Vernon City Council
October 17, 2023

CITY OF VERNON

ANNUAL COMPREHENSIVE FINANCIAL STATEMENTS

AND SUPPLEMENTARY INFORMATION
YEAR ENDED JUNE 30, 2022

CITY OF VERNON

TABLE OF CONTENTS
YEAR ENDED JUNE 30, 2022

INTRODUCTORY SECTION

LETTER OF TRANSMITTAL I

FINANCIAL SECTION
INDEPENDENT AUDITORS’ REPORT 1
MANAGEMENTS’ DISCUSSION AND ANALYSIS (REQUIRED
SUPPLEMENTARY INFORMATION) 4

FINANCIAL STATEMENTS

GOVERNMENT-WIDE FINANCIAL STATEMENTS
STATEMENT OF NET POSITION 17
STATEMENT OF ACTIVITIES 18

FUND FINANCIAL STATEMENTS
BALANCE SHEET – GOVERNMENTAL FUNDS 20

RECONCILIATION TO THE GOVERNMENTAL FUND BALANCE SHEET
TO THE STATEMENT OF NET POSITION – GOVERNMENTAL
ACTIVITIES 21

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE – GOVERNMENTAL FUNDS 22

RECONCILIATION TO THE STATEMENT OF REVENUES,

EXPENDITURES, AND CHANGES IN FUND BALANCE OF
GOVERNMENTAL FUND TO THE STATEMENT OF ACTIVITIES –
GOVERNMENTAL ACTIVITIES 23
STATEMENT OF NET POSITION – PROPRIETARY FUNDS 24

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET
POSITION – PROPRIETARY FUNDS 26
STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS 27
STATEMENT OF FIDUCIARY NET POSITION – FIDUCIARY FUNDS 29 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION –
FIDUCIARY FUNDS 30
NOTES TO FINANCIAL STATEMENTS 31

CITY OF VERNON

TABLE OF CONTENTS
YEAR ENDED JUNE 30, 2022

REQUIRED SUPPLEMENTARY INFORMATION
BUDGETARY COMPARISON SCHEDULE – GENERAL FUNDS 78
NOTE TO REQUIRED SUPPLEMENTARY INFORMATION 79

SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND
RELATED RATIOS – MISCELLANEOUS PLAN 80
SCHEDULE OF PENSION CONTRIBUTIONS – MISCELLANEOUS PLAN 83

SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION
LIABILITY – SAFETY PLAN 85

SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND
RELATED RATIOS – SAFETY PLAN 86
SCHEDULE OF PENSION CONTRIBUTIONS – SAFETY PLAN 87

SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED
RATIOS 89
SCHEDULE OF OPEB CONTRIBUTIONS 91

INTRODUCTORY SECTION
4305 Santa Fe Avenue, Vernon, California
90058 Telephone (323) 583‐8811
(i)
City of Vernon, California
Finance Department
October 2, 2023
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, 2022. 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 currently houses more than 1,800 businesses that employ approximately 50,000 men and women from nearby communities throughout the Greater Los Angeles area. These include food and agriculture, apparel, steel, plastics logistics and home furnishings companies serving as a vital economic engine in the region. (ii)
Vernon is a key contributor to the diverse Los Angeles County economy. While the California economy has effectively recovered from the pandemic recession of 2020 with a faster return to normalcy in most business sectors, the current global and local economies continue to face many of the same challenges of the prior year and remain prevalent today, Inflation continues to top historical norms, rising interest rates continue to put pressure on the housing market, car sales and other certain parts of the economy, the risk of new COVID variants, and the war in Ukraine continue to have a global economic effect. A mix of economic forecasts believe that the longer inflation persists and the higher the Federal Reserve increases interest rates in response, the greater the risk to the overall economy.

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 despite the current financial woes. As the City moves into fiscal year (FY) 2022- 23, we are optimistic about continued growth but applied conservative budgeting principles during the budget development process for FY 2022-23.

While the budget reflects tempered optimism, the current global and local economies continue to face new and ongoing challenges that lead us reevaluate spending strategies, The City’s future economic health will ne dependent on growing and maintaining healthy reserves through fiscally conservative budgets and polices, planning for economic opportunities, and maintaining its strong financial position through prudent, long-range policy decisions and sound fiscal management, The City will continue to monitor key economic indicators, sources of revenue, and spending levels as part of its sound, conservative fiscal approach.

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.

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 high-quality utility services at cost effective rates with the highest standards of reliability. 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. Established in 1908, the Vernon Department of Health & Environmental Control (DHEC) provides comprehensive and efficient services to accomplish this goal, tailoring its operations to regulate and meet the needs of the City's large industrial sector.

The DHEC provides Vernon businesses and residents multiple programs to ensure that they are operating as required by local and State regulations. In addition, the department oversees numerous programs that cater to the basic needs of the community as a whole.

From food safety, water quality, solid waste, to sustainability, the DHEC functions as a resource hub for information on regulatory mandates, user-friendly guidance, specialized permitting, and education. These in-house experts are accessible to businesses and residents alike.

By maintaining its own municipal health authority, the community deals directly with Vernon DHEC officials to address important environmental and health-related issues, thus enhancing the City’s ability to respond quickly, especially in critical times like the recent pandemic.

DHEC staff are equipped to efficiently address situations that have the potential to impact the health and wellness of the community. The team partners with complementary agencies including Los Angeles County Fire, Los Angeles County Public Health, and Vernon’s own Police Department; and engages thirdparty resources when necessary. The DHEC will often be the first on-scene when a hazardous incident is reported, as the team possesses the expertise to coordinate resources, and can spearhead the implementation of remedies to ensure that the City is safe haven to live and conduct business.

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: Food safety, Food Defense and Consumer Protection, Water Quality, Land Use, Solid Waste, Liquid Waste, Certified Unified Program Agency (CUPA), Groundwater and Soil Clean-up and Emergency Preparedness and Disaster Response. Each of these programs is designed to ensure a safe environment for residents and the business community. (iv)
Public Works
The City’s Public Works Department is responsible for the Planning, Building and Safety, and maintenance and construction of the City’s infrastructure. The department includes approximately 40 employees consisting of engineers, building inspectors, plan checkers, technicians, mechanics and maintenance personnel.

The engineering section is responsible for administering city contracts and designing public improvements, such as roadways, storm drains, sewers, traffic signals and City-owned buildings. This section also maintains plans for city construction projects and prepares legal descriptions for street dedications.

The survey section maintains Vernon’s centerline ties, monuments and benchmarks, providing the basis from which private property lines are established in the City. It is also responsible for engineering and inspecting city-run construction projects. Public works crews maintain the City’s streets, sewers, storm drain systems, traffic islands and City buildings. These crews also provide graffiti and litter removal. The City garage warehouses supplies and maintains a fleet of more than 300 vehicles and motorized equipment.

Public Works reviews, inspects and approves all new construction within the public right-of-way, and cooperates with other departments to review and process all parcel maps, lot line adjustments, lot mergers, covenants and agreements.

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 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.

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.

Vernon's Police 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 emergency response mutual aid coverage than that which the City requests through these agreements. (v)

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.

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. 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.

4. 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.

5. 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.

6. 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 (vi)
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.

7. Vernon’s electric rates remain competitive, and in many cases, lower than adjacent municipal and investor- o w n e d 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 is a three-time recipient of the RP3 Diamond Level Award, the highest reliability award from APPA, which reflects our continued investment in utility infrastructure and commitment to safety and workforce development.

8. Since the purchase of Malburg Generating Station (MGS), Vernon Public Utilities optimizes the operating profile for operational savings and continued coordination with the CAISO to prevent statewide rolling blackouts and requests to run MGS when energy is needed most across the electric grid.

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, 2022, the City’s overall total net position was $256.7 million. This consisted of a positive governmental net position of $74.3 million and business-type net position of $182.4 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, Jessica Alcaraz, Financial Services Administrator and Angela Melgar, Finance Manager. Appreciation is also expressed to Carlos Fandino, City Administrator; Zaynah Moussa, City Attorney; Todd Dusenberry, General Manager of Public Utilities; Dan wall, Director of Public Works; Robert Sousa, Chief of Police; Freddy Agyin, Director of Health and Environmental Control; Michael Earl, Human Resource Director; and Lisa Pope, City Clerk. (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
CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. See CLAglobal.com/disclaimer.

CliftonLarsonAllen LLP
CLAconnect.com
(1)
INDEPENDENT AUDITORS’ REPORT
Honorable Mayor and
Members of the City Council
City of Vernon
Vernon, California
Report on the Audit of 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, 2022, and the related notes to financial statements, which collectively comprise the City’s financial statements as listed in the table of contents.

In our opinion, the financial statements referred to above present fairly, in all material respects, the 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, 2022, and the changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

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

Emphasis of Matter
Change in Accounting Principle
As described in Note 1C to the financial statements, effective July 1, 2021, the City adopted new accounting guidance, Statement of Governmental Accounting Standards Board (GASB Statement) No. 87, Leases. Our opinions are not modified with respect to this matter.

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

Honorable Mayor and
Members of the City Council
City of Vernon
(2)
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City of Vernon’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS and Government Auditing Standards, we:
 Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.
 Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
 Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
(3)
Honorable Mayor and
Members of the City Council
City of Vernon
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 is the responsibility of management and, 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 Information
Management is responsible for the other information included in the annual report. The other information comprises the introductory section but does not include the basic financial statements and our auditors’ report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.

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

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 4, 2023, 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
October 4, 2023

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2022
(4)
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, 2022.

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 17-19 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, 2022
(5)
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 74).

The basic governmental funds financial statements can be found on pages 20-23 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.

The basic proprietary funds financial statements can be found on pages 24-28 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 29-30 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 31-75 of this report.

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2022
(6)

GOVERNMENT-WIDE FINANCIAL ANALYSIS
City’s Net Position
The table below summarizes the City’s net position as of June 30, 2022 and June 30, 2021. The details of the current year’s summary can be found on page 17 of this report.

City of Vernon
Net Position
June 30, 2022 and 2021
2022 2021 2022 2021 2022 2021
Assets:

Current and other assets $          31,543,883 $          15,676,741 $        190,425,409 $        174,666,191 $        221,969,292 $        190,342,932 Restricted assets    6,267,964     5,070,045   46,383,084    56,392,885    52,651,048    61,462,930 Capital assets       163,093,528    165,326,345    458,427,644     257,253,484     621,521,172      422,579,829 Total assets       200,905,375    186,073,131    695,236,137     488,312,560     896,141,512      674,385,691 Deferred Outflows of Resources
Deferred outflows related to pensions     23,034,461      23,952,913      5,338,797       4,901,360    28,373,258    28,854,273 Deferred outflows related to OPEB liability 2,856,840         3,326,931     662,143      680,773       3,518,983    4,007,704 Deferred amount on bond refunding      ‐ ‐        1,933,345      292,472       1,933,345   292,472 Total deferred outflows of resources     25,891,301      27,279,844      7,934,285       5,874,605    33,825,586    33,154,449 Liabilities:

Current liabilities    4,494,931     3,779,531   23,591,507    21,910,613    28,086,438    25,690,144 Long term liabilities     92,405,587    135,010,934    485,156,669     316,254,536     577,562,256      451,265,470 Total liabilities     96,900,518    138,790,465    508,748,176     338,165,149     605,648,694      476,955,614 Deferred Inflows of Resources
Deferred inflows related to pensions     44,972,489     2,754,345   10,423,470      563,607    55,395,959    3,317,952 Deferred inflows related to OPEB liability    6,807,966     7,315,776      1,577,912       1,496,988       8,385,878    8,812,764 Deferred inflows related to Leases    3,803,114 ‐   ‐   ‐          3,803,114     ‐ Deferred gain from sale of generation assets      ‐ ‐   ‐         6,555,916 ‐       6,555,916 Total deferred outflows of resources 55,583,569           10,070,121   12,001,382       8,616,511    67,584,951    18,686,632 Net Position:

Net investment in capital assets       162,746,593    165,326,345    168,787,837     148,442,763     331,534,430      313,769,108 Restricted    4,422,510     4,146,007   32,836,544    23,894,665    37,259,054    28,040,672 Unrestricted (deficit)    (92,856,514)     (104,979,963)     (19,203,517)      (24,931,923)   (112,060,031)    (129,911,886) Total net position $          74,312,589 $          64,492,389 $        182,420,864 $        147,405,505 $        256,733,453 $        211,897,894 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 $256,733,453 (net position).

