year June 30, 2018 to June 30, 2019:

There were no significant changes in assumptions.

From fiscal year June 30, 2019 to June 30, 2020:

There were no significant changes in assumptions.

From fiscal year June 30, 2020 to June 30, 2021:

The inflation rate was increased from 2.5% to 2.625%
The payroll growth rate was reduced from 3.00% to 2.875%. * Fiscal year 2017 was the first year the City allocated a portion of the net pension liability to the Water Fund, therefore only five years are shown.

CITY OF VERNON

WATER FUND

SCHEDULE OF PLAN CONTRIBUTIONS

CITY'S MISCELLANEOUS AND SAFETY COST SHARING PLAN
LAST TEN FISCAL YEARS *
(38)
Fiscal Year Ended 6/30/2021 6/30/2020 6/30/2019 6/30/2018 6/30/2017 Actuarially Determined
Contributions 435,752 $ 404,765 $ 339,930 $ 354,831 $ 346,113 $ Contributions in relation to the
Actuarially Determined
Contributions (435,752) (404,765) (339,930) (354,831) (346,113) Contribution :

Deficiency (Excess) - $ - $ - $ - $ - $
Covered Payroll 792,625 $ 891,592 $ 925,620 $ 1,100,727 $ 1,038,438 $ Contributions as a Percentage
of Covered Payroll 54.98% 45.40% 36.72% 32.24% 33.33%
Notes to Schedule:

Valuation Date 6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014 Methods and Assumptions Used to
Determine Contribution Rates:

Actuarial Cost Method Entry Age Entry Age Entry Age Entry Age Entry Age Amortization Method (1) (1) (1) (1) (1)
Asset Valuation Method Fair Value Fair Value Fair Value Fair Value Fair Value Inflation 2.625% 2.625% 2.75% 2.75% 2.75%
Salary Increases (2) (2) (2) (2) (2)
Investment Rate of Return 7.25% (3) 7.25% (3) 7.375% (3) 7.50% (3) 7.50% (3) Mortality (4) (4) (4) (4) (4)
(1) Level percentage of payroll, closed.
(2) Depending on age, service, and type of employment.
(3) Net of pension plan investment expense, including inflation. (4) Mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board.
* Fiscal year 2017 was the first year the City allocated a portion of the net pension liability to the Water Fund, therefore only five years are shown.

CITY OF VERNON

WATER FUND

SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY LAST TEN FISCAL YEARS *
(39)
Fiscal Year Ended 6/30/2021 6/30/2020 6/30/2019 6/30/2018 Measurement Date 6/30/2020 6/30/2019 6/30/2018 6/30/2017 Plan’s Proportion of the
Net OPEB Liability 3.45% 3.28% 3.11% 4.08%
Plan’s Proportionate Share of the
Net OPEB Liability 697,329 $ 719,261 $ 719,107 $ 1,482,614 $ Plan’s Covered-Employee Payroll 1,048,734 1,095,236 1,368,166 1,368,760 Plan’s Proportionate Share of the
Net OPEB Liability as a Percentage
of Covered-Employee Payroll 66.49% 65.67% 52.56% 108.32% Plan Fiduciary Net Position as a
Percentage of the Total OPEB Liability 25.70% 16.30% 8.62% 2.83% Notes to Schedule:

Changes in Assumptions:
* Fiscal year 2018 was the first year of implementation, therefore only four years are shown.

The mortality improvement rates for the measurement periods ended June 30, 2017 and 2018 were based on the Scale MP-2016 and Scale-2018, respectively.

In the June 30, 2018 measurement period, the pre-65 waived retiree re-election was updated to be 10% after age 65.

The discount rate was changed from 2.85% to 3.58% for the measurement period ended June 30, 2017. The discount rate for the measurement periods ended June 30, 2018 and 2019 was 6.50%. The discount rate for the measurement period ended June 30, 2020 was reduced to 6.25%.

The mortality, retirement, disability, and termination rates for the measurement periods ended June 30, 2017 and 2018 were based on the CalPERS 1997-2011 Experience Study and CalPERS 1997-2015 Experience Study, respectively.

CITY OF VERNON

WATER FUND

SCHEDULE OF OPEB CONTRIBUTIONS
LAST TEN FISCAL YEARS *
(40)
Fiscal Year Ended 6/30/2021 6/30/2020 6/30/2019 6/30/2018 Actuarially Determined
Contribution 66,646 $ 63,389 $ 83,829 $ 109,990 $
Contributions in relation to the
Actuarially Determined
Contribution (108,041) (128,484) (93,060) (84,361)
Contribution:

Deficiency (Excess) (41,395) $ (65,095) $ (9,231) $ 25,629 $ Covered Payroll 1,093,781 $ 1,048,734 $ 1,095,236 $ 1,368,166 $ Contributions as a Percentage
of Covered-Employee Payroll 9.88% 12.25% 8.50% 6.17%
Notes to Schedule:

Valuation Date 6/30/2018 6/30/2018 6/30/2016 6/30/2016
Methods and Assumptions Used to
Determine Contribution Rates:

Actuarial Cost Method Entry Age Entry Age Entry Age Entry Age Amortization Method (1) (1) (1) (1)
Amortization Period 28 years 27 Years 27 Years 29 Years Asset Valuation Method Market Value Market Value Market Value Market Value Inflation 2.25% 2.50% 2.50% 2.75%
Healthcare Trend Rates (6) (3) (3) (2)
Investment Rate of Return 6.25% 6.50% 7.00% 7.00%
Mortality (5) (5) (5) (4)
(1) Level percentage of payroll, closed.
(2) 8.50% trending down to 5.00%.
(3) 6.90% trending down to 4.00%.
(4) CalPERS December 2014 experience study.
(5) CalPERS December 2017 experience study.
(6) 6.70% trending down to 3.80%.
* Fiscal year 2018 was the first year of implementation, therefore four years year are shown.

City Council Agenda Item Report
Submitted by: Lisa Pope
Submitting Department: City Clerk
Meeting Date: March 15, 2022

SUBJECT
Approval of Minutes
Recommendation:

Approve the March 1, 2022 Regular City Council meeting minutes.

Background:

Staff has prepared and hereby submits the minutes for approval.

Fiscal Impact:

There is no fiscal impact associated with this report.

Attachments:

1. 20220301 City Council Minutes

MINUTES

VERNON CITY COUNCIL

REGULAR MEETING
TUESDAY, MARCH 1, 2022
COUNCIL CHAMBER, 4305 SANTA FE AVENUE

CALL TO ORDER
Mayor Ybarra called the meeting to order at 9:00 a.m.

FLAG SALUTE
Mayor Ybarra led the Flag Salute.