The category of the City’s net position with the largest balance totaling $331,534,430 represents resources that are invested in capital assets, net of the related debt.

The second-largest category of net position, totaling $37,259,054 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 ($112,060,031) 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, 2022
(7)
Governmental activities, net position:
 Current and other assets increased by $15,867,142 from the prior year due to increase in cash and cash equivalents of $3,566,960, accounts receivable of $1,773,892, taxes receivable of $1,630,903, internal balances of $4,881,456 and lease receivable of $3,836,304 through the implementation of GASB Statement No. 87.
 Restricted assets increased by $1,197,919 from the prior year mainly due to an increase in restricted cash and investments balance for streets improvements.  Capital assets decreased by $2,232,817 from the prior year mainly due to depreciation of $4,991,029 offset by the acquisition of machinery and equipment and infrastructure and building upgrades and improvements as well as the liquidation & disposal of City department’s assets.  Deferred outflows of resources for pension costs decreased by $918,452 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) decreased by $470,091 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 $715,400 from the prior year mainly due to an increase in accounts payable of $1,718,829 offset by a decrease in accrued wages and benefits of $825,446 and unearned revenue of $216,467.
 Long-term liabilities decreased by $42,605,347 from the prior year mainly due to decrease in net pension liability and other postemployment benefits liability of $40,851,219 and $3,485,823, respectively, offset by an increase in liabilities due in more than 1 year of $1,291,165.  Deferred inflows of resources for pension actuarial increased by $42,218,144 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.
 Deferred inflows of resources for OPEB decreased by $507,810 from the prior year mainly due to changes in actuarial assumptions and the difference between actual and expected experience.  Deferred inflows of resources for leases increased by $3,803,114 due to the implementation of GASB Statement No. 87.

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2022
(8)
Governmental activities, net position (continued):
 Net investment in capital assets decreased by $2,579,679 from the prior year which is equivalent to the decrease in capital assets, net of finance purchase obligations during the current year.  Restricted net position increased by $276,503 from the prior year mainly due to a decrease in the restricted designation placed on street improvement account and SCWP account.  The unrestricted net deficit decreased by $10,456,738 from the prior year mainly due to the current year’s change in net position of $8,153,489 offset by a decrease in net investment in capital assets of $2,579,679.

Business-type activities, net position:
 Current and other assets increased $15,759,218 from the prior year mainly due to an increase in cash and cash equivalents of $10,600,320 and in receivables of $9,212,592 offset by a decrease in internal balances of $4,881,456.
 Restricted assets decreased by $10,009,801 from the prior year mainly due to the drawdowns funding the capital improvement projects.
 Capital assets increased $201,174,160 from the prior year mainly due to acquisitions of the Malburg Generation Station (MGS), and new equipment and facility improvements, offset by depreciation of $17,904,210 and net capital asset disposals of $2,315,926 (See Note 5).  Deferred outflows of resources increased by $2,059,680 due to the decrease in amount on bond refunding of $1,640,873 and in deferred pensions of $437,437.  Current liabilities increased $1,680,894 mainly due to an increase in accounts payable of $3,393,468 offset by a decrease in bond interest payable $1,498,676.  Long-term liabilities increased by $168,902,133 from the prior year mainly due to bonds payable increase with newly issued bonds related to MGS acquisition (see Note 6).  Deferred inflows of resources increased by $3,384,871 mainly due to the increase related to pensions of $9,859,863 offset by the amortization of the remaining deferred gain from sale of generation assets of $6,555,916 as a result of the purchase of MGS.  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 VPU’s total net position at fiscal year 2021-22 was $182,420,864, which increased by $35,015,359 from the prior year due to an increase in the net investment in capital assets by $20,345,074, an increase in the funds restricted for debt service of $8,941,879 and a decrease of the unrestricted (deficit) of $5,728,406.

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2022
(9)
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 pages 18-19 of this report.

City of Vernon
Statement of Activities
Years ended June 30, 2022 and 2021
2022 2021 2022 2021 2022 2021
Revenues:

Program revenues
Charges forservices $       5,912,509 $      6,470,901 $      5,912,509 $      6,470,901 Vernon public utilities   238,570,758   212,205,129    238,570,758    212,205,129 Operating and capital grants and contributions 5,262,389        2,103,424     865,403    6,127,792    2,103,424 General revenues
Taxes   41,888,435   39,163,804     41,888,435     39,163,804 State allocations   14,989,046   14,445,575     14,989,046     14,445,575 Investment income (loss)   208,039    70,480     285,622     69,606    493,661    140,086 Gain (loss) on the sale of land and assets    ‐ ‐    ‐    ‐    ‐    ‐ Other revenues    2,736,631    2,531,566 ‐    ‐       2,736,631    2,531,566 Total revenues   70,997,049   64,785,750   239,721,783   212,274,735    310,718,832    277,060,485 Expenses:

Governmental activities
General government   17,564,758   15,238,548 ‐    ‐        17,564,758     15,238,548 Public safety   35,417,532   33,919,854 ‐    ‐        35,417,532     33,919,854 Public works   11,811,876   10,468,302 ‐    ‐        11,811,876     10,468,302 Health services    1,416,058    1,280,046 ‐    ‐       1,416,058    1,280,046 Interest on long‐term debt    199    67,707 ‐    ‐        199     67,707 Business‐type activities
Vernon public utilities   199,672,850   203,474,562    199,672,850    203,474,562 Total expenses   66,210,423   60,974,457   199,672,850   203,474,562    265,883,273    264,449,019 Change in net position before transfers 4,786,626        3,811,293     40,048,933     8,800,173     44,835,559     12,611,466 Transfers:

Interfund transfers    5,033,574    4,781,720   (5,033,574)   (4,781,720) ‐    ‐ Net Transfers    5,033,574    4,781,720   (5,033,574)   (4,781,720)    ‐ ‐ Change in net position    9,820,200    8,593,013     35,015,359     4,018,453     44,835,559     12,611,466 Net position ‐ beginning of year   64,492,389   55,899,376   147,405,505   143,387,052    211,897,894    199,286,428 Net position ‐ end of year $       74,312,589 $      64,492,389 $       182,420,864 $       147,405,505 $       256,733,453 $       211,897,894 Governmental Activities Business‐type Activities Totals

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2022
(10)
Governmental activities, changes in net position:

Governmental activities’ net position increased by $9,820,200 and business-type activities’ net position increased by $35,015,359 for a net increase of $44,835,559 for the City.

Governmental activities consist of the following departments:

GENERAL GOVERNMENT PUBLIC SAFETY PUBLIC WORKS HEALTH SERVICES CITY COUNCIL POLICE ADMIN‐ENGINEERING‐PLANNING HEALTH

CITY ADMINISTRATION BUILDING REGULATIONS

INFORMATION TECHNOLOGY CITY HOUSING

CITY ATTORNEY FACILITIES MAINTENANCE

HUMAN RESOURCES FLEET SERVICES

CITY CLERK STREET LIGHTING

FINANCE STREET MAINTENANCE

COMMUNITY PROMOTION WAREHOUSE

INDUSTRIAL DEVELOPMENT

COMMUNITY DEVELOPMENT

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2022
(11)

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2022
(12)
Business-type activities, changes in net position:

Business-type activities increased the City's net position by $35,015,359 before transfers which is a $30,996,906 decrease from the prior year. The key reason for this increase was due to the significant increase in operating income of $27,102,304 and lower interest expense of $5,134,307 offset by the loss on the disposition of assets of $2,315,926.

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2022
(13)

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 $27,847,091 (see page 20), an increase of $10,879,836 from the prior year. Approximately

0.61% of the total fund balance amount, $168,491, constitutes nonspendable fund balance, which are amounts that are not in a spendable form or are required to be maintained intact. Approximately

15.88% of the total fund balance amount, $4,442,510, 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, $23,256,090 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 $27,847,091 (see page 22). At the end of the current fiscal year, the total fund balance represents 43.9% 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 $19,203,517 (see page 25). 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 $35,015,359 (see page 26). 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, 2022
(14)

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 $11,450,180. The key reasons for this variance were due to lower actual revenues than projected of $1,615,795 and lower actual expenditures than appropriated by $13,155,975.

For the current year, the General Fund’s total positive variance between the final budgeted estimated revenues and actual revenues was $1,615,795. The main reason for the variance, was that taxes came in higher than expected by $2,621,650 and $8,935,173 respectively offset by intergovernmental revenues coming in lower by $5,534,510.

For the current year, the General Fund’s total positive variance between the final budgeted amount and the actual amount for expenditures was $13,155,975. The key reasons for this variance were due to higher appropriations than actual expenditures of $9,440,279 in capital outlay and $2,192,186 in public works.

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, 2022, amounts to $621,521,172 (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 increase in capital assets of $198,941,343 is mainly due to the purchase of Malburg Generation Station. Additionally, capital assets was updated for the implementation of GASB Statement No. 87, Leases, for right-to-use- lease assets.

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

Outstanding debt
As of June 30, 2022, the following debt remains outstanding:
 $37,895,000 City of Vernon Electric System Revenue Bonds, 2008 Taxable Series A  $11,505,000 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  $19,305,000 City of Vernon Electric System Revenue Bonds, 2020 Series A  $173,815,000 City of Vernon Electric System Revenue Bonds, 2021 Taxable Series A  $52,070,000 City of Vernon Electric System Revenue Bonds, 2022 Taxable Series A  $14,600,000 City of Vernon Water System Revenue Bonds, 2020 Taxable Series A  $1,220,930 City of Vernon agreement with the Water Replenishment District of Southern California

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2022
(15)
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 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 Electric System Revenue Bonds, 2021 Series A were issued to provide funds: (i) to pay the costs of the acquisition by the City of Vernon of a 134-megawatt natural gas-fired generating facility located within the city limits on land owned by the City, together with certain related electrical interconnection facilities and other assets, property, and contractual rights, (ii) to fund a deposit to the Debt Service Reserve Fund in satisfaction of the Debt Service Reserve Requirement, and (iii) to pay costs of issuance of the 2021 Bonds.

The City of Vernon Electric System Revenue Bonds, 2022 Series A were issued to (i) refund and defease all the City’s outstanding Electric System Revenue Bonds, 2012 Series A and a portion of the City’s outstanding Electric System Revenue Bonds, 2012 Taxable Series B and (ii) to pay costs of issuance of the 2022 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, 2022, the ratings on all Electric System Revenue Bonds of the City changed from the prior year to BBB+/Stable by S&P and Baa1/Stable by Moody’s and the ratings on all Water Revenue Bonds is A-/Stable by S&P and not rated by Moody’s.

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

CITY OF VERNON
MANAGEMENT’S DISCUSSION AND ANALYSIS
JUNE 30, 2022
(16)
ECONOMIC FACTORS AND NEW YEAR’S BUDGET AND RATES
Local and state economies experienced continual growth throughout fiscal year 2021-22, with tapering in the latter months due to prolonged historical high inflation and the increased interest rates by the Federal Reserve. Cities continue to be challenged in forecasting the economy and preparing the budget for the next fiscal year. The City has been fortunate in its specific mix of businesses, which has proven to be resilient in response to volatile economic changes. These factors were considered in preparing the City and VPU’s budget for fiscal year 2022-23.
 The City developed a conservative spending plan addressing City Council and community priorities while focusing on operations at full capacity, deferring maintenance and operational needs while still focused on delivering quality core municipal services.  VPU continues to respond to inflation and supply chain issues, including higher energy, natural gas, materials and supplies, chemicals, and construction costs to maintain generation, transmission, and distribution infrastructure to continue to provide exceptionally reliable service.
 Continue to implement VPU’s capital plan, manage operating and maintenance expenses, update the 2018 Integrated Resource Plan, complete an Electric Cost of Service Analysis and Rate Design study, transition customer load growth to green commerce, optimize the MGS operating profile, and continue to implement the multi-year water rate adjustment plan approved by City Council.

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, [email protected], City of Vernon, 4305 Santa Fe Avenue, Vernon, California, 90058.

CITY OF VERNON

STATEMENT OF NET POSITION
JUNE 30, 2022
See accompanying Notes to Financial Statements.
(17)
Governmental Business-Type
Activities Activities Total
ASSETS
Cash and Cash Equivalents 17,973,383 $ 156,960,639 $ 174,934,022 $ Accounts Receivable, Net of Allowance 1,783,820 14,262,338 16,046,158 Taxes Receivable 4,947,687 - 4,947,687
Lease Receivable - Current Portion 66,705 - 66,705
Lease Receivable 3,769,599 - 3,769,599
Notes and Loans Receivable 8,816 - 8,816
Other Receivables 61,919 - 61,919
Accrued Unbilled Revenue - 19,025,964 19,025,964
Accrued Interest Receivable - 89,197 89,197
Internal Balances 2,763,463 (2,763,463) -
Prepaid Natural Gas - 636,909 636,909
Prepaid Expenses 168,491 1,012,402 1,180,893
Deposits 1,201,423 - 1,201,423
Restricted Cash and Investments 6,267,964 46,383,084 52,651,048 Capital Assets:

Nondepreciable 65,801,086 70,803,890 136,604,976
Depreciable, Net 97,292,442 387,623,754 484,916,196
Total Assets 200,905,375 695,236,137 896,141,512

DEFERRED OUTFLOWS OF RESOURCES
Deferred Outflows Related to Pensions 23,034,461 5,338,797 28,373,258 Deferred Outflows Related to OPEB Liability 2,856,840 662,143 3,518,983 Deferred Amount on Bond Refunding - 1,933,345 1,933,345 Total Deferred Outflows of Resources 25,891,301 7,934,285 33,825,586

LIABILITIES
Accounts Payable 2,828,577 17,472,509 20,301,086
Accrued Wages and Benefits 613,476 406,604 1,020,080
Customer Deposits 239,139 500,168 739,307
Bond Interest Payable - 5,212,226 5,212,226
Unearned Revenue 813,739 - 813,739
Noncurrent Liabilities:

Due Within One Year 2,563,534 50,905,670 53,469,204
Due in More than One Year 5,082,788 414,605,974 419,688,762 Net Other Postemployment Benefit Liability 13,292,721 3,080,913 16,373,634 Net Pension Liability 71,466,544 16,564,112 88,030,656
Total Liabilities 96,900,518 508,748,176 605,648,694

DEFERRED INFLOWS OF RESOURCES
Deferred Inflows Related to Pensions 44,972,489 10,423,470 55,395,959 Deferred Inflows Related to OPEB Liability 6,807,966 1,577,912 8,385,878 Deferred Inflows Related to Leases 3,803,114 - 3,803,114 Total Deferred Inflows of Resources 55,583,569 12,001,382 67,584,951

NET POSITION
Net Investment in Capital Assets 162,746,593 168,787,837 331,534,430 Restricted for:

Employee Flexible Spending Account 25,261 - 25,261
Street Improvements 3,855,244 - 3,855,244
Asset Forfeiture Funds 542,005 - 542,005
Debt Service 32,836,544 - 32,836,544
Unrestricted (Deficit) (92,856,514) (19,203,517) (112,060,031) Total Net Position 74,312,589 $ 182,420,864 $ 256,733,453 $

CITY OF VERNON

STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30, 2022
See accompanying Notes to Financial Statements.
(18)
Program Revenues
Charges Operating Capital
for Grants and Grants and
Function/Program Activities Expenses Services Contributions Contributions

PRIMARY GOVERNMENT
Governmental Activities:

General Government 17,564,758 $ 8,525,489 $ 2,273 $ - $ Public Safety 35,417,532 229,726 1,862,043 -
Public Works 11,811,876 1,564,854 5,616 3,392,457
Health Services 1,416,058 626,014 - -
Interest on Long Term Liabilities 199 - - -
Total Governmental Activities 66,210,423 10,946,083 1,869,932 3,392,457 Business-Type Activities:

Electric 176,601,293 208,539,519 665,887 -
Gas 18,478,619 18,705,573 5,029 -
Water 9,217,802 10,845,652 194,487 -
Fiber Optics 408,710 480,014 - -
Total Business-Type Activities 204,706,424 238,570,758 865,403 - Total Primary Government $ 270,916,847 $ 249,516,841 $ 2,735,335 $ 3,392,457

CITY OF VERNON

STATEMENT OF ACTIVITIES (CONTINUED)
YEAR ENDED JUNE 30, 2022
See accompanying Notes to Financial Statements.
(19)
Function/Program Activities

PRIMARY GOVERNMENT
Governmental Activities:

General Government
Public Safety
Public Works
Health Services
Interest on Long Term Liabilities
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
Rental 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
$ (9,036,996) $ - $ (9,036,996)
(33,325,763) - (33,325,763)
(6,848,949) - (6,848,949)
(790,044) - (790,044)
(199) - (199)
(50,001,951) - (50,001,951)
- 32,604,113 32,604,113
- 231,983 231,983
- 1,822,337 1,822,337
- 71,304 71,304
- 34,729,737 34,729,737
(50,001,951) 34,729,737 (15,272,214)
4,982,723 - 4,982,723
15,214,692 - 15,214,692
13,826,831 - 13,826,831
1,821,409 - 1,821,409
5,929,166 - 5,929,166
12,805 - 12,805
100,809 285,622 386,431
208,039 - 208,039
14,989,046 - 14,989,046
2,736,631 - 2,736,631
59,822,151 285,622 60,107,773
9,820,200 35,015,359 44,835,559
64,492,389 147,405,505 211,897,894
$ 74,312,589 $ 182,420,864 $ 256,733,453

CITY OF VERNON
BALANCE SHEET – GOVERNMENTAL FUND
JUNE 30, 2022
See accompanying Notes to Financial Statements.
(20)
General
Fund
ASSETS
Cash and Cash Equivalents 17,973,383 $
Accounts Receivable, Net of Allowance 1,783,820
Taxes Receivable 4,947,687
Lease Receivable - Current Portion 66,705
Lease Receivable 3,769,599
Notes and Loans Receivable 8,816
Other Receivables 61,919
Due from Other Funds 2,966,261
Prepaid Items 168,491
Restricted Cash and Investments 6,267,964
Total Assets $ 38,014,645

LIABILITIES AND FUND BALANCE

LIABILITIES
Accounts Payable $ 2,828,577
Accrued Wages and Benefits 613,476
Unearned Revenue 813,739
Customer Deposits 239,139
Advances from Other Funds 202,798
Total Liabilities 4,697,729

DEFERRED INFLOWS OF RESOURCES
Deferred Inflows - Unavailable Revenues 1,666,711
Deferred Inflows Related to Leases 3,803,114
Total Deferred Inflows of Resources 5,469,825

FUND BALANCE
Nonspendable:

Prepaid Items 168,491
Restricted for:

Employee Flexible Spending Account 25,261
Street Improvements 3,855,244
Asset Forfeiture Funds 542,005
Unassigned 23,256,090
Total Fund Balance 27,847,091
Total Liabilities and Fund Balance $ 38,014,645

CITY OF VERNON

RECONCILIATION TO THE GOVERNMENTAL FUND BALANCE SHEET
TO THE STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES JUNE 30, 2022
See accompanying Notes to Financial Statements.
(21)
Fund Balance - Governmental Fund 27,847,091 $
Amounts reported for governmental activities in the Statement of Net Position are different because:

Receivables not available to pay for current period expenditures are reported as unavailable revenue in the financial statements. 1,666,711 Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental fund 163,061,941 Right to Use assets used in governmental activities are not current financial resources and therefore are not reported in the funds. Related long-term lease liabilities are not due and payable in the current period; therefore, they are not reported in the funds. These items consist of:

Right to Use Assets, Net of Accumulated Amortization 31,587 Lease Liability (31,660)
Long-term liabilities are not due and payable in the current period and therefore are not reported in the governmental fund
Compensated Absences (2,673,930)
Claims Payable (4,940,732)
Net pension and other postemployment 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 23,034,461
Deferred Outflows of Resources for OPEB 2,856,840
Deferred Inflows of Resources for Pensions (44,972,489) Deferred Inflows of Resources for OPEB (6,807,966)
Net Pension Liability (71,466,544)
Net OPEB Liability (13,292,721)
Net Position of Governmental Activities 74,312,589 $

CITY OF VERNON

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES
IN FUND BALANCE – GOVERNMENTAL FUND
YEAR ENDED JUNE 30, 2022
See accompanying Notes to Financial Statements.
(22)
General
Fund

REVENUES
Taxes $ 56,686,792
Special Assessments 1,704,159
Licenses and Permits 2,158,284
Fines, Forfeitures, and Penalties 258,268
Investment Income 100,809
Intergovernmental Revenues 1,789,300
Charges for Services 10,276,400
Rental Income 513,701
Other Revenues 876,199
Total Revenues 74,363,912

EXPENDITURES
Current:

General Government 17,085,390
Public Safety 34,345,479
Public Works 7,688,016
Health Services 1,411,874
Capital Outlay 2,927,921
Debt Service:

Principal 25,197
Interest 199
Total Expenditures 63,484,076
CHANGE IN FUND BALANCE 10,879,836
Fund Balance - Beginning of Year 16,967,255
FUND BALANCE - END OF YEAR $ 27,847,091

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, 2022
See accompanying Notes to Financial Statements.
(23)
Net Change in Fund Balance - Total Governmental Fund $ 10,879,836 Amounts reported for governmental activities in the Statement of Activities are different because:

Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds 1,666,711 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 3,291,130
Depreciation and Amortization Expense (5,016,299)
Loss on Disposal of Capital Assets (564,505)
Principal payment of long term liabilities uses current financial resources but is not reported in the Statement of Activities Principal Payments Lease Liability 25,197
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 40,851,219
Change in Net OPEB Liability 3,485,823
Change in Deferred Outflows Related to Pensions (918,452) Change in Deferred Outflows Related to OPEB (470,091)
Change in Deferred Inflows Related to Pensions (42,218,144) Change in Deferred Inflows Related to OPEB 507,810
Change in Compensated Absences (168,675)
Change in Claims Payable (1,531,360)
Change in Net Position of Governmental Activities $ 9,820,200

CITY OF VERNON
STATEMENT OF NET POSITION – PROPRIETARY FUNDS
JUNE 30, 2022
See accompanying Notes to Financial Statements.
(24)
Business-Type Activities
Enterprise Funds
Nonmajor
Electric Gas Water Fiber Optics
Fund Fund Fund Fund Totals
ASSETS
Current Assets:

Cash and Cash Equivalents 130,758,591 $ 8,692,417 $ 17,015,777 $ 493,854 $ 156,960,639 $ Accounts Receivable, Net of Allowance 12,396,047 580,100 1,141,938 144,253 14,262,338 Accrued Unbilled Revenue 16,411,782 1,240,987 1,373,195 - 19,025,964 Accrued Interest Receivable 84,749 - 4,448 - 89,197
Due from Other Funds 70,399 - - - 70,399
Prepaid Expenses 17,666 - - - 17,666
Prepaid Natural Gas 636,909 - - - 636,909
Total Current Assets 160,376,143 10,513,504 19,535,358 638,107 191,063,112 Noncurrent Assets:

Restricted Cash and Investments 39,025,025 - 7,358,059 - 46,383,084 Advances to Other Funds 27,079,890 - 202,798 - 27,282,688 Prepaid Expenses 994,736 - - - 994,736
Deposits 1,201,423 - - - 1,201,423
Capital Assets:

Nondepreciable 63,421,951 - 7,381,939 - 70,803,890
Depreciable, Net 362,295,361 15,379,161 8,886,072 1,063,160 387,623,754 Total Noncurrent Assets 494,018,386 15,379,161 23,828,868 1,063,160 534,289,575 Total Assets 654,394,529 25,892,665 43,364,226 1,701,267 725,352,687

DEFERRED OUTFLOWS OF RESOURCES
Deferred Outflows Related to Pensions 4,016,377 397,282 917,279 7,859 5,338,797 Deferred Outflows Related to OPEB Liability 498,130 49,273 113,765 975 662,143 Deferred Amount on Refunding 1,933,345 - - - 1,933,345
Total Deferred Outflows of Resources 6,447,852 446,555 1,031,044 8,834 7,934,285

CITY OF VERNON
STATEMENT OF NET POSITION – PROPRIETARY FUNDS (CONTINUED) JUNE 30, 2022
See accompanying Notes to Financial Statements.
(25)
Business-Type Activities
Enterprise Funds
Nonmajor
Electric Gas Water Fiber Optics
Fund Fund Fund Fund Totals

LIABILITIES
Current Liabilities:

Accounts Payable 15,828,391 $ 215,122 $ 1,415,262 $ 13,734 $ 17,472,509 $ Accrued Wages and Benefits 333,914 28,032 44,295 363 406,604 Due to Other Funds 2,965,077 71,583 - - 3,036,660
Customer Deposits 425,426 13,558 61,184 - 500,168
Bond Interest Payable 4,969,736 - 242,490 - 5,212,226
Bonds Payable 50,110,000 - 250,000 - 50,360,000
Note Payable - - 139,535 - 139,535
Compensated Absences 369,608 8,377 28,069 81 406,135
Total Current Liabilities 75,002,152 336,672 2,180,835 14,178 77,533,837 Noncurrent Liabilities:

Advances from Other Funds - 23,226,198 - 3,853,692 27,079,890 Bonds Payable 397,826,476 - 14,885,833 - 412,712,309
Note Payable - - 1,081,395 - 1,081,395
Compensated Absences 739,215 16,754 56,139 162 812,270
Other Postemployment Benefit Liability 2,317,770 229,264 529,343 4,536 3,080,913 Net Pension Liability 12,461,180 1,232,605 2,845,943 24,384 16,564,112 Total Noncurrent Liabilities 413,344,641 24,704,821 19,398,653 3,882,774 461,330,889 Total Liabilities 488,346,793 25,041,493 21,579,488 3,896,952 538,864,726

DEFERRED INFLOWS OF RESOURCES
Deferred Inflows Related to Pensions 7,841,575 775,654 1,790,896 15,345 10,423,470 Deferred Inflows Related to OPEB Liability 1,187,063 117,419 271,107 2,323 1,577,912 Total Deferred Inflows of Resources 9,028,638 893,073 2,062,003 17,668 12,001,382

NET POSITION
Net Investment in Capital Assets 145,563,396 15,301,360 6,869,387 1,053,694 168,787,837 Restricted for Debt Service 32,836,544 - - 32,836,544 - Unrestricted (Deficit) (14,932,990) (14,896,706) 13,884,392 (3,258,213) (19,203,517) Total Net Position $ 163,466,950 $ 404,654 $ 20,753,779 $ (2,204,519) $ 182,420,864

CITY OF VERNON

STATEMENT OF REVENUES, EXPENSES, AND CHANGES
IN FUND NET POSITION – PROPRIETARY FUNDS
YEAR ENDED JUNE 30, 2022
See accompanying Notes to Financial Statements.
(26)
Business-Type Activities
Enterprise Funds
Nonmajor
Electric Gas Water Fiber Optics
Fund Fund Fund Fund Totals

OPERATING REVENUES
Charges for Services 208,539,519 $ 18,705,573 $ 10,845,652 $ 480,014 $ 238,570,758 $ Total Operating Revenue 208,539,519 18,705,573 10,845,652 480,014 238,570,758

OPERATING EXPENSES
Cost of Sales 144,582,543 17,765,508 7,743,964 222,558 170,314,573 Depreciation 16,510,921 707,035 500,102 186,152 17,904,210 Total Operating Expenses 161,093,464 18,472,543 8,244,066 408,710 188,218,783 OPERATING INCOME 47,446,055 233,030 2,601,586 71,304 50,351,975

NONOPERATING REVENUES (EXPENSES)
Intergovernmental 665,887 5,029 194,487 - 865,403
Investment Income 269,257 4,128 11,991 246 285,622
Net Decrease in Fair Value of Investments (8,231) - - - (8,231) Interest Expense (13,599,589) - (563,895) - (14,163,484) Loss on Disposal of Assets (1,900,009) (6,076) (409,841) - (2,315,926) Total Nonoperating Revenues
(Expenses) (14,572,685) 3,081 (767,258) 246 (15,336,616) CHANGE IN NET POSITION 32,873,370 236,111 1,834,328 71,550 35,015,359 Net Position (Deficit) - Beginning of Year 130,593,580 168,543 18,919,451 (2,276,069) 147,405,505 NET POSITION (DEFICIT) - END OF YEAR $ 163,466,950 $ 404,654 $ 20,753,779 $ (2,204,519) $ 182,420,864

CITY OF VERNON
STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS
YEAR ENDED JUNE 30, 2022
See accompanying Notes to Financial Statements.
(27)
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 199,972,221 $ 18,586,393 $ 10,427,677 $ 367,504 $ 229,353,795 $ Cash Paid to Suppliers for Goods and Services (133,793,435) (16,770,406) (6,851,398) (242,584) (157,657,823) Cash Paid to Employees for Services (3,090,696) (724,165) (1,818,089) (168,276) (5,801,226) Cash Paid to City for Services (5,214,961) - - (5,214,961) - Net Cash Provided by Operating
Activities 57,873,129 1,091,822 1,758,190 (43,356) 60,679,785

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES
Repayment of Bonds (34,975,000) - (240,000) - (35,215,000) Issuance of Bonds 235,885,000 - - 235,885,000 -
Bond Premiums 38,266,557 - - 38,266,557 -
Payment to Refunding Bond Escrow Agent (62,999,903) - - (62,999,903) - Bond Interest Paid (16,875,267) - (587,975) - (17,463,242) Payment of Note Payable - - (139,535) - (139,535)
Net Acquisition of Capital Assets (216,887,677) (261,506) (4,033,299) (211,814) (221,394,296) Net Cash Used by Capital and Related
Financing Activities (57,586,290) (261,506) (5,000,809) (211,814) (63,060,419)

CASH FLOWS FROM NONCAPITAL FINANCING

ACTIVITIES
Grant Revenue Received 665,887 5,029 194,487 - 865,403
Cash Received (Paid) to Other Funds 114,065 (59) 1,915,195 (114,006) 1,915,195 Net Cash Provided (Used) by Noncapital
Financing Activities 779,952 4,970 2,109,682 (114,006) 2,780,598

CASH FLOWS FROM INVESTING ACTIVITIES
Investment Income 178,598 4,128 7,583 246 190,555
Cash Provided by Investing Activities 178,598 4,128 7,583 246 190,555 CHANGE IN CASH AND CASH EQUIVALENTS 1,245,389 839,414 (1,125,354) (368,930) 590,519 Cash and Cash Equivalents - Beginning of Year 168,538,227 7,853,003 25,499,190 862,784 202,753,204 CASH AND CASH EQUIVALENTS - END OF YEAR $ 169,783,616 $ 8,692,417 $ 24,373,836 $ 493,854 $ 203,343,723

COMPOSITION OF CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents $ 130,758,591 $ 8,692,417 $ 17,015,777 $ 493,854 $ 156,960,639 Restricted Cash and Investments 39,025,025 - 7,358,059 - 46,383,084 Total $ 169,783,616 $ 8,692,417 $ 24,373,836 $ 493,854 $ 203,343,723

CITY OF VERNON
STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS (CONTINUED) YEAR ENDED JUNE 30, 2022
See accompanying Notes to Financial Statements.
(28)
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) 47,446,055 $ 233,030 $ 2,601,586 $ 71,304 $ 50,351,975 $ Adjustments to Reconcile Operating Income
(Loss) to Net Cash Provided by Operating
Activities:

Depreciation 16,510,921 707,035 500,102 186,152 17,904,210 Deferred Gain from Sale of Generation Assets (6,555,916) - - (6,555,916) - Change in Operating Assets and Liabilities:

Accounts Receivable (6,672,318) (216,191) (164,414) (112,510) (7,165,433) Accrued Unbilled Revenue (1,889,809) 97,011 (254,361) - (2,047,159) Due from Other Funds 523,087 - - - 523,087
Prepaid Expenses and Deposits (104,017) - - - (104,017) Prepaid Natural Gas (636,909) - - - (636,909)
Deferred Outflows of Resources (564,694) 5,199 102,727 37,961 (418,807) Accounts Payable 3,257,996 164,516 (1,292) (27,752) 3,393,468 Accrued Wages and Benefits (115,466) (22,058) (67,916) (4,087) (209,527) Due to Other Funds 2,965,077 71,583 (593,486) - 2,443,174 Customer Deposits (5,171) - 800 - (4,371)
Compensated Absences 56,427 1,347 (18,983) (2,289) 36,502 Other Postemployment Benefit Liability (111,573) (48,588) (167,986) (24,246) (352,393) Net Pension Liability (3,801,160) (627,374) (1,822,068) (168,284) (6,418,886) Deferred Inflows of Resources 7,570,599 726,312 1,643,481 395 9,940,787 Net Cash Provided (Used) by Operating
Activities $ 57,873,129 $ 1,091,822 $ 1,758,190 $ (43,356) $ 60,679,785

CITY OF VERNON
STATEMENT OF FIDUCIARY NET POSITION – FIDUCIARY FUND
YEAR ENDED JUNE 30, 2022
See accompanying Notes to Financial Statements.
(29)
Redevelopment
Successor
Agency
Trust Fund
ASSETS
Other Receivable $ 3,654
Restricted Cash and Investments 19,037,529
Total Assets 19,041,183

LIABILITIES
Bond Interest Payable 734,183
Long-Term Debt:

Due Within One Year 1,845,000
Due in More than One Year 36,885,803
Total Liabilities 39,464,986

NET POSITION (DEFICIT)
Total Net Position Held in Trust for Dissolution of
Former Redevelopment Agency (20,423,803) $

CITY OF VERNON
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION – FIDUCIARY FUND YEAR ENDED JUNE 30, 2022
See accompanying Notes to Financial Statements.
(30)
Redevelopment
Successor
Agency
Trust Fund

ADDITIONS
Property Tax Increment $ 4,969,969
Investment Earnings 7,054
Total Additions 4,977,023

DEDUCTIONS
Community Development 831,337
Interest on Long-Term Debt 2,289,050
Total Deductions 3,120,387
CHANGE IN NET POSITION 1,856,636
Net Position (Deficit) Held in Trust - Beginning of Year (22,280,439) NET POSITION (DEFICIT) HELD IN TRUST - END OF YEAR $ (20,423,803)

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(31)
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

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(32)
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

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(33)
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.

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.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(34)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Basis of Presentation (Continued)
Fund Financial Statements (Continued)
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. Implementation of New Accounting Pronouncements
In June 2017, the Governmental Accounting Standards Board (GASB) issued GASB Statement No. 87, Leases. This standard requires the recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and as inflows of resources or outflows of resources recognized based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this standard, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources.

The City adopted the requirements of the guidance effective July 1, 2021 and has applied the provisions of this standard to the beginning of the period of adoption.

D. 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.

E. 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.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(35)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) E. Receivables/Payables (Continued)
Proprietary fund trade receivables are shown net of an allowance for uncollectible accounts. Allowances for uncollectible were $1,043,137 as of June 30, 2022. Utility customers are billed monthly. The estimated value of services provided, but unbilled at year-end, has been included in the accompanying financial statements.

F. 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.

G. Prepaid Items
The City 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.

H. 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
Right-to-use equipment 3 years
Machinery and Equipment 3 to 35 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 changes in net financial position.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. 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.

J. 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 assets 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. 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 pension 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 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.
 Deferred amount on bond refunding which is amortized over the life of refunding debt.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) J. Deferred Outflows and Inflows of Resources (Continued) 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 assets 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 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 pension and OPEB plans resulting from the net difference between projected and actual earnings on plan investments. These amounts are amortized over five years.

K. 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.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) L. Leases
Lessee
The City is a lessee for a noncancellable leases of equipment. The City recognizes a lease liability and an intangible right-to-use asset (lease asset) in the governmental activities in the government-wide statement of net position. At the commencement of a lease, the City initially measures the lease liability at the present value of payments expected to be made during the lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made. The lease asset is initially measured as the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date. Subsequently, the lease asset is amortized on a straight-line basis over its useful life.

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

Lessor
The City is a lessor for a noncancellable lease of land and improvements. The City recognizes a lease receivable and a deferred inflow of resources in the statement of net position and in the governmental fund balance sheet. At the commencement of a lease, the City initially measures the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflow of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term.

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

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) M. Net Position
The government-wide financial statements and proprietary fund financial statements utilize a net position presentation. Net position is categorized as follows:
 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.

N. 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.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) O. 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.

P. 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.

Q. 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.

R. 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.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) S. 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, 2022, are classified in the accompanying financial statements as follows:

Primary Fiduciary
Government Fund Total
Cash and Cash Equivalents $ 174,934,022 $ - $ 174,934,022 Restricted Cash and Cash Equivalents 52,651,048 19,037,529 71,688,577 Total Cash and Cash
Equivalents $ 227,585,070 $ 19,037,529 $ 246,622,599
Cash and investments as of June 30, 2022, consist of the following:

Cash on Hand $ 1,300
Deposits with Financial Institutions 99,883,420
Investments 146,737,879
Total Cash and Investments $ 246,622,599
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.