ROLL CALL
PRESENT:

Melissa Ybarra, Mayor
William Davis, Mayor Pro Tem
Leticia Lopez, Council Member
Crystal Larios, Council Member
Judith Merlo, Council Member
STAFF PRESENT:

Carlos Fandino, City Administrator
Zaynah Moussa, Interim City Attorney
Lisa Pope, City Clerk
Scott Williams, Finance Director
Fredrick Agyin, Health and Environmental Control Director Michael Earl, Human Resources Director
Robert Sousa, Police Chief
Abraham Alemu, Public Utilities General Manager
Dan Wall, Public Works Director

APPROVAL OF THE AGENDA
MOTION
Council Member Lopez moved and Council Member Merlo seconded a motion to approve the agenda. The question was called and the motion carried unanimously.

PUBLIC COMMENT
None.

Regular City Council Meeting Minutes Page 2 of 4
March 1, 2022

CONSENT CALENDAR
MOTION
Council Member Lopez moved and Council Member Larios seconded a motion to approve the Consent Calendar. The question was called and the motion carried unanimously.

The Consent Calendar consisted of the following items:

1. Approval of Minutes
Recommendation: Approve the February 15, 2022 Regular City Council meeting minutes.

2. Operating Account Warrant Register
Recommendation: Approve Operating Account Warrant Register No. 82, for the period of January 30 through February 12, 2022, totaling $2,966,642 and consisting of ratification of electronic payments totaling $2,713,771.11 and ratification of the issuance of early checks totaling $252,870.89.

3. Public Works Department Monthly Report
Recommendation: Receive and file the January 2022 Building Report.

4. Labor and Materials Contract with West Coast Arborists, Inc. for Urban Forest Management (Contract CS-1435)
Recommendation: A. Find that the proposed action is exempt from California Environmental Quality Act (CEQA) review, in accordance with CEQA Guidelines § 15304, because the project consists of only minor alterations in vegetation that does not involve removal of healthy, mature, scenic trees; and B. Approve and authorize the City Administrator to execute a three (3) year contract with West Coast Arborists, Inc., in substantially the same form as submitted, for Urban Forest Management Services in an amount not-to-exceed $325,000, with an effective date of April 1, 2022.

5. Services Agreement with CleanStreet, LLC for Street Sweeping Services (Contract No. CS-1434)
Recommendation: A. Find that the proposed action is categorically exempt from California Environmental Quality Act (CEQA) review, in accordance with CEQA Guidelines § 15301, because the project consists of the maintenance of existing streets and involves no expansion of an existing use; and B. Approve and authorize the City Administrator to execute a Services Agreement with CleanStreet, LLC, in substantially the same form as submitted, for a three (3) year term in an amount not-to-exceed $1,001,242.44, with an effective date of April 1, 2022.

6. Acceptance of Electrical Easement at 3333 Downey Road (APN 6303-001- 001)
Recommendation: Accept the Electrical Easement and authorize the Mayor to execute the Certificate of Acceptance.

7. Gas Enterprise Cost-of-Service Study and Rate Design Recommendation: Receive and file the report.

Regular City Council Meeting Minutes Page 3 of 4
March 1, 2022

8. Construction Contract with Cedro Construction, Inc. (Cedro) for Well No. 22 Equipment and Site Improvements
Recommendation: A. Find that the proposed action is categorically exempt from California Environmental Quality Act (CEQA) review, in accordance with CEQA Guidelines § 15301, because the project consists of the maintenance, repair or minor alteration of existing facilities and involves negligible or no expansion of an existing use; in addition, the extensions of sewer, water, and storm drain mains are exempt in accordance with CEQA Guidelines § 15303, because the project consists of minor extensions of utility services; B. Accept the bid from Cedro as the lowest responsive and responsible bidder and reject all other bids; C. Approve and authorize the City Administrator to execute a Construction Contract with Cedro, in substantially the same form as submitted, in an amount not to exceed $2,507,772, for Well No. 22 equipment and site improvements; and D. Authorize a contingency amount of $501,000 in the event of unforeseen changes in the project, and grant authority to the City Administrator to issue Change Orders for an amount up to the contingency amount, if necessary.

9. Ground Lease Re-Assignment and Sublease at 2970 E. 50th Street and Related Ground Lessor Estoppel and Consent
Recommendation: Adopt Resolution No. 2022-03 approving the ground lease reassignment and sublease at 2970 E. 50th Street and authorizing the execution of related Ground Lessor Estoppel and Consent.

NEW BUSINESS

10. 2022 Pension Obligation Bonds
Recommendation: Adopt Resolution No. 2022-04 authorizing the issuance of bonds to refund and prepay certain pension obligations of the City; approving the form and authorizing execution of a trust agreement and bond purchase agreement; authorizing judicial validation proceedings relating to the issuance of such bonds; and approving additional actions related thereto.

Finance Director Williams presented the staff report.

MOTION
Mayor Pro Tem Davis moved and Council Member Lopez seconded a motion to adopt Resolution No. 2022-04 authorizing the issuance of bonds to refund and prepay certain pension obligations of the City; approving the form and authorizing execution of a trust agreement and bond purchase agreement; authorizing judicial validation proceedings relating to the issuance of such bonds; and approving additional actions related thereto. The question was called and the motion carried unanimously.

Regular City Council Meeting Minutes Page 4 of 4
March 1, 2022

ORAL REPORTS
City Administrator Reports on Activities and other Announcements.

City Administrator Fandino thanked Los Angeles County Fire for hosting the fundraiser for fallen Fire Fighter Flagler; discussed COVID-19 masking requirements; and announced upcoming events including the New Business Welcome on March 9, 2022, and Vernon Job Fair on March 11, 2022.

City Council Reports on Activities (including AB 1234), Announcements, or Directives to Staff.

None.

RECESS
Mayor Ybarra recessed the meeting to Closed Session at 9:11 a.m.

CLOSED SESSION

11. CONFERENCE WITH LEGAL COUNSEL – EXISTING LITIGATION (2) Government Code Section 54956.9(d)(1)
Jerry Chavez v. City of Vernon
Los Angeles Superior Court Case No. 21STCP0413
Jerry Chavez v. City of Vernon
Los Angeles Superior Court Case No. BC719460

RECONVENE
At 9:17 a.m., Mayor Ybarra adjourned Closed Session and reconvened the regular meeting.

CLOSED SESSION REPORT
Interim City Attorney Moussa reported that the Council met in Closed Session, discussed the items on the agenda, and took no reportable action.

ADJOURNMENT
Mayor Ybarra adjourned the meeting at 9:18 a.m.
______________________________
MELISSA YBARRA, Mayor
ATTEST:
_____________________________________
LISA POPE, City Clerk
(seal)
City Council Agenda Item Report
Submitted by: Efren Peregrina
Submitting Department: Finance/Treasury
Meeting Date: March 15, 2022

SUBJECT
Operating Account Warrant Register
Recommendation:

Approve Operating Account Warrant Register No. 83, for the period of February 13 through February 26, 2022, totaling $10,359,152.54 and consisting of ratification of electronic payments totaling $10,098,309.85 and ratification of the issuance of early checks totaling $260,842.69.

Background:

Section 2.32.060 of the Vernon Municipal Code indicates the City Treasurer, or an authorized designee, shall prepare warrants covering claims or demands against the City which are to be presented to City Council for its audit and approval. Pursuant to the aforementioned code section, the City Treasurer has prepared Operating Account Warrant Register No. 83 covering claims and demands presented during the period of February 13 through February 26, 2022, drawn, or to be drawn, from East West Bank for City Council approval.

Fiscal Impact:

The fiscal impact of approving Operating Account Warrant Register No. 83, totals $10,359,152.54. The Finance Department has determined that sufficient funds to pay such claims/demands, are available in the respective accounts referenced on Operating Account Warrant Register No. 83.

Attachments:

1. Operating Account Warrant Register No. 83
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022
I hereby cerƟfy that claims and/or demands included in above listed warrantregister have been audited for accuracy and availability of funds for payments andthat said claims and/or demands are accurate and that the funds are available forpayments thereof.____________________________________________________________ScoƩ WilliamsDirector of Finance / City TreasurerDate: _______________________________________________________ This is to cerƟfy that the claims or demands covered by the above listed warrantshave been audited by the City Council of the City of Vernon and that all of saidwarrants are approved for payments except Warrant Numbers:________________________________________________________________________________________________________________________ Printed: 3/8/2022 9:48:26AM
3/9/2022
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022

ELECTRONIC
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT

PAYMENT
NUMBER

PAYMENT
DATE
ATHENS INSURANCE 011.1026.594200 $ 6,303.75 TPA Fees 02/22 IVC27147SERVICES, INC 004303 ‐
02/15/2022 12481 $ 6,303.75
005506 ‐ BEST BEST & KRIEGER, LLP 011.1024.593200 $ 433.50 Re: 5122 S. AtlanƟc Boulevard 926550 011.1024.593200 $ 97.50 Re: Whitworth, Keith Vernon 926551 02/15/2022 12482 $ 531.00
DAILY JOURNAL 011.1003.550000 $ 90.00 PublicaƟon Services B3553097CORPORATION 000947 ‐
011.1003.550000 $ 75.00 PublicaƟon Services B3553099011.1003.550000 $ 75.00 PublicaƟon Services B3553101 02/15/2022 12483 $ 240.00
006687 ‐ NDS 011.1004.520000 $ 5,000.00 Postage Replenishment 2085 02/15/2022 12484 $ 5,000.00
NORTHWEST ELECTRICAL 020.1084.590000 $ 69,697.50 Technical Design Services 1811SERVICES, 005614 ‐
02/15/2022 12485 $ 69,697.50
PIC ENVIRONMENTAL 011.1060.595200 $ 12,295.00 Geologic ConsulƟng Services 15971SERVICES 001649 ‐
02/15/2022 12486 $ 12,295.00
Printed: 3/8/2022 9:48:26AM Page 1 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022

ELECTRONIC
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT

PAYMENT
NUMBER

PAYMENT
DATE
000249 ‐ FEDEX 020.1084.520000 $ 50.57 Period: 12/21 759288226 055.9000.520000 $ 103.26 Period: 12/21 760865004011.1024.510000 $ 67.92 Period: 12/21 760865004055.7100.520000 $ 110.46 Period: 12/21 760865004011.1004.520000 $ 3.03 Period: 01/22 762887575011.1026.520000 $ 102.25 Period: 01/22 762887575011.1004.520000 $ 16.90 Period: 01/22 764415320011.1003.520000 $ 94.71 Period: 01/22 764415320011.1003.520000 $ 67.16 Period: 02/22 765766779 02/17/2022 12487 $ 616.26
HOME DEPOT CREDIT 011.1043.520000 $ 46.53 Small Tools & Plumbing Hardware~ 021722_MULTIPLE 011.0014991SERVICES 001552 ‐
011.1048.520000 $ 1,904.95 Small Tools & Plumbing Hardware~ 021722_MULTIPLE 011.0014991 011.1049.520000 $ 88.18 Small Tools & Plumbing Hardware~ 021722_MULTIPLE 011.0014991 02/17/2022 12488 $ 2,039.66
000059 ‐ SO CAL EDISON 011.1049.560000 $ 94.49 Period: 12/15/21 ‐ 01/13/22 011422 011.1043.560000 $ 478.57 Period: 01/22 020222011.1049.560000 $ 98.94 Period: 10/14/21 ‐ 11/14/21 111521 02/16/2022 12489 $ 672.00
006722 ‐ AVENU MUNISERVICES, LLC 011.1004.596200 $ 222.99 SUTA Services~ INV06013123 011.1004.596200 $ 359.07 SUTA Services~ INV06013124
02/17/2022 12490 $ 582.06
Printed: 3/8/2022 9:48:26AM Page 2 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022

ELECTRONIC
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT

PAYMENT
NUMBER

PAYMENT
DATE
JEMMOTT ROLLINS GROUP, 011.1021.797000 $ 8,100.00 Professional Services~ JAN22(2)INC 005108 ‐
02/17/2022 12491 $ 8,100.00
LEGENDARY FIRE SYSTEMS, 055.8200.596200 $ 3,300.00 Semi Annual Test & InspecƟon of Fire 1440INC 007018 ‐
02/17/2022 12492 $ 3,300.00
002515 ‐ POWEREX CORP 055.9200.596200 $ 125,000.00 Energy Purchase 01/22 51167760 02/17/2022 12493 $ 125,000.00
SO CAL PUBLIC POWER 055.9200.500154 $ 267,706.09 Astoria 2 Solar Project ATSP0222AUTHORITY 002517 ‐
02/17/2022 12494 $ 267,706.09
SO CAL PUBLIC POWER 055.9200.500154 $ 188,847.92 Antelope DSR 1 Solar Project DSR10222AUTHORITY 002517 ‐
02/17/2022 12495 $ 188,847.92
WATTS REGULATOR 011.1060.595200 $ 386.45 Syncta Backflow Test Mgmt ApplicaƟon 15238270COMPANY 006666 ‐
02/17/2022 12496 $ 386.45
Printed: 3/8/2022 9:48:26AM Page 3 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022

ELECTRONIC
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT

PAYMENT
NUMBER

PAYMENT
DATE
003049 ‐ PETRELLI ELECTRIC, INC 055.9100.900000 $ 363,866.21 Electric Service Maintenance 01/22 220036 057.1057.900000 $ 32,711.14 Electric Service Maintenance 01/22 220036 055.8300.590000 $ 540,078.80 Electric Service Maintenance 01/22 220036055.8000.590000 $ 39,707.13 Electric Service Maintenance 01/22 220036057.1057.590000 $ 18,424.07 Electric Service Maintenance 01/22 220036055.9100.900000 $ 654,682.61 Bond Projects 220036 02/17/2022 12497 $ 1,649,469.96
Printed: 3/8/2022 9:48:26AM Page 4 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022