CITY OF VERNON

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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 6/30/2022 12 Months 24 Months 60 Months Investments:

Local Agency Investment Fund $ 627,044 $ 627,044 $ - $ - Investments with Fiscal Agent:

Money Market Mutual Funds 146,110,835 146,110,835 - -
Total Investments $ 146,737,879 $ 146,737,879 $ - $ -

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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, 2022, 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 $99,883,420. The bank balances were $100,221,139, respectively. The difference between the bank balances and the carrying amounts represents outstanding checks and deposits in transit. As of June 30, 2022, 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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NOTES TO FINANCIAL STATEMENTS
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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, 2022
Investments:

Local Agency Investment Fund Not Rated Not Rated $ 627,044 Investments with Fiscal Agent:

Money Market Mutual Funds Aaa / AAA Aaa / AAA 146,110,835 Total Investments $ 146,737,879
NOTE 3 LEASE RECEIVABLE
The City, acting as lessor, leases land and improvements under a noncancellable lease agreement. The lease expires in January 2061. The net present value of the lease receivable was determined using a discount rate of 2.01%. Monthly lease payments are $11,914. During the year ended June 30, 2022, the District recognized $65,378 and $77,584 in lease revenue and interest revenue respectively, pursuant to this lease agreement. The lease provides for increases in future minimum monthly lease payments, subject to certain variable increases.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(46)
NOTE 3 LEASE RECEIVABLE (CONTINUED)
Estimated future minimum lease payments to be received are as follows:

Fiscal Year Ending June 30, Principal Interest
2023 $ 66,705 $ 76,258
2024 68,058 74,905
2025 69,439 73,524
2026 70,847 72,115
2027 72,284 70,678
2028-2032 384,022 330,792
2033-2037 424,587 290,227
2038-2042 469,436 245,378
2043-2047 519,023 195,791
2048-2051 573,847 140,966
2052-2056 634,463 80,350
2057-2061 483,593 16,776
Total Requirements $ 3,836,304 $ 1,667,760
NOTE 4 INTERFUND TRANSACTIONS
Interfund receivables and payables were as follows at June 30, 2022:

Due to/from Other Funds
Due from Other Funds Due to Other Funds Amount
General Fund Electric Enterprise Fund $ 2,965,077
Gas Enterprise Fund 1,184
Electric Enterprise Fund Gas Enterprise Fund 70,399
Total $ 3,036,660
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 $ 23,226,198 Fiber Optics Enterprise Fund 3,853,692
Water Enterprise Fund General Fund 202,798
Total $ 27,282,688
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.

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JUNE 30, 2022
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2012-215 extending the repayment term of the advance from 15 months to a period of over 10 years.

CITY OF VERNON

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NOTE 5 CAPITAL ASSETS
Capital asset activity of governmental activities for the fiscal year ended June 30, 2022, was as follows:

Balance
June 30, 2021 Balance
Restated (1) Additions Deletions June 30, 2022
Governmental Activities:

Capital Assets, Not Being Depreciated:

Land 63,569,108 $ - $ $ - 63,569,108 $
Construction in Progress 1,286,427 945,551 - 2,231,978
Total Capital Assets, Not
Being Depreciated 64,855,535 945,551 - 65,801,086
Capital Assets, Being Depreciated/Amortized:

Infrastructure 158,968,027 108,610 - 159,076,637
Building and Improvements 16,711,672 69,284 (8,362) 16,772,594 Improvements Other than Buildings 11,980,249 229,764 (297) 12,209,716 Right-to-Use Leased Equipment 56,857 - - 56,857
Machinery and Equipment 20,279,547 1,937,921 (5,312,385) 16,905,083 Total Capital Assets, Being
Depreciated/Amortized 207,996,352 2,345,579 (5,321,044) 205,020,887 Less: Accumulated Depreciation/
Amortization For:

Infrastructure (75,134,891) (3,567,572) - (78,702,463)
Building and Improvements (9,215,846) (394,407) 5,185 (9,605,068) Improvements Other than Buildings (6,228,742) (349,342) 199 (6,577,885) Right-to-Use Leased Equipment - (25,270) - (25,270)
Machinery and Equipment (16,889,206) (679,708) 4,751,155 (12,817,759) Total Accumulated Depreciation/
Amortization (107,468,685) (5,016,299) 4,756,539 (107,728,445) Total Capital Assets, Being Depreciated/
Amortized, Net:

Infrastructure 83,833,136 (3,458,962) - 80,374,174
Building and Improvements 7,495,826 (325,123) (3,177) 7,167,526 Improvements Other than Buildings 5,751,507 (119,578) (98) 5,631,831 Right-to-Use Leased Equipment 56,857 (25,270) - 31,587
Machinery and Equipment 3,390,341 1,258,213 (561,230) 4,087,324 Total 100,527,667 (2,670,720) (564,505) 97,292,442
Governmental Activities Capital
Assets, Net $ 165,383,202 $ (1,725,169) $ (564,505) $ 163,093,528 (1) Beginning balance was restated to add right-to-use leased assets due to implementation of GASB Statement No. 87, Leases. See Note 1C
Depreciation expense was charged to governmental functions as follows:

General Government $ 826,038
Public Safety 222,444
Public Works 3,967,817
Total Depreciation/Amortization Expense -
Governmental Functions $ 5,016,299

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NOTE 5 CAPITAL ASSETS (CONTINUED)
Capital asset activity of business-type activities for the fiscal year ended June 30, 2022, was as follows:

Balance Balance
June 30, 2021 Additions Deletions Transfers June 30, 2022 Business-Type Activities:

Capital Assets, Not Being Depreciated:

Electric Utility - Land $ 13,193,594 $ - $ - $ - 13,193,594 $ Water Utility - Water 467,640 - - - 467,640
Electric Utility - Intangibles -
Environmental Credits 1,163,811 3,610,772 - - 4,774,583 Electric Utility - Construction in
Progress 45,324,750 129,024 - - 45,453,774
Water Utility - Construction in Progress 4,635,417 2,366,637 - (87,755) 6,914,299 Total Capital Assets, Not
Being Depreciated 64,785,212 6,106,433 - (87,755) 70,803,890 Capital Assets, Being Depreciated
Electric Utility - Production Plant 16,189,303 196,173,685 - 212,362,988 - Electric Utility - Transmission Plant 4,888,113 - (1,271,649) - 3,616,464 Electric Utility - Distribution Plant 258,451,179 16,781,817 (18,181,346) 257,051,650 - Electric Utility - General Plant 9,587,933 192,379 (25,903) - 9,754,409 Water Utility Plant 23,765,353 1,666,662 (1,789,499) 87,755 23,730,271 Gas Utility Plant 26,973,692 261,506 (34,604) - 27,200,594 Fiber Optic Utility Plant 4,161,378 211,814 (616,583) - 3,756,609 Total Capital Assets, Being
Depreciated 344,016,951 215,287,863 (21,919,584) 87,755 537,472,985 Less: Accumulated Depreciation for:

Electric Utility - Production Plant (10,757,493) (8,634,043) - - (19,391,536) Electric Utility - Transmission Plant (3,424,581) (78,093) 1,059,485 - (2,443,189) Electric Utility - Distribution Plant (101,227,123) (7,438,076) 16,493,501 - (92,171,698) Electric Utility - General Plant (6,148,921) (360,709) 25,903 - (6,483,727) Water Utility Plant (15,723,755) (500,102) 1,379,658 - (14,844,199) Gas Utility Plant (11,142,926) (707,035) 28,528 - (11,821,433) Fiber Optic Utility Plant (3,123,880) (186,152) 616,583 - (2,693,449) Total Accumulated Depreciation (151,548,679) (17,904,210) 19,603,658 (149,849,231) - Total Capital Assets, Being Depreciated,
Net:

Electric Utility - Production Plant 5,431,810 187,539,642 - 192,971,452 - Electric Utility - Transmission Plant 1,463,532 (78,093) (212,164) - 1,173,275 Electric Utility - Distribution Plant 157,224,056 9,343,741 (1,687,845) 164,879,952 - Electric Utility - General Plant 3,439,012 (168,330) - - 3,270,682 Water Utility Plant 8,041,598 1,166,560 (409,841) 87,755 8,886,072 Gas Utility Plant 15,830,766 (445,529) (6,076) - 15,379,161 Fiber Optic Utility Plant 1,037,498 25,662 - - 1,063,160 Total 192,468,272 197,383,653 (2,315,926) 87,755 387,623,754 Business-Type Activities Capital
Assets, Net $ 257,253,484 $ 203,490,086 $ (2,315,926) $ - 458,427,644 $

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(50)
NOTE 5 CAPITAL ASSETS (CONTINUED)
Depreciation expense was charged to the business-type functions as follows:

Electric Fund $ 16,510,921
Gas Fund 707,035
Water Fund 500,102
Fiber Optics Fund 186,152
Total Depreciation Expense - Business-
Type Functions $ 17,904,210
NOTE 6 LONG-TERM LIABILITIES
Changes in Long-Term Liabilities
The following is a summary of long-term liabilities transactions for the fiscal year ended June 30, 2022:

Balance Balance Amounts
June 30, 2021 Due Within
Restated (1) Additions Reductions June 30, 2022 One Year Governmental Activities:

Claims Payable (Note 7) $ 3,409,372 $ 2,831,928 $ (1,300,568) $ 4,940,732 $ 1,646,911 Compensated Absences (Note 1I) 2,505,255 1,597,293 (1,428,618) 2,673,930 891,310 Lease Liability 56,857 - (25,197) 31,660 25,313
Total $ 5,971,484 $ 4,429,221 $ (2,754,383) $ 7,646,322 $ 2,563,534 Business-Type Activities:

Other Debt:

Bonds Payable $ 281,475,000 $ 235,885,000 $ (96,450,000) $ 420,910,000 $ 50,360,000 Bond Premium 7,744,795 38,266,557 (2,680,100) 43,331,252 - Bond Discount (1,923,931) - 754,988 (1,168,943) -
Notes Payable - Direct Borrowing 1,360,465 - (139,535) 1,220,930 139,535 Compensated Absences 1,181,903 805,554 (769,052) 1,218,405 406,135 Total $ 289,838,232 $ 274,957,111 $ (99,283,699) $ 465,511,644 $ 50,905,670 (1) The beginning balance was restated to add leases payable due to the implementation of GASB Statement No. 87, Leases. See Note 1C.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(51)
NOTE 6 LONG-TERM LIABILITIES (CONTINUED)
Compensated Absences
There is no fixed payment schedule for earned but unpaid compensated absences in both the governmental and business type activities.

Lease Liability
The City leases equipment under a noncancelable lease agreement. The lease expires October 2023. The net present values of the lease payable was determined using a discount rate of 0.46%. Monthly lease payments total $2,116.

Total future minimum lease payments under lease agreements are as follows:

Lease Liability
Fiscal Year Ending June 30, Principal Interest
2023 $ 25,313 $ 83
2024 6,347 2
Total Requirements $ 31,660 $ 85
$43,765,000 Electric System Revenue Bonds (2008 Taxable Series A) At June 30, 2022, $37,895,000 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 $72,050,772, payable through fiscal year 2039. For the current year, debt service and net electric revenues were $4,240,768 and $69,089,394, 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) On January 10, 2012, the City issued Electric System Revenue Bonds, 2012 Series A, in the amount of $37,640,000. 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 Electric System Revenue Bonds were refunded in the current fiscal year with the issuance of the Electric System Revenue Bonds 2021 Series A.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(52)
NOTE 6 LONG-TERM LIABILITIES (CONTINUED)
$35,100,000 Electric System Revenue Bonds (2012 Taxable Series B) On January 10, 2012, the City issued Electric System Revenue Bonds, 2012 Series B, in the amount of $35,100,000. During the current fiscal year, a portion of the Electric System Revenue Bonds were refunded with the issuance of the Electric System Revenue Bonds 2022 Series A. At June 30, 2022, $11,505,000 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 $12,752,831, payable through fiscal year 2027. For the current year, debt service and net electric revenues were $25,817,900 and $69,089,394, 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, 2022, $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 $124,140,019, payable through fiscal year 2027. For the current year, debt service and net electric revenues were $5,087,518 and $69,089,394, 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, 2022, $19,305,000 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 $30,319,875, payable through fiscal year 2038. For the current year, debt service and net electric revenues were $25,596,000 and $69,089,394, 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, 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 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, 2022
(53)
NOTE 6 LONG-TERM LIABILITIES (CONTINUED)
$183,815,000 Electric System Revenue Bonds (2021 Series A) In December 2021, the City of Vernon issued 2021A Electric System Revenue Bonds in the amount of $183,815,000 (i) to pay the costs of the acquisition by the City of Vernon of a 134-megawatt natural gas-fired generating facility located within the City limits on land owned by the City, together with certain related electrical interconnection facilities and other assets, property, and contractual rights; (ii) to fund a deposit to the Debt Service Reserve Fund in satisfaction of the Debt Service Reserve Requirement; and (iii) to pay costs of issuance of the 2021 bonds.