ELECTRONIC
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT

PAYMENT
NUMBER

PAYMENT
DATE
055.9200.500150 $ ‐12,271.41 RecalculaƟon Charges 10/21 202202153253433 405
002412 ‐ CALIFORNIA ISO
055.9200.500190 $ ‐173.01 RecalculaƟon Charges 10/21 202202153253433 405
055.9200.500170 $ 4,196.92 RecalculaƟon Charges 10/21 202202153253433 405
055.9200.500150 $ 205,550.14 IniƟal Charges 01/22 202202153253433 405
055.9200.500170 $ 1,573,298.45 IniƟal Charges 01/22 202202153253433 405
055.9200.500210 $ 9,518.00 IniƟal Charges 01/22 202202153253433 405
055.9200.500240 $ 8,597.06 IniƟal Charges 01/22 202202153253433 405
055.9200.500180 $ ‐1,652.30 IniƟal Charges 01/22 202202153253433 405
055.9200.500190 $ ‐1,413.35 IniƟal Charges 01/22 202202153253433 405
055.9200.500150 $ 219,385.48 IniƟal Charges 02/22 202202153253433 405
055.9200.500190 $ 10.15 IniƟal Charges 02/22 202202153253433 405
055.9200.500210 $ 6,555.30 IniƟal Charges 02/22 202202153253433 405
055.9200.500170 $ ‐1,960.73 IniƟal Charges 02/22 202202153253433 405
02/18/2022 12498 $ 2,009,640.70
Printed: 3/8/2022 9:48:26AM Page 5 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022

ELECTRONIC
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT

PAYMENT
NUMBER

PAYMENT
DATE
002227 ‐ US DEPARTMENT OF ENERGY 055.9200.500180 $ 30,065.94 Boulder Canyon Project Charges 01/22 GG1766W0122 055.9200.500150 $ 14,800.30 Boulder Canyon Project Charges 01/22 GG1766W0122 02/18/2022 12499 $ 44,866.24
000059 ‐ SO CAL EDISON 055.9200.560010 $ 556.68 Period: 01/22 020922 055.9200.560010 $ 460.70 Period: 11/21 122121
02/18/2022 12500 $ 1,017.38
001581 ‐ THE GAS COMPANY 056.5600.560000 $ 64.79 Period: 01/12/22 ‐ 02/11/22 021522 02/18/2022 12501 $ 64.79
002190 ‐ OFFICE DEPOT 011.9019.520000 $ 42.38 Office Supplies 210329348001 011.1002.520000 $ 100.85 Office Supplies 210329348001011.9019.520000 $ 15.42 Office Supplies 210387772001 02/18/2022 12502 $ 158.65
001481 ‐ VERIZON WIRELESS 011.9019.560010 $ 204.77 Period: 11/08/21 ‐ 12/07/21 120721_MULTIPLE 011.9019.560010 $ 129.84 Period: 11/08/21 ‐ 12/07/21 120721_MULTIPLE011.9019.560010 $ 990.70 Period: 11/08/21 ‐ 12/07/21 120721_MULTIPLE011.9019.560010 $ 5,231.74 Period: 11/08/21 ‐ 12/07/21 120721_MULTIPLE011.9019.560010 $ 51.26 Period: 11/08/21 ‐ 12/07/21 120721_MULTIPLE011.9019.560010 $ 946.50 Period: 11/08/21 ‐ 12/07/21 120721_MULTIPLE011.9019.560010 $ 678.42 Period: 11/08/21 ‐ 12/07/21 120721_MULTIPLE 011.9019.560010 $ 1,044.40 Period: 11/08/21 ‐ 12/07/21 120721_MULTIPLE 02/22/2022 12503 $ 9,277.63
Printed: 3/8/2022 9:48:26AM Page 6 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022

ELECTRONIC
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT

PAYMENT
NUMBER

PAYMENT
DATE
HOME DEPOT CREDIT 011.1043.520000 $ 166.16 Small Tools & Plumbing Hardware~ 022222 011.0014991SERVICES 001552 ‐
011.1048.520000 $ 4,656.72 Small Tools & Plumbing Hardware~ 022222 011.0014991 011.1049.520000 $ 2,349.82 Small Tools & Plumbing Hardware~ 022222 011.0014991 02/22/2022 12504 $ 7,172.70
001581 ‐ THE GAS COMPANY 011.1033.560000 $ 16.73 Period: 12/10/21 ‐ 01/11/22 011322 02/22/2022 12505 $ 16.73
BEAR ELECTRICAL 011.1043.590000 $ 2,960.00 Traffic Signal Maintenance 14890SOLUTIONS, INC 007026 ‐
011.1043.590000 $ 3,696.00 Traffic Signal Maintenance 14891 02/23/2022 12506 $ 6,656.00
CAPITAL INDUSTRIAL 020.1084.900000 $ 52,916.93 RehabilitaƟon of Reservoirs~ 013122COATINGS 007089 ‐
02/23/2022 12507 $ 52,916.93
005490 ‐ CINTAS CORPORATION 011.1046.540000 $ 266.32 Uniforms 4110990595 02/23/2022 12508 $ 266.32
001444 ‐ COUNTY OF LOS ANGELES 011.1033.596200 $ 1,260,440.35 Fire ProtecƟon Services~ C0010264 011.1033.596200 $ 112,025.47 Fire ProtecƟon Services~ C0010264011.1033.596200 $ 27,517.60 Fire ProtecƟon Services~ C0010264 02/23/2022 12509 $ 1,399,983.42
Printed: 3/8/2022 9:48:26AM Page 7 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022

ELECTRONIC
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT

PAYMENT
NUMBER

PAYMENT
DATE
EDF TRADING NORTH 055.9200.500160 $ 492,065.00 Natural Gas 01/22 2086869AMERICA, LLC 004116 ‐
02/23/2022 12510 $ 492,065.00
006190 ‐ IVANTI, INC 011.9019.590110 $ 1,465.56 Renewal Fees~ 90068261 011.0015114 011.9019.590110 $ 834.72 Renewal Fees~ 90068261 011.0015114 02/23/2022 12511 $ 2,300.28
006198 ‐ JRM 055.9000.596200 $ 11,492.00 Security Services~ 6054 055.8100.596200 $ 77,340.00 Security Services~ 6055
02/23/2022 12512 $ 88,832.00
006318 ‐ MIECO, LLC 055.9200.500160 $ 45,850.00 Natural Gas 01/22 291671 02/23/2022 12513 $ 45,850.00
PACIFIC SUMMIT ENERGY, 055.9200.500160 $ 123,200.00 Natural Gas 01/22 234324LLC 005908 ‐
02/23/2022 12514 $ 123,200.00
TWIN EAGLE RESOURCES 055.9200.500160 $ 368,807.50 Natural Gas 01/22 105748MGMT, LLC 007225 ‐
02/23/2022 12515 $ 368,807.50
Printed: 3/8/2022 9:48:26AM Page 8 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022

ELECTRONIC
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT

PAYMENT
NUMBER

PAYMENT
DATE
003601 ‐ UNITED SITE SERVICES OF CA 055.8100.596200 $ 877.97 Portable Restroom Service~ 11412557020 055.8100.596200 $ 280.17 Portable Restroom Service~ 11412752446055.8100.596200 $ 122.54 Portable Restroom Service~ 11412788374055.8100.596200 $ 122.54 Portable Restroom Service~ 11412788377020.1084.520000 $ 85.03 Portable Restroom Service~ 11412820778055.8100.596200 $ 280.17 Portable Restroom Service~ 11412822375055.8100.596200 $ 555.42 Portable Restroom Service~ 11412863352055.8100.596200 $ ‐877.97 Portable Restroom Service~ 2142954839 02/23/2022 12516 $ 1,445.87
001617 ‐ UPS 011.1041.520000 $ 78.46 Period: 01/22 933312052(2) 011.9019.520010 $ 4.30 Period: 02/22 933312062(2)011.1041.520000 $ 52.14 Period: 02/22 933312062(2)011.1041.520000 $ 36.00 Period: 02/22 933312072(2) 02/24/2022 12517 $ 170.90
ALL CITY MANAGEMENT 011.1070.596200 $ 1,681.02 School Crossing Guard Services 74834SERVICES 001490 ‐
011.1070.596200 $ 2,139.48 School Crossing Guard Services 75230 02/24/2022 12518 $ 3,820.50
000209 ‐ MERRIMAC ENERGY GROUP 011.120030 $ 158.74 Fuel~ 2217446 011.0015052 02/24/2022 12519 $ 158.74
006870 ‐ CARLOS SALDANA 011.1031.540000 $ 158.74 Reimbursement for Damaged Uniform Shirt 022222 02/24/2022 12520 $ 158.74
Printed: 3/8/2022 9:48:26AM Page 9 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022

ELECTRONIC
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT

PAYMENT
NUMBER

PAYMENT
DATE
055.9200.500150 $ 358,984.83 IniƟal Charges 02/22 202202223153502 069
002412 ‐ CALIFORNIA ISO
055.9200.500190 $ 7,285.35 IniƟal Charges 02/22 202202223153502 069
055.9200.500210 $ 11,570.34 IniƟal Charges 02/22 202202223153502 069
055.9200.500170 $ ‐3,912.93 IniƟal Charges 02/22 202202223153502 069
055.9200.500150 $ ‐13,377.64 RecalculaƟon Charges 11/21 202202223153502 069
055.9200.500190 $ ‐77.61 RecalculaƟon Charges 11/21 202202223153502 069
055.9200.500170 $ 644.10 RecalculaƟon Charges 11/21 202202223153502 069
055.9200.500150 $ ‐16,326.93 RecalculaƟon Charges 10/21 202202223153502 069
055.9200.500170 $ ‐1,110.18 RecalculaƟon Charges 10/21 202202223153502 069
055.9200.500180 $ ‐17.51 RecalculaƟon Charges 10/21 202202223153502 069
055.9200.500240 $ ‐4.49 RecalculaƟon Charges 10/21 202202223153502 069
055.9200.500190 $ 299.05 RecalculaƟon Charges 10/21 202202223153502 069
02/25/2022 12521 $ 343,956.38
Printed: 3/8/2022 9:48:26AM Page 10 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022

ELECTRONIC
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT

PAYMENT
NUMBER

PAYMENT
DATE
CALPINE ENERGY SERVICES, 055.9200.500160 $ 150,500.00 Natural Gas 01/22 83920LP 002060 ‐
02/25/2022 12522 $ 150,500.00
005490 ‐ CINTAS CORPORATION 011.1047.540000 $ 217.57 Uniforms 4110307160 02/25/2022 12523 $ 217.57
CITADEL ENERGY 055.9200.500160 $ 104,190.00 Natural Gas 01/22 105402MARKETING, LLC 007262 ‐
02/25/2022 12524 $ 104,190.00
005388 ‐ CONOCOPHILLIPS COMPANY 055.9200.500160 $ 160,900.00 Natural Gas 01/22 171739 02/25/2022 12525 $ 160,900.00
FLEMING ENVIRONMENTAL, 011.1049.590000 $ 650.00 UST Compliance Services 18285INC 004438 ‐
02/25/2022 12526 $ 650.00
G2 INTEGRATED SOLUTIONS, 055.9000.595200 $ 54,781.75 Natural Gas Compliance Services 112612LLC 006899 ‐
02/25/2022 12527 $ 54,781.75
ICE US OTC COMMODITY 055.9200.596200 $ 123.75 Physical Gas 122001688006MARKETS, 004500 ‐
055.9200.596200 $ 1,126.25 OTC Commission Adjustment 122001688088 02/25/2022 12528 $ 1,250.00
006086 ‐ MACQUARIE ENERGY, LLC 055.9200.500160 $ 587,185.99 Natural Gas 01/22 GASI00165876 02/25/2022 12529 $ 587,185.99
Printed: 3/8/2022 9:48:26AM Page 11 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022

ELECTRONIC
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT

PAYMENT
NUMBER

PAYMENT
DATE
MERCURIA ENERGY 055.9200.500160 $ 1,363,179.39 Natural Gas 01/22 3658028AMERICA, LLC 006262 ‐
02/25/2022 12530 $ 1,363,179.39
005968 ‐ NAVEX GLOBAL, INC 011.1026.594200 $ 2,567.41 Ethicspoint Hotline INV647286 02/25/2022 12531 $ 2,567.41
SO CAL PUBLIC POWER 055.9200.500180 $ 223,511.00 Minimum Cost 02/22 PV0222AUTHORITY 002517 ‐
055.9200.500150 $ 43,056.00 Variable Cost 12/21 PV0222055.122100 $ 10,000.00 PSF Cost 01/22 PV0222 02/25/2022 12532 $ 276,567.00
006780 ‐ THE HITT COMPANIES, INC 011.1026.520000 $ 19.35 Name plates for Ashley Reveles and OE104239 011.0015162 011.1026.520000 $ 10.50 Freight OE104239 011.0015162011.1026.520000 $ 1.84 Sales Tax 9.5% OE104239 02/25/2022 12533 $ 31.69
SO CAL PUBLIC POWER 055.9000.596200 $ 5,343.75 ResoluƟon Billing 0222AUTHORITY 002517 ‐
055.9000.593200 $ 13,517.52 ResoluƟon Billing 0222055.7200.596200 $ 2,450.63 ResoluƟon Billing 0222 02/24/2022 12534 $ 21,311.90
000209 ‐ MERRIMAC ENERGY GROUP 011.120030 $ 31,386.10 Fuel~ 2217446(2) 011.0015052 02/25/2022 12535 $ 31,386.10
TOTAL ELECTRONIC $ 10,098,309.85
Printed: 3/8/2022 9:48:26AM Page 12 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022
EARLY CHECKS
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT
CHECK
NUMBER