The bonds bear interest rates between 4.00%-5.00% that is payable on a semi-annual basis on April 1 and October 1, commencing April 1, 2022. At June 30, 2022, $173,815,000 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 $207,098,300, payable through fiscal year 2028. For the current year, debt service and net electric revenues were $12,671,686 and $69,089,394, 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, 2021 Series A were issued to (i) refund and defease all of the City’s outstanding Electric System Revenue Bonds, 2012 Series A and a portion of the City’s outstanding Electric System Revenue bonds, 2012 Taxable Series B and (ii) pay costs of issuance of the 2022 Bonds.
$52,070,000 Electric System Revenue Bonds (2022 Series A) In December 2021, the City of Vernon issued 2022A Electric System Revenue Bonds in the amount of $52,070,000 to refund the 2012A Electric System Revenue Bonds, a portion of the 2012B Electric Revenue Bonds, and provide for the costs of issuing the bonds.

The bonds bear interest rates between 4.00%-5.00% that is payable on a semi-annual basis beginning February 1 and August 1, commencing on August 1, 2022. At June 30, 2022, $52,070,000 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 $78,789,447, payable through fiscal year 2042. For the current year, debt service and net electric revenues were $0 and $69,089,394, 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, 2021 Series A were issued to (i) refund and defease all of the City’s outstanding Electric System Revenue Bonds, 2012 Series A and a portion of the City’s outstanding Electric System Revenue bonds, 2012 Taxable Series B and (ii) pay costs of issuance of the 2022 Bonds.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(54)
NOTE 6 LONG-TERM LIABILITIES (CONTINUED)
$14,840,000 Water System Revenue Bonds (2020 Series A)
At June 30, 2022, $14,600,000 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 $25,040,038, payable through fiscal 2051. For the current year, debt service and net water revenues were $827,975 and $3,194,732, 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).

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, 2022
City of Vernon 07/01/38 7.40% - To begin 07/01/10: 43,765,000 $ $ 37,895,000 Electric System Revenue Bonds, 8.59% $265,000 -
2008 Taxable Series A $4,065,000
City of Vernon 08/01/26 6.25% - To begin 08/01/22: 35,100,000 11,505,000 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 19,305,000 Electric System Revenue Bonds, $1,525,000 -
2020 Taxable Series A $28,655,000
City of Vernon 04/01/28 4% - To begin 04/01/22: 183,815,000 173,815,000 Electric System Revenue Bonds, 5.00% $10000,000 -
2021 Taxable Series A $54,915,000
City of Vernon 08/01/41 5.00% To begin 05/05/22: 52,070,000 52,070,000 Electric System Revenue Bonds, $950,000 -
2022 Taxable Series A $5,850,000
Premiums 42,376,244
Discounts (1,098,956)
Total Electric System
Revenue Bonds 447,587,288
Water System:

City of Vernon 08/01/50 5.00% To begin 08/01/21: 14,840,000 14,600,000 Water System Revenue Bonds, $240,000 -
2020 Taxable Series A $3,785,000
Premium 535,833
Total Water System
Revenue Bonds 15,135,833
Total Revenue Bonds $ 462,723,121

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(55)
NOTE 6 LONG-TERM LIABILITIES (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, 2022, 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, 2022, 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
2023 $ 1,025,000 $ 3,211,156
2024 1,120,000 3,119,029
2025 1,220,000 3,018,526
2026 1,330,000 2,909,004
2027 1,450,000 2,789,603
2028-2032 9,445,000 11,747,040
2033-2037 14,510,000 6,677,437
2038-2041 7,795,000 683,979
Total Requirements $ 37,895,000 $ 34,155,772
Electric System Revenue Bonds
2012 Taxable Series B
Fiscal Year Ending June 30, Principal Interest
2023 $ 6,165,000 $ 531,831
2024 1,170,000 302,613
2025 1,305,000 225,269
2026 1,390,000 140,181
2027 1,475,000 47,938
Total Requirements $ 11,505,000 $ 1,247,832

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(56)
NOTE 6 LONG-TERM LIABILITIES (CONTINUED)
Business-Type Activities Debt Service Requirements (Continued) Electric System Revenue Bonds
2015 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
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 15,295,000 370,904
Total Requirements $ 111,720,000 $ 12,420,019
Electric System Revenue Bonds
2020 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
2023 $ - $ 965,250
2024 - 965,250
2025 - 965,250
2026 - 965,250
2027 - 965,250
2028-2032 6,585,000 4,188,125
2033-2037 10,325,000 1,940,625
2038-2041 2,395,000 59,875
Total Requirements $ 19,305,000 $ 11,014,875
Electric System Revenue Bonds
2021 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
2023 $ 20,380,000 $ 8,385,050
2024 21,335,000 7,405,125
2025 22,400,000 6,325,000
2026 23,530,000 5,190,875
2027 31,255,000 3,917,875
2028-2032 54,915,000 2,059,375
Total Requirements $ 173,815,000 $ 33,283,300
Electric System Revenue Bonds
2022 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
2023 $ - $ 1,923,697
2024 4,690,000 2,486,250
2025 4,885,000 2,246,875
2026 5,130,000 1,996,500
2027 5,405,000 1,733,125
2028-2032 5,270,000 7,357,500
2033-2037 6,765,000 5,860,625
2038-2042 19,925,000 3,114,875
Total Requirements $ 52,070,000 $ 26,719,447

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(57)
NOTE 6 LONG-TERM LIABILITIES (CONTINUED)
Business-Type Activities Debt Service Requirements (Continued) Water System Revenue Bonds
2020 Taxable Series A
Fiscal Year Ending June 30, Principal Interest
2023 $ 250,000 $ 575,725
2024 265,000 562,850
2025 275,000 549,350
2026 - 542,475
2027 - 542,475
2028-2032 1,985,000 2,563,500
2033-2037 2,180,000 2,052,625
2038-2042 2,680,000 1,535,450
2043-2047 3,180,000 1,051,925
2048-2051 3,785,000 463,663
Total Requirements $ 14,600,000 $ 10,440,038
Note Payable
Fiscal Year Ending June 30, Principal Interest
2023 $ 139,535 $ -
2024 139,535 -
2025 139,535 -
2026 139,535 -
2027 139,535 -
2028-2031 523,256 -
Total Requirements $ 1,220,930 $ -

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(58)
NOTE 6 LONG-TERM LIABILITIES (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, 2022, this fund has a balance of $38,934,149.

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, 2022, 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, 2022, the City does not have a line of credit with a financial institution.

NOTE 7 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, 2022
(59)
NOTE 7 RISK MANAGEMENT (CONTINUED)
The insurance limits for the fiscal year 2022 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 nonsafety; $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 nonutility 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:
2022 2021
Claims Payable, Beginning of Fiscal Year $ 3,409,372 $ 3,840,080 Incurred Claims and Change in Estimates 2,831,928 836,537 Claims Payments (1,300,568) (1,267,245)
Claims Payable, End of Fiscal Year $ 3,409,372 4,940,732 $ NOTE 8 PENSION PLANS
The following is a summary of pension related items for the year ended June 30, 2022:

Deferred Deferred
Pension Outflows Inflows Pension
Liability of Resources of Resources Expense
Miscellaneous 28,268,856 $ 7,936,320 $ $ (14,256,658) $ 3,150,422 Safety 59,761,800 20,436,938 (41,139,301) 5,288,917
Total $ 88,030,656 $ 28,373,258 $ (55,395,959) $ 8,439,339

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(60)
NOTE 8 PENSION PLAN (CONTINUED)
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 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 multiple-employer 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, 2022
(61)
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, 2021, 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 Age50 52
Monthly Benefits, as a Percent 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 11.380% 11.380%
Payment of Unfunded Liability $ - 3,924,540 $
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 Age50 50
Monthly Benefits, as a Percent of Eligible Compensation 3% 2.0% to 2.7% Required Employee Contribution Rates 9.000% 13.750%
Required Employer Contribution Rates:

Normal Cost Rate 22.780% 22.780%
Payment of Unfunded Liability $ 15,563 7,063,113 $
Employees Covered
At June 30, 2022, the following employees were covered by the benefit terms for each Plan:

Miscellaneous Safety
Inactive Employees or Beneficiaries Currently
Receiving Benefits 243 262
Inactive Employees Entitled to But Not Yet
Receiving Benefits 215 132
Active Employees 161 41
Total 619 435

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(62)
NOTE 8 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 (UAL). 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, 2022, included $11,003,216 for the UAL and $3,213,343 for the normal cost rate resulting in a total amount paid of $14,216,559.

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, 2021, using an annual actuarial valuation as of June 30, 2020, rolled forward to June 30, 2021, using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

Actuarial Assumptions
The total pension liabilities in the June 30, 2021 actuarial valuations were determined using the following actuarial assumptions:

Miscellaneous Safety
Valuation Date June 30, 2020 June 30, 2020
Measurement Date June 30, 2021 June 30, 2021
Actuarial Cost Method Entry Age Normal Entry Age Normal Actuarial Assumptions:

Discount Rate 7.15% 7.15%
Inflation 2.500% 2.500%
Payroll Growth 2.750% 2.750%
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.

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
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NOTE 8 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
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 - (0.92)
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.

Asset Class (a)
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

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(64)
NOTE 8 PENSION PLAN (CONTINUED)
B. Net Pension Liability (Continued)
Subsequent Events
On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for fiscal year 202-21. Based on the thresholds specified in CalPERS Funding Risk Mitigation policy, the excess return of 14.3% prescribes a reduction in investment volatility that corresponds to a reduction in the discount rate used for funding purposes of 0.20%, from 7.00% to 6.80%. Since CalPERS was in the final stages of the four-year Asset Liability Management (ALM) cycle, the board elected to defer any changes to the asset allocation until the ALM process concluded, and the board could make its final decision on the asset allocation in November 2021.

On November 17, 2021, the board adopted a new strategic asset allocation. The new asset allocation along with new capital market assumptions, economic assumptions and administrative expense assumption support a discount rate of 6.90% (net of investment expense but without a reduction for administrative expense) for financial reporting purposes. This includes a reduction in the price inflation assumption from 2.50% to

2.30% as recommended in the November 2021 CalPERS Experience Study and Review of Actuarial Assumptions. This study also recommended modifications to retirement rates, termination rates, mortality rates and rates of salary increases that were adopted by the board. These new assumptions will be reflected in the GASB 68 account valuation reports for the June 30, 2022 measurement date.

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
Miscellaneous Plan:

Balance at June 30, 2020 (Measurement
Date) 184,953,577 $ 138,335,116 $ 46,618,461 $
Changes in the Year:

Service Cost 2,735,636 - 2,735,636
Interest on the Total Pension Liability 13,153,255 - 13,153,255 Differences Between Expected and
Actual Experience 1,777,340 - 1,777,340
Contribution - Employer - 4,979,542 (4,979,542)
Contribution - Employee - 1,161,711 (1,161,711)
Net Investment Income - 30,012,771 (30,012,771)
Benefit Payments, Including Refunds
of Employee Contributions (8,274,278) (8,274,278) -
Administrative Expenses - (138,188) 138,188
Net Changes 9,391,953 27,741,558 (18,349,605)
Balance at June 30, 2021 (Measurement
Date) $ 194,345,530 $ 166,076,674 $ 28,268,856

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(65)
NOTE 8 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, 2022, in the amount of $59,761,800.