PAYMENT
DATE
ALLIED UNIVERSAL 011.1049.590000 $ 10,656.18 Janitorial Services 02/22 12311757JANITORIAL SE 007276 ‐
02/17/2022 608730 $ 10,656.18
001948 ‐ AT&T 011.9019.560010 $ 23.48 Period: 07/06/21 ‐ 08/05/21 16853459 011.9019.560010 $ 2,684.65 Period: 07/10/21 ‐ 08/09/21 16868895011.9019.560010 $ 45.51 Period: 07/10/21 ‐ 08/09/21 16868896055.9000.560010 $ 250.38 Period: 07/10/21 ‐ 08/09/21 16868897011.9019.560010 $ 2,044.94 Period: 07/10/21 ‐ 08/09/21 16868898011.9019.560010 $ 1,181.18 Period: 07/10/21 ‐ 08/09/21 16868899056.5600.560010 $ 675.27 Period: 07/10/21 ‐ 08/09/21 16868900056.5600.560010 $ 23.46 Period: 07/10/21 ‐ 08/09/21 16868999011.9019.560010 $ 209.30 Period: 07/10/21 ‐ 08/09/21 16869331011.9019.560010 $ 21.74 Period: 07/15/21 ‐ 08/14/21 16909361 02/17/2022 608731 $ 7,159.91
007122 ‐ ATLAS PLANNING SOLUTIONS 011.1003.594000 $ 5,028.00 ConsulƟng Services for Local Hazard 1333 02/17/2022 608732 $ 5,028.00
007123 ‐ BARTEL ASSOCIATES, LLC 011.1004.595200 $ 8,360.00 Actuarial ConsulƟng Services~ 21861 011.1004.595200 $ 8,070.00 Actuarial ConsulƟng Services~ 21917 02/17/2022 608733 $ 16,430.00
Printed: 3/8/2022 9:48:26AM Page 13 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022
EARLY CHECKS
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT
CHECK
NUMBER

PAYMENT
DATE
BENNETT‐BOWEN & 011.1046.520000 $ 1,542.00 Cenator Light Bar~ 3016213 011.0015084LIGHTHOUSE 001752 ‐
011.1046.520000 $ 311.00 Eight Switch Controler~ 3016213 011.0015084011.1046.520000 $ 176.05 Sales Tax 9.5% 3016213 02/17/2022 608734 $ 2,029.05
007170 ‐ BIO‐ONE LONG BEACH 011.1043.596200 $ 4,185.00 Hazardous Waste Cleaning 1201 02/17/2022 608735 $ 4,185.00
000439 ‐ BNSF RAILWAY COMPANY 020.1084.596200 $ 50.00 Permit 20071746 02/17/2022 608736 $ 50.00
000419 ‐ CYNTHIA CANO 011.1041.596500 $ 42.56 Calbo EducaƟon Week ‐ Advanced 111721 02/17/2022 608737 $ 42.56
000256 ‐ CALPORTLAND COMPANY 020.1084.520000 $ 1,284.41 Concrete 95269198 020.1084.520000 $ 882.68 Concrete 95273973
02/17/2022 608738 $ 2,167.09
001645 ‐ EUGENIO CERDA 011.1031.596500 $ 23.13 Arrest & Control / Strategic 122821 011.1031.596700 $ 25.00 Arrest & Control / Strategic 122821 02/17/2022 608739 $ 48.13
CLEAN HARBORS 055.8000.590000 $ 278.48 Hazardous Waste Disposal Services 1004024616ENVIRONMENTAL SE 005031 ‐
02/17/2022 608740 $ 278.48
Printed: 3/8/2022 9:48:26AM Page 14 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022
EARLY CHECKS
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT
CHECK
NUMBER

PAYMENT
DATE
COMPRESSOR SERVICE 055.8400.590000 $ 595.20 Compressor Maintenance 2576PROFESSIONA 006045 ‐
02/17/2022 608741 $ 595.20
006131 ‐ CONGRUITIVE 055.9100.590110 $ 4,500.00 ConfiguraƟon Services~ 2179 055.0002909 02/17/2022 608742 $ 4,500.00
001444 ‐ ACWM 011.1070.797000 $ 370.00 CerƟfied Farmers Market RegistraƟon 021522 02/17/2022 608743 $ 370.00
000227 ‐ ENCINAS II, ANTHONY 011.1031.596500 $ 23.13 Arrest & Control / Strategic 122821 011.1031.596700 $ 25.00 Arrest & Control / Strategic 122821 02/17/2022 608744 $ 48.13
004730 ‐ EXTREME SAFETY, INC 011.120010 $ 830.80 Gloves~ 104048 011.0015102 011.120010 $ 415.40 Gloves~ 104048 011.0015102011.120010 $ 1,038.40 3 Ply Masks~ 104048 011.0015102011.120010 $ 234.17 Sales Tax 10.25 104048011.120010 $ 1,069.20 Gloves~ 104213 011.0015102011.120010 $ 484.50 Gloves~ 104213 011.0015102011.120010 $ 159.25 Sales Tax 10.25 104213 02/17/2022 608745 $ 4,231.72
003420 ‐ JEFF FRAGA 056.5600.596700 $ 80.00 Reimb. D2 Renewal 020922 02/17/2022 608746 $ 80.00
Printed: 3/8/2022 9:48:26AM Page 15 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022
EARLY CHECKS
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT
CHECK
NUMBER

PAYMENT
DATE
001668 ‐ GAYTAN, LORENZO 011.1031.596500 $ 23.13 Arrest & Control / Strategic 122821 011.1031.596700 $ 25.00 Arrest & Control / Strategic 122821 02/17/2022 608747 $ 48.13
007107 ‐ GEOTAB USA, INC 011.1046.590000 $ 750.50 GPS ProPlus Plan IN293417 011.1046.590000 $ 750.50 GPS ProPlus Plan IN296261
02/17/2022 608748 $ 1,501.00
HARPER & ASSOCIATES 020.1084.900000 $ 16,318.50 CoaƟng InspecƟon Services ENG7620ENGINEERIN 000280 ‐
02/17/2022 608749 $ 16,318.50
003065 ‐ HDL COREN & CONE 011.1004.596200 $ 16,000.00 Direct Assessment Services~ sin013325 02/17/2022 608750 $ 16,000.00
001208 ‐ INNER‐TITE 055.8000.590000 $ 3,512.00 Mitey Lock Assembly~ 30005878 011.0015093 055.8000.590000 $ 103.56 Freight 30005878 011.0015093055.8000.590000 $ 359.98 Sales Tax 10.25 30005878 02/17/2022 608751 $ 3,975.54
LA COUNTY ASSESSOR 011.9019.590110 $ 50.00 SBF Abstract 22ASRE091OFFICE 001792 ‐
011.9019.590110 $ 50.00 SBF Abstract 22ASRE119
02/17/2022 608752 $ 100.00
Printed: 3/8/2022 9:48:26AM Page 16 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022
EARLY CHECKS
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT
CHECK
NUMBER

PAYMENT
DATE
LOS ANGELES RUBBER 020.1084.900000 $ 4,404.00 Cooling Unit~ S1677168001 011.0015001COMPANY INC 000648 ‐
020.1084.900000 $ 252.03 Freight S1677168001 011.0015001020.1084.900000 $ 451.41 Sales Tax 10.25 S1677168001 02/17/2022 608753 $ 5,107.44
006667 ‐ MEGA RENOVATION, INC 011.1048.590000 $ 14,645.00 Remodel at 4328 Furlong Place 2416 011.1048.590000 $ 3,804.95 Remodel at 4328 Furlong Place 2417011.1048.590000 $ 2,450.00 Remodel at 4328 Furlong Place 2419011.1048.590000 $ 12,945.00 Remodel at 4328 Furlong Place 2420011.1048.590000 $ 7,889.00 Remodel at 4328 Furlong Place 2421011.1048.590000 $ 5,650.00 Remodel at 4328 Furlong Place 2422 02/17/2022 608754 $ 47,383.95
006228 ‐ MILLSOFT, LLC 011.9019.595210 $ 775.00 Computer Programming Services 349 02/17/2022 608755 $ 775.00
MRC SMART TECHNOLOGY 011.9019.590110 $ 1,672.02 Managed Print Services IN2427190SOLUTIONS 006203 ‐
02/17/2022 608756 $ 1,672.02
004831 ‐ PACIFIC AUTO REPAIR 011.1046.520000 $ 533.00 Hydroboost and Fluid 5090 011.0015085 011.1046.590000 $ 350.00 Labor 5090 011.0015085011.1046.520000 $ 54.63 Sales Tax 10.25 5090 02/17/2022 608757 $ 937.63
Printed: 3/8/2022 9:48:26AM Page 17 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022
EARLY CHECKS
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT
CHECK
NUMBER

PAYMENT
DATE
006628 ‐ REDONA, BRYAN 011.1031.596500 $ 115.64 Field Training Officer Course 010622 011.1031.596700 $ 89.00 Field Training Officer Course 010622 02/17/2022 608758 $ 204.64
REGISTRAR‐RECORDER/COU 011.1003.596300 $ 19,655.34 ElecƟon Services~ 212175NTY CLK 001931 ‐
011.1003.596300 $ 16,706.71 ElecƟon Services~ 222002
02/17/2022 608759 $ 36,362.05
006420 ‐ NAVDEEP SINGH SACHDEVA 011.1023.596200 $ 100.00 AƩendance SƟpend~ 021022 02/17/2022 608760 $ 100.00
STANLEY STEEMER OF LA 011.1048.590000 $ 821.50 Steam Cleaning Services 952133COUNTY, 005563 ‐
011.1049.590000 $ 660.48 Steam Cleaning Services 952429 02/17/2022 608761 $ 1,481.98
STATE WATER RESOURCES 020.1084.596200 $ 8,714.99 Water System Annual Fees~ LW1034520CONTROL 000287 ‐
02/17/2022 608762 $ 8,714.99
000141 ‐ THOMSON REUTERS ‐ WEST 011.1024.596600 $ 237.35 SoŌware SubscripƟon Charges 845784310 02/17/2022 608763 $ 237.35
VALLEY PRESBYTERIAN 011.1033.467100 $ 74.69 Refund Overpayment ID# 96693425D 020222HOSPITAL 007304 ‐
02/17/2022 608764 $ 74.69
Printed: 3/8/2022 9:48:26AM Page 18 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022
EARLY CHECKS
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT
CHECK
NUMBER

PAYMENT
DATE
006205 ‐ VELEZ, MARISSA 011.1031.596500 $ 115.64 Field Training Officer Course 010622 011.1031.596700 $ 89.00 Field Training Officer Course 010622 02/17/2022 608765 $ 204.64
000868 ‐ VILLEGAS, RICHARD 011.1031.596700 $ 25.00 Use of Force 011322 011.1031.596500 $ 23.13 Arrest & Control / Strategic 122821011.1031.596700 $ 25.00 Arrest & Control / Strategic 122821 02/17/2022 608766 $ 73.13
020.1084.595200 $ 30.00 Water Quality TesƟng & ReporƟng W1J1400COVERNO N
001628 ‐ WECK LABORATORIES, INC
020.1084.595200 $ 30.00 Water Quality TesƟng & ReporƟng W1J1401COVERNO N
02/17/2022 608767 $ 60.00
WEIDMANN ELECTRICAL 055.8000.590000 $ 180.00 Oil Samples 5900333757TECHNOLOGY 002075 ‐
02/17/2022 608768 $ 180.00
XEROX FINANCIAL SERVICES, 011.9019.590110 $ 2,333.24 Lease Payment~ 2975397LLC 000743 ‐
011.9019.590110 $ 2,333.24 Lease Payment~ 3029228
02/17/2022 608769 $ 4,666.48
ALAMITOS 011.1026.502031 $ 20.00 Medical Services / V. Malkenhorst 120621DERMATOLOGICAL MEDICA 001453 ‐
02/24/2022 608770 $ 20.00
Printed: 3/8/2022 9:48:26AM Page 19 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022
EARLY CHECKS
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT
CHECK
NUMBER

PAYMENT
DATE
001645 ‐ CERDA, EUGENIO 011.1031.596500 $ 165.82 FTO Update Course 020922 02/24/2022 608771 $ 165.82
005490 ‐ CINTAS CORPORATION 011.1047.540000 $ 5.38 First Aid Kit Restock 5095967010 02/24/2022 608772 $ 5.38
DEPT OF TOXIC SUBSTANCES 011.1060.595200 $ 20,058.52 Former Thermador Site Cleanup 21SM2038CTRL 000620 ‐
02/24/2022 608773 $ 20,058.52
000414 ‐ EXPRESS OIL CO 011.1046.590000 $ 270.00 Hazardous Waste Management Services 2202076 011.1046.590000 $ 170.00 Hazardous Waste Management Services 2202106 011.1046.590000 $ 396.00 Hazardous Waste Management Services 2202115 02/24/2022 608774 $ 836.00
000452 ‐ HERNANDEZ, EDWARD 011.1031.596500 $ 165.82 FTO Update Course 020922 02/24/2022 608775 $ 165.82
HUNTINGTON BEACH 011.1026.502031 $ 32.93 Medical Services / B. Malkenhorst 122721INTERNAL MEDI 006882 ‐
02/24/2022 608776 $ 32.93
000686 ‐ IGOE & COMPANY, INC 011.1026.594200 $ 75.00 ParƟcipaƟon Fee 247031 011.1026.594200 $ 75.00 ParƟcipaƟon Fee 256258
02/24/2022 608777 $ 150.00
006028 ‐ JANINE K JENSEN, M.D. 011.1026.502031 $ 42.89 Medical Services / V. Malkenhorst 103021 02/24/2022 608778 $ 42.89
Printed: 3/8/2022 9:48:26AM Page 20 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022
EARLY CHECKS
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT
CHECK
NUMBER