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, 2021, 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, 2020, rolled forward to June 30, 2021, 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, 2020 and 2022 measurement dates was as follows:

Safety
Proportion - June 30, 2020 1.33110 %
Proportion - June 30, 2021 1.70286
Change - Increase (Decrease) 0.37176 %
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
One Percent Decrease 6.15% 6.15%
Net Pension Liability $ 55,565,615 $ 99,454,775
Current Discount Rate 7.15% 7.15%
Net Pension Liability $ 28,268,856 $ 59,761,800
One Percent Increase 8.15% 8.15%
Net Pension Liability $ 27,158,923 5,909,752 $
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

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(66)
NOTE 8 PENSION PLAN (CONTINUED)
D. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
For the measurement period ended June 30, 2021, the City recognized pension expense of $3,150,422 related to the miscellaneous plan and $5,288,917 related to the safety plan. At June 30, 2022, 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 $ 5,957,671 $ - $ 8,258,888 $ - $ 14,216,559 $ - Differences Between Expected and
Actual Experience 1,978,648 - 10,210,224 - 12,188,872 - Change in Assumptions - - - - - -
Net Differences Between Projected
and Actual Earnings on Plan
Investments - (14,256,658) - (35,569,658) - (49,826,316) Change in Employer's Proportion and
Differences Between the Employer's
Contributions and the Employer's - -
Proportionate Share of Contributions - 1,967,827 - (5,569,643) 1,967,827 (5,569,643) Total $ 7,936,319 $ (14,256,658) $ 20,436,939 $ (41,139,301) $ 28,373,258 $ (55,395,959) The $14,216,559 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, 2023. 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
2023 $ (2,128,886) $ (5,309,183) $ (7,438,069)
2024 (2,660,978) (5,836,729) (8,497,707)
2025 (3,443,913) (8,027,111) (11,471,024)
2026 (4,044,233) (9,788,227) (13,832,460)
2027 - - -
E. Payable to the Pension Plan
At June 30, 2022, the City had no outstanding amount of contributions to the pension plans required for the year ended June 30, 2022.

NOTE 9 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.

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NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
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NOTE 9 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) A. General Information About the OPEB Plan (Continued)
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 nonvested 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.

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, 2022, the City contributed $1,538,693 to the trust, paid $905,939 for retiree premiums, and the estimated implied subsidy was $433,399, resulting in a total contribution of $2,878,031.

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NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(68)
NOTE 9 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) A. General Information About the OPEB Plan (Continued)
Employees Covered by Benefit Terms
At June 30, 2022, 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, 2021, 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.

The total OPEB liability in the June 30, 2020, actuarial valuation was rolled forward to the June 30, 2021, 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

6.3% 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

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NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(69)
NOTE 9 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) B. Net OPEB Liability (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, 2021 are summarized in the following table:

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

Equity 59.00 % 4.42 %
Fixed Income 25.00 1.00
TIPS 5.00 0.15
Commodities 3.00 3.98
REITs 8.00 1.73
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.

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JUNE 30, 2022
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NOTE 9 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) B. Net OPEB Liability (Continued)
Change in the Net OPEB Liability
Increase (Decrease)
Total Plan Net OPEB
OPEB Fiduciary Liability
Liability Net Position
Balance at June 30, 2020 (Measurement Date) 27,215,028 $ 7,003,178 $ 20,211,850 $ Changes in the Year:

Service Cost 303,057 - 303,057
Interest on the Total OPEB Liability 1,682,954 - 1,682,954 Differences Between Actual and
Expected Experience (677,446) - (677,446)
Changes in Assumptions 66,075 - 66,075
Changes of Benefit Terms -
Investment Income - 2,084,288 (2,084,288)
Contribution - Employer - 3,131,526 (3,131,526)
Benefit Payments (1,199,826) (1,199,826) -
Administrative Expenses - (2,958) 2,958
Net Changes 174,814 4,013,030 (3,838,216)
Balance at June 30, 2021 (Measurement Date) 27,389,842 $ $ 11,016,208 $ 16,373,634 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.

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 19,437,875 $ 16,373,634 $ 13,799,250 $

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NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(71)
NOTE 9 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) B. Net OPEB Liability (Continued)
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 (5.3% decreasing to an ultimate rate of 2.8%) or 1% point higher (7.3% decreasing to an ultimate rate of 4.8 %) than the current rate:

Healthcare Trend Rate
One Percent One Percent
Decrease Current Rate Increase
Net OPEB liability 15,079,060 $ 16,373,634 $ 17,660,423 $ OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB For the year ended June 30, 2022, the City recognized OPEB expense(revenue) of $(843,086). At June 30, 2022, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Deferred
Outflows Inflows
of Resources of Resources
Contributions Between Measurement Date and
Reporting Date $ 2,933,295 $ -
Difference Between Expected and Actual Experience 138,780 (3,529,083) Changes in Assumptions 446,908 (3,749,862)
Net Differences Between Projected and Actual
Earnings on Investments - (1,106,933)
Total $ 3,518,983 $ (8,385,878)
The $2,933,295 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, 2023. 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 $ (2,335,409)
2023 (2,344,060)
2024 (2,330,268)
2025 (628,401)
2026 (74,715)
Thereafter (87,337)

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NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
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NOTE 9 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (CONTINUED) B. Net OPEB Liability (Continued)
Payable to the OPEB Plan
At June 30, 2022, the City had no outstanding amount of contributions to the OPEB plan required for the year ended June 30, 2022.

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.

Bicent 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). 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.

On December 15, 2021, the City made the determination to reacquire MGS to achieve potential costs savings and other resource management benefits. In addition to the potential savings, the City expects there to be other benefits associated with the acquisition of MGS, which includes having control of the facility and the site, providing the City with flexibility with respect to the MGS operations and MGS’s role in the City’s resource portfolio. The City issued Electric System Revenue Bonds, 2021 Series A and Electric System Revenue Bonds, 2022 Series A in 2022 to finance the acquisition. (See Note 6)
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, 2022
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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 2022 was $3,320,768. 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, 2022
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NOTE 10 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 $2,250,667.

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 $1,007,652.

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 $1,192,621.

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JUNE 30, 2022
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NOTE 11 COMMITMENTS AND CONTINGENCIES
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 4% 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 1%. 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 o1%. Additionally, there are conversion costs that will be paid in 36 equal payments. The agreement shall remain in effect for a minimum of 10 years, subsequently it will be renewed for one-year periods.

Either party may terminate this agreement any time after the expiration of the initial 10-year period term upon one year’s written notice.

The following was the contract cost for the fiscal year ended June 30, 2022 totaled $16,785,842.

NOTE 12 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, 2022, were as follows:

CITY OF VERNON

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2022
(76)
NOTE 12 SUCCESSOR AGENCY DISCLOSURES (CONTINUED)
Amounts
Balance Balance Due Within
June 30, 2021 Additions Reductions June 30, 2022 One Year Bonds Payable $ 42,300,000 $ - $ (3,385,000) $ 38,915,000 $ 1,845,000 Bond Premium 236,866 - (25,869) 210,997 -
Bond Discount (439,105) - 43,910 (395,195) -
Total $ 42,097,761 $ - $ (3,366,959) $ 38,730,802 $ 1,845,000 $49,420,000 Industrial Redevelopment Project Tax Allocation Bonds, Series 2005 At June 30, 2022, $30,785,000 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 $43,289,819, payable through fiscal 2036. For the current year, debt service amounted to $3,276,800. 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, 2022, $8,130,000 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 $11,882,263, payable through fiscal 2031. For the current year, debt service amounted to $2,452,425. 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, 2022:

Fiscal Year Ending June 30, Principal Interest Total
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 2,585,000 1,627,475 4,212,475
2028-2032 15,265,000 5,381,106 20,646,106
2033-2037 12,625,000 1,316,875 13,941,875
Total $ 38,915,000 $ 16,257,081 $ 55,172,081

REQUIRED SUPPLEMENTARY INFORMATION

CITY OF VERNON
BUDGETARY COMPARISON SCHEDULE – GENERAL FUND
YEAR ENDED JUNE 30, 2022
See accompanying Note to Required Supplementary Information. (78)
Variance with
Final Budget
Budgeted Amounts Positive
Original Final Actual (Negative)

REVENUES
Taxes $ 54,065,142 $ 54,065,142 $ 56,686,792 $ 2,621,650 Special Assessments 1,201,200 1,201,200 1,704,159 502,959 Licenses and Permits 1,596,500 1,596,500 2,158,284 561,784 Fines, Forfeitures, and Penalties 140,800 140,800 258,268 117,468 Investment Income 86,700 86,700 100,809 14,109
Intergovernmental Revenues 7,323,810 7,323,810 1,789,300 (5,534,510) Charges for Services 10,337,306 10,337,306 10,276,400 (60,906) Rental Income 551,500 551,500 513,701 (37,799)
Other Revenues 676,749 676,749 876,199 199,450
Total Revenues 75,979,707 75,979,707 74,363,912 (1,615,795)

EXPENDITURES
Current:

General Government 17,337,548 17,534,892 17,085,390 449,502 Public Safety 34,936,189 34,936,189 34,345,479 590,710
Public Works 9,507,202 9,880,202 7,688,016 2,192,186
Health Services 1,825,172 1,895,172 1,411,874 483,298
Capital Outlay 12,348,200 12,368,200 2,927,921 9,440,279 Debt Service 25,396 25,396 25,396 -
Total Expenditures 75,979,707 76,640,051 63,484,076 13,155,975 CHANGE IN FUND BALANCE - (660,344) 10,879,836 11,540,180 Fund Balance - Beginning of Year 16,967,255 16,967,255 16,967,255 - FUND BALANCE - END OF YEAR $ 16,967,255 $ 16,306,911 $ 27,847,091 $ 11,540,180

CITY OF VERNON

NOTE TO REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2022
(79)
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 2022.

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 $11,450,180. The key reasons for this variance were due to lower actual revenues than projected of $1,615,795 and lower actual expenditures than appropriated by $13,155,975.

For the current year, the General Fund’s total positive variance between the final budgeted estimated revenues and actual revenues was $1,615,795. The main reason for the variance, was that taxes came in higher than expected by $2,621,650, in particular Sales Tax revenue offset by intergovernmental revenues coming lower by $5,534,510 since expected capital related work to the Atlantic Bridge Project funded by Caltrans was not completed.

For the current year, the General Fund’s total positive variance between the final budgeted amount and the actual amount for expenditures was $13,155,975. The key reasons for this variance were due to higher appropriations than actual expenditures of $9,440,279 in capital outlay as work and purchases were delayed due to the pandemic and supply chain issues offset by an increase of $2,192,186 in public works supplies and repairs and maintenance costs.

CITY OF VERNON

SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY
AND RELATED RATIOS – MISCELLANEOUS PLAN (CONTINUED)
LAST TEN FISCAL YEARS *
(80)
Fiscal Year Ended June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 Measurement Period June 30, 2021 June 30, 2020 June 30, 2019 June 30, 2018 Total Pension Liability:

Service Cost $ 2,735,636 $ 2,905,980 $ 2,991,388 $ 2,826,440 Interest on Total Pension Liability 13,153,255 12,502,379 11,863,069 11,053,679 Changes of Assumptions - - - (549,432)
Differences Between Expected and
Actual Experience 1,777,340 1,316,307 3,767,030 3,059,775 Benefit Payments, Including Refunds
of Employee Contributions (8,274,278) (7,720,453) (6,652,881) (6,166,082) Net Change in Total Pension
Liability 9,391,953 9,004,213 11,968,606 10,224,380
Total Pension Liability - Beginning of Year 184,953,577 175,949,364 163,980,758 153,756,378 Total Pension Liability -
End of Year (a) $ 194,345,530 $ 184,953,577 $ 175,949,364 $ 163,980,758 Plan Fiduciary Net Position:

Contributions - Employer $ 4,979,542 $ 4,501,532 $ 3,908,165 $ 3,380,432 Contributions - Employee 1,161,711 1,271,580 1,357,537 1,214,616 Net Investment Income 30,012,771 6,484,512 8,077,977 9,803,260 Benefit Payments, Including Refunds
of Employee Contributions (8,274,278) (7,720,453) (6,652,881) (6,166,082) Plan to Plan Resource Movement - - - (296)
Administrative Expenses (138,188) (188,889) (90,906) (186,518) Other Miscellaneous Income (1) - - 296 (354,202)
Net Change in Plan
Fiduciary Net Position 27,741,558 4,348,282 6,600,188 7,691,210 Plan Fiduciary Net Position -
Beginning of Year 138,335,116 133,986,834 127,386,646 119,695,436 Plan Fiduciary Net Position -
End of Year (b) $ 166,076,674 $ 138,335,116 $ 133,986,834 $ 127,386,646 Net Pension Liability - Ending (a)-(b) $ 28,268,856 $ 46,618,461 $ 41,962,530 $ 36,594,112 Plan Fiduciary Net Position as a
Percentage of the Total Pension Liability 85.45% 74.79% 76.15% 77.68% Covered Payroll $ 15,355,968 $ 15,399,491 $ 15,996,725 $ 15,146,241 Net Pension Liability as Percentage of
Covered Payroll 184.09% 302.73% 262.32% 241.61%
Notes to Schedule:

Benefit Changes:

There were no changes in benefits.

Changes in Assumptions:

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

GASB 68, paragraph 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense. The discount rate of 7.50% 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.

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.

From fiscal year June 30, 2021 to June 30, 2022:

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

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 *
(81)
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 Payroll
Net Pension Liability as Percentage of
Covered Payroll
June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2014 $ 2,129,659 2,432,788 $ 1,962,270 $ 1,955,694 $
9,969,103 10,383,859 9,447,012 9,609,274
9,321,776 - (2,466,126) -
(711,339) 1,046,363 (9,700,904) -
(6,145,366) (5,748,657) (5,680,624) (2,388,449)
15,281,718 7,396,468 (6,438,372) 9,176,519
138,474,660 131,078,192 137,516,564 128,340,045
$ 153,756,378 $ 138,474,660 $ 131,078,192 $ 137,516,564 $ 3,629,603 $ 3,140,644 $ 2,340,002 $ 1,825,732
1,245,990 1,095,824 1,054,426 1,015,741
11,857,647 583,692 2,337,855 16,045,243
(6,145,366) (5,748,657) (5,680,624) (2,388,449)
1,118 (780) 18 -
(161,327) (67,200) (124,052) -
- - - -
10,427,665 (996,477) (72,375) 16,498,267
109,267,771 110,264,248 110,336,623 93,838,356
$ 119,695,436 $ 109,267,771 $ 110,264,248 $ 110,336,623 $ 34,060,942 $ 29,206,889 $ 20,813,944 $ 27,179,941

77.85% 78.91% 84.12% 80.24%
$ 13,440,076 $ 13,150,103 $ 11,708,057 $ 11,084,188
253.43% 222.10% 177.77% 245.21%

CITY OF VERNON

SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY
AND RELATED RATIOS – MISCELLANEOUS PLAN (CONTINUED)
LAST TEN FISCAL YEARS *
(82)
Notes to Schedule:

Benefit Changes:

There were no changes in benefits.

Changes in Assumptions:

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

GASB 68, paragraph 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense. The discount rate of 7.50% 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.

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.

From fiscal year June 30, 2021 to June 30, 2022:

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

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 *
(83)
Fiscal Year Ended June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 Contractually Required Contribution
(Actuarially Determined) $ 5,957,671 $ 4,979,905 $ 4,500,718 $ 3,908,165 Contributions in Relation to
the Actuarially Determined
Contributions (5,957,671) (4,979,905) (4,500,718) (3,908,165) Contribution Deficiency (Excess) $ - $ - $ - $ -
Covered Payroll $ 19,708,798 $ 15,355,968 $ 15,399,491 $ 15,996,725 Contributions as a Percentage
of Covered Payroll 30.23% 32.43% 29.23% 24.43%
Notes to Schedule:

Valuation Date 6/30/2019 6/30/2018 6/30/2017 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)
Asset Valuation Method Fair Value Fair Value Fair Value Fair Value Inflation 2.625% 2.625% 2.625% 2.75%
Salary Increases (2) (2) (2) (2)
Investment Rate of Return 7.25% (3) 7.25% (3) 7.25% (3) 7.375% (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 eight years are shown.

CITY OF VERNON
SCHEDULE OF PENSION CONTRIBUTIONS – MISCELLANEOUS PLAN (CONTINUED) LAST TEN FISCAL YEARS *
(84)
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, 2018 June 30, 2017 June 30, 2016 June 30, 2015 $ 3,629,603 3,380,432 $ 3,140,644 $ 2,340,002 $
(3,380,432) (3,629,603) (3,140,644) (2,340,002)
$ - $ - $ - $ -
$ 15,146,241 $ 13,440,076 $ 13,150,103 $ 11,708,057

22.32% 27.01% 23.88% 19.99%
6/30/2015 6/30/2014 6/30/2013 6/30/2012
Entry Age Entry Age Entry Age Entry Age
(1) (1) (1) (1)
Fair Value Fair Value Fair Value 15 Year
Smoothed
Market Method

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

7.50% (3) 7.50% (3) 7.50% (3) 7.50% (3)
(4) (4) (4) (4)
(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 eight years are shown.

CITY OF VERNON
SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY – SAFETY PLAN LAST TEN FISCAL YEARS *
(85)
Fiscal Year Ended June 30, 2022 June 30, 2021
Measurement Period June 30, 2021 June 30, 2020
Plan's Proportion of the Net
Pension Liability 1.702860% 1.331100%
Plan's Proportionate Share of
the Net Pension Liability $ 59,761,800 $ 88,682,300
Plan's Covered Payroll $ 7,618,673 $ 11,770,766
Plan's Proportionate Share of
the Net Pension Liability as a
Percentage of Covered Payroll 784.41% 753.41%
Plan's Proportionate Share of
the Fiduciary Net Position as a
Percentage of the Plan's Total
Pension Liability 79.73% 69.13%
Plan's Proportionate Share of
Aggregate Employer Contributions 12,561,115 $ $ 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 two years are shown.

Safety

CITY OF VERNON

SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY
AND RELATED RATIOS – SAFETY PLAN
LAST TEN FISCAL YEARS *
(86)
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 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 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 Multiple Plan to a Cost Sharing Plan, and therefore only six years are shown.

CITY OF VERNON
SCHEDULE OF PENSION CONTRIBUTIONS – SAFETY PLAN
LAST TEN FISCAL YEARS *
(87)
Fiscal Year Ended June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 Contractually Required Contribution
(Actuarially Determined) $ 8,258,888 $ 7,650,585 $ 7,834,050 $ 7,011,540 Contributions in Relation to
the Actuarially Determined
Contributions (8,258,888) (7,650,585) (7,834,050) (7,011,540) Contribution Deficiency (Excess) $ - $ - $ - $ -
Covered Payroll $ 5,630,861 $ 7,618,673 $ 11,770,766 $ 13,737,311 Contributions as a Percentage
of Covered Payroll 146.67% 100.42% 66.56% 51.04%
Notes to Schedule:

Valuation Date 6/30/2019 6/30/2018 6/30/2017 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)
Asset Valuation Method Fair Value Fair Value Fair Value Fair Value Inflation 2.625% 2.625% 2.625% 2.75%
Salary Increases (2) (2) (2) (2)
Investment Rate of Return 7.25% (3) 7.25% (3) 7.25% (3) 7.375% (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 eight years are shown.

CITY OF VERNON
SCHEDULE OF PENSION CONTRIBUTIONS – SAFETY PLAN (CONTINUED) LAST TEN FISCAL YEARS *
(88)
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, 2018 June 30, 2017 June 30, 2016 June 30, 2015 $ 5,476,196 6,109,373 $ 5,116,412 $ 4,147,441 $
(6,109,373) (5,476,196) (5,116,412) (4,147,441)
$ - $ - $ - $ -
$ 14,292,273 $ 13,879,896 $ 12,971,888 $ 12,740,785

42.75% 39.45% 39.44% 32.55%
6/30/2015 6/30/2014 6/30/2013 6/30/2012
Entry Age Entry Age Entry Age
(1) (1) (1) Entry Age
Fair Value Fair Value Fair Value (1)
15 Year
Smoothed

2.75% 2.75% 2.75% Market Method
(2) (2) (2) 2.75%

7.50% (3) 7.50% (3) 7.50% (3) (2)
(4) (4) (4) 7.50% (3)
(5) (5) (5) (4)
(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 eight years are shown.

CITY OF VERNON

SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS LAST TEN FISCAL YEARS *
(89)
Fiscal Year End June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 Measurement Date June 30, 2021 June 30, 2020 June 30, 2019 June 30, 2018 Total OPEB Liability:

Service Cost $ 303,057 $ 565,922 $ 549,137 $ 1,204,747
Interest on Total OPEB Liability 1,682,954 1,699,197 1,641,230 2,063,052 Differences Between Expected and Actual Experience (677,446) 206,148 - (6,680,583) Assumption Changes 66,075 579,724 (124,861) (7,657,196) Change of Benefit Terms - (800,265) - -
Benefit Payments (1,199,826) (1,222,538) (1,158,450) (1,006,087) Net Change in Total OPEB Liability 174,814 1,028,188 907,056 (12,076,067) Total OPEB Liability - Beginning of Year 27,215,028 26,186,840 25,279,784 37,355,851 Total OPEB Liability - End of Year (a) $ 27,389,842 $ 27,215,028 $ 26,186,840 $ 25,279,784 Plan Fiduciary Net Position:

Contributions - Employer $ 3,131,526 $ 3,915,406 $ 2,989,393 $ 2,065,407 Net Investment Income 2,084,288 44,684 258,220 65,276
Benefit Payments
and the Implied Subsidy Benefit Payments (1,199,826) (1,222,538) (1,158,450) (1,006,087) Administrative Expenses (2,958) (2,563) (629) (808)
Other Deductions - - - (1,400)
Net Change in Plan Fiduciary Net Position 4,013,030 2,734,989 2,088,534 1,122,388 Plan Fiduciary Net Position - Beginning of Year 7,003,178 4,268,189 2,179,655 1,057,267 Plan Fiduciary Net Position - End of Year (b) $ 11,016,208 $ 7,003,178 $ 4,268,189 $ 2,179,655 Net OPEB Liability - Ending (a)-(b) $ 16,373,634 $ 20,211,850 $ 21,918,651 $ 23,100,129 Plan Fiduciary Net Position as a Percentage of the
Total OPEB Liability 40.22% 25.73% 16.30% 8.62%
Covered - Employee Payroll $ 31,702,877 $ 31,958,957 $ 35,182,647 $ 33,496,565 Net OPEB Liability as Percentage of
Covered - Employee Payroll 51.65% 63.24% 62.30% 68.96%
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 five years are shown.

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, 2022: Medical trend rates have been updated by actual premium increase from 2021 to 2022.

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, 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, 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 CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS LAST TEN FISCAL YEARS *
(90)
Fiscal Year End
Measurement Date
Total OPEB Liability:

Service Cost
Interest on Total OPEB Liability
Differences Between Expected and Actual Experience
Assumption Changes
Change of Benefit Terms
Benefit Payments
Net Change in Total OPEB Liability
Total OPEB Liability - Beginning of Year
Total OPEB Liability - End of Year (a)
Plan Fiduciary Net Position:

Contributions - Employer
Net Investment Income
Benefit Payments
and the Implied Subsidy Benefit Payments
Administrative Expenses
Other Deductions
Net Change in Plan Fiduciary Net Position
Plan Fiduciary Net Position - Beginning of Year
Plan Fiduciary Net Position - End of Year (b)
Net OPEB Liability - Ending (a)-(b)
Plan Fiduciary Net Position as a Percentage of the
Total OPEB Liability
Covered - Employee Payroll
Net OPEB Liability as Percentage of
Covered - Employee Payroll
June 30, 2018
June 30, 2017
$ 1,166,825
1,879,025
-
(770,716)
-
(838,818)
1,436,316
35,919,535
$ 37,355,851
$ 1,898,138
(2,049)
(838,818)
(4)
-
1,057,267
-
$ 1,057,267
$ 36,298,584

2.83%
$ 33,511,114
108.32%
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 five years are shown.

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, 2022: Medical trend rates have been updated by actual premium increase from 2021 to 2022.

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, 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, 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 *
(91)
Fiscal Year Ended June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 June 30, 2018 Actuarially Determined Contribution $ 1,538,693 $ 1,538,693 $ 1,931,700 $ 2,692,868 $ 2,692,868 Contributions in Relation to the Actuarially Determined Contributions (2,933,295) (3,131,526) (3,915,406) (2,989,393) (2,065,407) Contribution Deficiency (Excess) $ (1,394,602) $ (1,592,833) $ (1,983,706) $ (296,525) $ 627,461 Covered - Employee Payroll $ 31,702,877 $ 31,702,877 $ 31,958,957 $ 35,182,647 $ 33,496,565 Contributions as a Percentage of Covered - Employee
Payroll 9.25% 9.88% 12.25% 8.50% 6.17%
Notes to Schedule:

Valuation Date 6/30/2020 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 Entry Age Amortization Method (1) (1) (1) (1) (1)
Amortization Period 27 Years 27 Years 27 Years 27 Years 29 Years Asset Valuation Method Market Value Market Value Market Value Market Value Market Value Inflation 2.25% 2.25% 2.50% 2.50% 2.75%
Healthcare Trend Rates (4) (4) (3) (3) (2)
Investment Rate of Return 6.25% 6.25% 6.50% 7.00% 7.00% Mortality (6) (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 five years are shown.