PAYMENT
DATE
005630 ‐ LUCAS, JASON 011.1031.596500 $ 199.02 POST Supervisory Course 010422 02/24/2022 608779 $ 199.02
000870 ‐ MAYWOOD CAR WASH 011.1031.570000 $ 80.00 Car & Truck Wash Services ~ 1165 011.0014948 02/24/2022 608780 $ 80.00
MELVYN GREEN & 011.1049.900000 $ 10,737.50 Plan Check Services~ 14347ASSOCIATES, INC 001096 ‐
02/24/2022 608781 $ 10,737.50
MEMORIALCARE MEDICAL 011.1026.502031 $ 10.00 Medical Services / V. Malkenhorst 011122GROUP 005516 ‐
02/24/2022 608782 $ 10.00
003488 ‐ HILDA MORENO 011.1026.596800 $ 1,635.99 TuiƟon Reimbursement 012622 02/24/2022 608783 $ 1,635.99
PACIFIC COMMERCIAL TRUCK 011.1046.590000 $ 3,520.00 Labor~ 27926 011.0015121BODY, 004111 ‐
02/24/2022 608784 $ 3,520.00
004365 ‐ PACIFICA ORTHOPEDICS 011.1026.502031 $ 20.00 Medical Services / V. Malkenhorst 110121 02/24/2022 608785 $ 20.00
006612 ‐ QUALIFIED MOBILE, INC 011.1046.590000 $ 1,126.50 Car Wash Services 292154 011.1046.590000 $ 1,194.00 Car Wash Services 292657011.1046.590000 $ 1,038.00 Car Wash Services 292926 02/24/2022 608786 $ 3,358.50
Printed: 3/8/2022 9:48:26AM Page 21 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022
EARLY CHECKS
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT
CHECK
NUMBER

PAYMENT
DATE
001457 ‐ QUINN COMPANY 011.1046.520000 $ 319.35 Wheel~ PC810940110 011.0015082 011.1046.520000 $ 30.34 Sales Tax 9.5% PC810940110011.1046.520000 $ 83.15 Freight PC810940929 011.0015082 02/24/2022 608787 $ 432.84
RADIN CARDIOVASCULAR 011.1026.502031 $ 20.00 Medical Services / V. Malkenhorst 011722MED GRP 005142 ‐
011.1026.502031 $ 73.16 Medical Services / B. Malkenhorst 011722(2) 02/24/2022 608788 $ 93.16
000805 ‐ RIO HONDO COLLEGE 011.1031.596700 $ 228.00 RegistraƟon / J. Lucas 010422 02/24/2022 608789 $ 228.00
006340 ‐ S & J SUPPLY COMPANY, INC 020.1084.520000 $ 559.56 Mega Lug Kit~ S100183772001 011.0015094 020.1084.520000 $ 314.82 Mega Lug Kit~ S100183772001 011.0015094020.1084.520000 $ 407.10 Mega Lug Kit~ S100183772001 011.0015094020.1084.520000 $ 131.35 Sales Tax 10.25 S100183772001 02/24/2022 608790 $ 1,412.83
006870 ‐ SALDANA, CARLOS 011.1031.596500 $ 53.65 Vehicle Defense Course 020922 02/24/2022 608791 $ 53.65
006997 ‐ SESPE CONSULTING, INC 011.1060.595200 $ 3,094.00 Environmental RemediaƟon Services 01/22 1325668 02/24/2022 608792 $ 3,094.00
Printed: 3/8/2022 9:48:26AM Page 22 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022
EARLY CHECKS
VENDOR NAME AND NUMBER

ACCOUNTNUMBER

INVOICE
AMOUNT DESCRIPTION INVOICE P.O.#

PAYMENT
AMOUNT
CHECK
NUMBER

PAYMENT
DATE
002358 ‐ TETRA TECH, INC. 011.1060.595200 $ 2,496.23 Vapor Monitoring & Sampling Services 51806296 011.1060.595200 $ 4,394.56 Vapor Monitoring & Sampling Services 51820044 011.1060.595200 $ 2,223.84 Vapor Monitoring & Sampling Services 51834128 02/24/2022 608793 $ 9,114.63
000141 ‐ THOMSON REUTERS ‐ WEST 011.1031.596200 $ 1,276.60 SoŌware SubscripƟon Charges 845807271 02/24/2022 608794 $ 1,276.60
006587 ‐ UCLA MEDICAL GROUP 011.1026.502031 $ 20.00 Medical Services / B. Malkenhorst 010522 02/24/2022 608795 $ 20.00
TOTAL EARLY CHECKS $ 260,842.69
Printed: 3/8/2022 9:48:26AM Page 23 of 24
CITY OF VERNON
OPERATING ACCOUNT
WARRANT REGISTER NO. 83
MARCH 15, 2022
RECAP BY FUNDFUND ELECTRONIC TOTAL EARLY CHECK TOTAL WARRANT TOTAL GRAND TOTALS 011 ‐ GENERAL $ 1,501,495.27 $ 216,453.51 $ 0.00 $ 1,717,948.78020 ‐ WATER 122,750.03 33,830.85 0.00 156,580.88055 ‐ LIGHT & POWER 8,422,864.55 9,779.60 0.00 8,432,644.15056 ‐ NATURAL GAS 64.79 778.73 0.00 843.52 057 ‐ FIBER OPTIC 51,135.21 0.00 0.00 51,135.21GRAND TOTAL $ 10,098,309.85 $ 260,842.69 $0.00 $ 10,359,152.54 TOTAL CHECKS TO BE PRINTED 0
Printed: 3/8/2022 9:48:26AM Page 24 of 24
City Council Agenda Item Report
Submitted by: Efren Peregrina
Submitting Department: Finance/Treasury
Meeting Date: March 15, 2022

SUBJECT
City Payroll Warrant Register
Recommendation:

Approve City Payroll Warrant Register No. 789, for the period of February 1 through February 28, 2022, totaling $2,993,490.97 and consisting of ratification of direct deposits, checks and taxes totaling $2,102,761.38 and ratification of checks and electronic fund transfers (EFT) for payroll related disbursements totaling $890,729.59 paid through operating bank account.

Background:

Section 2.32.060 of the Vernon Municipal Code indicates the City Treasurer, or an authorized designee, shall prepare warrants covering claims or demands against the City which are to be presented to City Council for its audit and approval. Pursuant to the aforementioned code section, the City Treasurer has prepared City Payroll Account Warrant Register No. 789 covering claims and demands presented during the period of February 1 through February 28, 2022, drawn, or to be drawn, from East West Bank for City Council approval.

Fiscal Impact:

The fiscal impact of approving City Payroll Warrant Register No. 789, totals $2,993,490.97.

The Finance Department has determined that sufficient funds to pay such claims/demands, are available in the respective accounts referenced on City Payroll Warrant Register No. 789.

Attachments:

1. City Payroll Account Warrant Register No. 789
Raquel Franco | 3/9/2022 7:29 AM
PAYROLL WARRANT REGISTERCity of VernonNo. 789 Month of February 2022 I hereby Certify: that claims or demands covered by the This is to certify that the claims or demandsabove listed warrants have been audited as to accuracy covered by the above listed warrants have been and availability of funds for payments thereof; and that audited by the City Council of the City of Vernonsaid claims or demands are accurate and that funds are and that all of said warrants are approved for payavailable for payments thereof. mentsScott A. Williams DATEDirector of Finance / City Treasurer DATE
Date: