Vernon City Council
February 20, 2024

2 Auditors’ Responsibility 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.

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, the Budgetary Comparison Schedule, the Schedule of Changes in Net Pension Liabilities and Related Ratios – Miscellaneous Plan and Safety Plan, the Schedule of Proportionate Share of the Net Pension Liabilities and Related Ratios – Safety Plan, the Schedule of Contributions – Pensions, the Schedules of Changes in Net Other Postemployment Benefits Liability and Related Ratios, and the Schedules of Contributions – Other Postemployment Benefits be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by Government Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the Required Supplementary Information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. ..

Item 11 Page 16 of 405
To the Honorable Mayor and Members of the City Council
of the City of Vernon
Vernon, California

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

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

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 8, 2024 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

Santa Ana, California
February 8, 2024 ..

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City of Vernon, California
Management’s Discussion and Analysis (Unaudited)
June 30, 2023
5 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, 2023.

OVERVIEW OF THE 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 20-23 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. ..

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City of Vernon, California
Management’s Discussion and Analysis (Unaudited)
(Continued)
6 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 93).

The basic governmental funds financial statements can be found on pages 29 and 32 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 34-39 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 43 and 44 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 49-91 of this report. ..

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City of Vernon, California
Management’s Discussion and Analysis (Unaudited)
(Continued)
7 GOVERNMENT-WIDE FINANCIAL ANALYSIS
City’s Net Position
The table below summarizes the government-wide Statement of Net Position as of June 30, 2022 and June 30, 2023, and is as follows:

City of Vernon
Net Position
June 30, 2023 and 2022
Overtime, net position may serve as a useful indicator of a city's financial position. At June 30, 2023, the City’s net position was $337.8 million, an increase of $81.0 million over the net position of $256.7 million at June 30, 2022.

The largest portion of the City's net position ($353.4 million) is its investment in capital assets (e.g., land, buildings, infrastructure, and equipment, right-to-use assets, etc.), net of related debt. The City uses capital assets to provide services to residents; consequently, these assets are not available for future spending.

This category of net position increased mainly from the construction of ongoing, or nearly completed projects such as the city-wide tree well project, Gateway Arch Project, Electrical service upgrades, Well and Reservoir rehabilitation, and upgrading the existing fiber optics network system.

The City's restricted net position totals $42.8 million. Restricted net position represents resources that are subject to external restrictions on how they may be used, such as debt. The remaining deficit balance of $58.4 million represents unrestricted net position.

Total net position increased by $81.0 million from an excess of revenues over expenses. This net increase was reflected by an increase of $53.7, $21.8, and $5.5 million in unrestricted net position net investment in capital assets and restricted net position, respectively. The excess of revenues over expenses will be analyzed in conjunction with the Statement of Activities. 2023 2022 2023 2022 2023 2022
Assets:

Current and other assets $ 47,272,062 $ 31,543,883 $ 189,058,515 $ 190,425,409 $ 236,330,577 $ 221,969,292 Restricted assets 2,824,858 6,267,964 36,427,615 46,383,084 39,252,473 52,651,048 Capital assets 162,262,242 163,093,528 465,066,379 458,427,644 627,328,621 621,521,172 Total assets 212,359,162 200,905,375 690,552,509 695,236,137 902,911,671 896,141,512 Deferred Outflows of Resources
Deferred outflows related to pensions 48,056,290 23,034,461 14,399,006 5,338,797 62,455,296 28,373,258 Deferred outflows related to OPEB liability 3,906,490 2,856,840 1,170,494 662,143 5,076,984 3,518,983 Deferred amount on bond refunding - - 1,731,362 1,933,345 1,731,362 1,933,345 Total deferred outflows of resources 51,962,780 25,891,301 17,300,862 7,934,285 69,263,642 33,825,586 Liabilities:

Current liabilities 7,167,000 4,494,931 76,168,309 23,591,507 83,335,309 28,086,438 Long term liabilities 138,346,981 92,405,587 395,093,373 485,156,669 533,440,354 577,562,256 Total liabilities 145,513,981 96,900,518 471,261,682 508,748,176 616,775,663 605,648,694 Deferred Inflows of Resources
Deferred inflows related to pensions 6,073,932 44,972,489 1,819,920 10,423,470 7,893,852 55,395,959 Deferred inflows related to OPEB liability 4,639,817 6,807,966 1,390,219 1,577,912 6,030,036 8,385,878 Deferred inflows related to Leases 3,704,545 3,803,114 - - 3,704,545 3,803,114 Total deferred outflows of resources 14,418,294 55,583,569 3,210,139 12,001,382 17,628,433 67,584,951 Net Position:

Net investment in capital assets 161,850,189 162,746,593 191,510,736 168,787,837 353,360,925 331,534,430 Restricted 5,750,277 4,422,510 37,049,052 32,836,544 42,799,329 37,259,054 Unrestricted (deficit) (63,210,799) (92,856,514) 4,821,762 (19,203,517) (58,389,037) (112,060,031) Total net position $ 104,389,667 $ 74,312,589 $ 233,381,550 $ 182,420,864 $ 337,771,217 $ 256,733,453 Governmental Activities Business-type Activities Totals ..

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City of Vernon, California
Management’s Discussion and Analysis (Unaudited)
(Continued)
8 With the implementation of GASB 96, the City was required to report long-term subscriptions in the financial statements. The following categories were added to the financial statements: intangible (right-touse asset) subscription assets, and subscription liabilities. Additional information and discussion of these can be found in Notes 1H, 1N, and 5 of the City’s Notes to the Basic Financial Statements.

Following is a summary of the government-wide Statement of Activities which illustrates the City’s overall $81.0 million increase in net position resulting from program expenses being less than total program and general revenues. A discussion regarding significant changes in revenues and expenses follows the table.

City of Vernon
Statement of Activities
Years ended June 30, 2023 and
2022
2023 2022 2023 2022 2023 2022
Revenues:

Program revenues
Charges for services $ 12,528,733 $ 10,764,696 $ - $ - $ 12,528,733 $ 10,764,696 Vernon public utilities - - 262,570,096 238,570,758 262,570,096 238,570,758 Operating and capital grants and contributions 1,670,481 5,262,389 - 865,403 1,670,481 6,127,792 General revenues - - - - - -
Taxes 43,386,468 41,787,626 - - 43,386,468 41,787,626
Sales and Use Tax 16,485,569 14,989,046 - - 16,485,569 14,989,046 Investment income (loss) 414,374 100,809 4,711,672 285,622 5,126,046 386,431 Rental income 519,373 208,039 - - 519,373 208,039
Other revenues 2,072,655 2,736,631 - - 2,072,655 2,736,631 Gain (loss) on the sale of land and assets 67,582 - (989,157) - (921,575) - Total revenues 77,145,235 75,849,236 266,292,611 239,721,783 343,437,846 315,571,019 Expenses:

Governmental activities
General government 15,151,873 17,564,758 - - 15,151,873 17,564,758 Public safety 17,615,641 35,417,532 - - 17,615,641 35,417,532 Public works 13,266,854 11,811,876 - - 13,266,854 11,811,876 Health services 1,523,844 1,416,058 - - 1,523,844 1,416,058 Interest on long-term debt 1,487 199 - - 1,487 199
Business-type activities - - - - - -
Vernon public utilities - - 214,840,383 204,525,037 214,840,383 204,525,037 Total expenses 47,559,699 66,210,423 214,840,383 204,525,037 262,400,082 270,735,460 Change in net position before transfers 29,585,536 9,638,813 51,452,228 35,196,746 81,037,764 44,835,559 Transfers:

Interfund transfers 491,542 181,387 (491,542) (181,387) - - Net Transfers 491,542 181,387 (491,542) (181,387) - -
Change in net position 30,077,078 9,820,200 50,960,686 35,015,359 81,037,764 44,835,559 Net position - beginning of year 74,312,589 64,492,389 182,420,864 147,405,505 256,733,453 211,897,894 Net position - end of year $ 104,389,667 $ 74,312,589 $ 233,381,550 $ 182,420,864 $ 337,771,217 $ 256,733,453 Governmental Activities Business-type Activities Totals ..

Item 11 Page 22 of 405
City of Vernon, California
Management’s Discussion and Analysis (Unaudited)
(Continued)
9 Government-wide revenues increased by $27.9 million to $343.3 million. The majority of this increase resulted from an increase of $24.0 million Vernon Public Utilities charges for services, an increase of $4.7 million in Investment Income partially due to interest income derived from the City’s investment portfolio performing better as compared to prior year due to the rise in interest rates.

Operating and capital grants decreased by $4.5 million as compared to the prior year, as there was a slow down on the Atlantic Bridge widening project this year. The remaining changes include all other governmental activities accounting for a net $1.8 million increase mainly comprised of $1.5 million increase in sales and use tax revenue.

The most significant portion of the City's revenue came from sales and use taxes, parcel taxes, ad utility user taxes which accounted for 22.7%, 21.3% and 21.1% of total revenue respectively. Charges for services accounted for 10.3% of total revenue. Additionally, 8% was received from business license taxes,

6.7% from property taxes, and the remaining 9.9% was from franchise taxes, grants, and investment income.

Government-wide expenses of all the City programs and services decreased by $8.3 million to $262.4 million. Governmental Activities decreased by $18.7 million while the Business Type Activities increased by $10.3 million. Expenses include adjustments for depreciation, long-term debt, and pension costs. The net decrease in Government-wide expenses is spread across the City's programs with decreases in Public Safety services by $17.8 million, General Government by $2.4 million, and an increase in Vernon Public Utilities of $10.3 million, and Public Works increased by $15 million each. Interest Expense is now presented on a separate line item at $0.6 million and is attributed to long-term debt and leases/subscription liabilities.

Vernon Public Utilities accounted for 81.9% of the total costs, General Government for 5.8%, Public Safety for 6.7%, Public Works for 5.1%, and Health for 0.6%. Interest Expense accounts for a minimal amount of the remaining expenses.

Governmental activities contributed $29.6 million before transfers to the increase in net position resulting from revenues exceeding expenses.

Revenues of governmental activities report a net increase over the prior year of $1.3 million, to $77.1 million. The increase is attributed to a $1.7 million increase in charges for services, $1.5 million increase in sales and use tax, $1.5 million increase is utility users tax, while operating and capital grants decreased by $3.6 million.

Expenses of governmental activities decreased by a net $18.7 million. Expenses include adjustments for depreciation, long-term debt, and pension costs. The net decrease is spread across the City's programs with Police decreasing by $17.8 million, General Government decreasing by $2.4 and Public Works increasing by $1.6 million each. Health services and interest expense experienced a very negligible change.
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City of Vernon, California
Management’s Discussion and Analysis (Unaudited)
(Continued)
10 The following two charts show the source and use of funds for Governmental Activities:

Property taxes
7%
Parcel taxes
21%
Utility users taxes
21%
Franchise taxes
3%
Business license taxes
8%
Other Taxes
Investment income 0%
0%
Rental Income
1%
Sales and use taxes
23%
Other revenues
4%
Operating Grants
1%
Capital Grants
1% Charges for services
10%
Governmental Activities
Revenue by Source
FY 2023
General Government
32%
Public Safety
37%
Public Works
28%
Health Services
3%
Interest and Fiscal
Charges
0%
Governmental Activities
Expenses by Function
FY 2023
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City of Vernon, California
Management’s Discussion and Analysis (Unaudited)
(Continued)
11 Business-type activities consists of the Electric, Gas, Water and Fiber Utilities Enterprise Funds. The total net position at the end of the year was $233.4 million as compared to $182.4 million at the end of the prior year. This represents an increase in net position of $51.0 million. The increase can largely be attributed to the purchase of Malburg Generating Station and the end of the PPTA agreement which has resulted in savings. Another factor are lowered Transmission firm expenses from Cal ISO.

Revenues of $262.3 million consist of charges for services. This is an increase of $27.0 million over the prior year's total revenue of $239.7 million. The increase is mainly due to increased energy cost adjustment pass-through which is directly offset by the increase in cost of energy and natural gas in the expenses. Despite the increases in the aforementioned expenses. -
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
(In Millions)
Vernon Public Utilities
Business-type Activities- Revenues and Expenses
Years ended June 30, 2023 and 2022
2023 Revenues
2023 Expenditures
2022 Revenues
2022 Expenditures
..

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City of Vernon, California
Management’s Discussion and Analysis (Unaudited)
(Continued)
12 FINANCIAL ANALYSIS OF THE GOVERNMENTAL FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements.

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

At the end of the current fiscal year, the City's governmental funds reported a combined ending fund balances of $42.0 million (see page 31), an increase of $14.1 million from the prior year. Approximately

0.28% of the total fund balance amount, $116 thousand, constitutes nonspendable fund balance, which are amounts that are not in a spendable form or are required to be maintained intact. Approximately

13.69% of the total fund balance amount, $5.8 million, 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. Approximately 23.81% of the total fund balance amount, $10 million, constitutes committed fund balance, which are amounts that the City Council set aside for various reserves. The remainder of the fund balance amount, $26.1 million is an unassigned fund balance 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 $42.0 (see page 29). At the end of the current fiscal year, the total fund balance represents 54.1% 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 balance of $4.8 million (see page 35). 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 $51 million (see page 23). Other factors concerning the finances of these funds have already been addressed in the discussion of the City's business-type activities. ..

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City of Vernon, California
Management’s Discussion and Analysis (Unaudited)
(Continued)
13 GENERAL FUND AND BUDGETARY HIGHLIGHTS
For the current year, the General Fund’s total positive variance between the final budgeted amounts and the actual amount of change in fund balance was $20.3 million. The key reasons for this variance were due to lower actual expenditures than projected of approximately $20.1 million.

For the current year, the General Fund’s total positive variance between the final budgeted estimated revenues and actual revenues was $162,546. The main reason for the variance, was that taxes came in higher than expected by $4.4 million offset by intergovernmental revenues coming lower by $5.3 million and charges for services by $1.1 million.

For the current year, the General Fund’s total positive variance between the final budgeted amount and the actual amount for expenditures was $20.1 million. The key reasons for this variance were due to higher appropriations than actual expenditures of $14.5 million in capital outlay and related professional services of $1.8 million in public works as well as a reduction in the LA County contracted services of $1.8 million.

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, 2023, amounts to $627.3 million (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 $5.7 million is mainly due to city-wide tree well project, Gateway Arch Project, Electrical service upgrades, Well and Reservoir rehabilitation, and upgrading the existing fiber optics network system. For additional information see Note 5 of this report.

Outstanding debt
As of June 30, 2023, the following debt remains outstanding:  $36,870,000 City of Vernon Electric System Revenue Bonds, 2008 Taxable Series A  $5,340,000 City of Vernon Electric System Revenue Bonds, 2012 Taxable Series B  $89,180,000 City of Vernon Electric System Revenue Bonds, 2015 Taxable Series A  $19,305,000 City of Vernon Electric System Revenue Bonds, 2020 Series A  $153,435,000 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  $14,350,000 City of Vernon Water System Revenue Bonds, 2020 Taxable Series A  $1,081,395 City of Vernon agreement with the Water Replenishment District of Southern California
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City of Vernon, California
Management’s Discussion and Analysis (Unaudited)
(Continued)
14 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, 2023, the ratings on all Electric System Revenue Bonds of the City were BBB+/Stable by S&P and Baa1/Stable by Moody’s. The rating on Water System 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. ..

Item 11 Page 28 of 405
City of Vernon, California
Management’s Discussion and Analysis (Unaudited)
(Continued)
15 ECONOMIC FACTORS AND NEW YEAR’S BUDGET AND RATES
Local and state economies experienced continual growth throughout fiscal year 2022-23, 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 2023-24.  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 at the City of Vernon, 4305 Santa Fe Avenue, Vernon, California, 90058. ..

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Item 11 Page 30 of 405

BASIC FINANCIAL STATEMENTS
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GOVERNMENT-WIDE FINANCIAL STATEMENTS
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Governmental Business-Type
Activities Activities Total
ASSETS
Current assets:

Cash and investments $ 33,979,557 $ 153,374,024 $ 187,353,581 Accounts receivable, net 2,015,947 14,760,699 16,776,646 Taxes receivabl
e - 4,313,563 4,313,563
Interest receivable 376,475 - 376,475
Due from other government 8,829 2,250 11,079
Notes and loans receivable - 17,132 17,132
Other receivables - 12,860 12,860
Accrued unbilled revenue 19,771,908 - 19,771,908
Internal balances (3,045,159) 3,045,159 -
Lease receivable - due within one year - 68,058 68,058
Prepaid expenses 163,337 115,995 279,332
Inventor
y 570,202 - 570,202
Total current assets 43,570,521 185,980,315 229,550,836 Noncurrent assets:

Restricted cash and investments 2,824,858 36,427,615 39,252,473 Lease receivable, due in more than one yea
r 3,701,541
- 3,701,541
Prepaid items
- 977,070 977,070
Deposits
- 2,101,130 2,101,130
Capital assets:

Capital assets, not being depreciated 66,415,785 75,215,406 141,631,191 Capital assets, being depreciated, net 95,372,294 389,850,973 485,223,267 Intangible assets, being amortized, net 474,163 - 474,163 Total capital assets, net 162,262,242 465,066,379 627,328,621 Total noncurrent assets 168,788,641 504,572,194 673,360,835 Total assets 212,359,162 690,552,509 902,911,671

DEFERRED OUTFLOWS OF RESOURCES
Pension related items 48,056,290 14,399,006 62,455,296
Other postemployment benefits related items 3,906,490 1,170,494 5,076,984 Deferred charges on refunding
- 1,731,362 1,731,362
Total deferred outflows of resources 51,962,780 17,300,862 69,263,642 City of Vernon
Primary Government
June 30, 2023
Statement of Net Position
See accompanying Notes to the Basic Financial Statements. 20 ..

Item 11 Page 34 of 405
Governmental Business-Type
Activities Activities Total

LIABILITIES
Current liabilities:

Accounts payable 15,397,491 2,785,987 18,183,478
Accrued wages and benefits 422,751 670,617 1,093,368
Accrued interest payable 7,064,261 - 7,064,261
Unearned revenue - 702,202 702,202
Customer deposits payable 660,943 241,790 902,733
Lease liabilities - due within one yea
r - 6,347 6,347
Subscription liabilities - due within one year - 196,027 196,027 Compensated absences - due within one year 928,824 383,328 1,312,152 Claims and judgments - due within one year 1,635,206 - 1,635,206 Bonds payable - due within one year - 52,100,000 52,100,000 Note payable - due within one year 139,535 - 139,535
Total current liabilities 7,167,000 76,168,309 83,335,309 Noncurrent liabilities:

Subscription liabilities - due in more than one year 209,679 - 209,679
Compensated absences - due in more than one year 1,857,649 766,656 2,624,305 Claims and judgments - due in more than one year 2,311,608 - 2,311,608 Bonds payable - due in more than one year 353,244,291 - 353,244,291 Note payable - due in more than one year
- 941,860 941,860
Net pension liability 121,359,740 36,362,766 157,722,506 Net other postemployment benefits liabilit
y 12,608,305 3,777,800 16,386,105
Total noncurrent liabilities 138,346,981 395,093,373 533,440,354 Total liabilities 145,513,981 471,261,682 616,775,663

DEFERRED INFLOWS OF RESOURCES
Pension related items 6,073,932 1,819,920 7,893,852
Other postemployment benefits related items 4,639,817 1,390,219 6,030,036 Lease 3,704,545
- 3,704,545
Total deferred inflows of resources 14,418,294 3,210,139 17,628,433

NET POSITION
Net investment in capital assets 161,850,189 191,510,736 353,360,925 Restricted:

Debt service
- 34,116,035 34,116,035
Assembly Bill 1890 2,933,017 2,933,017
Employee flexible spending accoun
t - 23,590 23,590
Street improvements - 3,897,139 3,897,139
Asset forfeiture funds - 459,041 459,041
Drug abuse program - 5,232 5,232
Metropolitan transit authority - 27,208 27,208
Safe clean water progra
m - 1,338,067 1,338,067
Unrestricted (deficit) (63,210,799) 4,821,762 (58,389,037) Total net position $ 233,381,550 104,389,667 $ 337,771,217 $ Primary Government
June 30, 2023
Statement of Net Position (Continued)
City of Vernon
See accompanying Notes to the Basic Financial Statements. 21 ..

Item 11 Page 35 of 405
Operating Capital
Charges for Grants and Grants and
Functions/Programs Expenses Services Contributions Contributions Governmental Activities:

General governmen
t $ 9,680,621 15,151,873 $ 2,341 $ - $
Public safety 183,483 17,615,641 686,359 -
Public works 13,266,854 2,036,231 4,709 977,072
Health services 1,523,844 628,398 - -
Interest and fiscal charges 1,487 - - -
Total
governmental activities 12,528,733 47,559,699 693,409 977,072 Business-type Activities:

Electric 188,823,910 233,135,904 - -
Gas 18,180,746 19,064,515 - -
Water 9,844,537 7,353,002 - -
Fiber optics 482,725 525,140 - -
Total business-type activities 262,570,096 214,840,383 - - Total
primarygovernment $ 275,098,829 262,400,082 $ 693,409 $ 977,072 $ Program Revenues
City of Vernon
Statement of Activities
For the Year Ended June 30, 2023
See accompanying Notes to the Financial Statements.
22 ..

Item 11 Page 36 of 405
Governmenta
l Business-Type
Functions/Programs Activities Activities Total
Governmental Activities:

General governmen
t $ - (5,468,911) $ (5,468,911) $
Public safety - fire (16,745,799) - (16,745,799)
Public safety - police (10,248,842) - (10,248,842)
Economic developmen
t - (895,446) (895,446)
Interest and fiscal charges (1,487) - (1,487)
Total
governmental activities - (33,360,485) (33,360,485)
Business-type Activities:

Electric 44,311,994 - 44,311,994
Gas 883,769 - 883,769
Water 2,491,535 - 2,491,535
Fiber optics 42,415 - 42,415
Total business-type activities 47,729,713 - 47,729,713
Total
primarygovernment 47,729,713 (33,360,485) 14,369,228
General revenues and transfers
:

General revenues:

Taxes:

Property taxes 4,840,920 - 4,840,920
Parcel taxes 15,452,698 - 15,452,698
Utility users taxes 15,313,832 - 15,313,832
Franchise taxes 1,997,970 - 1,997,970
Business license taxes 5,781,048 - 5,781,048
Sales and use taxes 16,485,569 - 16,485,569
Total taxes - 59,872,037 59,872,037
Investment income 414,374 4,711,672 5,126,046
Rental income 519,373 - 519,373
Other income 2,072,655 - 2,072,655
Loss on disposal of capital assets 67,582 (989,157) (921,575) Total
general revenues 62,946,021 3,722,515 66,668,536
Transfers 491,542 (491,542) -
Chan
ges in net position 30,077,078 50,960,686 81,037,764
Net
position - beginning of year 74,312,589 182,420,864 256,733,453 Net
position - end of year $ 233,381,550 104,389,667 $ 337,771,217 $ Net (Expenses) Revenues and
Changes in Net Position
City of Vernon
Statement of Activities (Continued)
For the Year Ended June 30, 2023
See accompanying Notes to the Financial Statements.
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FUND FINANCIAL STATEMENTS
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GOVERNMENTAL FUND FINANCIAL STATEMENTS
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General
Fund
ASSETS
Cash and investments $ 33,979,557
Accounts receivable, ne
t 2,015,947
Taxes receivabl
e 4,313,563
Lease receivabl
e 3,769,599
Due from other governmen
t 2,250
Due from other funds 3,045,195
Notes and loans receivable 17,132
Other receivables 12,860
Inventories and prepaid items 115,995
Restricted assets:

Restricted cash and investments 2,824,858
Total assets $ 50,096,956

LIABILITIES, DEFERRED INFLOW OF

RESOURCES, AND FUND BALANCE
Liabilities:

Accounts payable $ 2,785,987
Accrued wages and benefits 670,617
Unearned revenue 702,202
Deposits payable 241,790
Due to other funds 36
Total liabilities 4,400,632
Deferred inflow of resources:

Leases 3,704,545
Total deferred inflow of resources 3,704,545
Fund Balance:

Nonspendable 115,995
Restricted for:

Employee Flexible Spending Account 23,590
Street improvements 3,897,139
Asset forfeiture funds 459,041
Drug Abuse Program 5,232
Metropolitan Transit Authority 27,208
Safe Clean Water Program 1,338,067
Committed 10,000,000
Unassigned 26,125,507
Total fund balance 41,991,779
Total liabilities, deferred inflow of
resources, and fund balance $ 50,096,956
City of Vernon
Balance Sheet
Governmental Fun
d
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 29 ..

Item 11 Page 43 of 405
Total Fund Balances - Total Governmental Funds $ 41,991,779 Amounts reported for governmental activities in the statement of net position are different because:

Nondepreciable assets 66,415,785 $
Depreciable assets, ne
t 95,372,294
Intangible assets, net 474,163 162,262,242
48,056,290
Net pension liability (121,359,740)
(6,073,932)
3,906,490
Net OPEB liabilities (12,608,305)
(4,639,817)
(6,347)
(405,706)
(2,786,473)
(3,946,814)
Net
position of governmental activities $ 104,389,667
Claims payable
Net pension liabilities and the related deferred outflows of resources and deferred inflows of resources are not due and payable in the current period or not available for current expenditures and are not reported in the governmental fund financial statements:

Pension related deferred outflows of resources
Pension related deferred inflows of resources
Ne
t otherpostemploymentbenefits liability and the related deferred outflows of resources and deferred inflows of resources are not due and payable in the current period or not available for current expenditures and are not reported in the governmental fund financial statements:

OPEB related deferred outflows of resources
OPEB related deferred inflows of resources
Long-term liabilities applicable to the City's governmental activities are not due and payable in the current period and, accordingly are not reported as fund liabilities. All liabilities, both current and long-term are reported in the Statement of Net Position. Those liabilities consist of:

Compensated absences
Subscription liability
Lease liability
Amount reported in government-wide statement of position:

City of Vernon
Reconciliation of the Governmental Fund Balance Sheet
to the Government-Wide Statement of Net Position
June 30, 2023
Capital assets used in governmental activities are not current financial resources and therefore are not reported in governmental funds. Those assets consist of:

See accompanying Notes to the Basic Financial Statements. 30 ..

Item 11 Page 44 of 405
General
Fund
REVENUES:

Taxes $ 59,628,704
Special assessments 1,878,995
Licenses, and permits 2,387,396
Fines, forfeitures, and penalties 273,830
Intergovernmental 2,353,070
Investment earnings 414,374
Charges for services 10,245,375
Rent income 519,373
Other revenues 1,043,247
Total revenues 78,744,364
EXPENDITURES:

Current:

General government 15,630,351
Public safety 33,860,124
Public works 9,695,296
Health services 1,691,036
Capital outlay 4,593,430
Debt service:

Principal retirement 225,620
Interest and fiscal charges 1,487
Total expenditures 65,697,344
REVENUES OVER EXPENDITURES 13,047,020
OTHER FINANCING SOURCES:

Transfer in 491,542
Proceeds from sale of capital asset 67,582
Issuance of debt 538,544
Total other financing sources 1,097,668
NET CHANGE IN FUND BALANCE 14,144,688
FUND BALANCE:

Beginning of year 27,847,091
End of year $ 41,991,779
For the Year Ended June 30, 2023
Governmental Fund
Statement of Revenues, Expenditures, and Change in Fund Balance City of Vernon
See accompanying Notes to the Basic Financial Statements. 31 ..

Item 11 Page 45 of 405
Net change in fund balances - total governmental funds: $ 14,144,688 Amounts reported for governmental activities in the Statement of Activities are different because:

Capital outlay expenditures, net of functional expenses of $(15,750) $ 4,609,180 Depreciation and amortization expense (5,507,935) (898,755) (1,666,711)
Change in compensated absences (112,543)
Change in claims payable 993,918
Pension expense, net of pension contribution made after measurement date 14,027,190 OPEB expense, net of OPEB contribution made after measurement date 3,902,215 Issuance of long-term debt (538,544)
Principal repayment of long-term debt 225,620
Chan
ge in net position of governmental activities $ 30,077,078 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 funds:

City of Vernon
in Fund Balance to the Government-Wide Statement of Activities For the Year Ended June 30, 2023
Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of those capital assets is allocated over the estimated useful lives as depreciation expense. This is the amount by which capital expenditures exceeded depreciation in the current period:

Certain accrued revenues such as grants do not provide current financial resources and therefore, are not reported in the governmental funds as revenues. This is the amount of the net change in these accrued revenue amounts during the current period.

Reconciliation of the Governmental Fund Statement of Revenues, Expenditures, and Change See accompanying Notes to the Basic Financial Statements. 32 ..

Item 11 Page 46 of 405

PROPRIETARY FUND FINANCIAL STATEMENTS
33 ..

Item 11 Page 47 of 405
Nonmajor
Electric Gas Water (Fiber Optics)
Fund Fund Fund Fund Total
ASSETS
Current assets:

Cash and investments $ 16,776,807 117,511,564 $ 17,994,763 $ 1,090,890 $ 153,374,024 $ Accounts receivable, ne
t 191,638 13,592,491 943,517 33,053 14,760,699
Interest receivable - 367,547 8,928 - 376,475
Accrued unbilled revenue 1,025,232 17,231,152 1,515,524 - 19,771,908 Due from other government - 8,829 - - 8,829
Due from other funds - - 18,247 36 18,283
Prepaid items - 159,007 4,330 - 163,337
Inventory - 570,202 - - 570,202
Total current assets 149,440,792 17,993,677 20,485,309 1,123,979 189,043,757 Noncurrent assets:

Restricted cash and investments 34,278,926 2,148,689 - 36,427,615 - Advances to other funds 33,926,562 - - 33,926,562 -
Prepayment to Southern California Public
Power Authority 977,070 - - 977,070 -
Deposits 2,101,130
- - 2,101,130 -
Capital assets:

Capital assets, not being depreciated 63,837,963 11,111,271 - 266,172 75,215,406 Capital assets, being depreciated, net 362,862,804 14,672,800 11,302,440 1,012,929 389,850,973 Total capital assets 426,700,767 14,672,800 22,413,711 1,279,101 465,066,379 Total noncurrent asset
s 14,672,800 497,984,455 24,562,400 1,279,101 538,498,756 Total assets 32,666,477 647,425,247 45,047,709 2,403,080 727,542,513

DEFERRED OUTFLOW OF RESOURCES
Pension related items 11,703,498 860,759 1,821,009 13,740 14,399,006 Other postemployment benefits related items 951,376 69,971 148,030 1,117 1,170,494 Deferred charges on refunding - 1,731,362 - - 1,731,362 Total deferred outflow of resources $ 930,730 14,386,236 $ 1,969,039 $ 14,857 $ 17,300,862 $ (Continued)
Enterprise Funds
City of Vernon
Statement of Net Position
Proprietary Funds
June 30, 2023
Business-Type Activities
See accompanying Notes to the Basic Financial Statements. 34 ..

Item 11 Page 48 of 405
Nonmajor
Electric Gas Water (Fiber Optics)
Fund Fund Fund Fund Total

LIABILITIES
Current liabilities:

Accounts payable $ 53,542 14,053,698 $ 1,279,568 $ 10,683 $ 15,397,491 $ Accrued wages and benefits 21,106 369,773 31,872 - 422,751 Accrued interest payable - 6,826,980 237,281 - 7,064,261 Due to other funds - 2,953,113 110,329 - 3,063,442
Customer deposits 13,558 410,497 236,888 - 660,943
Compensated absences, due within one yea
r 14,283 334,712 34,155 178 383,328
Bonds payable, due within one year - 51,835,000 265,000 - 52,100,000 Note payable, due within one year - - 139,535 - 139,535 Total current liabilities 76,783,773 102,489 2,334,628 10,861 79,231,751 Noncurrent liabilities:

Advances from other funds 29,405,104 - 4,521,458 - 33,926,562 Compensated absences, due in more than one year 669,422 28,567 68,311 356 766,656 Bonds payable, due in more than one year 338,642,538 14,601,753 - 353,244,291 - Note payable, due in more than one year
- 941,860 - 941,860 -
Net pension liability 29,555,620 2,173,732 4,598,715 34,699 36,362,766 Net other postemployment benefits liabilit
y 225,833 3,070,592 477,770 3,605 3,777,800
Total noncurrent liabilities 371,938,172 31,833,236 20,688,409 4,560,118 429,019,935 Total liabilities 448,721,945 31,935,725 23,023,037 4,570,979 508,251,686

DEFERRED INFLOWS OF RESOURCES
Pension related items 1,479,229 108,793 230,161 1,737 1,819,920 Other postemployment benefits related items 1,129,968 83,106 175,818 1,327 1,390,219 Total deferred inflows of resources 2,609,197 191,899 405,979 3,064 3,210,139

NET POSITION
Net investment in capital assets 167,320,725 14,672,800 8,238,110 1,279,101 191,510,736 Restricted for:

Debt service 33,955,595 160,440 -
- 34,116,035
Assembly Bill 1890 2,933,017
- - - 2,933,017
Unrestricted (deficit) 6,271,004 (13,203,217) 15,189,182 (3,435,207) 4,821,762 Total net
position $ 1,469,583 210,480,341 $ 23,587,732 $ (2,156,106) $ 233,381,550 $

(Concluded)
Business-Type Activities
Enterprise Funds
City of Vernon
Statement of Net Position (Continued)
Proprietary Funds
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 35 ..

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Nonmajor
Electric Gas Water (Fiber Optics)
Fund Fund Fund Fund Total p
OPERATING REVENUES:

Charges for services $ 233,135,904 $ 19,064,515 $ 9,844,537 $ 525,140 $ 262,570,096 Total operating revenues 233,135,904 19,064,515 9,844,537 525,140 262,570,096 OPERATING EXPENSES:

Cost of sales 151,898,323 17,474,385 6,226,053 272,564 175,871,325 Depreciation expense 22,734,810 706,361 575,512 210,161 24,226,844 Total operating expenses 174,633,133 18,180,746 6,801,565 482,725 200,098,169 OPERATING INCOME 58,502,771 883,769 3,042,972 42,415 62,471,927 NONOPERATING REVENUES (EXPENSES):

Investment income 4,198,611 181,160 327,529 5,998 4,713,298 Net decrease in fair value of investments (1,626) - - - (1,626) Interest expense (14,190,777) (551,437) - - (14,742,214) Transfers ou
t (491,542) - - - (491,542)
Gain (loss) on disposal of assets (1,004,046) - 14,889 - (989,157) Total nonoperating revenues (expenses) (11,489,380) 181,160 (209,019) 5,998 (11,511,241) CHANGE IN NET POSITION 47,013,391 1,064,929 2,833,953 48,413 50,960,686 NET POSITION:

Beginning of year 163,466,950 404,654 20,753,779 (2,204,519) 182,420,864 End of year $ 210,480,341 $ 1,469,583 $ 23,587,732 $ (2,156,106) $ 233,381,550 City of Vernon
Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds
Enterprise Funds
For the Year Ended June 30, 2023
Business-Type Activities
See accompanying Notes to the Basic Financial Statements. 37 ..

Item 11 Page 51 of 405
Nonmajor
Electric Gas Water (Fiber Optics)
Fund Fund Fund Fund Total
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash receipts from customers and users $ 19,668,732 230,220,383 $ $ 9,900,629 $ 636,340 $ 260,426,084 Cash paid to suppliers for goods and services (137,074,541) (16,731,644) (5,024,168) (272,394) (159,102,747) Cash paid to employees for services (13,451,748) (1,141,181) (2,053,190) (14,536) (16,660,655) Net cash
provided by operating activities 1,795,907 79,694,094 2,823,271 349,410 84,662,682

CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES:

Transfer to City (491,542) - - (491,542) -
Receipt from other funds 61,570 6,178,906 313,127 667,766 7,221,369 Payment to other funds (6,858,636) (71,583) (18,247) (6,948,502) (36) Net cash provided by (used in) noncapital
financin
g activities 6,107,323 (7,288,608) 294,880 667,730 (218,675)

CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:

Acquisition of capital assets (24,759,717) (6,721,212) - (426,102) (31,907,031) Proceed from sale of capital assets 37,406 14,889 - 52,295 - Principal paid on long-term debt (50,110,000) (389,535) - (50,499,535) - Interest paid on long-term debt (19,480,488) (575,726) - (20,056,214) - Net cash (used in) capital and related
financin
g activities - (94,312,799) (7,671,584) (426,102) (102,410,485) CASH FLOWS FROM INVESTING ACTIVITIES:

Interest received 3,914,187 181,160 323,049 5,998 4,424,394 Net cash
provided by investing activities 181,160 3,914,187 323,049 5,998 4,424,394 Net increase (decrease) in cash and
cash e
quivalents 8,084,390 (17,993,126) (4,230,384) 597,036 (13,542,084) CASH AND CASH EQUIVALENTS:

Beginning of year 169,783,616 8,692,417 24,373,836 493,854 203,343,723 End of yea
r $ 16,776,807 151,790,490 $ 20,143,452 $ 1,090,890 $ 189,801,639 $ CASH AND CASH EQUIVALENTS:

Cash and investment 117,511,564 $ 16,776,807 $ 17,994,763 $ 1,090,890 $ 153,374,024 $ Restricted cash and investment 34,278,926 - 2,148,689 - 36,427,615 Total cash and cash e
quivalents $ 16,776,807 151,790,490 $ 20,143,452 $ 1,090,890 $ 189,801,639 $ (Continued)
Business-Type Activities
Enterprise Funds
City of Vernon
Statement of Cash Flows
Proprietary Funds
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 38 ..

Item 11 Page 52 of 405
Nonmajor
Electric Gas Water (Fiber Optics)
Fund Fund Fund Fund Total

INCOME (LOSS) TO NET CASH (USED IN)
OPERATING ACTIVITIES:

Operating income (loss) 58,502,771 $ 883,769 $ 3,042,972 $ 42,415 $ 62,471,927 $ Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities:

Depreciation 22,734,810 706,361 575,512 210,161 24,226,844 Change in assets and liabilities:
(Increase) decrease in accounts receivable (1,196,444) 388,462 198,421 111,200 (498,361) (Increase) decrease in accrued unbilled revenue (819,370) 215,755 (142,329) - (745,944) (Increase) decrease in inventories and prepaid items (56,968) - (4,330) - (61,298) (Increase) decrease in customer deposits (899,707) - - - (899,707) (Increase) decrease in deferred outflows
of resources related to pensions (7,687,121) (463,477) (903,730) (5,881) (9,060,209) (Increase) decrease in deferred outflows
of resources related to OPEB (453,246) (20,698) (34,265) (142) (508,351) Increase (decrease) in accounts payable (1,774,693) (161,580) (135,694) (3,051) (2,075,018) Increase (decrease) in accrued wages and benefits 35,859 (6,926) (12,423) (363) 16,147 Increase (decrease) in deposits payable (14,929) - 175,704 - 160,775 Increase (decrease) in compensated absences (104,689) 17,719 18,258 291 (68,421) Increase (decrease) in net pension liabilities 17,094,440 941,127 1,752,772 10,315 19,798,654 Increase (decrease) in OPEB liabilities 752,822 (3,431) (51,573) (931) 696,887 Increase (decrease) in deferred inflows
of resources related to pension (6,362,346) (666,861) (1,560,735) (13,608) (8,603,550) Increase (decrease) in deferred inflows
of resources related to OPEB (57,095) (34,313) (95,289) (996) (187,693) Total adjustment 21,191,323 912,138 (219,701) 306,995 22,190,755 Net cash
provided by operating activities $ 1,795,907 79,694,094 $ 2,823,271 $ 349,410 $ 84,662,682 $ (Concluded)
Proprietary Funds
City of Vernon
Statement of Cash Flows (Continued)
For the Year Ended June 30, 2023
Enterprise Funds
Business-Type Activities
See accompanying Notes to the Basic Financial Statements. 39 ..

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FIDUCIARY FUND FINANCIAL STATEMENTS
41 ..

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Private-Purpose Custodial
Trust Fund Fund
Successo
r Southeast Water
Agency Trust Coalition Joint
Fund Powers Authority
ASSETS
Cash and investments $ 668,273 $ 220,854
Restricted cash and investments 3,590,059
-
Accounts receivable
- 3,000
Total assets 4,258,332 223,854

LIABILITIES
Current liabilities:

Accounts payable 1,000 2,148
Due to other government 11,079
-
Bond interest payable 283,372
-
Bonds payable, due within one year 3,165,000 -
Noncurrent liabilities:

Bonds payable, due in more than one year 18,165,000 -
Total liabilities 2,148 21,625,451

NET POSITION (DEFICIT)
Restricted for other governments (17,367,119) $ 221,706 $ City of Vernon
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 43 ..

Item 11 Page 57 of 405
Private-Purpose Custodial
Trust Fund Fund
Successo
r Southeast Water
Agency Trust Coalition Joint
Fund Powers Authority
ADDITIONS:

Redevelopment property tax trust fund $ 5,560,421 $
-
Member contributions
- 33,000
Investment income 8,720 856
Total additions 5,569,141 33,856
DEDUCTIONS:

Community development 1,345,147
-
Contractual services - 19,620
Professional fees - 10,965
Policy board compensation - 5,550
Meeting expense - 1,137
Interest expense 1,167,310
-
Total deductions 37,272 2,512,457
Change in net position (3,416) 3,056,684
NET POSITION :

Beginning of year 225,122 (20,423,803)
End of year $ 221,706 (17,367,119) $
City of Vernon
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 44 ..

Item 11 Page 58 of 405
45 NOTES TO THE BASIC FINANCIAL STATEMENTS
..

Item 11 Page 59 of 405
46 This page intentionally left blank.
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Item 11 Page 60 of 405
City of Vernon
Index to the Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
47 Note 1 – Summary of Significant Accounting Policies ....................................................................................... 49 A. Financial Reporting Entity ................................................................................................................... 49 B. Basis of Accounting and Measurement Focus ..................................................................................... 49 C. Cash, Cash Equivalents and Investments ............................................................................................. 51 D. Fair Value Measurement ...................................................................................................................... 52 E. Interfund Transactions. ........................................................................................................................ 52 F. Inventories and Prepaid Items .............................................................................................................. 52 G. Lease Receivables ................................................................................................................................ 53 H. Capital Assets ....................................................................................................................................... 53 I. Deferred Outflows and Inflows of Resources ...................................................................................... 54 J. Unearned and Unavailable Revenue .................................................................................................... 54 K. Compensated Absences ........................................................................................................................ 55 L. Claims Payable ..................................................................................................................................... 55 M. Lease Liabilities ................................................................................................................................... 55 N. Subscription Liabilities ........................................................................................................................ 55 O. Long-Term Debt .................................................................................................................................. 56 P. Pensions. .............................................................................................................................................. 56 Q. Other Postemployment Benefits (“OPEB”) ......................................................................................... 57 R. Property Taxes ..................................................................................................................................... 57 S. Net Position and Fund Balances .......................................................................................................... 58 T. Use of Estimates................................................................................................................................... 59 U. Implementation of New GASB Pronouncement .................................................................................. 59 Note 2 – Cash and Investments ............................................................................................................................ 59 A. Deposits ................................................................................................................................................ 60 B. Investments .......................................................................................................................................... 61 C. Local Agency Investment Fund (“LAIF”) ........................................................................................... 61 D. Fair Value Measurement ...................................................................................................................... 61 E. Risk Disclosures ................................................................................................................................... 62 Note 3 – Lease Receivable ..................................................................................................................................... 63 Note 4 – Interfund Transactions .......................................................................................................................... 63 A. Due From/To Other Funds ................................................................................................................... 63 B. Advances To/From Other Funds .......................................................................................................... 64 C. Interfund Transfers ............................................................................................................................... 64 Note 5 – Capital Assets .......................................................................................................................................... 65 A. Governmental Activities ...................................................................................................................... 65 B. Business-Type Activities .................................................................................................................... 66 Note 6 – Long-Term Liabilities ............................................................................................................................ 67 A. Governmental Activities ...................................................................................................................... 67 B. Business-Type Activities .................................................................................................................... 68 C. Fiduciary Funds ................................................................................................................................... 73 D. Expense Stabilization Fund .................................................................................................................. 75 E. Right to Accelerate Upon Default ........................................................................................................ 75 F. Credit Rating ........................................................................................................................................ 75 ..

Item 11 Page 61 of 405
City of Vernon
Index to the Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2023
48 Note 7 – Compensated Absences .......................................................................................................................... 75 Note 8 – Risk Management ................................................................................................................................... 76 Note 9 – Pension Plan ............................................................................................................................................ 77 A. General Information about the Pension Plan ....................................................................................... 77 B. Net Pension Liability ........................................................................................................................... 79 C. Changes in the Net Pension Liability ................................................................................................... 81 D. Pension Expense, Deferred Outflows and Inflows of Resources Related to Pensions ........................ 83 Note 10 – Other Postemployment Benefits (“OPEB”) ....................................................................................... 84 A. General Information about the OPEB Plan .......................................................................................... 84 B. Net OPEB Liability .............................................................................................................................. 86 C. Changes in Net OPEB Liability ........................................................................................................... 87 Note 11 – Southern California Public Power Authority .................................................................................... 88 A. Take or Pay Contract ............................................................................................................................ 89 B. Power Purchase Commitments ............................................................................................................ 89 Note 12 – Commitment and Contingencies ......................................................................................................... 91 ..

Item 11 Page 62 of 405
City of Vernon
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
49 Note 1 – Summary of Significant Accounting Policies
The basic financial statements of the City of Vernon, California, (the “City”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as applied to governmental agencies. The Governmental Accounting Standards Board (“GASB”) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the significant policies:

A. Financial Reporting Entity
The City was incorporated on September 16, 1905 under the general laws of the State of California. Effective July 1, 1988, the City became a Charter City. The City operates under a Council-City Administrator form of government. Five Vernon citizens make up the Vernon City Council and each is elected to a five-year term of office. The Mayor position is rotated annually among City Council Members in order of election. The City provides full services to its citizens, including: public safety, public utilities, planning and zoning, and health services.

The financial statements include the financial activities of the City of Vernon, the primary government, and its fiduciary component units which include the Vernon Redevelopment Successor and Southeast Water Coalition.

The City had no discretely presented component units.

B. Basis of Accounting and Measurement Focus
The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. City resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled.

The Government-Wide Financial Statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. On an accrual basis, revenue from sales taxes is recognized in the period in which the taxable sale takes place. Revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.

Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the year when use is first permitted, matching requirements, in which the City must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the City on a reimbursement basis. Fiduciary activities are not included in these statements.

Certain types of transactions are reported as program revenues for the City in three categories:  Charges for services  Operating grants and contributions  Capital grants and contributions ..

Item 11 Page 63 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
50 Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Governmental Fund Financial Statements
A Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balance are presented for governmental fund. Accompanying schedules are presented to reconcile and explain the differences in fund balance as presented in these statement, to the net position presented in the government-wide financial statements.

Governmental fund is accounted for on a spending or “current financial resources” measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheet. The Statement of Revenues, Expenditures and Change in Fund Balance presents increases (revenue and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both “measurable” and “available” to finance expenditures of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred. However, debt service expenditures, expenditures related to compensated absences, claims and judgments, pension and other post-employment benefits are recorded only when payment is due.

Revenues are recorded when received in cash, except those revenues subject to accrual are recognized when due.

Property taxes, taxpayer-assessed tax revenues (e.g., franchise taxes, sales taxes, motor vehicle fees, etc.), net of estimated refunds and uncollectible amounts, and intergovernmental revenues associated with the current fiscal period are all considered susceptible to accrual and so have been recognized as revenues of the current fiscal period to the extent normally collected within the availability period, as defined above.

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

Proprietary Fund Financial Statements
Proprietary funds are accounted for using the “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Net Position presents increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the Electric, Gas, Water, and Fiber Optics Enterprise Funds are charges to customers for sales and services. Operating expenses for the proprietary funds include the costs of sales and services, administrative expenses and depreciation on capital assets.

All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. ..

Item 11 Page 64 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
51 Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Proprietary Fund Financial Statements (Continued)
The City reports the following major proprietary funds:  Electric Enterprise Fund - accounts for the operation and maintenance of the City's electric utility plant.

Revenues for this fund are primarily from charges for services.  Gas Enterprise Fund - accounts for the operation and maintenance of the City's gas utility plant. Revenues for this fund are primarily from charges for services.
 Water Enterprise Fund - account for the operation and maintenance 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 proprietary fund for the maintenance and operation of the City’s fiber optics utility plant.

Fiduciary Fund Financial Statements
Fiduciary fund financial statements include a Statement of Fiduciary Net Position and a Statement of Changes in Fiduciary Net Position. The City’s fiduciary funds represent custodial funds and private purpose trust funds. Both custodial funds and the private purpose trust funds are accounted for on the full accrual basis of accounting where the assets associated with the activity are controlled by the City and the assets are not derived 1) solely from the government’s own-source revenues or 2) from government-mandated nonexchange transactions or voluntary nonexchange transactions.

The City reports the following two fiduciary funds:

Vernon Redevelopment Successor Agency Private-Purpose Trust Fund - The Successor Agency for the former Vernon Redevelopment Agency (the “Successor Agency”) was established on February 1, 2012 in accordance to the Assembly Bill X1 26 that provides for the dissolution of all redevelopment agencies in the State of California. Effective February 1, 2012, successor agencies in California will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated. The activities of the Successor Agency are reported in a fiduciary fund (private-purpose trust fund) in the financial statements of the City.

Custodial Funds - To account for assets and activities related to the Southeast Water Coalition Joint Powers Agreement.

C. Cash, Cash Equivalents and Investments
The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturity of three months or less from the date of acquisition. The City pools the main operating cash account. Cash in excess of current requirements is invested and reported as investments. It is the City's intent to hold investments until maturity. However, the City may, in response to market conditions, sell investments prior to maturity in order to improve the quality, liquidity or yield of the portfolio. Interest earnings are apportioned among funds each month based on ending cash and investment balances of each fund. ..

Item 11 Page 65 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
52 Note 1 – Summary of Significant Accounting Policies (Continued) C. Cash, Cash Equivalents and Investments (Continued)
Highly liquid market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction. In determining the amount, the City uses the market approach, one of the three acceptable valuation techniques. Market approach uses prices generated for identical or similar assets or liabilities.

D. Fair Value Measurement
U.S. GAAP defines fair value, establishes a framework for measuring fair value and establishes disclosure about fair value measurement. Investments, unless otherwise specified at fair value in the financial statements, are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Levels of inputs are as follows:
 Level 1 –
Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.  Level 2 –
Inputs, other than quoted prices included in Level 1, that are observable for the assets or liabilities through corroboration with market data at the measurement date.  Level 3 –
Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the assets or liabilities at the measurement date.

E. Interfund Transactions
Outstanding short-term borrowing between funds are reported as “due from/to other funds”. Interfund loans are reported as advances to and from other funds and are eliminated upon consolidation. Advances to other funds are presented as nonspendable in General Fund’s fund balance to indicate that they are not in a spendable form. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." F. Inventories and Prepaid Items
Inventories within the various fund types consist of materials and supplies which are valued at cost on a first-in, first-out basis. Reported expenditures reflect the consumption method of recognizing inventory-related expenditures.

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements by using purchase method.

A nonspendable fund balance has been reported in the governmental fund to show that inventories and prepaid items do not constitute “available spendable resources,” even though they are a component of current assets.

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 services obligation. See Note 11 for further information regarding SCPPA. ..

Item 11 Page 66 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
53 Note 1 – Summary of Significant Accounting Policies (Continued) G. Lease Receivable
The City is a lessor for leases of land and recognizes lease receivables and deferred inflows of resources in the financial statements. Variable payments based on future performance or usage of the underlying asset are not included in the measurement of the lease receivable.

At the commencement of a lease, the lease receivable is measured at the present value of payments expected to be received during the lease term. The City established a threshold of $15,000 for lease receivables. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflows of resources are initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflows of resources are recognized as revenue over the life of the lease term in a systematic and rational method.

Key estimates and judgments include how the City determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term, and (3) lease receipts.  The City uses incremental borrowing rate (IBR) provided by the financial institution at July 1, 2021 for existing leases or the current rate at the time a new lease is executed.  The lease term includes the noncancelable period of the lease plus any option periods that are likely to be exercised.
 Lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee.

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

H. Capital Assets
In the government-wide and proprietary fund financial statements, capital assets are recorded at cost where historical records are available and at an estimated original cost where no historical records exist. Donated capital assets are valued at their acquisition value. 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.

Capital assets used in operations are depreciated over their estimated useful lives using the straight-line method.

The lives used for depreciation purposes are as follows:

Assets Years
Infrastructures 10-50
Utility Plant and Buildings 25-50
Improvements 10-20
Right-to-use equipment 3
Machinery and equipment 3-35
..

Item 11 Page 67 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
54 Note 1 – Summary of Significant Accounting Policies (Continued) H. Capital Assets (Continued)
Maintenance and repairs are charged to operations when incurred. Betterments and major improvements, which significantly increase values, change capacities or extend useful lives, are capitalized. Upon sale or retirement of capital assets, the cost and related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in the changes in net financial position.

The governmental fund financial statements do not present capital assets. Instead, capital assets purchases are reported as capital outlay expenditures or other functional expenditures such as public works. As such, capital assets are shown as a reconciling item in the Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position.

The City established a threshold to recognize right‐to‐use assets, including lease assets or subscription-based information technology arrangement (“SBITA”) assets (“subscription assets”), in the government‐wide financial statements and proprietary fund financial statements for right-to-use asset over $15,000.

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

Subscription assets are recorded at the amount of the initial measurement of the SBITA liabilities (“subscription liabilities”) and adjusted by any subscription payments to the SBITA vendor at or before the commencement of the subscription term, less any incentives received from the SBITA vendor at or before the commencement of the subscription term along with subscription implementation costs. Subscription assets are amortized over the shorter of the subscription term or the useful life of the underlying IT assets.

I. Deferred Outflows and Inflows of Resources
The statement of net position reports separate sections for deferred outflows of resources and deferred inflows of resources, when applicable.

Deferred Outflows of Resources represents consumption of net assets that applies to future periods.

Deferred Inflows of Resources represents acquisition of net assets that applies to future periods.

J. Unearned and Unavailable Revenue
Unearned revenue is reported for transactions for which revenue has not yet been earned. Typical transactions recorded as unearned revenues in the government-wide financial statements are grant revenues received in advance.

In the governmental fund financial statements, unavailable revenue is reported when transactions have not yet met the revenue recognition criteria based on the modified accrual basis of accounting. The City reports unavailable revenue when an asset is reported in governmental fund financial statements but the revenue is not available. ..

Item 11 Page 68 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
55 Note 1 – Summary of Significant Accounting Policies (Continued) K. 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.

L. Claims Payable
When it is probable that a claim liability has been incurred at year-end and the amount of the loss can be reasonably estimated, the City records the estimated loss, net of any insurance coverage, under its self- insurance program.

Claims payable, which includes an estimate for incurred but not reported (“IBNR”) claims, is recorded in the General Fund.

M. Lease Liabilities
The City recognizes lease liabilities with an initial, individual value of $15,000 or more with a lease term greater than one year in the government-wide and proprietary fund financial statements. Variable payments based on future performance of the lessee or usage of the underlying asset are not included in the measurement of the lease liability.

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.

Key estimates and judgments related to leases include how the City determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease term, and (3) lease payments.  The City uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, the State generally uses its estimated incremental borrowing rate as the discount rate for leases.
 The lease term includes the noncancellable period of the lease. Lease payments included in the measurement of the lease liability are composed of fixed payments and purchase option price that the City is reasonably certain to exercise.

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

N. Subscription Liabilities
The City recognizes subscription liabilities with an initial, individual value of $15,000 or more with a subscription term greater than one year in the government-wide and proprietary fund financial statements. Variable payments based on future performance of the City or usage of the underlying asset are not included in the measurement of the subscription liability.

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

Item 11 Page 69 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
56 Note 1 – Summary of Significant Accounting Policies (Continued) N. Subscription Liabilities (Continued)
Key estimates and judgments related to subscription include how the City determines (1) the discount rate it uses to discount the expected v payments to present value, (2) subscription term, and (3) subscription payments.  The City uses incremental borrowing rate provided by the financial institution at July 1, 2022 for existing subscription or the current rate at the time a new subscription is executed.  The subscription term includes the noncancellable period of the SBITA. Subscription payments included in the measurement of the subscription liability are composed of fixed payments.

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

O. Long-Term Debt
In the government-wide financial statements and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the appropriate activities. Bonds payable are reported net of the applicable bond premium or discount. Debt issuance costs except for any portion related to prepaid insurance were recognized as expense in the period incurred. Premium or discount not considered as part of the reacquisition price was amortized over the life of the bond.

The governmental fund financial statements do not present long-term liabilities. Consequently, long-term debt is shown as a reconciling item in the Reconciliation of the Governmental Funds Balance Sheet to the GovernmentWide Statement of Net Position.

P. Pensions
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the plans and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value.

General Fund is used to liquidate pension liabilities for governmental fund.

The following timeframes are used for pension reporting:

Valuation Date June 30, 2021
Measurement Date June 30, 2022
Measurement Period July 1, 2021 to June 30, 2022
Gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. The amortization period differs depending on the source of the gain or loss. The difference between projected and actual earnings is amortized straight-line over 5 years. All other amounts are amortized straight-line over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) as of the beginning of the measurement period...

Item 11 Page 70 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
57 Note 1 – Summary of Significant Accounting Policies (Continued) Q. Other Postemployment Benefits (“OPEB”)
For the purpose of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City’s OPEB Plan and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined on the same basis as they are reported by the Plan. For this purpose, the OPEB Plan recognizes benefit payments when due and payable in accordance with the benefit terms. Investments are reported at fair value, except for money market investments, which are reported at amortized cost.

General Fund is typically used to liquidate OPEB liabilities for governmental funds.

The following timeframes are reported OPEB reporting:

Valuation Date June 30, 2022
Measurement Date June 30, 2022
Measurement Period July 1, 2021 to June 30, 2022
Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. The first amortized amounts are recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense. The amortization period differs depending on the sources of gain or loss. The difference between projected and actual earnings is amortized on a straight-line basis over 5 years. All other amounts are amortized on a straight-line basis over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) at the beginning of the measurement period.

R. Property Taxes
The County of Los Angeles 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 applicable to the City less an administrative fee throughout the year.

Under California law, property taxes are assessed and collected by the counties for up to 1% of assessed property value, plus other increases approved by the voters. Property taxes collected are pooled and then allocated to the cities based on complex formulas. Property taxes are assessed, collected and allocated by Los Angeles County throughout the fiscal year. The following are key dates pertaining to property taxes:

January 1
July 1 to June 30
November 1 and February 1
December 10 and April 10
Lien Date
Levy Date
Due Dates
Delinquent Dates
Property taxes receivable for the governmental fund types, which have been remitted within 60 days subsequent to year end, are considered measurable and available and recognized as revenues. All other property taxes are offset by deferred property tax inflows of resources and, accordingly, have not been recorded as revenue. Taxes are considered past due on the above delinquent dates, at which time the applicable property is subject to lien, and penalties and interest are assessed. ..

Item 11 Page 71 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
58 Note 1 – Summary of Significant Accounting Policies (Continued) S. Net Position and Fund Balances
In the Government-Wide Financial Statements and proprietary fund financial statements, net position is classified as follows:

Net Investment in Capital Assets – This component of net position consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of retention payable and debt that are attributable to the acquisition, construction, or improvement of those assets, and related deferred outflows and inflows of resources, net of unspent debt proceeds.

Restricted – This component of net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets.

Unrestricted – This component of net position is the amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position.

When expenses are incurred for purposes for which both restricted and unrestricted components of net position are available, the City’s policy is to apply the restricted component of net position first, then the unrestricted component of net position as needed.

In the Governmental Fund Financial Statements, fund balances are classified as follows:

Nonspendable – Nonspendable fund balances are items that cannot be spent because they are not in spendable form, such as prepaid items and inventories, or items that are legally or contractually required to be maintained intact, such as principal of an endowment or revolving loan funds.

Restricted – Restricted fund balances encompass the portion of net fund resources subject to externally enforceable legal restrictions. This includes externally imposed restrictions by creditors, such as through debt covenants, grantors, contributors, laws or regulations of other governments, as well as restrictions imposed by law through constitutional provisions or enabling legislation.

Committed – Committed fund balances encompass the portion of net fund resources, the use of which is constrained by limitations that the government imposes upon itself at its highest level of decision making, normally the governing body, and that remain binding unless removed in the same manner. The City Council is considered the highest authority for the City. Adoption of a resolution by the City Council is required to commit resources or to rescind the commitment.

Unassigned – This amount is for any portion of the fund balances that do not fall into one of the above categories. The General Fund is the only fund that reports a positive unassigned fund balance amount. In other governmental funds, it is not appropriate to report a positive unassigned fund balance amount. However, in governmental funds other than General Fund, if expenditures incurred for specific purposes exceed the amounts that are restricted, committed or assigned to those purposes, it may be necessary to report a negative unassigned fund balance in that fund.

The City establishes encumbrance to record the amount of purchase orders, contracts, and other obligations, which have not yet been fulfilled, cancelled or discharged. Encumbrances outstanding at year end do not constitute expenditures or liabilities. Encumbrances outstanding at year-end are reported as a component of committed fund balance. Unencumbered appropriations lapse at year-end. ..

Item 11 Page 72 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
59 Note 1 – Summary of Significant Accounting Policies (Continued) S. Net Position and Fund Balances (Continued)
When expenditures are incurred for purposes for which all restricted, committed, assigned and unassigned fund balances are available, the City’s policy is to apply in the following order, except for instances wherein an ordinance specifies the fund balance:  Restricted  Committed  Assigned  Unassigned T. Use of Estimates
The preparation of the basic financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

U. Implementation of New GASB Pronouncement
In May 2020, GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements (GASB Statement No. 96), to better meet the information needs of financial statement users by (a) establishing uniform accounting and financial reporting requirements for SBITAs; (b) improving the comparability of financial statements among governments that have entered into SBITAs; and (c) enhancing the understandability, reliability, relevance, and consistency of information about SBITAs. Under this Statement, a government is required to recognize a subscription liability and an intangible right-to-use subscription asset. The effective date of GASB Statement No. 96 is for fiscal years beginning after June 15, 2022. Implementation of this Statement resulted in restatement of beginning balance of capital assets (Note 5) and long-term debt liabilities (Note 6) at July 1, 2022.

Note 2 – Cash and Investments
The City maintains a cash and investment pool, which includes cash balances and authorized investments of all funds.

Certain restricted funds which are held and invested by independent outside custodians through contractual agreements are not pooled. These restricted funds include cash and investments with fiscal agents.

The City had the following cash and investments at June 30, 2023:

Fiduciary
Fund
Governmental Business-Typ
e Statement of
Activities Activities Net Position Tota
l
Cash and investments $ 33,979,557 $ 153,374,024 $ 889,127 $ 188,242,708 Restricted cash and investments 2,824,858 36,427,615 3,590,059 42,842,532 Total cash and investments $ 189,801,639 36,804,415 $ 4,479,186 $ 231,085,240 $ Government-Wide
Statement of Net Position
..

Item 11 Page 73 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
60 Note 2 – Cash and Investments (Continued)
The City’s cash and investments at June 30, 2023, in more detail:

Cash on hand $ 1,300
Deposits with financial institution 55,483,350
Cash with fiscal agents 3,780,628
Investments 171,819,962
Total cash and investments $ 231,085,240
A. Deposits
The carrying amounts of the City’s demand deposits were $55,483,350 at June 30, 2023. Bank balances at that date were $56,320,937, the total amount of which was collateralized or insured with accounts held by the pledging financial institutions in the City’s name as discussed below.

The California Government Code requires California banks and savings and loan associations to secure the City’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City's name.

The market value of pledged securities must equal at least 110% of the City's cash deposits. California law also allows institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total cash deposits. The City may waive collateral requirements for cash deposits, deposits, which are fully insured up to $250,000 by the Federal Deposit Insurance Corporation (“FDIC”). The City did not waive the collateral requirement for deposits insured by FDIC.

The City follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under the provisions of bond indentures. Interest income earned on pooled cash and investments is allocated on an accounting period basis to the various funds based on the period-end cash and investment balances.

Interest income from cash and investments with fiscal agents is credited directly to the related fund. ..

Item 11 Page 74 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
61 Note 2 – Cash and Investments (Continued)
B. Investments
Under the provisions of the City’s investment policy, and in accordance with California Government Code, the following investments are authorized:

Maximum Maximum
Maximum Percentage Investments in
Authorized Investment Type Maturity Allowed One Issuer
United States Treasury Bills, Bonds and Notes 5 Years None None United States Government Sponsored Agency Securities 5 Years None None Local Agency Bonds 5 Years None None
California State and Local Agency Bonds 5 Years 30% None Negotiable Certificates of Deposit 5 Years 30% None
Corporate Notes 5 Years 30% None
Non-Government issued Mortgage-backed pass-through
securities, collateralized Mortgage obligations and Asset-backed securities
5 Years 20% None
Repurchasement Agreement 1 year None None
Banker's Acceptance Notes 180 Days 40% 30%
Commercial Paper 270 Days 25% 10% of the issuer outstanding paper Reverse Repurchase Agreements 92 Days 20% None
Mutual Funds N/A 20% 10% of the issuer outstanding paper Local Agency Investment Fund (LAIF) N/A None None
N/A - Not Applicable
C. Local Agency Investment Fund (“LAIF”)
The City is a participant in LAIF which is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. As of June 30, 2023, the City had $636,435 invested in LAIF.

The fair value of the City’s portion in the pool is the same as the value of the pool shares and reported at amortized cost.

D. Fair Value Measurement
At June 30, 2023, investments are reported at fair value. The following table presents the fair value measurements of investments on a recurring basis and the levels with GASB 72 fair value hierarchy in which the fair value measurements fall at June 30, 2023:

Quoted Prices in Active Significant
Market for Identical Other Observable
Investment Type Assets (Level 1) Inputs (Level 2) Uncategorized Total Local Agency Investment Fund $ - $ - $ 636,435 $ 636,435 Money Market Funds - 105,047,087 - 105,047,087
US Treasury bills 29,402,775 - - 29,402,775
Negotiable Certificates of Deposit* - 496,620 - 496,620 Investment with fiscal agent:

Money Market Funds - - 36,237,045 36,237,045
Total $ 29,402,775 $ 496,620 $ 141,920,567 $ 171,819,962 * Priced based on significant obervable inputs.

Measurement Input
..

Item 11 Page 75 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
62 Note 2 – Cash and Investments (Continued)
E. Risk Disclosures
Interest Rate Risk - As a means of limiting its exposure to fair value losses arising from rising interest rates, the City’s investment policy limits investments to a maximum maturity of five years. At June 30, 2023, the City had the following investment maturities:
1 Year 1 Year to 3 Years to
Investment Type or Less 3 Years 5 Years Total
Local Agency Investment Fund $ 636,435 $ - $ - $ 636,435 Money Market Funds 105,047,087 - 105,047,087 -
US Treasury bills 29,402,775 - 29,402,775 -
Negotiable Certificates of Deposit - 247,137 249,483 496,620 Investment with fiscal agent:

Money Market Funds 36,237,045 - 36,237,045 -
Total $ 171,323,342 $ 247,137 $ 249,483 $ 171,819,962
Remaining Maturity (In Months)
Credit Risk – Generally, Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City’s investment policy, or debt agreements, and the actual rating, by Standard and Poor’s and Moody’s at June 30, 2023 for each investment type:

Fair Value Minimum Not Required
at Legal to be
Investment Type June 30, 2023 Rating AAA Other Rated
Local Agency Investment Fund $ 636,435 Not Rated $ - $ - $ 636,435 Money Market Funds 105,047,087 AAA 105,047,087 - -
US Treasury bills 29,402,775 N/A 29,402,775 - -
Negotiable Certificates of Deposit 496,620 N/A - 496,620 - Investment with fiscal agent:

Money Market Funds 36,237,045 N/A 36,237,045 - -
Total $ 171,819,962 $ 170,686,907 $ 496,620 $ 636,435
N/A - Not Required
Concentration of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in any one issuer excluding a 10% limitation on commercial papers, mutual funds, and money market mutual funds and a 30% limitation on banker’ acceptances. The City’s investment policy 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.

Custodial Credit Risk
The Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of a third party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of the third party. At June 30, 2023, none of the City’s deposits or investments were exposed to custodial credit risk. ..

Item 11 Page 76 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
63 Note 3 – Lease Receivables
Lease receivable consist of agreements with others for the right–to–use of the underlying assets for land owned by the City. The lease expires in January 2061. The incremental borrowing rate used was 2.01%. For the year ended June 30, 2023, the City recognized $98,569 in lease revenue and $76,258 in interest revenue for General Fund. The outstanding receivables are in the amounts of $3,769,599 for General Fund.

The future required payments for these leases, including interest, are as follows:

Year Ending
June 30, Principal Interest Total
2024 $ 68,058 $ 74,905 $ 142,963
2025 69,439 73,524 142,963
2026 70,847 72,115 142,962
2027 72,284 70,678 142,962
2028 73,751 69,212 142,963
2029-2033 391,812 323,001 714,813
2034-2038 433,200 281,614 714,814
2039-2043 478,959 235,855 714,814
2044-2048 529,552 185,262 714,814
2049-2053 585,489 129,325 714,814
2054-2058 647,334 67,479 714,813
2059-2061 348,874 8,532 357,406
Total $ 3,769,599 $ 1,591,502 $ 5,361,101
Governmental Activities
Note 4 – Interfund Transactions
A. Due From/To Other Funds
At June 30, 2023, the City had the following due from/to other funds:

Governmental
Fund
Wate
r Fiber Optics
Due to Other Funds General Fund Enterprise Fund Enterprise Fund Total Governmental Fund
General Fund - $ - $ 36 $ 36 $
Proprietary Fund
Electric Enterprise Fund 2,934,866 18,247 - 2,953,113
Water Enterprise Fund 110,329 - - 110,329
Total $ 18,247 3,045,195 $ 36 $ 3,063,478 $
Proprietary Fund
Due From Other Funds
The interfund balances resulted from borrowing of cash for temporary purposes. All balances are expected to be reimbursed within the subsequent year. ..

Item 11 Page 77 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
64 Note 4 – Interfund Transactions (Continued)
B. Advances To/From Other Funds
At June 30, 2023, the City had the following advances:

Gas Fiber Optics
Advances to Other Funds Enterprise Fund Enterprise Fund Total Proprietary Fund
Electric Enterprise Fund 29,405,104 $ 4,521,458 $ 33,926,562 $ Proprietary Fund
Advances from Other Funds
The advances 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.

C. Interfund Transfers
For the year ended June 30, 2023, the Electric Enterprise Fund transferred $491,542 to the General Fund for the reimbursement of general governmental services. ..

Item 11 Page 78 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
65 Note 5 – Capital Assets
A. Governmental Activities
A summary of changes in the capital assets for the governmental activities for the year ended June 30, 2023 is as follows:

Balance
July 1, 2022 Balance
(As Restated) Additions Deletions Transfers June 30, 2023 Capital assets, not being depreciated:

Land $ 63,569,108 $ - $ - $ 63,569,108 - $
Construction in progress 2,231,978 614,699 - 2,846,677 - Total capital assets, not being depreciated 65,801,086 614,699 - 66,415,785 -
Capital assets, being depreciated:

Buildings and improvements 16,772,594 188,238 - 16,960,832 - Improvements Other Than Buildings 12,209,716 70,734 - 12,280,450 - Machinery and equipment 16,905,083 1,652,101 (260,619) 18,296,565 - Infrastructure 159,076,637 1,544,864 - 160,621,501 -
Total capital assets, being depreciated 204,964,030 3,455,937 (260,619) 208,159,348 - Less accumulated depreciation for:

Buildings and improvements (9,605,068) (407,206) - (10,012,274) - Improvements Other Than Buildings (6,577,885) (374,996) - (6,952,881) - Machinery and equipment (12,817,759) (930,134) 260,619 (13,487,274) - Infrastructure (78,702,463) (3,632,162) - (82,334,625) - Total accumulated depreciation (107,703,175) (5,344,498) 260,619 (112,787,054) - Total capital assets, being depreciated, net 97,260,855 (1,888,561) - 95,372,294 -
Intangible assets, being amortized
Right-to-use lease assets 56,857 - - 56,857 -
Right-to-use subscription assets 67,469 538,544
- 606,013 -
Total intangible assets, being amortized 124,326 538,544 - 662,870 -
Less accumulated amortization for:

Right-to-use lease assets (25,270) (25,270) - (50,540) - Right-to-use subscription assets (138,167) - - (138,167) - Total accumulated amortization (25,270) (163,437)
- (188,707) -
Total intangible assets, being amortized, net 99,056 375,107 - 474,163 -
Governmental activities capital assets, net $ 163,160,997 $ (898,755) $ - $ 162,262,242 - $
Depreciation and amortization expense was charged to functions of the governmental activities for the year ended June 30, 2023 as follows:

General government $ 638,571
Public safety 262,111
Public works 4,607,253
Total depreciation and amortization expense $ 5,507,935 ..

Item 11 Page 79 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
66 Note 5 – Capital Assets (Continued)
B. Business-Type Activities
A summary of changes in the capital assets for the business-type activities for the year ended June 30, 2023 is as follows:

Balance Balance
July 1, 2022 Additions Deletions Transfers June 30, 2023 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 4,774,583 160,763 (884,702) 4,050,644 - Electric utility - Construction in progress 45,453,774 1,287,047 (137,328) (9,768) 46,593,725 Water utility - Construction in progress 6,914,299 5,933,375 (2,204,043) - 10,643,631 Fiber Optic utility - Construction in progress 266,172 - - 266,172 - Total capital assets, not being depreciated 70,803,890 7,647,357 (1,022,030) (2,213,811) 75,215,406 Capital assets, being depreciated:

Electric utility - Production plant 212,362,988 458,731 - 212,821,719 - Electric utility - Transmission plant 3,616,464 - - 3,616,464 - Electric utility - Distribution plant 257,051,650 22,548,011 - 279,609,429 9,768 Electric utility - General plant 9,754,409 305,165 (98,179) 9,961,395 - Water utility plant 23,730,271 787,837 (14,782) 2,204,043 26,707,369 Gas utility plant 27,200,594 (14,803) - 27,185,791 -
Fiber Optic utility plant 3,756,609 159,930 - 3,916,539 - Total capital assets, being depreciated 537,472,985 24,259,674 (127,764) 2,213,811 563,818,706 Less accumulated depreciation for:

Electric utility - Production plant (19,391,536) (14,276,852) - (33,668,388) - Electric utility - Transmission plant (2,443,189) (77,553) - (2,520,742) -
Electric utility - Distribution plant (92,171,698) (7,999,264) - (100,170,962) - Electric utility - General plant (6,483,727) (381,141) 78,757 (6,786,111) - Water utility plant (14,844,199) (575,512) 14,782 (15,404,929) - Gas utility plant (11,821,433) (706,361) 14,803 (12,512,991) - Fiber Optic utility plant (2,693,449) (210,161) - (2,903,610) - Total accumulated depreciation (149,849,231) (24,226,844) 108,342 (173,967,733) - Total capital assets, being depreciated, net 387,623,754 32,830 (19,422) 2,213,811 389,850,973 Business-type activities capital assets, net $ 458,427,644 $ 7,680,187 $ (1,041,452) $ 465,066,379 - $ Depreciation expense was charged to functions of the business-type activities for the year ended June 30, 2023 as follows:

Electric Fund $ 22,734,810
Water Fund 575,512
Gas Fund 706,361
Fiber Optic Fund 210,161
Total depreciation and amortization expense $ 24,226,844 ..

Item 11 Page 80 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
67 Note 6 – Long-Term Liabilities
A. Governmental Activities
A summary of changes in long-term liabilities for governmental activities for the year ended June 30, 2023 is as follows:

Balance
July 1, 2022 Balance Due within Due in More
(As Restated) Additions Deletions June 30, 2023 One Year Than One Year Governmental Activities:

Lease liabilities 31,660 $ - $ (25,313) $ 6,347 $ 6,347 $ - $ Subscription liabilities 67,469 538,544 (200,307) 405,706 196,027 209,679 Compensated absences 2,673,930 1,512,554 (1,400,011) 2,786,473 928,824 1,857,649 Claims and judgments 4,940,732 1,529,740 (2,523,658) 3,946,814 1,635,206 2,311,608 Total governmental activities $ 3,580,838 7,713,791 $ (4,149,289) $ 7,145,340 $ 2,766,404 $ 4,378,936 $ Lease liabilities
On July 17, 2021, the City entered into a lease agreement with MRC Smart Technology Solutions for equipment in the amount of $290,000. The lease agreement has 36 payments of $2,116 with an interest rate of 0.46%.

The future annual lease payments are as follows:

Year Ending
June 30, Principal Interest Total
2024 6,347 $ 3 $ 6,350 $
Subscription liabilities
The City entered into subscription agreements with various vendors for software. The agreements expire from March 34, 2025 to June 30, 2026 with interest rates range from 2.36% to 3.38%.

The future annual subscription payments are as follows:

Year Ending
June 30, Principal Interest Total
2024 196,027 $ 12,101 $ 208,128 $
2025 202,155 6,514 208,669
2026 7,524 188 7,712
Total 405,706 $ 18,803 $ 424,509 $
..

Item 11 Page 81 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
68 Note 6 – Long-Term Liabilities (Continued)
A. Governmental Activities (Continued)
Compensated Absences
The compensated absences are liquidated by the General Fund. At June 30, 2023, compensated absences were in the amount of $2,786,473. Refer to note 7 for more information of these liabilities.

Claims and Judgments
Refer to Note 8 for more information on claims and judgments.

B. Business-Type Activities
The following is a summary of changes in long-term liabilities for business-type activities for the year ended June 30, 2023:

Balance Balance Due within Due in More
July 1, 2022 Additions Deletions June 30, 2023 One Year Than One Year Business-Type activities
Public Borrowings:

Revenue Bonds:
2008 Taxable Revenue Bonds - Series A - Electric 37,895,000 $ - $ (1,025,000) $ 36,870,000 $ 1,120,000 $ 35,750,000 $ 2012 Taxable Revenue Bonds - Series B - Electric 11,505,000 - (6,165,000) 5,340,000 1,170,000 4,170,000 2015 Taxable Revenue Bonds - Series A - Electric 111,720,000 - (22,540,000) 89,180,000 23,520,000 65,660,000 2020 Taxable Revenue Bonds - Series A - Electric 19,305,000 - - 19,305,000 - 19,305,000 2021 Taxable Revenue Bonds - Series A - Electric 173,815,000 - (20,380,000) 153,435,000 21,335,000 132,100,000 2022 Taxable Revenue Bonds - Series A - Electric 52,070,000 - - 52,070,000 4,690,000 47,380,000 2020 Taxable Revenue Bonds - Series A - Water 14,600,000 - (250,000) 14,350,000 265,000 14,085,000 Total Revenue Bonds 420,910,000 - (50,360,000) 370,550,000 52,100,000 318,450,000 Unamortized Premiums/(Discounts):
2008 Taxable Revenue Bonds - Series A - Electric (2,093) - 131 (1,962) - (1,962) 2012 Taxable Revenue Bonds - Series B - Electric (69,987) - 16,797 (53,190) - (53,190) 2015 Taxable Revenue Bonds - Series A - Electric (1,096,863) - 355,739 (741,124) - (741,124) 2020 Taxable Revenue Bonds - Series A - Electric 6,615,877 - (438,622) 6,177,255 - 6,177,255 2021 Taxable Revenue Bonds - Series A - Electric 25,999,586 - (6,550,066) 19,449,520 - 19,449,520 2022 Taxable Revenue Bonds - Series A - Electric 10,179,957 - (732,918) 9,447,039 - 9,447,039 2020 Taxable Revenue Bonds - Series A - Water 535,833 - (19,080) 516,753 - 516,753 Total Unamortized Premiums/(Discounts) 42,162,310 - (7,368,019) 34,794,291 - 34,794,291 Total Public Offering 463,072,310 - (57,728,019) 405,344,291 52,100,000 353,244,291 Direct Borrowing:

Water Replenishment District Note Payable 1,220,930 (139,535) - 1,081,395 139,535 941,860 Total Direct Borrowing 1,220,930 (139,535) - 1,081,395 139,535 941,860 Compensated absences 1,218,405 904,156 (972,577) 1,149,984 383,328 766,656 Total business-Type activities $ 465,511,645 $ 904,156 $ (58,840,131) $ 407,575,670 $ 52,622,863 $ 354,952,807 ..

Item 11 Page 82 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
69 Note 6 – Long-Term Liabilities (Continued)
B. Business-Type Activities (Continued)
$43,765,000 Electric System Revenue Bonds (2008 Taxable Series A) The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. 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. The total unpaid balance as of June 30, 2023, was $36,870,000.

The future annual debt service requirements for the Taxable Revenue Bonds, Series 2008A-T are as followed:

Year Ending
June 30, Principal Interest Total
2024 1,120,000 $ 3,119,029 $ 4,239,029 $
2025 1,220,000 3,018,526 4,238,526
2026 1,330,000 2,909,004 4,239,004
2027 1,450,000 2,789,603 4,239,603
2028 1,580,000 2,659,464 4,239,464
2029-2033 10,290,000 10,899,422 21,189,422
2034-2038 15,815,000 5,374,978 21,189,978
2039 4,065,000 174,592 4,239,592
Total 36,870,000 $ 30,944,618 $ 67,814,618 $
$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 fiscal year ended 2022, a portion of the Electric System Revenue Bonds were refunded with the issuance of the Electric System Revenue Bonds 2022 Series A. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. 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. The total unpaid balance as of June 30, 2023, was $5,340,000.

The future annual debt service requirements for the Taxable Revenue Bonds, Series 2012B-T are as followed:

Year Ending
June 30, Principal Interest Total
2024 $ 1,170,000 $ 302,613 $ 1,472,613
2025 1,305,000 225,269 1,530,269
2026 1,390,000 140,181 1,530,181
2027 1,475,000 47,938 1,522,938
Total $ 5,340,000 $ 716,001 $ 6,056,001
..

Item 11 Page 83 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
70 Note 6 – Long-Term Liabilities (Continued)
B. Business-Type Activities (Continued)
$111,720,000 Electric System Revenue Bonds (2015 Taxable Series A) The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. 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. The total unpaid balance as of June 30, 2023, was $89,180,000.

The future annual debt service requirements for the Taxable Revenue Bonds, Series 2015A-T are as followed:

Year Ending
June 30, Principal Interest Total
2024 23,520,000 $ $ 3,596,938 $ 27,116,938
2025 24,585,000 2,530,618 27,115,618
2026 25,780,000 1,341,193 27,121,193
2027 15,295,000 370,904 15,665,904
$ 89,180,000 $ 7,839,653 $ 97,019,653
$71,990,000 Electric System Revenue Bonds (2020 Series A) The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. 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. The total unpaid balance as of June 30, 2023, was $19,305,000.

The future annual debt service requirements for the Taxable Revenue Bonds, Series 2020A-T are as followed:

Year Ending
June 30, Principal Interest Total
2024 $ 965,250 - $ $ 965,250
2025 965,250 - 965,250
2026 965,250 - 965,250
2027 965,250 - 965,250
2028 965,250 - 965,250
2029-2033 8,450,000 3,812,250 12,262,250
2034-2038 10,855,000 1,411,125 12,266,125
Total 19,305,000 $ $ 10,049,625 $ 29,354,625
..

Item 11 Page 84 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
71 Note 6 – Long-Term Liabilities (Continued)
B. Business-Type Activities (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. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The total unpaid balance as of June 30, 2023, was $153,435,000.

The future annual debt service requirements for the Taxable Revenue Bonds, Series 2021A-T are as followed:

Year Ending
June 30, Principal Interest Total
2024 21,335,000 $ 7,405,125 $ 28,740,125 $
2025 22,400,000 6,325,000 28,725,000
2026 23,530,000 5,190,875 28,720,875
2027 31,255,000 3,917,875 35,172,875
2028 54,915,000 2,059,375 56,974,375
Tota
l $ 24,898,250 153,435,000 $ 178,333,250 $
$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.

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, 2022 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.

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. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The total unpaid balance as of June 30, 2023, was $52,070,000. ..

Item 11 Page 85 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
72 Note 6 – Long-Term Liabilities (Continued)
B. Business-Type Activities (Continued)
$52,070,000 Electric System Revenue Bonds (2022 Series A) (Continued) The future annual debt service requirements for the Taxable Revenue Bonds, Series 2022A-T are as followed:

Year Ending
June 30, Principal Interest Total
2024 4,690,000 $ $ 2,486,250 $ 7,176,250
2025 4,885,000 2,246,875 7,131,875
2026 5,130,000 1,996,500 7,126,500
2027 5,405,000 1,733,125 7,138,125
2028 950,000 1,574,250 2,524,250
2029-2033 5,540,000 7,087,250 12,627,250
2034-2038 7,110,000 5,513,750 12,623,750
2039-2042 18,360,000 2,157,750 20,517,750
Total 52,070,000 $ $ 24,795,750 $ 76,865,750
$14,840,000 Water System Revenue Bonds (2020 Series A)
The bonds are special obligation bonds which are secured by an irrevocable pledge of water revenues payable to bondholders. Under the Indenture of Trust dated May 6, 2020, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Water Enterprise (as those terms are defined in the Indenture of Trust). The total unpaid balance as of June 30, 2023, was $14,350,000.

The future annual debt service requirements for the Taxable Revenue Bonds, Series 2020A-T are as followed:

Year Ending
June 30, Principal Interest Total
2024 265,000 $ $ 562,850 $ 827,850
2025 275,000 549,350 824,350
2026- 542,475 542,475
2027- 542,475 542,475
2028- 542,475 542,475
2029-2033 1,985,000 2,464,250 4,449,250
2034-2038 2,180,000 1,943,625 4,123,625
2039-2043 2,680,000 1,445,000 4,125,000
2044-2048 3,180,000 940,625 4,120,625
2049-2051 3,785,000 331,188 4,116,188
Total 14,350,000 $ $ 9,864,313 $ 24,214,313
..

Item 11 Page 86 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
73 Note 6 – Long-Term Liabilities (Continued)
B. Business-Type Activities (Continued)
Water Replenishment District 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. The total unpaid balance as of June 30, 2023, was $1,081,395.

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.

The future annual debt service requirements are as follows:

Year Ending
June 30, Principal Interest Total
2024 139,535 $ - $ 139,535 $
2025 139,535 - 139,535
2026 139,535 - 139,535
2027 139,535 - 139,535
2028 139,535 - 139,535
2029-2031 383,720 - 383,720
Total 1,081,395 $ - $ 1,081,395 $
Compensated Absences
The balance outstanding at June 30, 2023, was $1,149,984. See note 7 for details.

C. Fiduciary Funds
The following long-term obligations were approved by California State Department of Finance as enforceable obligations and were considered as accounting liabilities in accordance with GAAP.

Balance Balance Due within Due in More
July 1, 2022 Additions Deletions June 30, 2023 One Year Than One Year Fiduciary Activities:

Public Offering
2005 Industrial Redevelopement
Project Tax Allocation Bonds 30,785,000 $ - $ (30,785,000) $ - $ - $ - $ 2011 Industrial Redevelopement
ProjectTax Allocation Bonds 8,130,000 - (8,130,000) - - - 2022 Tax Allocation Refunding
Bonds - 21,330,000 - 21,330,000 3,165,000 18,165,000
Total fiduciary activities $ 21,330,000 38,915,000 $ (38,915,000) $ 21,330,000 $ 3,165,000 $ 18,165,000 $ ..

Item 11 Page 87 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
74 Note 6 – Long-Term Liabilities (Continued)
C. Fiduciary Funds (Continued)
2005 Industrial redevelopment Project Tax Allocation Bonds In October 2005, the Redevelopment Agency of the City issued the 2005 Industrial redevelopment Project Tax Allocation Bonds in the amount of $49,420,000. The bonds are special obligation bonds and are payable from the pledged tax revenues and amounts on deposit in the reserve account. 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%.

In July 2022, the 2005 Industrial redevelopment Project Tax Allocation Bonds were current refunded by 2022 Taxable Tax Allocation Refunding Bonds and fully redeemed on July 25, 2022. 2011 Industrial redevelopment Project Tax Allocation Bonds In March 2011, the Redevelopment Agency of the City issued the 2011 Industrial redevelopment Project Tax Allocation Bonds in the amount of $19,490,000. The bonds are special obligation bonds and are payable from the pledged tax revenues and amounts on deposit in the reserve account. 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 Projects, (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%.

In July 2022, the 2011 Industrial redevelopment Project Tax Allocation Bonds were current refunded by 2022 Taxable Tax Allocation Refunding Bonds and fully redeemed on July 25, 2022. 2022 Taxable Tax Allocation Refunding Bonds
In July 2022, the Successor Agency of the former Redevelopment Agency of the City issued the 2022 Taxable Tax Allocation Refunding Bonds in the amount of $21,330,000 to current refund the City’s 2005 Industrial Redevelopment Project Tax Allocation Bonds and 2011 Industrial Redevelopment Project Tax Allocation Bonds.

The current refunding resulted in an saving in debt service payments of $11,666,099 and economic gain in the of $2,387,082.

The bonds bear interest at rates between 3.489% and 4.431%. Interest on the bonds is payable annually on each March 1 and September 1. Principal payments are due in annual installments ranging from $3,165,000 to $4,030,000, commencing September 1, 2023 through September 1, 2028. The bonds are not subject to redemption prior to maturity. The refunding revenue bonds debt service payments will be made from the debt service funds.

The annual debt service requirements for the Taxable Tax Allocation Refunding Bonds are as follows:

Year Ending
June 30, Principal Interest Total
2024 3,165,000 $ 794,903 $ $ 3,959,903
2025 3,445,000 677,008 4,122,008
2026 3,625,000 543,802 4,168,802
2027 3,820,000 395,560 4,215,560
2028 4,030,000 230,814 4,260,814
2029 3,245,000 71,893 3,316,893
Tota
l $ 2,713,980 21,330,000 $ 24,043,980 $
..

Item 11 Page 88 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
75 Note 6 – Long-Term Liabilities (Continued)
C. Fiduciary Funds (Continued)
2022 Taxable Tax Allocation Refunding Bonds (Continued) The 2022 Taxable Tax Allocation Refunding Bonds are secured by the Pledged Tax Revenues deposited in the Redevelopment Property Tax Trust Fund. The pledged tax revenues are to be used solely for the repayment of principal and interest on the bonds until they are paid in full through September 1, 2028 and are not available for other purposes during the duration that the bonds are outstanding. The total principal and interest remaining is approximately $24,043,980. Management expects that pledged tax revenues will be sufficient to make future principal and interest payments on the bonds.

D. 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 when no event of default exists under the Indenture. As at June 30, 2023, this fund has a balance of $40,161,516.

E. 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.

F. Credit Rating
As of June 30 , 2023, the ratings on all Electric System Revenue Bonds is Baa1 stable by Moody’s and BBB+ stable by S&P and the ratings on all Water System Revenue Bonds is A- by S&P.

Note 7 – Compensated Absences
Under certain circumstances and accordingly to the negotiated labor agreements, City employees are allowed to accumulate annual leave. The annual leave amount is accrued and accounted for as compensated absences in the government-wide and proprietary fund statements.

The following is a summary of compensated absences payable transactions for the year ended June 30 2023:

Balance Balance Due within Due in More
July 1, 2022 Additions Deletions June 30, 2023 One Year Than One Year Governmental activities:

Compensated absences $ 2,673,930 $ 1,512,554 $ (1,400,011) $ 2,786,473 $ 928,824 $ 1,857,649 Business-type activities
Compensated absences $ 1,218,405 $ 904,156 $ (972,577) $ 1,149,984 $ 383,328 $ 766,656 ..

Item 11 Page 89 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
76 Note 7 – Compensated Absences (Continued)
The General Fund is used to liquidate the compensated absences for governmental activities. The Enterprise Funds are used to liquidate the compensated absences for business-type activities.

Note 8 – 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 self-insured 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 the City’s Third-Party Administrator for workers’ compensation program and they provide basic services for general liability claims and litigation.

A summary of the insurance limits for fiscal year 2023 are as follows:

Insurance Type Program Limits Deductible/SIR (Self-Insured Retention) 1st Excess Liability $5,000,000 $2 Million
$3 Million Law Enforcement
2nd Excess Liability $5,000,000 $5,000,000
3rd Excess Liability $5,000,000 $10,000,000
4th Excess Liability $5,000,000 $15,000,000
Excess Workers Compensation $50,000,000 $1,000,000
$1.5 Million Presumptive Loss
Property - Power Generating $100,000,000 Various
Property - Residential $7,950,653 $2,500
Property - Municipal $59,614,930 $25,000
Commercial Property/EQ and FL $50,000,000-
Government Crime $1,000,000 $25,000
Premise Pollution/Environmental Impairment $5,000,000 $25,000 $5,000,000 per Claim $50,000 Utility Locs.
$100,000 Natural Gas Pipeline
Cyber Liability $5,000,000 $100,000
Auto Physical Damage $10,000,000 $5,000
Residential Property Insurance $7,950,653 $2,500
Terrorism $100 Million Property Terrorism $0
$5 Million Terrorism Liability
$5 Million Active Shooter
Special Events $2,000,000 $1,000,000 Each Occurrence
Changes in the balances of claims liabilities during the past three years are as follows:

Current Year Current Year
Balance at Claims and Changes Claim Balance at
Year Ended July 1 in Estimates Payments June 30
June 30, 2021 3,840,080 $ 836,537 $ (1,267,245) $ 3,409,372 $ June 30, 2022 3,409,372 2,831,928 (1,300,568) 4,940,732 June 30, 2023 4,940,732 1,529,740 (2,523,658) 3,946,814 ..

Item 11 Page 90 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
77 Note 9 – Pension Plan
A. General Information about the Pension Plan
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 multipleemployer defined benefit pension plan to a cost-sharing defined benefit pension plan during the fiscal year ended June 30, 2021. See Note 12 for further information.

Plan Description
The City contribution to the California Public Employees Retirement System (“CalPERS”), an agent multipleemployer defined benefit pension plan for miscellaneous employees and a cost-sharing multiple-employer defined benefit plan for safety employees. CalPERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by state statute and City ordinance. A full description of the pension plan regarding number of employees covered, benefit provisions, assumptions (for funding, but not accounting purposes), and membership information are listed in the June 30, 2021 Annual Actuarial Valuation Report. This report and CalPERS’ audited financial statements are publicly available reports that can be obtained at CalPERS’ website under Forms and Publications.

Benefits Provided
CalPERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions under both plans are established by State Statute and City Resolution as follows:

Classic PEPRA
Prior to On or Afte
r
Hire date January 1, 2013 January 1, 2013
Benefit formula 2.7% @ 55 2% @ 62
Benefit vesting schedule 5 years service 5 years service Benefit payments Monthly for life Monthly for life
Retirement age 50 yrs 52 yrs
Monthly benefits, as a % of eligible
compensation

2.0%-2.7%,
50 yrs - 55 yrs,
res
pectively

1.0%-2.0%,
52 yrs - 62 yrs,
res
pectively
Required employee contribution rate (FY22-23) 8.00% 6.25% Required employer contribution rate (FY22-23) 11.50% 11.50% Required employer contribution rate (FY21-22) 11.38% 11.38% Miscellaneous
..

Item 11 Page 91 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
78 Note 9 – Pension Plan (Continued)
A. General Information about the Pension Plan (Continued) Benefits Provided (Continued)
Classic PEPRA
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 service 5 years service Benefit payments Monthly for life Monthly for life
Retirement age 50 yrs 50 yrs
Monthly benefits, as a % of eligible 3%, 50 yrs
Required employee contribution rate (FY22-23) 9.00% 13.75% Required employer contribution rate (FY22-23) 23.39% 20.70% Required employer contribution rate (FY21-22) 22.78% 22.78% Safet
y

2.0% - 2.7%
50 yrs - 57 yrs,
res
pectively
Participants are eligible for non-industrial disability retirement if they become disabled and have at least 5 years credited service. There is no special age requirement. The standard non-industrial disability retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service years.

Industrial disability benefits are not offered to miscellaneous employees. The City provides industrial disability retirement benefits to safety employees only. The industrial disability retirement benefit is a monthly allowance equal to 50 percent of final compensation.

An employee's beneficiary may receive the basic death benefit if the employee becomes deceased while actively employed. The employee must be actively employed with the City to be eligible for this benefit. An employee's survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this basic death benefit. The basic death benefit is a lump sum in the amount of the employee's accumulated contributions, where interest is currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months’ salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death. Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree's designated survivor(s), or to the retiree 's estate.

Benefit terms provide for annual cost-of-living adjustments to each employee's retirement allowance. Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually adjusted on a compound basis up to 2 percent. ..

Item 11 Page 92 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
79 Note 9 – Pension Plan (Continued)
A. General Information about the Pension Plan (Continued) Employees Covered by Benefit Terms
At June 30, 2021, the valuation date, the following employees were covered by the benefit terms:

Miscellaneous Safety
Active employees 144 43
Transferred and terminated employees 186 141
Retired employees and beneficiaries 200 291
Total 530 475
Plans
Contributions
Section 20814(c) of the California Public Employees’ Retirement Law (“PERL”) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CalPERS’ annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

B. Net Pension Liability
Actuarial Methods and Assumption Used to Determine Total Pension Liability The June 30, 2021 valuation was rolled forward to determine the June 30, 2022 total pension liability, based on following actuarial methods and assumptions:

Actuarial Methods and Assumptions Used to Determine Total Pension Liability Actuarial Cost Method
Actuarial Assumptions:

Discount Rate
Inflation
Salary Increases
Mortalit
y Rate Table(1)
Post Retirement Benefit Increase
(1)The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study for the period from 2001 to 2019. Pre-retirement and Postretirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 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 November 2021 that can be found on the CalPERS website.

Entry Age Normal

6.90%

2.30%
Varies by Entry Age and Service
The lesser of contract COLA or 2.30% until Purchasing
Power Protection. Allowance floor on purchasing power
applies, 2.30% thereafter.

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

Item 11 Page 93 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
80 Note 9 – Pension Plan (Continued)
B. Net Pension Liability (Continued)
Change of Assumptions
Effective with the June 30, 2021 valuation date (2022 measurement date), the accounting discount rate was reduced from 7.15% to 6.90%. In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. Projected returns for all asset classes are estimated, combined with risk estimates, and are used to project compound (geometric) returns over the long term. The discount rate used to discount liabilities was informed by the long-term projected portfolio return. In addition, demographic assumptions and the inflation rate assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions.

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. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 basis points.

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

Asset Class
1 Assumed Asset
Allocation Real Return1,2
Global Equity - Cap-weighted 30.00% 4.54%
Global Equity - Non-Cap-weighted 12.00% 3.80%
Private Equity 13.00% 7.28%
Treasury 5.00% 0.27%
Mortgage-backed Securities 5.00% 0.50%
Investment Grade Corporates 10.00% 1.56%
High Yield 5.00% 2.27%
Emerging Market Debt 5.00% 2.48%
Private Debt 5.00% 3.57%
Real Assets 15.00% 3.21%
Leverage -5.00% -0.59%
100.00%
1 An expected inflation of 2.30% used for this period. 2 Figures are based on the 2021 Asset Liability Management study.

Discount Rate
The discount rate used to measure the total pension liability was 6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability. ..

Item 11 Page 94 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
81 Note 9 – Pension Plan (Continued)
C. Changes in the Net Pension Liability
The following table shows the changes in net pension liability for the City’s Miscellaneous Plan recognized over the measurement period.

Total Pension Plan Fiduciary Net Net Pension
Liability Position Liability/(Asset)
(a) (b) (c) = (a) - (b)
Balance at June 30, 2021 (Valuation Date) 194,345,530 $ 166,076,674 $ 28,268,856 $ Changes Recognized for the Measurement Period:

Service cost 3,251,213 - 3,251,213
Interest on the total pension liability 13,576,496 - 13,576,496 Changes of benefit terms - - -
Changes of assumptions 6,500,648 - 6,500,648
Difference between expected and actual experience 73,961 - 73,961 Net plan to plan resource movement - - -
Contributions from the employer - 5,956,560 (5,956,560) Contributions from employees - 1,439,715 (1,439,715)
Net investment income - (12,217,103) 12,217,103
Benefit payments, including refunds
of employee contributions (11,569,889) (11,569,889) -
Administrative expense - (103,456) 103,456
Net Changes during July 1, 2021 to June 30, 2022 11,832,429 (16,494,173) 28,326,602 Balance at June 30, 2022 (Measurement Date) 206,177,959 $ 149,582,501 $ 56,595,458 $ Increase (Decrease)
Proportionate Share of Net Pension Liability and Pension Expense The following table shows the City’s safety plan’s proportionate share of the risk pool collective net pension liability over the measure period.

Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability
(a) (b) (c) = (a) - (b)
Balance at 6/30/21 (Valuation Date) 294,876,901 $ 235,115,101 $ 59,761,800 $ Balance at 6/30/22 (Measurement Date) 307,584,651 206,457,603 101,127,048 Net Changes during 2021-2022 12,707,750 (28,657,498) 41,365,248 Increase (Decrease)
The following is the approach established by the plan actuary to allocate the net pension liability and pension expense to the individual employers within the risk pool. (1) In determining a cost-sharing plan’s proportionate share, total amounts of liabilities and assets are first calculated for the risk pool as a whole on the valuation date (June 30, 2021). The risk pool’s fiduciary net position (“FNP”) subtracted from its total pension liability (“TPL”) determines the net pension liability (“NPL”) at the valuation date.
..

Item 11 Page 95 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
82 Note 9 – Pension Plan (Continued)
C. Changes in the Net Pension Liability (Continued)
Proportionate Share of Net Pension Liability and Pension Expense (Continued) (2) Using standard actuarial roll forward methods, the risk pool TPL is then computed at the measurement date (June 30, 2022). Risk pool FNP at the measurement date is then subtracted from this number to compute the NPL for the risk pool at the measurement date. For purposes of FNP in this step and any later reference thereto, the risk pool’s FNP at the measurement date denotes the aggregate risk pool’s FNP at June 30, 2022 less the sum of all additional side fund (or unfunded liability) contributions made by all employers during the measurement period (2021-2022).
(3) The individual plan’s TPL, FNP and NPL are also calculated at the valuation date. TPL is allocated based on the rate plan’s share of the actuarial accrued liability. FNP is allocated based on the rate plan’s share of market value assets.
(4) Two ratios are created by dividing the plan’s individual TPL and FNP as of the valuation date from (3) by the amounts in step (1), the risk pool’s total TPL and FNP, respectively. (5) The plan’s TPL as of the Measurement Date is equal to the risk pool TPL generated in (2) multiplied by the TPL ratio generated in (4). The plan’s FNP as of the Measurement Date is equal to the FNP generated in (2) multiplied by the FNP ratio generated in (4) plus any additional side fund (or unfunded liability) contributions made by the employer on behalf of the plan during the measurement period. (6) The plan’s NPL at the Measurement Date is the difference between the TPL and FNP calculated in (5).

Deferred outflows of resources, deferred inflows of resources, and pension expense are allocated based on the City’s share of net pension liability at the end of measurement date.

The City’s proportionate share of the net pension liability was as follows:

Safety Plan
June 30, 2021 1.1050%
June 30, 2022 0.8755%
Change - Increase (Decrease) -0.2295%
Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the plans as of the measurement date, calculated using the discount rate of 6.90%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (5.90%) or 1 percentage-point higher (7.90%) than the current rate:

Discount Rate Current Discount Discount Rate
- 1% (5.90%) Rate (6.90%) + 1% (7.90%)
Miscellaneous Plan 86,296,598 $ 56,595,458 $ 32,344,481 $ Safety Plan 143,604,007 $ 101,127,048 $ 66,411,730 $
Plan's Net Pension Liability/(Asset)
..

Item 11 Page 96 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
83 Note 9 – Pension Plan (Continued)
C. Changes in the Net Pension Liability (Continued)
Pension Plan Fiduciary Net Position
Detailed information about the plan’s fiduciary net position is available in the separately issued CalPERS financial report.

D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions For the year ended June 30, 2023, the City recognized pension expense (credit) in the amounts of $9,037,689 and $(4,806,121) for the miscellaneous plan and safety plan, respectively.

As of measurement date of June 30, 2022, the City has deferred outflows and deferred inflows of resources related to pensions as follows:

Deferred Outflows Deferred Inflows
of Resources of Resources
Contribution made after measurement period 6,946,066 $ - $ Changes of assumptions 4,259,045 -
Difference between expected and actual experience 638,538 - Net difference between projected and actual earning
on pension plan investments 8,069,881 -
Total $ 19,913,530 $ -
Miscellaneous Plan
Deferred Outflows Deferred Inflows
of Resources of Resources
Contribution made after measurement period 9,178,981 $ - $ Changes of assumptions 10,196,668 -
Difference between expected and actual experience 4,185,281 (1,098,160) Net difference between projected and actual earning
on pension plan investments 15,969,375 -
Adjustment due to differences in proportions 3,011,462 - Difference between City contributions and
proportionate share of contributions - (6,795,692)
Total 42,541,767 $ (7,893,852) $
Safety Plan
The amounts above are net of outflows and inflows recognized in the 2021-2022 measurement period expense.

The expected average remaining service lifetime (“EARSL”) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired). The EARSL for the Miscellaneous Plan and the Safety Plan risk pool for the 2021-22 measurement period is 2.9 and 3.7 years, which was obtained by dividing the total service years of 1,560 and 574,655 (the sum of remaining service lifetimes of the active employees) by 530 and 153,587 (the total number of participants: active, inactive, and retired), respectively. ..

Item 11 Page 97 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
84 Note 9 – Pension Plan (Continued)
D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions (Continued) $6,946,066, and $9,178,981 reported as deferred outflows of resources related to pensions for miscellaneous plan and safety plan, respectively, resulting from the City’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability and collectively net pension liability, respectively, in the year ending June 30, 2024.

Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in the future pension expense as follows:

Measurement Period
Ending June 30 Miscellaneous Safety
2023 4,308,400 $ $ 7,231,853
2024 3,298,754 5,346,795
2025 658,038 3,148,764
2026 4,702,272 9,741,522
Total $ 12,967,464 $ 25,468,934
Deferred Outflows/(Inflows) of Resources
Note 10 – Other Postemployment Benefits (“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 Memorandum of Understanding (“MOU”) between the City and the City’s various employee bargaining groups.

Benefits Provided
Generally, the City will provide a postemployment benefit plan for the employee only to those who retire at age sixty (60) or later with twenty (20) years of continuous uninterrupted service up to the age of sixty-five (65).

Alternatively, employees who retire before the age of sixty (60) with twenty (20) years of continuous uninterrupted service, will be permitted to pay their medical and dental premium cost and upon reaching the age of fifty (50), the City will pay the premium for the medical and dental plans until they reach the age of sixty-five (65). ..

Item 11 Page 98 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
85 Note 10 – Other Postemployment Benefits (“OPEB”) (Continued) A. General Information about the OPEB Plan (Continued)
Benefits Provided (Continued)
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 service have been with the City of Vernon. Resolution 2011-127 sets forth the MOU 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 MOU and the Vernon Police Officers’ Benefit Association MOU. 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.

Eligibility
All of the Plan’s employees became participants in accordance with a negotiated Memorandum of Understanding (“MOU”) as negotiated by each group or bargaining unit. In order to receive benefits, eligible employees must meet the minimum requirements defined in their MOU. At June 30, 2022 valuation date, the following numbers of participants were covered by the benefit terms:

Active plan members 209
Inactive plan members currently receiving benefits 128
Inactive plan members entitled to but not receiving benefits 15 Total 352
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, 2023, the City contributed $1,538,693 to the trust, paid $1,572,048 for retiree premiums, resulting in a total contribution of $3,110,741. ..

Item 11 Page 99 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
86 Note 10 – Other Postemployment Benefits (“OPEB”) (Continued) B. Net OPEB Liability
The OPEB liability was measured as of June 30, 2022, and total liability used to calculate the net OPEB liability was determined by an actuarial valuation as of June 30, 2022.

Significant Actuarial Assumptions Used for Total OPEB Liability The total OPEB liability, measured as of June 30, 2022, was determined using the following actuarial assumptions:

Actuarial Cost Method
Actuarial Assumptions:

Asset Valuation Method
Inflation
Salary Increases
Long Term return on Assets
Discount Rate
Mortality Improvement
Healthcare Trend
CalPERS 2021 Experience Study; Project with MP Scale
Based on 2022 Getzen model with in inflation rate of 7.00% non-Medicare / 5.50% Medicare decreasing gradually to an ultimate rate of 3.73% by 2075

2.80% wage inflation plus seniority, merit, and promotion salary increases based on CalPERS Expenditure Study and Review of Actuarial Assumptions published in November
2021
Entry Age Normal
Market value of assets

6.00%

6.00%

2.30%
Change in assumptions
Discount rate changed from 6.25% at June 30, 2021 to 6.00% at June 30, 2022. Healthcare trend rate assumption and mortality improvement scale were updated.

Discount Rate
The discount rate used to measure the total OPEB liability was 6.00%. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan's 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 OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

Expected Long-Term Rates of Return
Long-term
Target Expected Real
Asset Class Allocation Rate of Return
Global Equity 49.00% 4.50%
Fixed Income 23.00% 1.40%
Global Real Estate (REITs) 20.00% 3.70%
Treasury Inflation Protected Securities (TIPS) 5.00% 0.50% Commodities 3.00% 1.10%
Total 100.00%
..

Item 11 Page 100 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
87 Note 10 – Other Postemployment Benefits (“OPEB”) (Continued) C. Changes in Net OPEB Liability
The following presents the changes in the net OPEB liability for the governmental activities’ Retiree Health Plan:

Total OPEB Plan Fiduciary Net Net OPEB
Liability Position Liability
(a) (b) (c) = (a) - (b)
Balance at June 30, 2021 $ 27,389,842 $ 11,016,209 $ 16,373,633 Changes Recognized for the Measurement Period:

Service Cost 365,851 - 365,851
Interest on the total OPEB liability 1,689,071 1,689,071 - Investment income (1,612,431) - 1,612,431
Employer contribution 3,022,275 - (3,022,275)
Changes of benefit terms (78,332) - (78,332)
Administrative expenses - (2,903) 2,903
Benefit payments (1,483,582) (1,483,582) -
Assumption changes 565,573 - 565,573
Plan experience (1,122,750) (1,122,750) -
Net Changes during July 1, 2021 to June 30, 2022 (64,169) (76,641) 12,472 Balance at June 30, 2022 (Measurement Date) $ 27,325,673 $ 10,939,568 $ 16,386,105 Increase (Decrease)
Sensitivity of the Net OPEB Liability to Change in the Discount Rate The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using a discount rate that is 1 percentage-point lower (5.00 percent) or 1percentage- point higher (7.00 percent) than the current discount rate:

Sensitivity of the Net OPEB Liability to Change in the Discount Rate (Continued) Discount Rate Current Discount Discount Rate
-1% (5.00%) Rate (6.00%) +1 % (7.00%)
$ 19,491,170 $ 16,386,105 $ 13,782,951
Plan's Net OPEB Liability
Sensitivity of the Total OPEB Liability to Changes in the Health Care Cost Trend Rates The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1 percentage-point lower or 1 percentage-point higher than the current healthcare cost trend rates:

Healthcare Cost Healthcare Cost Healthcare Cost
Trend Rate - 1% Trend Rate Trend Rate + 1%
$ 15,196,487 $ 16,386,105 $ 17,537,069
Plan's Net OPEB Liability
..

Item 11 Page 101 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
88 Note 10 – Other Postemployment Benefits (“OPEB”) (Continued) C. Changes in Net OPEB Liability (Continued)
OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the measurement period ended June 30, 2022, the City recognized OPEB credit of $(701,650). At June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows Deferred Inflows
of Resources of Resources
Contribution made after measurement period $ 3,110,741 $ - Changes in assumptions 827,520 (2,568,416)
Difference between expected and actual experience 105,096 (3,461,620) Net difference between projected and actual earning on
OPEB plan investments 1,033,627 -
Total $ 5,076,984 $ (6,030,036)
The $3,110,741 reported as deferred outflows of resources related to contributions subsequent to the June 30, 2022 measurement date will be recognized as a reduction of the net OPEB liability during the year ending June 30, 2024.

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

Measurement Deferred
Period Outflows/(Inflows)
Ending June 30 of Resources
2023 (1,954,015) $
2024 (1,940,223)
2025 (238,356)
2026 315,330
2027 (166,934)
Thereafter (79,595)
Total $ (4,063,793)
Note 11 – Southern California Public Power Authority
The Southern California Public Power Authority (the “SCPPA”) was formed in 1980 as a not for profit joint powers agency. SCPPA is currently comprised of 11 Southern California cities and an irrigation district. The SCPPA’s purpose is 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 1160 Nicole Ct Glendora, CA 91740. ..

Item 11 Page 102 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
89 Note 11 – Southern California Public Power Authority (Continued) A. Take or Pay Contract
The SCPPA’s interest of 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 SCPPA, is responsible for financing its share of construction and operating costs. The City has the following “take or pay” contract with the SCPPA:

Palo Verde Project
The SCPPA purchases a 5.91% interest in the Palo Verde Nuclear Generating Station (the “Station”), a nuclearfired generating station near Phoenix, Arizona, from 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 SCPPA’s interest in the station.

Between 1983 and 2008, the SCPPA issued $3.266 billion in debt of Power Project Revenue Bonds for the Station to finance the bonds and the purchase of the SCPPA’s share of the Station and related transmission right. The bonds are not obligations of any member of the SCPPA or public agency other than the SCPPA. Under a power sales contract with the SCPPA, the City is obliged 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 2023 was $3,730,000. The City expects no significant increases in costs related to its nuclear resources.

B. Power Purchase Commitments
The SCPPA 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 of energy. The City has entered into power purchase agreements with the SCPPA related to the following projects:

Astoria 2 Solar Project
On July 23, 2014, the SCPPA 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 SCPPA, 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 for fiscal year 2023 was $10,114,000. ..

Item 11 Page 103 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
90 Note 11 – Southern California Public Power Authority (Continued) B. Power Purchase Commitments (Continued)
Puente Hills Landfill Gas-to-Energy Project
On June 25, 2014, the SCPPA 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 SCPPA on January 1, 2017 for a term of 10 years. The City contacted to purchase 23.2558% of the output. The City’s proportional share of the costs during fiscal year 2023 was $6,616,000.

Antelope DSR 1 Solar Project
On July 16, 2015, the SCPPA, 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’s proportionate share of costs during fiscal year 2023 was $6,124,000.

Hoover Dam Hydroelectric Power Plant
The Hoover Dam Hydroelectric Power Plant is located on the Arizona-Nevada border, approximately 25 miles southeast of Las Vegas. This hydropower plant is part of the larger Hoover Dam facility, which was completed in 1935 and controls the flow of the Colorado River. The Hoover Dam facility consists of 17 generating units and two service generating units with a total installed capacity of 2,080 MW. In 1987, Vernon entered a power purchase agreement to purchase 22 MW of firm capacity from the Western Area Power Administration. SCPPA and other contractor allocations of Hoover power have been extended for 50 years beyond the power purchase agreement’s original expiration in 2017, which now expires in 2067. The City’s proportionate share of costs during fiscal year 2023 was $574,973.

Desert Harvest 2 REC Solar PV Project
On December 17, 2020, SCPPA executed a power purchase agreement with EDF Renewables for 70 MW of solar PV capacity from the Desert Harvest 2 Solar PV project. The project is a fixed-tilt PV system that interconnects at the Marketplace substation and is located on 1,200 acres of Bureau of Land Management land in Desert Center, California. The REC + Index agreement serves the cities of Anaheim, Burbank, and Vernon. VPU is entitled to

17.14 percent of the Project’s output or about 12 MW. This power purchase agreement, which expires at the end of 2045, only provides renewable energy credits (RECs). The City’s proportionate share of costs during fiscal year 2023 was $627,755.

Sapphire Solar Project
On January 17, 2023, the SCPPA, entered into a power purchase agreement with EDF Renewables North America for 39 MW solar power and up to approximately 19.7 MW of battery storage with associated green attributes through the Sapphire Solar Project for a projected annual amount of $6,665,000 over a 20-year term. The expected start date of the project is December 31, 2025. ..

Item 11 Page 104 of 405
City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
91 Note 11 – Southern California Public Power Authority (Continued) B. Power Purchase Commitments (Continued)
Daggett Solar PV and BESS Project
The Daggett Solar plus BESS project is a single‑axis tracker 65 MW solar with a 33 MW 4‑hour Lithium‑Ion BESS. The commercial operation date was December 12, 2023. The project, located in the City of Daggett in San Bernardino County, is a portion of an approximately 482 MW solar PV facility. The project is being developed by Clearway Energy Group and is owned by Daggett Solar Power 2 LLC.

On June 24, 2022, SCPPA executed a PPA for 65 MW for the cities of Vernon and Cerritos. The PPA entitles VPU to 60 MW of solar PV output and 30 MW of energy storage. The commercial operation date was December 12, 2023. The power purchase agreement expires on December 31, 2044.

Note 12 – Commitment 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 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 immediate preceding five years’ percentage increases in the Annual Fee of 1%. Additionally, there are conversion costs that will be paid in 36 equal monthly payments. The agreement shall remain in effect for a minimum of 10 years, subsequently it will be renewed for one-year period. 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 contract costs for the year ended June 30, 2023 was totaled $14,326,351. ..

Item 11 Page 105 of 405
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Item 11 Page 106 of 405

REQUIRED SUPPLEMENTARY INFORMATION
(UNAUDITED)
93 ..

Item 11 Page 107 of 405
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Item 11 Page 108 of 405
Original Final Variance with
Budget Budget Actual Final Budget
REVENUES:

Taxes $ 55,256,414 $ 55,256,414 $ 59,628,704 $ 4,372,290 Special assessments 127,200 127,200 273,830 146,630
Licenses and permits 1,203,000 1,203,000 1,878,995 675,995 Fines, forfeitures, and penalties 2,336,900 2,336,900 2,387,396 50,496 Intergovernmental 7,640,962 7,640,962 2,353,070 (5,287,892) Investment earnings 85,000 85,000 414,374 329,374
Charges for services 11,312,934 11,312,934 10,245,375 (1,067,559) Rent income 551,500 551,500 519,373 (32,127)
Other revenues 393,000 393,000 1,043,247 650,247
Total revenues 78,906,910 78,906,910 78,744,364 (162,546) EXPENDITURES:

Current:

General government 16,320,525 16,487,525 15,630,351 857,174 Public safety 36,124,377 36,346,405 33,860,124 2,486,281 Public works 11,510,917 11,510,917 9,695,296 1,815,621
Health services 2,170,356 2,170,356 1,691,036 479,320
Capital outlay 18,939,150 19,084,997 4,593,430 14,491,567 Debt service:

Principal retirement 225,620 225,620 225,620
-
Interest and fiscal charges 1,487 1,487 1,487 -
Total expenditures 85,292,432 85,827,307 65,697,344 20,129,963

EXCESS (DEFICIENCY) OF REVENUES OVER
(UNDER) EXPENDITURES (6,385,522) (6,920,397) 13,047,020 19,967,417 OTHER FINANCING SOURCES:

Transfer in 799,329 799,329 491,542 (307,787)
Proceeds from sale of capital asset - - 67,582 67,582
Issuance of debt - - 538,544 538,544
Total other financing sources 799,329 799,329 1,097,668 298,339 NET CHANGE IN FUND BALANCE $ (5,586,193) $ (6,121,068) 14,144,688 $ 20,265,756 FUND BALANCE:

Beginning of year 27,847,091
End of yea
r $ 41,991,779
City of Vernon
Required Supplementary Information (Unaudited)
Budgetary Comparison Schedule - General Fund
For the Year Ended June 30, 2023
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Item 11 Page 109 of 405
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Item 11 Page 110 of 405
City of Vernon
Required Supplementary Information (Unaudited)
Notes to the Budgetary Comparison Schedule
For the Year Ended June 30, 2023
Budgetary Information
The City adheres to the following general procedures in establishing its annual budget, which is reflected in the accompanying General Fund budgetary comparison schedule.

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 through City Council action. Unencumbered appropriations lapse at year-end.

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.

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 2023. Encumbrances carried forward from the prior year are reflected in the original budget.

Encumbrances, which are commitments related to executory contracts for goods and services, are recorded to assure effective budgetary control and accountability.
97 ..

Item 11 Page 111 of 405
Fiscal
year 2015 2016 2017 2018 2019
Measurement
period 2013-14
1 2014-15 2015-16 2016-17 2017-18
Total
pension liability
Service cost $ 1,962,270 1,955,694 $ 2,129,659 $ 2,432,788 $ 2,826,440 $ Interest 9,609,274 9,447,012 9,969,103 10,383,859 11,053,679 Differences between expected and actual experienc
e (9,700,904) - 1,046,363 (711,339) 3,059,775
Changes of assumptions (2,466,126) - 9,321,776 - (549,432) Benefit payments, including refunds of employee
contributions (2,388,449) (5,680,624) (5,748,657) (6,145,366) (6,166,082) Net chan
ge in total pension liability (6,438,372) 9,176,519 7,396,468 15,281,718 10,224,380 Total
pension liability - beginning 137,516,564 128,340,045 131,078,192 138,474,660 153,756,378 Total
pension liability - ending (a) $ 131,078,192 137,516,564 $ 138,474,660 $ 153,756,378 $ 163,980,758 $ Pension fiduciar
y net position
Contributions - employer $ 1,825,732 $ 2,340,002 $ 3,140,644 $ 3,629,603 $ 3,380,432 Contributions - employee 1,015,741 1,054,426 1,095,824 1,245,990 1,214,616 Net investment income 16,045,243 2,337,855 583,692 11,857,647 9,803,260 Benefit payments, including refunds of employe
e
contributions (2,388,449) (5,680,624) (5,748,657) (6,145,366) (6,166,082) Net plan to plan resources movement - 18 (780) 1,118 (296) Administrative expens
e (124,052) - (67,200) (161,327) (186,518)
Other miscellaneous income/expense - - - (354,202) -
Net chan
ge in plan fiduciary net position (72,375) 16,498,267 (996,477) 10,427,665 7,691,210 Plan fiduciar
y net position - beginning2 110,336,623 93,838,356 110,264,248 109,267,771 119,695,436 Plan fiduciary net position - ending (b) $ 110,264,248 110,336,623 $ 109,267,771 $ 119,695,436 $ 127,386,646 $ Plan net
pension liability - ending (a) - (b) $ 20,813,944 27,179,941 $ 29,206,889 $ 34,060,942 $ 36,594,112 $ Plan fiduciar
y net position as a percentage 80.24% 84.12% 78.91% 77.85% 77.68% of the total
pension liability
Covered payroll3
$ 11,708,057 11,084,188 $ 13,150,103 $ 13,440,076 $ 15,146,241 $ Plan net
pension liability as a percentage of
covered payroll 245.21% 177.77% 222.10% 253.43% 241.61% 123
Notes to Schedule:

City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Changes in Net Pension Liability and Related Ratios For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 California Public Employees' Retirement System Defined Pension Plan - Miscellaneous Plan Historical information is presented only for measurement periods for which GASB 68 is implemented in 2013-14. Additional years of information will be displayed as it becomes available.

Includes one year’s payroll growth using 2.80% payroll growth assumption for fiscal year ended June 30, 2022; 2.75% payroll growth assumption for fiscal years ended June 30, 2018-21; 3.00% payroll growth assumption for fiscal years ended June 30, 2014-17.

Benefit Changes: There were no changes in benefits.

Changes of Assumptions: Effective with the June 30, 2021 valuation date (2022 measurement date), the accounting discount rate was reduced from 7.15% to 6.90%.

In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. Projected returns for all asset classes are estimated, combined with risk estimates, and are used to project compound (geometric) returns over the long term.

The discount rate used to discount liabilities was informed by the long-term projected portfolio return. In addition, demographic assumptions and the inflation rate assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. The accounting discount rate was 7.15% for measurement dates 2017 through 2021, 7.65% for measurement dates 2015 through 2016, and 7.50% for measurement date 2014.

Additionally, CalPERS employees participate in various State of California agent pension plans and during Fiscal Year 2017-18, CalPERS recorded a correction to previously reported financial statements to properly reflect its proportionate share of activity related to pensions in accordance with GASB Statement No. 68, Accounting and Financial Reporting for Pensions (GASB 68). 98 ..

Item 11 Page 112 of 405
Fiscal
year ended 2020 2021 2022 2023
Measurement
period 2018-19 2019-20 2020-21 2021-22
Total
pension liability
Service cost $ 2,905,980 2,991,388 $ 2,735,636 $ 3,251,213 $ Interest 11,863,069 12,502,379 13,153,255 13,576,496
Differences between expected and actual experienc
e 1,316,307 3,767,030 1,777,340 73,961
Changes of assumptions - - 6,500,648 -
Benefit payments, including refunds of employee
contributions (6,652,881) (7,720,453) (8,274,278) (11,569,889) Net chan
ge in total pension liability 9,004,213 11,968,606 9,391,953 11,832,429 Total
pension liability - beginning 175,949,364 163,980,758 184,953,577 194,345,530 Total
pension liability - ending (a) $ 184,953,577 175,949,364 $ 194,345,530 $ 206,177,959 $ Pension fiduciar
y net position
Contributions - employer $ 4,501,532 3,908,165 $ 4,979,542 $ 5,956,560 $ Contributions - employee 1,357,537 1,271,580 1,161,711 1,439,715 Net investment income 8,077,977 6,484,512 30,012,771 (12,217,103) Benefit payments, including refunds of employe
e
contributions (6,652,881) (7,720,453) (8,274,278) (11,569,889) Net plan to plan resources movement - - -
Administrative expens
e (188,889) (90,906) (138,188) (103,456)
Other miscellaneous income/expense 296 - - -
Net chan
ge in plan fiduciary net position 4,348,282 6,600,188 27,741,558 (16,494,173) Plan fiduciar
y net position - beginning 133,986,834 127,386,646 138,335,116 166,076,674 Plan fiduciary net position - ending (b) $ 138,335,116 133,986,834 $ 166,076,674 $ 149,582,501 $ Plan net
pension liability - ending (a) - (b) $ 46,618,461 41,962,530 $ 28,268,856 $ 56,595,458 $ Plan fiduciar
y net position as a percentage 76.15% 74.79% 85.45% 72.55% of the total
pension liability
Covered payroll3
$ 15,399,491 15,996,725 $ 15,355,968 $ 15,913,917 $
Plan net
pension liability as a percentage of
covered payroll 262.32% 302.73% 184.09% 355.63%
City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Changes in Net Pension Liability and Related Ratios (Continued) For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 California Public Employees' Retirement System Defined Pension Plan - Miscellaneous Plan (Continued) 99 ..

Item 11 Page 113 of 405
Fiscal year 2015 2016 2017 2018 2019
Measurement period 2013-14
1 2014-15 2015-16 2016-17 2017-18
Total pension liability
Service cost $ 3,388,157 3,448,760 $ 3,454,025 $ 4,144,398 $ 4,414,740 $ Interest 15,255,372 15,777,736 16,325,879 16,898,830 17,691,261 Differences between expected and actual experienc
e (2,400,883) - (2,430,394) (1,380,683) 2,008,618
Changes of assumptions - (3,878,396) - 14,134,794 (1,533,898) Benefit payments, including refunds of employee
contributions (9,639,123) (9,470,058) (9,736,302) (10,147,899) (10,992,416) Net chan
ge in total pension liability 3,416,556 9,065,009 7,613,208 23,649,440 11,588,305 Total
pension liability - beginning 215,565,152 206,500,143 218,981,708 226,594,916 250,244,356 Total
pension liability - ending (a) $ 218,981,708 215,565,152 $ 226,594,916 $ 250,244,356 $ 261,832,661 $ Pension fiduciar
y net position
Contributions - employer $ 3,234,539 $ 4,147,441 $ 5,116,412 $ 5,476,196 $ 6,109,373 Contributions - employee 1,092,012 1,167,329 1,222,561 1,212,646 1,302,308 Net investment income 24,855,525 3,525,241 760,559 17,760,401 14,666,919 Benefit payments, including refunds of employe
e
contributions (9,639,123) (9,470,058) (9,736,302) (10,147,899) (10,992,416) Net plan to plan resources movement - 24 780 (1,118) (431) Administrative expens
e (191,323) - (99,525) (237,068) (272,124)
Other miscellaneous income/expense - - - (516,768) -
Net chan
ge in plan fiduciary net position (821,346) 19,542,953 (2,735,515) 14,063,158 10,296,861 Plan fiduciary net position - beginning 164,125,062 144,582,109 163,303,716 160,568,201 174,631,359 Plan fiduciary net position - ending (b) $ 163,303,716 164,125,062 $ 160,568,201 $ 174,631,359 $ 184,928,220 $ Plan net
pension liability - ending (a) - (b) $ 55,677,992 51,440,090 $ 66,026,715 $ 75,612,997 $ 76,904,441 $ Plan fiduciar
y net position as a percentage 76.14% 74.57% 70.86% 69.78% 70.63% of the total
pension liability
Covered payroll $ 12,510,920 $ 12,740,785 $ 12,971,888 $ 13,879,896 $ 14,292,273 Plan net
pension liability as a percentage of
covered
payroll 411.16% 437.01% 509.00% 544.77% 538.08%
1 Notes to Schedule:

City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of Net Pension Liability and Related Ratios Historical information is presented only for measurement periods for which GASB No. 68 is presented for periods after GASB 68 implemented in 2013-14. Additionally, measurement period 2019-20 (fiscal year 2021) was the first year the City's Safety Plan converted from an Agent Multiple Plan to a Cost Sharing Plan. Therefore, only six years are shown.

Benefit Changes: There were no changes in benefits.

Changes of Assumptions: In 2019, there were no changes. In 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There were no changes in the discount rate. In 2017, the discount rate was reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense.) In 2014, amounts reported were based on the 7.5 percent discount rate.

For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 California Public Employees' Retirement System Defined Pension Plan - Safety Plan 100
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Item 11 Page 114 of 405
Fiscal year 2020
Measurement period 2018-19
Total
pension liability
Service cost $ 4,287,003
Interest 18,414,262
Differences between expected and actual experienc
e (364,199)
Changes of assumptions -
Benefit payments, including refunds of employee
contributions (12,139,668)
Net chan
ge in total pension liability 10,197,398
Total
pension liability - beginning 261,832,661
Total
pension liability - ending (a) $ 272,030,059
Pension fiduciar
y net position
Contributions - employer $ 7,011,540
Contributions - employee 1,239,891
Net investment income 12,275,401
Benefit payments, including refunds of employe
e
contributions (12,139,668)
Net plan to plan move -
Administrative expens
e (131,969)
Other miscellaneous income/expense 431
Net chan
ge in plan fiduciary net position 8,255,626
Plan fiduciary net position - beginning 184,928,220
Plan fiduciary net position - ending (b) $ 193,183,846
Plan net
pension liability - ending (a) - (b) $ 78,846,213
Plan fiduciar
y net position as a percentage 71.02%
of the total
pension liability
Covered payroll $ 13,737,311
Plan net
pension liability as a percentage of
covered
payroll 573.96%
City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of Net Pension Liability and Related Ratios (Continued) For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 California Public Employees' Retirement System Defined Pension Plan - Safety Plan (Continued) 101
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Fiscal year 2021 2022 2023
Measurement period 2019-20 2020-21 2021-22
City's proportion of the net pension liability 1.33110% 1.70286% 1.47167% City's proportionate share of the net pension liability 88,682,300 $ 59,761,800 $ 101,127,048 $ City's covered payroll
2 $ 7,618,673 11,770,766 $ 5,630,861 $
City's proportionate share of the net pension liability as a percentage of its covered payroll 753.41% 784.41% 1795.94% Plan fiduciary net position as a percentage of
the total pension liability 69.13% 79.73% 67.12%
1 Notes to Schedule:

Measurement period 2019-20 was the first year the City's Safety Plan was converted from an Agent Multiple Plan to a Cost Sharing Plan therefore only three years are shown.

Benefit Changes: There were no changes in benefits.

Changes of Assumptions: Effective with the June 30, 2021 valuation date (2022 measurement date), the accounting discount rate was reduced from

7.15% to 6.90%. In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. Projected returns for all asset classes are estimated, combined with risk estimates, and are used to project compound (geometric) returns over the long term. The discount rate used to discount liabilities was informed by the long-term projected portfolio return. In addition, demographic assumptions and the inflation rate assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. The accounting discount rate was 7.15% for measurement 2020 through 2021.

City of Vernon
Required Supplementary Information (Unaudited)
Schedule of the City's Proportionate Share of the Net Pension Liability and Related Ratios For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 California Public Employees' Retirement System Defined Pension Plan - Safety Plan 103
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Item 11 Page 117 of 405
Fiscal year 2014 2015 2016 2017 2018
Actuarially determined contribution $ 1,825,732 $ 2,340,002 $ 3,140,644 $ 3,629,603 $ 3,380,432 Contributions in relation to the
actuarially determined contribution (1,825,732) (2,340,002) (3,140,644) (3,629,603) (3,380,432) Contribution deficiency (excess) $ - $ - $ - $ - $ -
Covered payroll
1 $ 11,708,057 11,084,188 $ 13,150,103 $ 13,440,076 $ 15,146,241 $ Contributions as a percentage of covered
payroll 16.47% 19.99% 23.88% 27.01% 22.32%
1 Notes to Schedule:

Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry Age Actuarial Cost Method
Amortization method Level percentage of payroll
Asset valuation method Fair Market Value
Inflation 2.500%
Salary increases varies by entry age and service
Payroll Growth 2.750%
Investment rate of return
Retirement age
Mortality
City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions
For the Year Ended June 30, 2023
Last Ten Fiscal Years
California Public Employees' Retirement System Defined Pension Plan - Miscellaneous Plan The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2022-23 were derived from the June 30, 2020 funding valuation report.
7% Net of Pension Plan Investment and Administrative Expenses; includes Inflation.

The probabilities of Retirement are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015.

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 include 15 years of projected mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries.

Includes on year's payroll growth using 2.80 percent payroll growth assumption for fiscal years ended June 30, 2023; 2.75 percent payroll growth assumption for fiscal years ended June 30, 2018-2021; 3 percent payroll growth assumption for fiscal years ended June 30, 2014-2017. 104
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Item 11 Page 118 of 405
Fiscal year 2019 2020 2021 2022 2023
Actuarially determined contribution $ 3,908,165 $ 4,501,532 $ 4,979,542 $ 5,956,560 $ 6,946,066 Contributions in relation to the
actuarially determined contribution (3,908,165) (4,501,532) (4,979,542) (5,956,560) (6,946,066) Contribution deficiency (excess) $ - $ - $ - $ - $ -
Covered payroll
1 $ 15,827,780 15,996,725 $ 14,803,225 $ 15,913,917 $ 16,359,507 $ Contributions as a percentage of covered
payroll 24.43% 28.44% 33.64% 37.43% 42.46%
City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions (Continued)
For the Year Ended June 30, 2023
Last Ten Fiscal Years
California Public Employees' Retirement System Defined Pension Plan - Miscellaneous Plan (Continued) 105
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Item 11 Page 119 of 405
Fiscal year 2014 2015 2016 2017 2018
Actuarially determined contribution $ 3,234,539 $ 4,147,441 $ 5,116,412 $ 5,476,196 $ 6,109,373 Contributions in relation to the
actuarially determined contribution (3,234,539) (4,147,441) (5,116,412) (5,476,196) (6,109,373) Contribution deficiency (excess) $ - $ - $ - $ - $ -
Covered payroll
1 $ 12,740,785 12,510,920 $ 12,971,888 $ 13,879,896 $
0 $ 14,292,273
Contributions as a percentage of covered payroll. 25.85% 32.55% 39.44% 39.45% 42.75% 1 Notes to Schedule:

Methods and assumptions used to determine contribution rates:

Amortization method Level percentage of payroll
Discount rate 7.000%
Inflation 2.500%
Salary increases varies by entry age and service
Payroll Growth 2.750%
Retirement age
Mortality
City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions (Continued)
Last Ten Fiscal Years
California Public Employees' Retirement System Defined Pension Plan - Safety Plan Includes one year’s payroll growth using 2.80 percent payroll growth assumption for fiscal years ended June 30, 2022-23; 2.75 percent payroll growth assumption for fiscal years ended June 30, 2018-21; 3.00 percent payroll growth assumption for fiscal years ended June 30, 2014-17.

The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2022-23 were derived from the June 30, 2020 funding valuation report.

The probabilities of Retirement are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015.

Derived using CalPERS' membership data for all funds.

For the Year Ended June 30, 2023
106
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Item 11 Page 120 of 405
Fiscal year 2019 2020 2021 2022 2023
Actuarially determined contribution $ 7,011,540 $ 7,834,050 $ 7,650,585 $ 8,258,888 $ 9,178,981 Contributions in relation to the
actuarially determined contribution (7,011,540) (7,834,050) (7,650,585) (8,258,888) (9,178,981) Contribution deficiency (excess) $ - $ - $ - $ - $ -
Covered payroll
1 $ 11,770,766 13,737,311 $ 7,618,673 $ 5,630,861 $ 5,788,525 $ Contributions as a percentage of covered payroll. 51.04% 66.56% 100.42% 146.67% 158.57% City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions (Continued)
For the Year Ended June 30, 2023
Last Ten Fiscal Years
California Public Employees' Retirement System Defined Pension Plan - Safety Plan (Continued) 107
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Fiscal year 2018 2019 2020 2021
Measurement period 2016-17
1 2017-18 2018-19 2019-20
Total OPEB liability
Service cost 1,166,825 $ 1,204,747 $ 549,137 $ 565,922 $ Interest 1,879,025 2,063,052 1,641,230 1,699,197
Changes of benefit terms - - - (800,265)
Differences between expected and actual experience - (6,680,583) - 206,148 Changes of assumptions (770,716) (7,657,196) (124,861) 579,724 Benefit payments, including refunds of employee contributions (838,818) (1,006,087) (1,158,450) (1,222,538) Net change in total pension liability (12,076,067) 1,436,316 907,056 1,028,188 Total OPEB liability - beginning 37,355,851 35,919,535 25,279,784 26,186,840 Total OPEB liabilit
y - ending (a) $ 25,279,784 37,355,851 $ 26,186,840 $ 27,215,028 $ OPEB fiduciary net position
Contributions - employer 1,898,138 $ 2,065,407 $ 2,989,393 $ 3,915,406 $ Net investment income (2,049) 65,276 258,220 44,684
Benefit payments, including refunds of employee contributions (838,818) (1,006,087) (1,158,450) (1,222,538) Administrative expense (4) (808) (629) (2,563)
Other expenses - (1,400) - -
Net change in plan fiduciary net position 1,122,388 1,057,267 2,088,534 2,734,989 Plan fiduciary net position - beginning 1,057,267 - 2,179,655 4,268,189 Plan fiduciar
y net position - ending (b) $ 2,179,655 1,057,267 $ 4,268,189 $ 7,003,178 $ Plan net OPEB liabilit
y - ending (a) - (b) $ 23,100,129 36,298,584 $ 21,918,651 $ 20,211,850 $ Plan fiduciar
y net position as a percentage 2.83% 8.62% 16.30% 25.73% of the total OPEB liability
Covered-em
ployee payroll $ 33,496,565 33,511,114 $ 35,182,647 $ 31,958,957 $ Plan net OPEB liability as a percentage of
covered-em
ployee payroll 108.32% 68.96% 62.30% 63.24%
1 Historical information is presented only for measurement periods after GASB 75 was implement in fiscal year of 2016-17 (measurement period of 2017-18). Additional years of information will be displayed as it becomes available.

City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Changes in Net Other Postemployment Benefits Liability and Related Ratios For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 Other Postemployment Benefits ("OPEB") Plan
108
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Fiscal year 2022 2023
Measurement period 2020-21 2021-22
Total OPEB liability
Service cost $ 365,851 303,057 $
Interest 1,689,071 1,682,954
Changes of benefit terms (78,332) -
Differences between expected and actual experience (677,446) (1,122,750) Changes of assumptions 565,573 66,075
Benefit payments, including refunds of employee contributions (1,199,826) (1,483,582) Net change in total pension liability (64,169) 174,814
Total OPEB liability - beginning 27,389,842 27,215,028
Total OPEB liabilit
y - ending (a) $ 27,325,673 27,389,842 $
OPEB fiduciary net position
Contributions - employer $ 3,022,275 3,131,526 $
Net investment income (1,612,431) 2,084,288
Benefit payments, including refunds of employee contributions (1,199,826) (1,483,582) Administrative expense (2,903) (2,958)
Other expenses - -
Net change in plan fiduciary net position (76,641) 4,013,030 Plan fiduciary net position - beginning 11,016,208 7,003,178 Plan fiduciar
y net position - ending (b) $ 10,939,567 11,016,208 $
Plan net OPEB liabilit
y - ending (a) - (b) $ 16,386,106 16,373,634 $
Plan fiduciar
y net position as a percentage 40.22% 40.03%
of the total OPEB liability
Covered-em
ployee payroll $ 25,376,320 31,702,877 $
Plan net OPEB liability as a percentage of
covered-em
ployee payroll 51.65% 64.57%
Other Postemployment Benefits ("OPEB") Plan (Continued) City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Changes in Net Other Postemployment Benefits Liability and Related Ratios (Continued) For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 109
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Fiscal yea
r 2017 2018 2019 2020 2021
Actuarially determined contribution $ 2,692,868 - $ $ 2,692,898 $ 1,931,700 $ 1,538,693 Contributions in relation to the
actuarially determined contribution (1,898,138) (2,065,407) (2,989,393) (3,915,406) (3,131,526) Contribution deficiency (excess) $ (1,898,138) $ 627,461 $ (296,495) $ (1,983,706) $ (1,592,833) Covered-employee payrol
l $ 33,496,565 33,511,114 $ 35,182,647 $ 31,958,957 $ 31,702,877 $ Contributions as a percentage of covered-employee payroll.2 5.66% 6.17% 8.50% 12.25% 9.88% 1 Notes to Schedule:

Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry Age Normal Cost Method
Amortization method Level percentage of payroll
Asset valuation method Market valuation of assets
Discount Rate 6.25%
Payroll Growth 3.00%
General Inflation Rate 2.5% per year
Health Trend 5.6 in FY2023, step down 0.5% per year to 3.9% by 2076 City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Other Postemployment Benefits For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 Other Postemployment Benefits ("OPEB") Plan
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2022-23 were derived from the June 30, 2020 funding valuation report.

Historical information is presented only for measurement periods after GASB 75 implementation in fiscal year of 2017-18 (measurement period of 2016-17). Additional years of information will be displayed as it becomes available. 110
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Item 11 Page 124 of 405
Fiscal yea
r 2022 2023
Actuarially determined contribution $ 1,538,693 $ 1,402,612 Contributions in relation to the
actuarially determined contribution (2,933,295) (3,110,941) Contribution deficiency (excess) $ (1,394,602) $ (1,708,329) Covered-employee payrol
l $ 24,483,172 25,376,320 $
Contributions as a percentage of covered-employee payroll. 2 11.56% 12.71%
City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Other Postemployment Benefits (Continued) For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 Other Postemployment Benefits ("OPEB") Plan (Continued) 111
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200 E. Sandpointe Avenue, Suite 600
Santa Ana, California 92707

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE

AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Independent Auditors’ Report
To the Honorable Mayor and Members of the City Council
of the City of Vernon
Vernon, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (“Government Auditing Standards”), the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Vernon, California (the “City”), as of and for the year ended June 30, 2023, and the related notes to the basic financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated February 8, 2024.

Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (“internal control”) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified.
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Item 11 Page 127 of 405
To the Honorable Mayor and Members of the City Council
of the City of Vernon
Vernon, California

114
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Santa Ana, California
February 8, 2024 ..

Item 11 Page 128 of 405
Vernon Public Utilities
(The Electric, Gas, Water and
Fiber Optics Enterprise Funds of
the City of Vernon)
Vernon, California
Financial Statements and
Independent Auditors’ Reports
For the Year Ended June 30, 2023
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City of Vernon
Vernon Public Utilities
For the Year Ended June 30, 2023
Table of Contents
Page
INTRODUCTORY SECTION (UNAUDITED):

A Message From The General Manager of Vernon Public Utilities .................................................................... i FINANCIAL SECTION:

Independent Auditors’ Report on the Audit of the Financial Statements .......................................................... 1 Management’s Discussion and Analysis (Required Supplementary Information) (Unaudited) ...................... 5 Basic Financial Statements:

Statement of Net Position ........................................................................................................................... 14 Statement of Revenues, Expenses, and Changes in Net Position ............................................................... 17 Statement of Cash Flows ............................................................................................................................ 18 Notes to the Basic Financial Statements ..................................................................................................... 25 Required Supplementary Information (Unaudited):

Schedule of Proportionate Share of the Net Pension Liability and Related Ratios ........................................... 54 Schedule of Plan Contributions – Pensions ....................................................................................................... 56 Schedule of Proportionate Share of the Net OPEB Liability and Related Ratios ............................................. 58 Schedule of Contributions – Other Postemployment Benefits .......................................................................... 60 Supplementary Information:

Combining Statement of Net Position ............................................................................................................... 64 Combining Statement of Revenues, Expenses, and Changes in Net Position ................................................... 67 Combining Statement of Cash Flows ................................................................................................................ 68 ..

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ELECTRIC FUND
Introduction
Vernon Public Utilities (VPU) remains dedicated to its core mission of providing reliable, safe, and affordable energy while meeting California's clean energy goals. VPU is building a full-service utility that embraces emerging technologies and capitalizes on strategic opportunities.

VPU goes beyond electricity, offering water, natural gas, and fiber optic services. As a publicly owned utility, it prioritizes customer focus, responsible operations, and a sustainable future for the Vernon community. With local control, VPU ensures transparency, competitive rates, and tailored policies to serve the community's needs. In partnership with the local community, VPU is shaping a sustainable energy future for Vernon.

Awards
The American Public Power Association (APPA) designates Reliable Public Power Provider recognition (RP3) to utilities that demonstrate exceptional proficiency in four key areas: safety, reliability, workforce development, and system improvement. Consistent with its mission, VPU strives for excellence in these areas.

APPA has awarded VPU its highest – Diamond Level – RP3 designation for three consecutive terms, encompassing nine years from 2016 to 2025. VPU earned these honors by providing exceptionally reliable and safe electric service. VPU is one of only 26 of the more than 2,000 public power utilities across the United States to achieve Diamond Level RP3 designation from 2022 to 2025. APPA also awarded VPU the Safety Award for Excellence every year since 2018, recording no reportable safety incidents for 2023.

Reliability
VPU emphasizes operational reliability as a cornerstone of its strategic vision. VPU utilizes IEEE’s beta methodology to track reliability metrics to assess and enhance the resilience and dependability of VPU’s services. By tracking and analyzing key reliability indicators, VPU proactively identifies areas for improvement, allocates resources effectively, and implements targeted strategies to maintain an unwavering commitment to providing consistent and uninterrupted power supply to its valued customers. ..

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Three Reliability Indicators
VPU tracks three reliability indicators that the electric utility industry uses to assess and improve the performance of power distribution systems.

System Average Interruption Frequency Index (SAIFI)
Quantifies the frequency of power outages per customer within a year.

System Average Interruption Duration Index (SAIDI)
Measures the duration of power outages experienced by the average customer over a year.

Customer Average Interruption Duration Index (CAIDI)
Provides the average time it takes to restore power after an outage, calculated by dividing SAIDI by SAIFI.

VPU leverages data and industry benchmarks to improve service quality, minimize downtime, and ensure a reliable power supply. VPU benchmarks its performance against data from the U.S. Energy Information Administration (EIA) to ensure alignment with industry standards and best practices.

For the data year 2021, VPU’s average customer experienced 0.5 outages for 38.2 minutes. The restoration time was approximately 76.4 minutes. These metrics place VPU among the top 25 percent of the electric industry in reliability. Being in the top quartile of electric utility reliability benchmarking signifies VPU’s commitment to excellence, ensuring that the utility consistently delivers dependable service, promotes customer satisfaction, and contributes positively to the overall health of the community it serves. ..

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Cause of Outages
Virtually all outages in the City of Vernon are from
accidental causes. Contact with metallic balloons is the primary cause of outages (indicated as a “foreign object” in the chart below). The Other category includes single instances of storm damage, direct strike, and equipment damage. ..

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Energy Resources
VPU’s generation portfolio continues to evolve with state mandates for renewable energy and zerocarbon generation. Vernon participates in the CAISO wholesale energy markets under a metered subsystem agreement (MSSA). Five years ago, natural gas generation from MGS and market purchases supplied approximately 59 percent of VPU’s energy resource mix. The remaining energy came from 7.7 percent nuclear, 1.6 percent large hydroelectric, and approximately 32 percent renewables.

One of VPU’s central goals of the updated Integrated Resource Plan, approved by the City Council in October 2023, is to increase its renewable generation penetration to 60 percent by 2030 as directed by California statute. The chart below shows VPU’s Fiscal Year (FY) 2022-23 Energy Resource Mix. ..

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Natural Gas Resources
Malburg Generating Station (MGS)
MGS is a 139 MW combined-cycle
(CC) plant in the City of Vernon. MGS
includes two Siemens GTXI00
natural gas-fired combustion turbine
generators (CTGs) and a steam
turbine generator (STG). MGS has
duct burners, evaporative inlet air
coolers, and filters that enable the
units to achieve higher levels of
power output in selected modes of
operation.

H. Gonzales Generating Station
Units 1 & 2
The H. Gonzales Generating Station
Unit 1 and Unit 2, located within the
City of Vernon, is a natural gas-fueled
facility powered by two Allison
571-KA combustion turbines (CTs),
each rated at 5.75 MW, operating
solely as peaking units. Both CT units
began commercial operation in 1988.

Each unit is restricted by air quality
regulators to run on natural gas for
no more than six hours per day. ..

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Zero-Emission Resources
Palo Verde Nuclear Station
The Palo Verde Nuclear Generating Station
(PVNGS) is in Tonopah, Arizona,
approximately 55 miles west of Phoenix. It
generates the largest capacity of electricity
in the United States, with the second-largest
rated capacity. The plant consists of three
nuclear electric generating units totaling
3,937 MW. In 1981, VPU signed a “take or
pay” contract with the Southern California
Public Power Authority (SCPPA) for 11 MW
of power from Palo Verde. Under the Power
Purchase Agreement (PPA), VPU must pay
for its proportionate share of power
generated and operating and maintenance
expenses, regardless of the amount of
power taken.

Hoover Dam Hydroelectric Power Plant
The Hoover Dam Hydroelectric Power Plant is
located on the Arizona-Nevada border,
approximately 25 miles southeast of Las
Vegas. This hydropower plant is part of the
larger Hoover Dam facility, which was
completed in 1935 and controls the flow of
the Colorado River. The Hoover Dam facility
consists of 17 generating units and two
service generating units with a total installed
capacity of 2,080 MW. In 1987, Vernon
entered a PPA to purchase 22 MW of firm
capacity from the Western Area Power
Administration (WAPA). SCPPA and other
contractor allocations of Hoover power have
been extended for 50 years beyond the PPA’s
original expiration in 2017, which now expires
in 2067. ..

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Renewable Energy Resources
Puente Hills Landfill Gas Plant
The Puente Hills Landfill Gas-to-Energy
facility is a 46 MW conventional Rankine
Cycle Steam Power Plant that uses
landfill gas as fuel to generate electricity.

The Los Angeles County Sanitation
District (LACSD) constructed the facility
and began full commercial operation in
January 1987.

SCPPA entered a PPA with LACSD for 43
MW of generating capacity from the
facility. VPU, through SCPPA, is entitled
to 10 MW of renewable capacity from
the facility. The PPA expires on
December 31, 2030.

Astoria II Solar Photovoltaic Facility
The Astoria II Solar PV facility is sited on
approximately 840 acres between Los
Angeles and Kern Counties, and
interconnects with the CAISO system at
the SCE Whirlwind Substation. The City
of Vernon, in conjunction with five other
SCPPA municipal utilities, participated in
a PPA with Recurrent Energy to purchase
the output from the Astoria II Solar
facility for 20 years. The PPA entitled
Vernon to 20 MW of capacity from
January 2017 to December 2021.

Starting in January 2022 and extending
until the PPA’s expiration in December
2036, VPU is entitled to 30 MW of
power. ..

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Antelope DSR 1 Solar PV Facility
The Antelope DSR 1 Solar PV facility is in the
City of Lancaster, Los Angeles County. It was
developed by the Sustainable Power Group
(sPower) and came online in December 2016.

Through SCPPA, VPU owns a PPA with
Antelope DSR 1 LLC (a subsidiary of sPower)
for 25 MW of output, 50 percent of the
facility’s 50 MW capacity, through December
31, 2036. In conjunction with the solar facility,
the cities of Riverside and Vernon negotiated
an energy storage option in the PPA, which
provides for the potential to design, build,
and operate an energy storage facility at the
site when economically feasible.

Desert Harvest 2 REC Solar PV Project
On December 17, 2020, SCPPA executed a PPA with EDF Renewables for 70 MW of solar PV capacity from the Desert Harvest 2 Solar PV project. The project is a fixed-tilt PV system that interconnects at the Marketplace substation and is located on 1,200 acres of Bureau of Land Management (BLM) land in Desert Center, California. The REC + Index agreement serves the cities of Anaheim, Burbank, and Vernon.

VPU is entitled to 17.14 percent of the Project’s output or about 12 MW. This PPA, which expires at the end of 2045, only provides renewable energy credits (RECs). ..

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Daggett Solar PV and BESS Project
The Daggett Solar plus BESS project is a single-axis tracker 65 MW solar with a 33 MW 4-hour Lithium-Ion BESS. The commercial operation date (COD) was December 12, 2023. The project, located in the City of Daggett in San Bernardino County, is a portion of an approximately 482 MW solar PV facility. The project is being developed by Clearway Energy Group and is owned by Daggett Solar Power 2 LLC.

On June 24, 2022, SCPPA executed a PPA for 65 MW for the cities of Vernon and Cerritos. The PPA entitles VPU to 60 MW of solar PV output and 30 MW of energy storage. The PPA expires on December 31, 2044.

Sapphire Solar and BESS Project
The Sapphire Solar project is a solar PV and BESS facility being developed by EDF Renewables. Located on 1,140
acres of private land in Riverside County, the project will generate 117 MW of solar power paired with a 59 MW 4-hour Lithium-Ion BESS with a total capacity of 236 MWh.

The project will interconnect on an existing Desert
Harvest transmission line and deliver to the CAISO
System. The bundled energy products include renewable
energy, RECs, Resource Adequacy, and other energy
attributes. The estimated COD is December 31, 2026. VPU has executed a PPA for 39 MW of solar output combined
with 19.67 MW of BESS. The PPA expires on December 1,
2046. ..

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Distribution System Capital Improvement Plan
Investing in infrastructure is crucial for a reliable
electric utility. As such, Vernon proactively assesses its distribution system, identifying opportunities to
bolster reliability, enhance safety, optimize efficiency, and increase operational flexibility. These upgrades
will ensure a robust and adaptable electric
distribution system, powering a brighter future for the City and its customers.

For the past three years, from 2020 through 2023,
VPU has been working on a distribution Capital
Improvement Plan (CIP) focused on strengthening its
infrastructure to prevent outages and grid resiliency
to sustain reliability and maintain high service quality.

The result is VPU’s Five-Year CIP, which is updated as
part of the annual budget process. The plan focuses
on infrastructure upgrades to help achieve a strategic
vision that addresses its five-square-mile service
territory and the unique industrial characteristics that make up the City. The plan defined strategies that involve in-depth evaluation of the condition of the electric system, performing detailed engineering analysis of distribution system capability and performance, and listed construction and upgrade projects to help transform the system into an intelligent, increasingly automated, and technologically advanced electric system.

The CIP addresses the key areas and
construction required for
replacements or upgrades. The
success of the CIP results in the
improved electric system reliability
provided to the City of Vernon
residential and business customers.

The plan also aims to reduce VPU's
carbon footprint by removing
greenhouse gas (GHG) emissions
from the system. The plan includes
replacing switches and circuit
breakers that use sulfur
hexafluoride (SF6) for insulation and
..

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leverages new technologies for replacing and upgrading these units. The plan aims to increase system reliability for the local electric grid and environmental improvements for a sustainable future for the community. VPU estimates that the FY 2024-25 CIP is $25 million. ..

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Customer Service
VPU continues to educate its business community on the importance of efficiency through its no-cost energy audit services. Over the years, businesses have successfully leveraged VPU's energy audit services to identify various efficiency opportunities. The utility's longstanding Custom Incentive Program has consistently provided incentives for commercial electric customers that implement efficiency upgrades that produce above building code savings. For FY 2022-23, VPU's energy efficiency programs generated 3,157 MWh of energy savings, along with $212,934 of efficiency rebates issued to VPU customers for lighting retrofits and refrigeration control upgrades.

VPU has also been a key partner
throughout the customer’s
electrification journey, providing
incentives and expertise in the
transition towards increased
sustainability and GHG emission
reduction. In particular, the utility
issued electric vehicle and charger
rebates for customers who switched
to all-electric equipment. In July 2023,
the utility also opened its first fast
charging depot at 3805 S. Soto Street
to support the growing number of
electric vehicles on the road and help
expand public charging infrastructure
in the region.

VPU customers who are in the cold
storage and food processing business sectors continue to explore refrigeration control upgrades to achieve energy savings. The optimization of refrigeration controls often involves system hardware and software upgrades to maximize efficiency. To help support these complex energy efficiency projects, VPU works with a third-party engineering consultant to conduct the evaluation, measurement, and verification studies to confirm the validity of the savings generated. In addition, LED Lighting retrofits continue to account for a majority of energy savings through VPU's Customized Incentive Program. Customers with 24/7 operations and large warehouses can realize significant savings by upgrading from non-LED to LED lighting technology.
..

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WATER FUND
Introduction
The water supply in Vernon is extremely important for
the well-being of the public, economic growth, and
environmental sustainability. The VPU Water Division
has been working for over a century to ensure that this critical infrastructure is able to provide safe,
dependable, and affordable water services to more
than 800 customers. They distribute around 1.8 billion
gallons of water annually.

To accomplish its mission, the VPU Water Division
consists of professionals who are dedicated to
maintaining the water infrastructure, responding to
any issues as soon as possible, and proactively
planning for the future needs of the water system.

Their knowledge and commitment guarantee that the
water delivered meets the highest quality and service
standards. By prioritizing reliability, sustainability, and affordability, the VPU Water Division team ensures
that the Water Fund continues to succeed financially
and operationally.

Reliability
With a network of 7 Wells, 2 booster plants, and reservoirs with a total capacity of 16.6 million gallons spanning the City, as well as a direct connection to the Metropolitan Water District, the VPU Water Division ensures a consistent supply of high-quality water even during periods of peak demand or drought.

This commitment to reliability is further bolstered by a comprehensive water quality monitoring program that meets rigorous Federal and State regulations.

The VPU Water Division pursues innovative technologies and best practices to ensure high-quality and reliable water service. This includes a bidirectional flushing program, valve exercising programs, prompt repair of leaks to save water loss, and a state-of-the-art real-time UV spectrometer water quality analyzer. ..

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Capital Improvement Plan
The Water Fund continues to implement major capital investments that began in FY 2019-20. The VPU Water Division has made significant capital investments in such projects as the construction of the first new groundwater well since 1989, Well 22; well and reservoir rehabilitation; and an entirely new Supervisory Control and Data Acquisition (SCADA) system along with electrical and fiber service upgrades to ensure the continued reliability of the Water system. This eight-year capital investment program represents a total investment of almost $30 million.
..

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GAS FUND
Introduction
The VPU Gas Division is a reliable and cost-effective natural gas provider for businesses and residents in Vernon. They operate a state-of-the-art natural gas distribution and transmission system that serves over 125 customers. The Division is committed to providing its customers safe,
reliable, and affordable natural gas service and has been nationally recognized for its strong safety record. The VPU Gas Division is staffed with highly qualified technicians who are available 24/7 to respond to emergencies.

In addition to providing natural gas service, the VPU Gas Division offers various energy efficiency rebate programs and incentives to help customers reduce their GHG
emissions.

The services offered by the VPU Gas Division include:

Natural Gas Service
Provides natural gas services to residential, commercial, and industrial customers.

Energy Efficiency Programs
Offers a variety of energy efficiency programs and incentives to help customers reduce their GHG emissions.

Leak Detection and Repair
A team of experienced technicians who can detect and repair leaks immediately to ensure the continued reliability and safety of customers.

Awards
The VPU Gas Division has received the 2021 Safety Management Excellence Award and the Safety Award for calendar years 2018, 2020, 2021, and 2022 from the American Public Gas Association.

Reliability
As the only public utility in the state with a high-pressure natural gas transmission pipeline and one of the largest public gas systems by volume in the United States, the VPU Gas Division performs an annual assessment of its Integrity Management Plan and routinely surveys its gas system for compliance with ..

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regulatory requirements. Further, the VPU Gas Division annually conducts joint training with the Vernon Police Department and the Los Angeles County Fire Department to provide a continued overall understanding of the City’s natural gas system.

Capital Projects
During FY 2022-23, the VPU Gas Division updated its
remote-access SCADA system by installing electronic
recording devices (ERX) in each regulator station. This new system allows for live monitoring of transmission
and distribution pressures, as well as monitoring of
temperatures and alarms.

Additionally, the high-pressure transmission pipeline
system at the Seville lateral underwent a guided-wave
ultrasonic test, and some gouges were discovered. The
system was swiftly repaired, and the lateral was placed back online.

Lastly, the VPU Gas Division conducted a systemwide
inspection of all transmission and distribution valves.

This critical project focused on maintenance to prevent valve leaks, as required by federal regulations.

Gas Energy Efficiency Rebate
The VPU Gas Division is dedicated to supporting its commercial and industrial gas customers in their efforts to decrease energy consumption and GHG emissions. To achieve this, the division provides an Energy Efficiency Rebate Program, which assists customers in saving money, improving energy efficiency, and reducing GHG emissions. The rebate covers a wide range of projects, such as upgrading to highefficiency equipment, implementing energy-saving retrofits, and replacing customer fleets for lower or zero-emission vehicles and forklifts.
..

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FIBER OPTICS FUND
Introduction
The VPU Fiber Optics Division offers high-speed
fiber optic internet service to residents and
businesses in Vernon. The service is up to 5 times
faster than AT&T and has a dedicated service line
for businesses and residents. Fiber Internet
includes 24-hour customer care technical
support, consistent bi-directional high-speed
connection, 99.9% up-time, and Dark Fiber
connections for lease.

Vernon customers have access to a high-quality and reliable internet service, which is constantly monitored in real-time to ensure a stable connection. The dedicated support team is available 24/7 to swiftly resolve any issues that may arise. Customers are assured reliable connectivity and significantly faster internet speeds and bandwidth due to fiber optic cables.

Significant benefits of the VPU Fiber Optics Division services include: Smart Grid Infrastructure Support Fiber optic networks support real-time data collection, fault detection, and remote control of grid components, improving grid stability and reducing power outages.

Diversification of Revenue Streams and Community Development Fiber-based internet services generate additional revenue for VPU and promote economic growth by attracting businesses to the City.

Community Development and Economic Growth
Access to high-speed internet is essential for economic development and attracting businesses to the City.

The VPU Fiber Optic Division is vital in bridging the digital divide by providing fiber-based internet services to underserved areas. ..

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Capital Projects
In 2023, the VPU Fiber Optics Division
underwent a major upgrade of the entire fiber
equipment system. This upgrade included the
installation of cutting-edge technology and
advanced equipment, resulting in faster
internet speeds and higher reliability for
customers. The upgraded system has
significantly improved the data transmission
rate, reducing latency and increasing
bandwidth.

The fiber system upgrade was a strategic move by the VPU Fiber Optics Division to meet the growing demand for high-speed internet services. VPU’s fiber upgrade significantly increased capacity, with the system now capable of handling 100 GB and offering customers up to 1GB fiber circuit service. With this upgrade, the fiber system is now capable of providing seamless and uninterrupted internet services to more customers, even during peak usage hours.

Moreover, the upgraded fiber system not only meets the current needs of customers but also secures the future growth of the fiber network. The new equipment and technology installed during the upgrade are designed to extend the life expectancy of the system and support future expansion and upgrades. The VPU Fiber Optics Division can confidently meet the increasing demand for high-speed internet services, ensuring the continued reliability and overall satisfaction of our customers. ..

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200 E. Sandpointe Avenue, Suite 600
Santa Ana, California 92707
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and Members of the City Council
of the City of Vernon
Vernon, California
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of the Vernon Public Utilities (the “VPU”) of the City of Vernon, California (the “City), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the VPU’s basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of the VPU as of June 30, 2023, and the change in financial position, and cash flows for the year then ended, in accordance with accounting principles generally accepted in the United States of America.

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

Emphasis of Matter
As discussed in Note 1 to the financial statements, the financial statements present only the basic financial statements of the VPU and do not purport to, and do not present fairly the financial statements of the City as of June 30, 2023, the changes in its financial statements, or its cash flows for the year then ended, in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.

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

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

2 Auditors’ Responsibility 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 opinion.

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.

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

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, the Schedule of the Proportionate Share of the Net Pension Liability and Related Ratios, the Schedule of the Contributions - Pension, the Schedule of Proportionate Share of the Net Other Postemployment Benefits Liability and Related Ratios, and the Schedule of Contributions – Other Postemployment Benefits be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by Government Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the Required Supplementary Information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. ..

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

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

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

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

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 8, 2024 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

Santa Ana, California
February 8, 2024 ..

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City of Vernon, California
Vernon Public Utilities
Management’s Discussion and Analysis (Unaudited)
June 30, 2023
5 The management of the Vernon Public Utilities (“VPU”), the electric, gas, water, and fiber optics utilities of the City of Vernon (the “City”), offers the following overview and analysis of the basic financial statements of the VPU for the fiscal year ending June 30, 2023. Management encourages readers to utilize information in the Management’s Discussion and Analysis (“MD&A”) in conjunction with the accompanying basic financial statements.

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

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

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

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

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

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City of Vernon, California
Vernon Public Utilities
Management’s Discussion and Analysis (Unaudited) (Continued) June 30, 2023
6 FINANCIAL HIGHLIGHTS
Net Position
The table below summarizes VPU’s net position as of the current fiscal year, which ended June 30, 2023, and the prior fiscal year, which ended June 30, 2022. The current year’s summary details can be found on pages 18-19 of this report.

City of Vernon
Vernon Public Utilities
Net Position
June 30, 2023 and 2022
2023 2022 $ Variance
Current and other assets $ 189,025,510 $ 190,992,713 $ (1,967,203) Restricted and other assets 39,505,815 48,782,041 (9,276,226) Capital assets 465,066,379 458,427,644 6,638,735
Total assets 693,597,704 698,202,398 (4,604,694)
17,300,862 7,934,285 9,366,577
Current liabilities 79,213,504 77,463,438 1,750,066
Long term liabilities 395,093,373 434,250,999 (39,157,626) Total liabilities 474,306,877 511,714,437 (37,407,560)
3,210,139 12,001,382 (8,791,243)
Net investment in capital assets 191,510,736 168,787,837 22,722,899 Restricted for debt service 34,116,035 32,836,544 1,279,491 Restricted for AB1890 2,933,017 - 2,933,017
Unrestricted (deficit) 4,821,762 (19,203,517) 24,025,279 Total net position $ 233,381,550 $ 182,420,864 $ 50,960,686 Net Position
Deferred Inflows of Resources
Assets
Deferred Outflows of Resources
Liabilities ..

Item 11 Page 160 of 405
City of Vernon, California
Vernon Public Utilities
Management’s Discussion and Analysis (Unaudited) (Continued) June 30, 2023
7 The assets and deferred outflows of resources of the VPU exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $233,381,550 (net position).

The category of VPU’s net position with the largest balance totaling $191,510,736 represents resources that are invested in capital assets.

The second category, restricted for debt service totaling $34,116,035, represents resources that are subject to external restrictions on how they can be used, in this case, bond debt.

The third category, restricted for AB1890 totals $2,933,017, which is used for the electric fund public benefits obligations.

The remaining category of total net position totaling $4,821,762 represents the unrestricted net position.

Activities, Net Position  Total current assets decreased by ($1,984,869) from the prior year mainly due to a decrease in cash and cash investments of ($3,586,615) offset by an increase in accounts receivable, net of allowance, of $498,361 and an increase in accrued unbilled revenue of $745,944.  Capital assets increased by $6,638,735, net of depreciation, from the prior year mainly due to acquisitions of new equipment and facility improvements in the electric fund and water fund.

Additional information can be found in Note 5 of this report.  Total liabilities decreased by $37,407,560 from the prior year, primarily due to a decrease in bonds payable of $59,468,018 and offset by an increase of $19,798,654 in the net pension liability.  The VPU’s total net position in fiscal year 2022-23 was $233,381,550, which increased by $50,960,686 from the prior year due to an increase in the net investment in capital assets by $22,722,899, an increase in the funds restricted for debt service of $1,279,491, restricted funds for AB 1890, the electric fund public benefits program, of $2,933,017, and an increase of the unrestricted (deficit) position of $24,025,279.
..

Item 11 Page 161 of 405
City of Vernon, California
Vernon Public Utilities
Management’s Discussion and Analysis (Unaudited) (Continued) June 30, 2023
8 Changes in Net Position
The table below summarizes the VPU’s changes in net position over the current and prior fiscal years. The details of the current year’s changes in net position can be found on page 21 of this report.

City of Vernon
Vernon Public Utilities
Net Position
June 30, 2023 and 2022
2023 2022 $ Variance
Charges for services $ 262,570,096 $ 238,570,758 $ 23,999,338 Cost of sales 175,871,325 170,314,573 5,556,752
Depreciation 24,226,844 17,904,210 6,322,634
Total operating expenses 200,098,169 188,218,783 11,879,386 Operating income 62,471,927 50,351,975 12,119,952
Intergovernmental - 865,403 (865,403)
Investment income 4,713,298 285,622 4,427,676
Net decrease in fair value of investments (1,626) (8,231) 6,605 Interest expense (14,742,214) (14,163,484) (578,730)
Transfer Out (491,542) - (491,542)
Gain (loss) on disposition of assets (989,157) (2,315,926) 1,326,769 Net nonoperating revenues (expenses) (11,511,241) (15,336,616) 3,825,375 50,960,686 35,015,359 15,945,327
182,420,864 147,405,505 35,015,359
$ 233,381,550 $ 182,420,864 $ 50,960,686
Nonoperating revenues (expenses)
Change in net position
Net position - beginning of year
Net position - end of year
Operating Revenues
Operating Expenses
VPU’s operating income of $62,471,927, less non-operating expenses of $11,511,241, resulted in a change in net position of $50,960,686 during the current year. This change in net position is primarily due to higher billed electric fund revenue, the management and control of operating expenses, and higher investment income as a result of favorable market conditions. ..

Item 11 Page 162 of 405
City of Vernon, California
Vernon Public Utilities
Management’s Discussion and Analysis (Unaudited) (Continued) June 30, 2023
9 CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
The VPU’s investment in capital assets as of June 30, 2023 amounted to $465,066,379 (net of accumulated depreciation and deletions). This investment in capital assets includes land, intangible assets, construction in progress, building, utilities system improvements, and machinery and equipment. The total increase in the VPU's investment in capital assets for the current fiscal year was $6,638,735, net of depreciation and deletions.

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

Outstanding Debt
As of June 30, 2023, the following debt remains outstanding:  $36,870,000 City of Vernon Electric System Revenue Bonds, 2008 Taxable Series A  $5,340,000 City of Vernon Electric System Revenue Bonds, 2012 Taxable Series B  $89,180,000 City of Vernon Electric System Revenue Bonds, 2015 Taxable Series A  $19,305,000 City of Vernon Electric System Revenue Bonds, 2020 Taxable Series A  $153,435,000 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  $14,350,000 City of Vernon Water System Reserve Bonds, 2020 Taxable Series A The City of Vernon Electric System Revenue Bonds, 2008 Taxable Series A, were issued to provide funds to (i) finance the cost of certain capital improvements to the City’s Electric System, (ii) fund a deposit to the Debt Service Reserve Fund, and (iii) to pay costs of issuance of the 2008 Bonds.

The City of Vernon Electric System Revenue Bonds, 2012 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 Taxable 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 the City’s outstanding Electric System Revenue Bonds, 2009 Series A, and (iii) to pay costs of issuance of the 2020 Bonds. ..

Item 11 Page 163 of 405
City of Vernon, California
Vernon Public Utilities
Management’s Discussion and Analysis (Unaudited) (Continued) June 30, 2023
10 The City of Vernon Electric System Revenue Bonds, 2021 Taxable 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 Taxable 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.

As of June 30, 2023, the following Water Fund debt remains outstanding:  $14,350,000 City of Vernon Water System Revenue Bonds, 2020 Taxable Series A  $1,081,395 City of Vernon agreement with the Water Replenishment District of Southern California The City of Vernon Water System Revenue Bonds 2020, Taxable 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, 2023, the ratings on all Electric System Revenue Bonds of the City were BBB+/Stable by S&P and Baa1/Stable by Moody’s. The rating on Water System Revenue Bonds is A-/Stable by S&P.

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

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES
These factors were considered in preparing the VPU’s FY 2023-24 operating and capital budgets.  VPU is committed to providing dependable, high-quality electric, water, natural gas, and fiber services at the lowest competitive rates and the highest standards for reliability.  VPU continues to respond to inflation and supply chain issues, including higher energy, natural gas, materials and supplies, chemicals, and construction costs to expand and maintain the generation, transmission, and distribution infrastructure to continue to provide exceptionally reliable service.
 In support of the City’s business development plans, VPU continues to collaborate with City staff to attract new businesses and industries to Vernon, especially in the development of green commerce. VPU continues to implement its five-year capital plan as well as VPU’s rate strategy that was approved by City Council in August 2023. City Council approved VPU’s Integrated Resource Plan in October 2023. As part of managing VPU’s operating expenses, VPU continues to optimize the operations of the Malburg Generating Station, which continues to result in savings for the City.
..

Item 11 Page 164 of 405
City of Vernon, California
Vernon Public Utilities
Management’s Discussion and Analysis (Unaudited) (Continued) June 30, 2023
11 REQUESTS FOR INFORMATION
This report is designed to provide an overview of the VPU electric, gas, water, and fiber optics utilities of the City of Vernon. Questions concerning the financial results can be addressed to the Finance Department, City of Vernon, 4305 Santa Fe Avenue, Vernon, California, 90058. ..

Item 11 Page 165 of 405
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Item 11 Page 166 of 405

FINANCIAL STATEMENTS
13 ..

Item 11 Page 167 of 405
ASSETS
Current assets:

Cash and investments $ 153,374,024
Accounts receivable, net 14,760,699
Interest receivable 376,475
Accrued unbilled revenue 19,771,908
Due from other government 8,829
Due from the City of Vernon 36
Prepaid items 163,337
Inventory 570,202
Total current assets 189,025,510
Noncurrent assets:

Restricted cash and investments 36,427,615
Prepayment to Southern California Public
Power Authority 977,070
Deposits 2,101,130
Capital assets:

Capital assets, not being depreciated 75,215,406
Capital assets, being depreciated, net 389,850,973
Total capital assets, net 465,066,379
Total noncurrent assets 504,572,194
Total assets 693,597,704

DEFERRED OUTFLOWS OF RESOURCES
Pension related items 14,399,006
Other postemployment benefits related items 1,170,494
Deferred charges on refunding 1,731,362
Total deferred outflows of resources 17,300,862
(Continued)
City of Vernon
June 30, 2023
Statement of Net Position
Vernon Public Utilities
See accompanying Notes to the Basic Financial Statements. 14 ..

Item 11 Page 168 of 405

LIABILITIES
Current liabilities:

Accounts payable 15,397,491
Accrued wages and benefits 422,751
Accrued interest payable 7,064,261
Due to other City funds 3,045,195
Customer deposits payable 660,943
Compensated absences - due within one year 383,328
Bonds payable - due within one year 52,100,000
Note payable - due within one yea
r 139,535
Total current liabilities 79,213,504
Noncurrent liabilities:

Compensated absences - due within one year 766,656
Bonds payable - due within one year 353,244,291
Note payable - due within one yea
r 941,860
Net pension liability 36,362,766
Net other postemployment benefits liability 3,777,800
Total noncurrent liabilities 395,093,373
Total liabilities 474,306,877

DEFERRED INFLOWS OF RESOURCES
Pension related items 1,819,920
Other postemployment benefits related items 1,390,219
Total deferred inflows of resources 3,210,139

NET POSITION
Net investment in capital assets 191,510,736
Restricted for:

Debt service 34,116,035
Assembly Bill 1890 2,933,017
Unrestricted 4,821,762
$ 233,381,550
(Concluded)
Vernon Public Utilities
Total net position
June 30, 2023
Statement of Net Position (Continued)
City of Vernon
See accompanying Notes to the Basic Financial Statements. 15 ..

Item 11 Page 169 of 405
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16 ..

Item 11 Page 170 of 405
OPERATING REVENUES:

Charges for services $ 262,570,096
Total operating revenues 262,570,096
OPERATING EXPENSES:

Cost of sales 175,871,325
Depreciation expense 24,226,844
Total operating expenses 200,098,169
OPERATING INCOME 62,471,927
NONOPERATING REVENUES (EXPENSES):

Investment income 4,713,298
Net decrease in fair value of investments (1,626)
Interest expense (14,742,214)
Transfers out to the City of Vernon (491,542)
Loss on disposal of assets (989,157)
Total nonoperating revenues (expenses) (11,511,241)
CHANGE IN NET POSITION 50,960,686
NET POSITION:

Beginning of year 182,420,864
End of year $ 233,381,550
City of Vernon
Statement of Revenues, Expenses, and Changes in Net Position Vernon Public Utilities
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 17 ..

Item 11 Page 171 of 405
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash receipts from customers and users $ 260,426,084
Cash paid to suppliers for goods and services (159,102,747) Cash paid to employees for services (16,660,655)
Net cash
provided by operating activities 84,662,682

CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES:

Transfer to the City (491,542)
Receipt from other funds 7,203,122
Payment to other funds (6,930,255)
Net cash (used in) nonca
pital financing activities (218,675)

CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:

Acquisition of capital assets (31,907,031)
Proceed from sale of capital assets 52,295
Principal paid on long-term debt (50,499,535)
Interest paid on long-term debt (20,056,214)
Net cash (used in) ca
pital and related financing activities (102,410,485)
CASH FLOWS FROM INVESTING ACTIVITIES:

Interest received 4,424,394
Net cash
provided by investing activities 4,424,394
Net (decrease) in cash and ash equivalents (13,542,084) CASH AND CASH EQUIVALENTS:

Beginning of year 203,343,723
End of yea
r $ 189,801,639
CASH AND CASH EQUIVALENTS:

Cash and investment $ 153,374,024
Restricted cash and investment 36,427,615
Total cash and cash e
quivalents $ 189,801,639
(Continued)
City of Vernon
Statement of Cash Flows
Vernon Public Utilities
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 18 ..

Item 11 Page 172 of 405

OPERATING INCOME TO NET CASH PROVIDED B
Y
OPERATING ACTIVITIES:

Operating income $ 62,471,927
Adjustments to reconcile operating income to net cash
provided by operating activities:

Depreciation 24,226,844
Change in assets and liabilities:
(Increase) decrease in accounts receivable (498,361)
(Increase) decrease in accrued unbilled revenue (745,944) (Increase) decrease in inventories and prepaid items (61,298) (Increase) decrease in customer deposits (899,707)
(Increase) decrease in deferred outflows
of resources related to pension (9,060,209)
(Increase) decrease in deferred outflows
of resources related to OPEB (508,351)
Increase (decrease) in accounts payable (2,075,018)
Increase (decrease) in accrued wages and benefits 16,147 Increase (decrease) in deposits payable 160,775
Increase (decrease) in compensated absences (68,421)
Increase (decrease) in net pension liabilities 19,798,654 Increase (decrease) in OPEB liabilities 696,887
Increase (decrease) in deferred inflows
of resources related to pension (8,603,550)
Increase (decrease) in deferred inflows
of resources related to OPEB (187,693)
Total adjustment 22,190,755
Net cash
provided by operating activities $ 84,662,682
(Concluded)
City of Vernon
Vernon Public Utilities
Statement of Cash Flows (Continued)
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 19 ..

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20 ..

Item 11 Page 174 of 405
21 NOTES TO THE BASIC FINANCIAL STATEMENTS
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Item 11 Page 175 of 405
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Item 11 Page 176 of 405
City of Vernon
Vernon Public Utilities
Index to the Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
23 Note 1 – Summary of Significant Accounting Policies ....................................................................................... 25 A. Financial Reporting Entity ...................................................................................................................... 25 B. Basis of Accounting and Measurement Focus ........................................................................................ 25 C. Pooled Cash ............................................................................................................................................. 26 D. Cash, Cash Equivalents and Investments ................................................................................................ 26 E. Fair Value Measurement ......................................................................................................................... 26 F. Interfund Transactions ............................................................................................................................. 26 G. Receivables.............................................................................................................................................. 26 H. Prepaid Items ........................................................................................................................................... 27 I. Capital Assets .......................................................................................................................................... 27 J. Deferred Outflows and Inflows of Resources ......................................................................................... 27 K. Compensated Absences ........................................................................................................................... 27 L. Long-Term Debt ...................................................................................................................................... 28 M. Pensions ................................................................................................................................................... 28 N. Postemployment Benefits Other than Pensions (OPEB) ......................................................................... 28 O. Net Pension ............................................................................................................................................. 29 P. Use of Estimates ...................................................................................................................................... 29 Note 2 – Cash and Cash Equivalents ................................................................................................................... 29 A. Equity in the Cash Pool of the City of Vernon ........................................................................................ 30 B. Investments.............................................................................................................................................. 30 C. Local Agency Investment Fund (“LAIF”) .............................................................................................. 30 D. Fair Value Measurement ......................................................................................................................... 31 E. Risk Disclosures ...................................................................................................................................... 31 Note 3 – Accounts Receivable ............................................................................................................................... 32 Note 4 – Interfund Transactions .......................................................................................................................... 33 A. Due From/To Other City Funds .............................................................................................................. 33 B. Transfers From/To Other City Funds ...................................................................................................... 33 Note 5 – Capital Assets .......................................................................................................................................... 33 Note 6 – Long-Term Debt ..................................................................................................................................... 34 Note 7 – Compensated Absences .......................................................................................................................... 40 Note 8 – Risk Management ................................................................................................................................... 40 Note 9 – Pension Plan ............................................................................................................................................ 41 A. General Information about the Pension Plans ......................................................................................... 41 B. Net Pension Liabilities, Pension Expenses, and Deferred Net Outflows/Inflows of Resources Related to Pensions ........................................................................ 43 ..

Item 11 Page 177 of 405
City of Vernon
Vernon Public Utilities
Index to the Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2023
24 Note 10 – Other Postemployment Benefits (OPEB) ........................................................................................... 47 A. General Information about the OPEB Plan ............................................................................................. 47 B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of resources related to OPEB .............................................................................................................. 48 Note 11 – Southern California Public Power Authority .................................................................................... 50 A. Take or Pay Contract ............................................................................................................................... 50 B. Power Purchase Commitments ................................................................................................................ 51 ..

Item 11 Page 178 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
25 Note 1 – Summary of Significant Accounting Policies
The accompanying financial statements present only the Vernon Public Utilities (“VPU”) of the City of Vernon, California (the “City”), and do not present fairly the financial position and results of the operations of the City. The VPU accounts for the independent operations and the maintenance of the City’s electric, gas, water, and fiber optics utilities. A fund, or utility, administered by the VPU is an independent fiscal and accounting entity with a self-balancing set of accounts recording resources, related liabilities, obligations, reserves, and equities, segregated for the purpose of carrying out specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations.

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

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

A. Financial Reporting Entity
Ordinance No. 1242, adopted May 16, 2017, requires each utility of the City to be independent with its assets, liabilities, and equities segregated, budgeted, and accounted for in separate funds. Ordinance No. 1240, adopted March 21, 2017, consolidates all utilities-related services under the management of the stand-alone entity “Vernon Public Utilities” for Ordinance No. 1242, adopted May 16, 2017, requires each utility of the City to be independent with its assets, liabilities, and equities segregated, budgeted, and accounted for in separate funds. Ordinance No. 1240, adopted March 21, 2017, consolidates all utilities-related services under the management of the stand-alone entity “Vernon Public Utilities” for better oversight and management of the day-to-day activities of such independent utilities. Each of the City’s utilities, namely the electric, gas, water, and fiber optics utilities, were established by the City under and by virtue of the City Charter and the City Code enacted in 1988. Prior to July 1, 2016, the electric and gas utilities were consolidated and reported as the Light & Power Enterprise for financial reporting purposes. Ordinance No. 1242 continues to require each utility to be independent with its assets, liabilities, and equities segregated, budgeted, and accounted for in separate funds, while Ordinance No. 1240 enables the consolidated financial reporting of those independent utilities for better oversight and management.

B. Basis of Accounting and Measurement Focus
The VPU’s financial statements accounted for using the “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Net Position presents increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred.

VPU distinguishes operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the Electric, Gas, Water, and Fiber Optics Enterprise funds are charges to customers for sales and services. Operating expenses for the proprietary funds include the costs of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. ..

Item 11 Page 179 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
26 Note 1 – Summary of Significant Accounting Policies (Continued) C. Pooled Cash
Part of the VPU’s operating cash balance is pooled with other City funds for deposit purposes. The share of each fund in the pooled cash account is recorded in each of the funds’ book of accounts, and interest income is apportioned to the participating funds based on the relationship of their average monthly balances to the total of the pooled cash.

D. Cash, Cash Equivalents and Investments
For purposes of the statement of cash flows, the VPU considers all highly liquid investments (including restricted cash and investments) with an original maturity of three months or less when purchased to be cash equivalents.

Investment transactions are recorded on the settlement date. Investments in nonparticipating interest-earning investment contracts are reported at cost and all other investments are reported at fair value.

E. Fair Value Measurement
U.S. GAAP defines fair value, establishes a framework for measuring fair value and establishes disclosure about fair value measurement. Investments, unless otherwise specified at fair value in the financial statements, are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Levels of inputs are as follows:
 Level 1 –
Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.  Level 2 –
Inputs, other than quoted prices included in Level 1, that are observable for the assets or liabilities through corroboration with market data at the measurement date.  Level 3 –
Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the assets or liabilities at the measurement date.

F. Interfund Transactions
Outstanding short-term borrowing between funds are reported as “due from/to other funds City funds”. Long-term interfund loans are classified as “advances to/from other City funds” on the statement of net position.

G. Receivables
Trade receivables are shown net of an allowance for uncollectible accounts. Allowances for uncollectible accounts were $1,207,483 of June 30, 2023. Utility customers are billed monthly. The estimated value of services provided, but unbilled at year-end has been included in the accompanying statement of net position. ..

Item 11 Page 180 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
27 Note 1 – Summary of Significant Accounting Policies (Continued) H. Prepaid Items
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements by using purchase method.

The VPU made a prepayment to Southern California Public Power Authority (“SCPPA”) for the VPU’s share of SCPPA’s payoff of the Hoover Center and Air Slots debt. This prepaid amount is amortized over the life of the debt based on the annual debt service obligations. See Note 11 for further information regarding SCPPA.

I. Capital Assets
Capital assets are recorded at cost where historical records are available and at an estimated original cost where no historical records exist. Donated capital assets are valued at their acquisition value. 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.

Capital assets used in operations are depreciated over their estimated useful lives using the straight-line method.

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

J. Deferred Outflows and Inflows of Resources
The statement of net position reports separate sections for deferred outflows of resources and deferred inflows of resources, when applicable.

Deferred Outflows of Resources represents consumption of net assets that applies to future periods.

Deferred Inflows of Resources represents acquisition of net assets that applies to future periods.

K. Compensated Absences
Accumulated vacation is accrued when incurred. Upon termination of employment, the VPU will pay the employee all accumulated vacation leave at 100% of the employee’s base hourly rate. ..

Item 11 Page 181 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
28 Note 1 – Summary of Significant Accounting Policies (Continued) L. Long-Term Debt
Long-term debt and other long-term obligations are reported as liabilities in the appropriate activities. Bonds payable are reported net of the applicable bond premium or discount. Debt issuance costs except for any portion related to prepaid insurance were recognized as expense in the period incurred. Premium or discount not considered as part of the reacquisition price was amortized over the life of the bond.

M. Pensions
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the plans and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value.

The following timeframes are used for pension reporting:

Valuation Date June 30, 2021
Measurement Date June 30, 2022
Measurement Period July 1, 2021 to June 30, 2022
Gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. The amortization period differs depending on the source of the gain or loss. The difference between projected and actual earnings is amortized straight-line over 5 years. All other amounts are amortized straight-line over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) as of the beginning of the measurement period.

N. Postemployment Benefits Other than Pensions (OPEB)
For the purpose of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City’s OPEB Plan and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined on the same basis as they are reported by the Plan. For this purpose, the OPEB Plan recognizes benefit payments when due and payable in accordance with the benefit terms. Investments are reported at fair value, except for money market investments, which are reported at amortized cost.

The following timeframes are reported OPEB reporting:

Valuation Date June 30, 2022
Measurement Date June 30, 2022
Measurement Period July 1, 2021 to June 30, 2022
..

Item 11 Page 182 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
29 Note 1 – Summary of Significant Accounting Policies (Continued) N. Postemployment Benefits Other than Pensions (OPEB) (Continued) Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. The first amortized amounts are recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense. The amortization period differs depending on the sources of gain or loss. The difference between projected and actual earnings is amortized on a straight-line basis over 5 years. All other amounts are amortized on a straight-line basis over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) at the beginning of the measurement period.

O. Net Position
The VPU financial statements utilize a net position presentation. Net position is classified as follows.

Net Investment in Capital Assets – This component of net position consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of retention payable and debt that are attributable to the acquisition, construction, or improvement of those assets, and related deferred outflows and inflows of resources, net of unspent debt proceeds.

Restricted – This component of net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets.

Unrestricted – This component of net position is the amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position.

When expenses are incurred for purposes for which both restricted and unrestricted components of net position are available, the VPU’s policy is to apply the restricted component of net position first, then the unrestricted component of net position as needed.

P. Use of Estimates
The preparation of basic financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Note 2 – Cash and Cash Equivalents
The VPU has the following cash and investments at June 30, 2023:

Cash and investments 153,374,024 $
Restricted cash and investments 36,427,615
Total cash and investments $ 189,801,639
..

Item 11 Page 183 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
30 Note 2 – Cash and Cash Equivalents (Continued)
The VPU’s cash and investments at June 30, 2023, in more detail:

Equity in pooled cash 28,046,792 $
Deposits with financial institutions 9,802,498
Investments 151,952,349
Total cash and investments $ 189,801,639
A. Equity in the Cash Pool of the City of Vernon
The VPU has equity in the cash pool managed by the City. The VPU is a voluntary participant in that pool and the pool is governed by and under the regulatory oversight of the Investment Policy adopted by the City Council of the City. The VPU has not adopted an investment policy separate from that of the City. The amount of the VPU’s cash in this pool is reported in the accompanying financial statements based upon the VPU’s pro rata share of the amount calculated by the City. The balance available for withdrawal is based on the accounting records maintained by the City.

B. Investments
Under the provisions of the City’s investment policy, and in accordance with California Government Code, the following investments are authorized:

Maximum Maximum
Maximum Percentage Investments in Minimum
Authorized Investment Type Maturity Allowed* One Issuer Rating United States Treasury Bills, Bonds and Notes 5 Years None None None State and Local Agency Bonds 5 Years None None None
United States Government Sponsored Agency Securities 5 Years None None None Certain Asset-Backed Securities 5 Years 20% None AA
Negotiable Certificates of Deposit 5 Years 30% None None Banker's Acceptance Notes 180 days 40% 30% None
Commercial Paper 270 days 25% 10% of the issuer outstanding paper A Repurchasement Agreement 1 year None None None
Reverse Repurchase Agreement 92 Days 20% None None
Medium-Term Notes 5 Years 30% None A
Mutual Funds Incesting in Eligible Securities N/A 20% 10% AAA Money Market Mutual Funds N/A 20% 10% AAA
Mortgage-Backed Pass-Through Securities 5 Years 20% None AA State Administered Pool Investment N/A None $75 Million None N/A - Not Applicable
*Excluding amounts held by bond trustee that are not subject to California Government Code restrictions.

C. Local Agency Investment Fund (“LAIF”)
The VPU is a participant in LAIF which is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. As of June 30, 2023, the VPU had $636,435 invested in LAIF.

The fair value of the VPU’s portion in the pool is the same as the value of the pool shares and reported at amortized cost.
..

Item 11 Page 184 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
31 Note 2 – Cash and Cash Equivalents (Continued)
D. Fair Value Measurement
At June 30, 2023, investments are reported at fair value. The following table presents the fair value measurements of investments on a recurring basis and the levels with GASB 72 fair value hierarchy in which the fair value measurements fall at June 30, 2023:

Quoted Prices in Active Significant
Market for Identical Other Observable
Investment Type Assets (Level 1) Inputs (Level 2) Uncategorized Total Local Agency Investment Fund - $ - $ 636,435 $ 636,435 $ Money Market Funds - - 85,179,474 85,179,474
US Treasury bills 29,402,775 - - 29,402,775
Negotiable Certificates of Deposit* - 496,620 - 496,620 Investment with fiscal agent:

Money Market Funds - - 36,237,045 36,237,045
Total $ 496,620 29,402,775 $ 85,815,909 $ 151,952,349 $ * Priced based on significant obervable inputs.

Measurement Input
E. Risk Disclosures
Interest Rate Risk - As a means of limiting its exposure to fair value losses arising from rising interest rates, the City’s investment policy limits investments to a maximum maturity of five years. At June 30, 2023, the VPU had the following investment maturities:
1 Year 1 Year to 3 Years to
Investment Type or Less 3 Years 5 Years Total
Local Agency Investment Fund 636,435 $ - $ - $ 636,435 $ Money Market Funds 85,179,474 - - 85,179,474
US Treasury bills 29,402,775 - - 29,402,775
Negotiable Certificates of Deposit - 247,137 249,483 496,620 Investment with fiscal agent:

Money Market Funds 36,237,045 - - 36,237,045
Total $ 247,137 151,455,729 $ 249,483 $ 151,952,349 $
Remaining Maturity (In Months)
..

Item 11 Page 185 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
32 Note 2 – Cash and Cash Equivalents (Continued)
E. Risk Disclosures (Continued)
Credit Risk – Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City’s investment policy, or debt agreements, and the actual rating, by Standard and Poor’s and Moody’s at June 30, 2023 for each investment type:

Fair Value Minimum Not Required
at Legal to be
Investment Type June 30, 2023 Rating AAA Other Rated
Local Agency Investment Fund 636,435 $ Not Rated - $ - $ 636,435 $ Money Market Funds 85,179,474 AAA 85,179,474 - -
US Treasury bills 29,402,775 N/A 29,402,775 - -
Negotiable Certificates of Deposit 496,620 N/A - 496,620 - Investment with fiscal agent:

Money Market Funds 36,237,045 36,237,045 - -
Total $ 150,819,294 151,952,349 $ 496,620 $ 636,435 $
Concentration of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in any one issuer excluding a 10% limitation on commercial papers, mutual funds, and money market mutual funds and a 30% limitation on banker’ acceptances. The City’s investment policy 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.

Custodial Credit Risk
The Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of a third party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of the third party. At June 30, 2023, none of the City’s deposits or investments were exposed to custodial credit risk.

Note 3 – Accounts Receivable
The VPU’s accounts receivable at June 30, 2023 are as follows:

Accounts Receivabe 15,968,182 $
Less: Allowance for Uncollectible Accounts (1,207,483)
Total accounts Receivable, Net 14,760,699 $
..

Item 11 Page 186 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
33 Note 4 – Interfund Transactions
A. Due From/To Other City Funds
Due to other City funds of $3,045,195 and due from other City funds of $36 resulted from borrowing of cash for temporary purposes. All balances are expected to be reimbursed within the subsequent year.

B. Transfers From/To Other City Funds
For the year ended June 30, 2023, the VPU transferred $491,542 to the City’s General Fund for the reimbursement of Enterprise Resource Planning implementation costs.

Note 5 – Capital Assets
A summary of changes in the capital assets for the VPU for the year ended June 30, 2023 is as follows:

Balance Balance
July 1, 2022 Additions Deletions Transfers June 30, 2023 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 4,774,583 160,763 (884,702) - 4,050,644 Electric utility - Construction in progress 45,453,774 1,287,047 (137,328) (9,768) 46,593,725 Water utility - Construction in progress 6,914,299 5,933,375 - (2,204,043) 10,643,631 Fiber Optic utility - Construction in progress - 266,172 - - 266,172 Total capital assets, not being depreciated 7,647,357 70,803,890 (1,022,030) (2,213,811) 75,215,406 Capital assets, being depreciated:

Electric utility - Production plant 212,362,988 458,731 - - 212,821,719 Electric utility - Transmission plant 3,616,464 - - - 3,616,464 Electric utility - Distribution plant 257,051,650 22,548,011 - 9,768 279,609,429 Electric utility - General plant 9,754,409 305,165 (98,179) - 9,961,395 Water utility plant 23,730,271 787,837 (14,782) 2,204,043 26,707,369 Gas utility plant 27,200,594 - (14,803) - 27,185,791
Fiber Optic utility plant 3,756,609 159,930 - - 3,916,539 Total capital assets, being depreciated 24,259,674 537,472,985 (127,764) 2,213,811 563,818,706 Less accumulated depreciation for:

Electric utility - Production plant (19,391,536) (14,276,852) - - (33,668,388) Electric utility - Transmission plant (2,443,189) (77,553) - - (2,520,742) Electric utility - Distribution plant (92,171,698) (7,999,264) - - (100,170,962) Electric utility - General plant (6,483,727) (381,141) 78,757 - (6,786,111) Water utility plant (14,844,199) (575,512) 14,782 - (15,404,929) Gas utility plant (11,821,433) (706,361) 14,803 - (12,512,991) Fiber Optic utility plant (2,693,449) (210,161) - - (2,903,610) Total accumulated depreciation (24,226,844) (149,849,231) 108,342 - (173,967,733) Total capital assets, being depreciated, net 32,830 387,623,754 (19,422) 2,213,811 389,850,973 Total Capital assets, net $ 7,680,187 458,427,644 $ (1,041,452) $ - $ 465,066,379 $ ..

Item 11 Page 187 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
34 Note 5 – Capital Assets (Continued)
The VPU’s total depreciation expense for the year was $24,226,844, broken down as follows:

Electric Fund 22,734,810 $
Gas Fund 706,361
Water Fund 575,512
Fiber Optics Fund 210,161
Total depreciation expense $ 24,226,844
Note 6 – Long-Term Debt
The following is a summary of changes in VPU’s long-term liabilities for the year ended June 30, 2023:

At June 30, 2023, the outstanding debt obligations were as follows:

Balance Balance Due within Due in More
July 1, 2022 Additions Deletions June 30, 2023 One Year Than One Year Business-Type activities
Public Borrowings:

Revenue Bonds:
2008 Taxable Revenue Bonds - Series A - Electric 37,895,000 $ - (1,025,000) $ 36,870,000 $ 1,120,000 $ 35,750,000 $ 2012 Taxable Revenue Bonds - Series B - Electric 11,505,000 - (6,165,000) 5,340,000 1,170,000 4,170,000 2015 Taxable Revenue Bonds - Series A - Electric 111,720,000 - (22,540,000) 89,180,000 23,520,000 65,660,000 2020 Taxable Revenue Bonds - Series A - Electric 19,305,000 - - 19,305,000 - 19,305,000 2021 Taxable Revenue Bonds - Series A - Electric 173,815,000 - (20,380,000) 153,435,000 21,335,000 132,100,000 2022 Taxable Revenue Bonds - Series A - Electric 52,070,000 - - 52,070,000 4,690,000 47,380,000 2020 Taxable Revenue Bonds - Series A - Water 14,600,000 - (250,000) 14,350,000 265,000 14,085,000 Total Revenue Bonds 420,910,000 - (50,360,000) 370,550,000 52,100,000 318,450,000 Unamortized Premiums/(Discounts):
2008 Taxable Revenue Bonds - Series A - Electric (2,093) - 131 (1,962) - (1,962) 2012 Taxable Revenue Bonds - Series B - Electric (69,987) - 16,797 (53,190) - (53,190) 2015 Taxable Revenue Bonds - Series A - Electric (1,096,863) - 355,739 (741,124) - (741,124) 2020 Taxable Revenue Bonds - Series A - Electric 6,615,877 - (438,622) 6,177,255 - 6,177,255 2021 Taxable Revenue Bonds - Series A - Electric 25,999,586 - (6,550,066) 19,449,520 - 19,449,520 2022 Taxable Revenue Bonds - Series A - Electric 10,179,957 - (732,918) 9,447,039 - 9,447,039 2020 Taxable Revenue Bonds - Series A - Water 535,833 - (19,080) 516,753 - 516,753 Total Unamortized Premiums/(Discounts) 42,162,310 - (7,368,019) 34,794,291 - 34,794,291 Total Public Offering 463,072,310 - (57,728,019) 405,344,291 52,100,000 353,244,291 Direct Borrowing:

Water Replenishment District Note Payable 1,220,930 - (139,535) 1,081,395 139,535 941,860 Total Direct Borrowing 1,220,930 - (139,535) 1,081,395 139,535 941,860 Compensated absences 1,218,405 904,156 (972,577) 1,149,984 383,328 766,656 Total business-Type activities $ 904,156 465,511,645 $ (58,840,131) $ 407,575,670 $ 52,622,863 $ 354,952,807 $ $43,765,000 Electric System Revenue Bonds (2008 Taxable Series A) The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. 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. The total unpaid balance as of June 30, 2023, was $36,870,000. ..

Item 11 Page 188 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
35 Note 6 – Long-Term Debt (Continued)
$43,765,000 Electric System Revenue Bonds (2008 Taxable Series A) (Continued) The future annual debt service requirements for the Taxable Revenue Bonds, Series 2008A-T are as followed:

Year Ending
June 30, Principal Interest Total
2024 1,120,000 $ 3,119,029 $ 4,239,029 $
2025 1,220,000 3,018,526 4,238,526
2026 1,330,000 2,909,004 4,239,004
2027 1,450,000 2,789,603 4,239,603
2028 1,580,000 2,659,464 4,239,464
2029-2033 10,290,000 10,899,422 21,189,422
2034-2038 15,815,000 5,374,978 21,189,978
2039 4,065,000 174,592 4,239,592
Total 36,870,000 $ 30,944,618 $ 67,814,618 $
$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 fiscal year ended 2022, a portion of the Electric System Revenue Bonds were refunded with the issuance of the Electric System Revenue Bonds 2022 Series A. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. 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. The total unpaid balance as of June 30, 2023, was $5,340,000.

The future annual debt service requirements for the Taxable Revenue Bonds, Series 2012B-T are as followed:

Year Ending
June 30, Principal Interest Total
2024 1,170,000 $ 302,613 $ 1,472,613 $
2025 1,305,000 225,269 1,530,269
2026 1,390,000 140,181 1,530,181
2027 1,475,000 47,938 1,522,938
Total 5,340,000 $ 716,001 $ 6,056,001 $
..

Item 11 Page 189 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
36 Note 6 – Long-Term Debt (Continued)
$111,720,000 Electric System Revenue Bonds (2015 Taxable Series A) The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. 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. The total unpaid balance as of June 30, 2023, was $89,180,000.

The future annual debt service requirements for the Taxable Revenue Bonds, Series 2015A-T are as followed:

Year Ending
June 30, Principal Interest Total
2024 23,520,000 $ 3,596,938 $ 27,116,938 $
2025 24,585,000 2,530,618 27,115,618
2026 25,780,000 1,341,193 27,121,193
2027 15,295,000 370,904 15,665,904
$ 7,839,653 89,180,000 $ 97,019,653 $
$71,990,000 Electric System Revenue Bonds (2020 Series A) The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. 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. The total unpaid balance as of June 30, 2023, was $19,305,000.

The future annual debt service requirements for the Taxable Revenue Bonds, Series 2020A-T are as followed:

Year Ending
June 30, Principal Interest Total
2024 - $ 965,250 $ 965,250 $
2025 - 965,250 965,250
2026 - 965,250 965,250
2027 - 965,250 965,250
2028 - 965,250 965,250
2029-2033 8,450,000 3,812,250 12,262,250
2034-2038 10,855,000 1,411,125 12,266,125
Total 19,305,000 $ 10,049,625 $ 29,354,625 $
..

Item 11 Page 190 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
37 Note 6 – Long-Term Debt (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. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The total unpaid balance as of June 30, 2023, was $153,435,000.

The future annual debt service requirements for the Taxable Revenue Bonds, Series 2021A-T are as followed:

Year Ending
June 30, Principal Interest Total
2024 21,335,000 $ 7,405,125 $ 28,740,125 $
2025 22,400,000 6,325,000 28,725,000
2026 23,530,000 5,190,875 28,720,875
2027 31,255,000 3,917,875 35,172,875
2028 54,915,000 2,059,375 56,974,375
Total 153,435,000 $ 24,898,250 $ 178,333,250 $
$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.

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, 2022 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.

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. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The total unpaid balance as of June 30, 2023, was $52,070,000. ..

Item 11 Page 191 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
38 Note 6 – Long-Term Debt (Continued)
$52,070,000 Electric System Revenue Bonds (2022 Series A) (Continued) The future annual debt service requirements for the Taxable Revenue Bonds, Series 2022A-T are as followed:

Year Ending
June 30, Principal Interest Total
2024 4,690,000 $ 2,486,250 $ 7,176,250 $
2025 4,885,000 2,246,875 7,131,875
2026 5,130,000 1,996,500 7,126,500
2027 5,405,000 1,733,125 7,138,125
2028 950,000 1,574,250 2,524,250
2029-2033 5,540,000 7,087,250 12,627,250
2034-2038 7,110,000 5,513,750 12,623,750
2039-2042 18,360,000 2,157,750 20,517,750
Total 52,070,000 $ 24,795,750 $ 76,865,750 $
$14,840,000 Water System Revenue Bonds (2020 Series A)
The bonds are special obligation bonds which are secured by an irrevocable pledge of water revenues payable to bondholders. Under the Indenture of Trust dated May 6, 2020, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Water Enterprise (as those terms are defined in the Indenture of Trust). The total unpaid balance as of June 30, 2023, was $14,350,000.

The future annual debt service requirements for the Taxable Revenue Bonds, Series 2020A-T are as followed:

Year Ending
June 30, Principal Interest Total
2024 265,000 $ 562,850 $ 827,850 $
2025 275,000 549,350 824,350
2026 - 542,475 542,475
2027 - 542,475 542,475
2028 - 542,475 542,475
2029-2033 1,985,000 2,464,250 4,449,250
2034-2038 2,180,000 1,943,625 4,123,625
2039-2043 2,680,000 1,445,000 4,125,000
2044-2048 3,180,000 940,625 4,120,625
2049-2051 3,785,000 331,188 4,116,188
Total 14,350,000 $ 9,864,313 $ 24,214,313 $
..

Item 11 Page 192 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
39 Note 6 – Long-Term Debt (Continued)
Water Replenishment District 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. The total unpaid balance as of June 30, 2023, was $1,081,395.

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.

The future annual debt service requirements are as follows:

Year Ending
June 30, Principal Interest Total
2024 139,535 $ - $ 139,535 $
2025 139,535 - 139,535
2026 139,535 - 139,535
2027 139,535 - 139,535
2028 139,535 - 139,535
2029-2031 383,720 - 383,720
Tota
l $ - 1,081,395 $ 1,081,395 $
Compensated Absences
The balance outstanding at June 30, 2023, was $1,149,984. Refer to note 7 for more information of these liabilities.

Expense Stabilization Fund
The VPU maintains an Expense Stabilization Fund held by a Trustee in such amounts, at such times and from sources as shall be determined by the City in its sole discretion. If an Event of Default under the Indenture has occurred and is continuing, the Trustee shall transfer all moneys in this fund to the debt service interest account and principal account as provided in the Indenture.

Moneys on deposit in this Fund may be withdrawn by the City at any time that no Event of Default exists under the Indenture. As at June 30, 2023, this fund has a balance of $40,161,516.

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. ..

Item 11 Page 193 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
40 Note 6 – Long-Term Debt (Continued)
Credit Ratings
As of June 30, 2023, the ratings on all Electric System Revenue Bonds is Baa1 stable Moody’s and BBB+ stable by S&P and the ratings on all Water System Revenue Bonds is A- by S&P.

Note 7 – Compensated Absences
Under certain circumstances and accordingly to the negotiated labor agreements, VPU employees are allowed to accumulate annual leave.

The following is a summary of compensated absences payable transactions for the year ended June 30 2023:

Balance Balance Due within Due in More
July 1, 2022 Additions Deletions June 30, 2023 One Year Than One Year Compensated absences 1,218,405 $ 904,156 $ (972,577) $ 1,149,984 $ 383,328 $ 766,656 $ Note 8 – Risk Management
The VPU is in the City’s self-insurance program as part of its policy to self-insure certain levels of risk within certain separate lines of coverage to maximize cost savings.

The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets, errors, and omissions; injuries to employees, and natural disasters. The City utilizes insurance policy(s) to transfer these risks. Each policy has either self-insured retention or deductible, which are parts of the City’s risk financing program. These expenses are paid on a cash basis as they are incurred. There have been no significant settlements or deductions in insurance coverage during the past three fiscal years.

Starting in fiscal year 2010, the City chose to establish risk financing in the City’s General Fund, whereby assets are set aside for claim-litigation settlements associated with the abovementioned risks up to their self-insured retentions or policy deductibles. Athens Administrators Inc. is the third-party administrator for the City’s workers’ compensation program and they provide basic services for general liability claims and litigation. ..

Item 11 Page 194 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
41 Note 8 – Risk Management (Continued)
The insurance limits for the fiscal year 2023 are as follows:

Insurance Type Program Limits Deductible/SIR (Self-Insured Retention) 1st Excess Liability $5,000,000 $2 Million
$3 Million Law Enforcement
2nd Excess Liability $5,000,000 $5,000,000
3rd Excess Liability $5,000,000 $10,000,000
4th Excess Liability $5,000,000 $15,000,000
Excess Workers Compensation $50,000,000 $1,000,000
$1.5 Million Presumptive Loss
Property - Power Generating $100,000,000 Various
Property - Residentia
l $7,950,653 $2,500
Property - Municipa
l $59,614,930 $25,000
Commercial Propert/EQ and FL $50,000,000 -
Government Crime $1,000,000 $25,000
Premise Pollution/Environmental Impairment $5,000,000 $25,000 $5,000,000 per Clai
m $50,000 Utility Locs.
$100,000 Natural Gas Pipeline
Cyber Liability $5,000,000 $100,000
Auto Physical Damage $10,000,000 $5,000
Residential Property Insurance $7,950,653 $2,500
Terroris
m $100 Million Property Terrorism $0
$5 Million Terrorism Liabilty
$5 Million Active Shoote
r
Special Events $2,000,000 $1,000,000 Each Occurrence
Note 9 – Pension Plan
A. General Information about the Pension Plans
Plan Descriptions
The City contribution to the California Public Employees Retirement System (“CalPERS”), an agent multipleemployer defined benefit pension plan for miscellaneous employees and a cost-sharing multiple-employer defined benefit plan for safety employees. CalPERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by state statute and City ordinance. A full description of the pension plan regarding number of employees covered, benefit provisions, assumptions (for funding, but not accounting purposes), and membership information are listed in the June 30, 2021 Annual Actuarial Valuation Report. This report and CalPERS’ audited financial statements are publicly available reports that can be obtained at CalPERS’ website under Forms and Publications. ..

Item 11 Page 195 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
42 Note 9 – Pension Plan (Continued)
A. General Information about the Pension Plans (Continued) Benefits Provided
CalPERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions under both plans are established by State Statute and City Resolution as follows:

Classic PEPRA
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 service 5 years service Benefit payments Monthly for life Monthly for life
Retirement age 50 yrs 52 yrs
Monthly benefits, as a % of eligible
compensation

2.0%-2.7%,
50 yrs -55 yrs,
res
pectively

1.0%-2.0%,
52 yrs -62 yrs,
res
pectively
Required employee contribution rate (FY22-23) 8.00% 6.25% Required employer contribution rate (FY22-23) 11.50% 11.50% Required employer contribution rate (FY21-22) 11.38% 11.38% Classic PEPRA
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 service 5 years service Benefit payments Monthly for life Monthly for life
Retirement age 50 yrs 50 yrs
Monthly benefits, as a % of eligible 3%, 50 yrs 2.0% - 2.7% 50 yrs - 57 yrs
repectively
Required employee contribution rate (FY22-23) 9.00% 13.75% Required employer contribution rate (FY22-23) 23.39% 20.70% Required employer contribution rate (FY21-22) 22.78% 22.78% Miscellaneous
Safet
y
Benefits Provided
Participants are eligible for non-industrial disability retirement if they become disabled and have at least 5 years credited service. There is no special age requirement. The standard non-industrial disability retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service years.

Industrial disability benefits are not offered to miscellaneous employees. The City provides industrial disability retirement benefits to safety employees only. The industrial disability retirement benefit is a monthly allowance equal to 50 percent of final compensation. ..

Item 11 Page 196 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
43 Note 9 – Pension Plan (Continued)
A. General Information about the Pension Plans (Continued) Benefits Provided (Continued)
An employee's beneficiary may receive the basic death benefit if the employee becomes deceased while actively employed. The employee must be actively employed with the City to be eligible for this benefit. An employee's survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this basic death benefit. The basic death benefit is a lump sum in the amount of the employee's accumulated contributions, where interest is currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months’ salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death. Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated survivor(s), or to the retiree’s estate.

Benefit terms provide for annual cost-of-living adjustments to each employee’s retirement allowance. Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually adjusted on a compound basis up to 2 percent.

Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute to the difference between the actuarially determined rate and the contribution rate of employees. For the year ended Jun 30, 2023, the VPU’s share of employer contributions made to the plans was $3,716,823.

B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions Assumptions
The net pension liability of each of the Plans is measured as of June 30, 2022, using an annual actuarial valuation as of June 30, 2021, rolled forward to June 30, 2022, using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

Actuarial Cost Method
Actuarial Assumptions:

Discount Rate
Inflation
Salary Increases
Mortality Rate Table(1)
Post Retirement Benefit Increase
(1)The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study for the period from 2001 to 2019. Pre-retirement and Post-retirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 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 November 2021 that can be found on the CalPERS website.

Derived using CalPERS’ Membership Data for all Funds.

The lesser of contract COLA or 2.30% until Purchasing Power Protection. Allowance floor on purchasing power applies, 2.30% thereafter
Varies by Entry Age and Service

2.30%

6.90%
Entry Age Normal
..

Item 11 Page 197 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
44 Note 9 – Pension Plan (Continued)
B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (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 Asset
Asset Class
1 Allocation Real Return1,2
Global Equity - Cap-weighted 30.00% 4.54%
Global Equity - Non-Cap-weighted 12.00% 3.80%
Private Equity 13.00% 7.28%
Treasury 5.00% 0.27%
Mortgage-backed Securities 5.00% 0.50%
Investment Grade Corporates 10.00% 1.56%
High Yield 5.00% 2.27%
Emerging Market Debt 5.00% 2.48%
Private Debt 5.00% 3.57%
Real Assets 15.00% 3.21%
Leverage -5.00% -0.59%
100%
1 An expected inflation of 2.30% used for this period. 2 Figures are based on the 2021 Asset Liability Management study.

Discount Rate
The discount rate used to measure the total pension liability was 6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on the 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. ..

Item 11 Page 198 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
45 Note 9 – Pension Plan (Continued)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Proportionate Share of Net Pension Liability – Allocation of the City’s Pension Plans to the VPU The VPU’s net pension liability for the Plans is measured as the proportionate share of the aggregate net pension liability of the City’s miscellaneous agent multiple-employer plan and safety cost-sharing plan. The VPU’s proportionate share of the aggregate net pension liability was based on the VPU’s current year share of contributions of the pension plans relative to the City’s total current year contributions to the pension plans.

The VPU’s proportionate share of the aggregate net pension liability for the pension plans as of the measurement date ended June 30, 2021 and 2022 were as follows:

Total Pension Plan Fiduciary Net Net Pension
LiabilityPosition Liability/(Asset)Proportionate
(a) (b) (c) = (a) - (b) Share
Balance at 6/30/21 (Valuation Date) 120,548,668 $ 103,984,555 $ 16,564,113 $ 18.82% Balance at 6/30/22 (Measurement Date) 118,447,456 82,084,690 36,362,766 23.05% Net Changes during 2021-2022 (2,101,212) (21,899,865) 19,798,653 4.23% Increase (Decrease)
Pension Expense and Deferred Outflows and Inflows of Resources For the measurement period ended June 30, 2022, the VPU recognized its proportionate share of the aggregate pension expense of the plans which totaled $975,584. At June 30, 2023, the VPU reported its proportionate share of the aggregate deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows
of Resources of Resources
Contribution made after measurement perio
d $ - 3,717,613 $
Changes of assumptions 3,332,750 (253,180)
Difference between expected and actual experien
c - 1,112,127
Net difference between projected and actual earning
on pension plan investments 5,542,226 -
Adjustment due to differences in proportions 694,290 -
Difference betwwen City contributions an
d
proportionate share of contribution - (1,566,740) Total $ 14,399,006 $ (1,819,920) ..

Item 11 Page 199 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
46 Note 9 – Pension Plan (Continued)
B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Pension Expense and Deferred Outflows and Inflows of Resources (Continued) $3,717,613 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the collective net pension liability in the year ending June 30, 2024. Differences between projected and actual investment earnings are amortized on a five-year straight-line basis and all other amounts are amortized over the expected average remaining service lives of all members that are provided with benefits. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Measurement Period
Ending June 30 Total
2023 2,660,594 $
2024 1,993,223
2025 877,654
2026 3,330,002
Total 8,861,473 $
Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the VPU’s proportionate share of the Plans’ combined net pension liability, calculated using a discount rate of 6.90%, as well as what the VPU’s proportionate share of the Plans’ combined net pension liability would be if it were calculated using a discount rate that is a 1-percentage point lower (5.90%) or a 1-percentage point higher (7.90%) than the current rate:

Discount Rate Current Discount Discount Rate
- 1% (5.90%) Rate (6.90%) + 1% (7.90%)
Miscellaneous Plan 19,895,594 $ 13,048,026 $ 7,456,988 $ Safety Plan 33,107,760 $ 23,314,740 $ 15,311,158 $
VPU's Net Pension Liability/(Asset)
Pension Plan Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

Payable to the Pension Plan
At June 30, 2023, the VPU had no outstanding amount of contributions to the pension plans required for the year ended June 30, 2023. ..

Item 11 Page 200 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
47 Note 10 – Other Postemployment Benefits (“OPEB”)
A. General Information about the OPEB Plan
The other postemployment benefits (“OPEB”) described in the following paragraphs relate to the City’s OPEB plan. The VPU’s share of the net pension liability of the City’s OPEB Plan is reported as a cost-sharing plan in these financial statements since the VPU’s operations are handled by City employees who are eligible to participate in the City’s OPEB plan.

Benefits Provided
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 service have been with the City of Vernon. Resolution 2011-127 sets forth the MOU 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 MOU and the Vernon Police Officers’ Benefit Association MOU. 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.

Contributions
The City has established an irrevocable OPEB trust with assets dedicated to paying future retiree medical benefits.

The City intends to contribute 100% or more of the actuarially determined contribution for the explicit subsidy liability only. The portion of the liability due to the implicit subsidy is not prefunded but is paid as benefits come due.

For the fiscal year ended June 30, 2023, the VPU’s proportionate share of contribution made to the trust was $354,744, and $362,434 for retiree premiums, resulting in a total contribution of $717,178. ..

Item 11 Page 201 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
48 Note 10 – Other Postemployment Benefits (“OPEB”) (Continued) B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of resources related to OPEB The OPEB liability was measured as of June 30, 2022, and total liability used to calculate the net OPEB liability was determined by an actuarial valuation as of June 30, 2022.

Significant Actuarial Assumptions Used for Total OPEB Liability The total OPEB liability, measured as of June 30, 2022, was determined using the following actuarial assumptions:

Actuarial Cost Method
Actuarial Assumptions:

Asset Valuation Method
Inflation
Salary Increases
Long Term return on Assets
Discount Rate
Mortality Improvement
Healthcare Trend
CalPERS 2021 Experience Study; Project with MP Scale
Based on 2022 Getzen model with in inflation rate of 7.00% non-Medicare / 5.50% Medicare decreasing gradually to an ultimate rate of 3.73% by 2075

6.00%
Entry Age Normal
Market value of assets

2.30%

2.80% wage inflation plus seniority, merit, and promotion salary increases based on CalPERS Expenditure Study and Review of Actuarial Assumptions published in November
2021

6.00%
Change in assumptions
Discount rate changed from 6.25% at June 30, 2021 to 6.00% at June 30, 2022. Healthcare trend rate assumption and mortality improvement scale were updated.

Discount Rate
The discount rate used to measure the total OPEB liability was 6.00%. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan's 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 OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

Long-Term Expected Rate of Return
Long-term
Target Expected Real
Asset Class Allocation Rate of Return
Global Equity 49.00% 4.50%
Fixed Income 23.00% 1.40%
Global Real Estate (REITs) 20.00% 3.70%
Treasury Inflation Protected Securities (TIPS) 5.00% 0.50% Commodities 3.00% 1.10%
Total 100.00%
* Preliminary estimate, pending confirmation by CalPERS ..

Item 11 Page 202 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
49 Note 10 – Other Postemployment Benefits (“OPEB”) (Continued) B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of resources related to OPEB (Continued)
The VPU’s proportionate share of the net OPEB liability as of the measurement dates ended June 30, 2021 and 2022 was as follows:

Total OPEB Plan Fiduciary Net Net OPEB
Liability Position Liability/(Asset) Proportionate
(a) (b) (c) = (a) - (b) Share
Balance at June 30, 2021 5,153,673 $ 2,072,760 $ 3,080,913 $ 18.82% Balance at June 30, 2022 (Measurement Date) 6,299,907 2,522,106 3,777,801 23.05% Net changes during 2021-22 1,146,234 $ 449,346 $ 696,888 $ 4.23% Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the VPU’s proportionate share of the net OPEB liability if it were calculated using a discount rate that is 1% point lower (5.00%) or 1% point higher (7.00%) than the current rate:

Discount Rate Current Discount Discount Rate
-1% (5.00%) Rate (6.00%) +1 % (7.00%)
$ 3,777,800 4,493,670 $ 3,177,646 $
Plan's Net OPEB Liability
Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates The following presents the VPU’s proportionate share of the net OPEB liability if it were calculated using a healthcare cost trend rates that are 1% point lower (5.3% 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 Cost Healthcare Cost Healthcare Cost
Trend Rate - 1% Trend Rate Trend Rate + 1%
$ 3,777,800 3,503,535 $ 4,043,154 $
Plan's Net OPEB Liability
OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB For the year ended June 30, 2023, the VPU recognized its proportionate share of the OPEB credit of $(161,730).

At June 30, 2023, the VPU reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows Deferred Inflows
of Resources of Resources
Contribution made after measurement period 717,178 $ - $ Changes in assumptions 190,784 (592,146)
Difference between expected and actual experience 24,230 (798,073) Net difference between projected and actual earning on
OPEB plan investments 238,302 -
Total 1,170,494 $ (1,390,219) $
..

Item 11 Page 203 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
50 Note 10 –Other Postemployment Benefits (“OPEB”)
B. Net OPEB Liability, OPEB Expenses, and Deferred Outflows/Inflows of resources related to OPEB (Continued) OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB (Continued) The $717,178 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ended June 30, 2024. Differences between projected and actual investment earnings are amortized on a five-year straight-line basis and all other amounts are amortized over the expected average remaining service lives of all members that are provided with benefits. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as OPEB expense as follows:

Deferred
Measurement Period Outflows/(Inflows)
Ending June 30 of Resources
2023 (450,496) $
2024 (447,316)
2025 (54,953)
2026 72,699
2027 (38,486)
Thereafter (18,351)
Total (936,903) $
Payable to the OPEB Plan
At June 30, 2023, the VPU had no outstanding amount of contributions to the OPEB plan required for the year ended June 30, 2023.

Note 11 – Southern California Public Power Authority
The Southern California Public Power Authority (“SCPPA”) was formed in 1980 as a not for profit joint powers agency. SCPPA is currently comprised of 11 Southern California cities and an irrigation district. The SCPPA’s purpose is 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 1160 Nicole Ct Glendora, CA 91740.

A. Take or Pay Contract
The SCPPA’s interest of 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 SCPPA, is responsible for financing its share of construction and operating costs. The City has the following “take or pay” contract with the SCPPA: ..

Item 11 Page 204 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
51 Note 11 – Southern California Public Power Authority (Continued) A. Take or Pay Contract (Continued)
Palo Verde Project
The SCPPA purchases a 5.91% interest in the Palo Verde Nuclear Generating Station (the “Station”), a nuclearfired generating station near Phoenix, Arizona, from 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 SCPPA’s interest in the station.

Between 1983 and 2008, the SCPPA issued $3.266 billion in debt of Power Project Revenue Bonds for the Station to finance the bonds and the purchase of the SCPPA’s share of the Station and related transmission right. The bonds are not obligations of any member of the SCPPA or public agency other than the SCPPA. Under a power sales contract with the SCPPA, the City is obliged 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 2023 was $3,730,000. The City expects no significant increases in costs related to its nuclear resources.

B. Power Purchase Commitments
The SCPPA 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 of energy. The City has entered into power purchase agreements with the SCPPA related to the following projects:

Astoria 2 Solar Project
On July 23, 2014, the SCPPA 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 SCPPA, 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 for fiscal year 2023 was $10,114,000.

Puente Hills Landfill Gas-to-Energy Project
On June 25, 2014, the SCPPA 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 SCPPA on January 1, 2017 for a term of 10 years. The City contacted to purchase 23.2558% of the output. The City’s proportional share of the costs during fiscal year 2023 was $6,616,000. ..

Item 11 Page 205 of 405
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
52 Note 11 – Southern California Public Power Authority (Continued) B. Power Purchase Commitments (Continued)
Antelope DSR 1 Solar Project
On July 16, 2015, the SCPPA, 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’s proportionate share of costs during fiscal year 2023 was $6,124,000.

Hoover Dam Hydroelectric Power Plant
The Hoover Dam Hydroelectric Power Plant is located on the Arizona-Nevada border, approximately 25 miles southeast of Las Vegas. This hydropower plant is part of the larger Hoover Dam facility, which was completed in 1935 and controls the flow of the Colorado River. The Hoover Dam facility consists of 17 generating units and two service generating units with a total installed capacity of 2,080 MW. In 1987, Vernon entered a power purchase agreement to purchase 22 MW of firm capacity from the Western Area Power Administration. SCPPA and other contractor allocations of Hoover power have been extended for 50 years beyond the power purchase agreement’s original expiration in 2017, which now expires in 2067. The City’s proportionate share of costs during fiscal year 2023 was $574,973.

Desert Harvest 2 REC Solar PV Project
On December 17, 2020, SCPPA executed a power purchase agreement with EDF Renewables for 70 MW of solar PV capacity from the Desert Harvest 2 Solar PV project. The project is a fixed-tilt PV system that interconnects at the Marketplace substation and is located on 1,200 acres of Bureau of Land Management land in Desert Center, California. The REC + Index agreement serves the cities of Anaheim, Burbank, and Vernon. VPU is entitled to

17.14 percent of the Project’s output or about 12 MW. This power purchase agreement, which expires at the end of 2045, only provides renewable energy credits (RECs). The City’s proportionate share of costs during fiscal year 2023 was $627,755.

Daggett Solar PV and BESS Project
The Daggett Solar plus BESS project is a single‑axis tracker 65 MW solar with a 33 MW 4‑hour Lithium‑Ion BESS. The commercial operation date was December 12, 2023. The project, located in the City of Daggett in San Bernardino County, is a portion of an approximately 482 MW solar PV facility. The project is being developed by Clearway Energy Group and is owned by Daggett Solar Power 2 LLC.

On June 24, 2022, SCPPA executed a PPA for 65 MW for the cities of Vernon and Cerritos. The PPA entitles VPU to 60 MW of solar PV output and 30 MW of energy storage. The power purchase agreement expires on December 31, 2044.

Sapphire Solar Project
On January 17, 2023, the SCPPA, entered into a power purchase agreement with EDF Renewables North America for 39 MW solar power and up to approximately 19.7 MW of battery storage with associated green attributes through the Sapphire Solar Project for a projected annual amount of $6,665,000 over a 20-year term. The expected start date of the project is December 31, 2025. ..

Item 11 Page 206 of 405

REQUIRED SUPPLEMENTARY INFORMATION
(UNAUDITED)
53 ..

Item 11 Page 207 of 405
Fiscal year 2017 2018 2019 2020 2021
Measurement period 2015-16 2016-17 2017-18 2018-19 2019-20 VPU's proportion of the net
pension liability 15.41% 15.55% 14.86% 15.47% 16.99%
VPU's proportionate share of the
net pension liability 14,675,830 $ 17,052,279 $ 16,866,107 $ 18,692,374 $ 22,982,998 $ Covered payroll
2 $ 4,210,103 2,026,477 $ 4,577,147 $ 4,418,536 $ 4,203,972 $ VPU's proportionate share of the net
pension liability as a percentage of
covered payroll 724.20% 405.03% 368.49% 423.04% 546.70% VPU Fiduciary Net Position as a
percentage of the total pension liability 78.91% 77.85% 77.68% 76.15% 74.79% 12 Notes to Schedule:

Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry Age Actuarial Cost Method
Amortization method Level percentage of payroll
Asset valuation method Fair Market Value
Inflation 2.500%
Salary increases varies by entry age and service
Payroll Growt
h 2.750%
Investment rate of return
Retirement age
Mortality
The probabilities of Retirement are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015.

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 include 15 years of projected mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries.

City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Pension Liability and Related Ratios Includes one year’s payroll growth using 2.80 percent payroll growth assumption for fiscal years ended June 30, 2022; 2.75 percent payroll growth assumption for fiscal years ended June 30, 2018-21; 3.00 percent payroll growth assumption for fiscal years ended June 30, 2015-17.

The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2022-23 were derived from the June 30, 2020 funding valuation report.
7% Net of Pension Plan Investment and Administrative Expenses; includes Inflation.

Vernon Public Utilities
Last Ten Fiscal Years
1 California Public Employees' Retirement System Defined Pension Plan For the Year Ended June 30, 2023
Fiscal year ended June 30, 2017 was the first fiscal year the City allocated a portion of the net pension liability to the VPU. Additional years of information will be displayed as it becomes available.
54 ..

Item 11 Page 208 of 405
Fiscal year 2022 2023
Measurement period 2020-21 2021-22
VPU's proportion of the net
pension liability 18.82% 23.05%
VPU's proportionate share of the
net pension liability $ 36,362,766 16,563,816 $
Covered payroll
2 $ 4,967,127 3,902,610 $
VPU's proportionate share of the net
pension liability as a percentage of
covered payroll 424.43% 732.07%
VPU Fiduciary Net Position as a
percentage of the total pension liability 85.45% 69.30% City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Pension Liability and Related Ratios (Continued) Vernon Public Utilities
For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 California Public Employees' Retirement System Defined Pension Plan (Continued) 55 ..

Item 11 Page 209 of 405
Fiscal year 2017 2018 2019 2020 2021
Actuarially determined contribution 1,403,235 $ 1,475,490 $ 1,622,690 $ 1,908,522 $ 2,145,491 $ Contributions in relation to the
actuarially determined contribution (1,403,235) (1,475,490) (1,622,690) (1,908,522) (2,145,491) Contribution deficiency (excess) - $ - $ - $ - $ - $
Covered payroll
2 $ 4,577,147 4,210,103 $ 4,418,536 $ 4,203,972 $ 3,902,610 $ Contributions as a percentage of covered payroll 33.33% 32.24% 36.72% 45.40% 54.98% 12 Notes to Schedule:

Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry Age Actuarial Cost Method
Amortization method Level percentage of payroll
Asset valuation method Fair Market Value
Inflation 2.500%
Salary increases varies by entry age and service
Payroll Growth 2.750%
Investment rate of return
Retirement age
Mortality
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2022-23 were derived from the June 30, 2020 funding valuation report.
7% Net of Pension Plan Investment and Administrative Expenses; includes Inflation.

The probabilities of Retirement are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015.

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 include 15 years of projected mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries.

City of Vernon
Includes one year’s payroll growth using 2.80 percent payroll growth assumption for fiscal years ended June 30, 2022; 2.75 percent payroll growth assumption for fiscal years ended June 30, 2018-21; 3.00 percent payroll growth assumption for fiscal years ended June 30, 2015-17.

Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions
Vernon Public Utilities
For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 California Public Employees' Retirement System Defined Pension Plan Fiscal year ended June 30, 2017 was the first year the City allocated a portion of the net position to the VPU. Additional years will be displayed as it becomes available.
56 ..

Item 11 Page 210 of 405
Fiscal year 2022 2023
Actuarially determined contribution $ 3,717,613 2,674,893 $ Contributions in relation to the
actuarially determined contribution (3,717,613) (2,674,893) Contribution deficiency (excess) $ - - $
Covered payroll
2 $ 5,106,207 4,967,127 $
Contributions as a percentage of covered payroll 53.85% 72.81% City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions (Continued)
Vernon Public Utilities
For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 California Public Employees' Retirement System Defined Pension Plan (Continued) 57 ..

Item 11 Page 211 of 405
Fiscal year 2018 2019 2020 2021 2022
Measurement period 2016-17
1 2017-18 2018-19 2019-20 2020-21
VPU's proportion of the net
OPEB liability 15.55% 14.86% 15.47% 16.99% 18.82%
VPU's proportionate share of the
net OPEB liability 3,887,475 $ 3,432,725 $ 3,391,408 $ 3,433,306 $ 3,080,913 $ Covered - employee payrol
l $ 3,587,387 3,588,945 $ 5,228,211 $ 4,944,915 $ 5,385,241 $ VPU's proportionate share of the net
OPEB liability as a percentage of
covered - employee payrol
l 108.32% 95.69% 64.87% 69.43% 57.21%
VPU's fiduciary net position as a
percentage of the total
OPEB liability 2.83% 8.62% 16.30% 25.70% 40.20%
1 City of Vernon
Vernon Public Utilities
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Other Postemployment For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 Benefits Liability and Related Ratios
Other Postemployment Benefits ("OPEB") Plan
Historical information is presented only for measurement periods after GASB 75 was implemented in fiscal year of 2017-18 (measurement period of 2016-17). Additional years of information will be displayed as it becomes available. 58 ..

Item 11 Page 212 of 405
Fiscal year 2023
Measurement period 2021-22
VPU's proportion of the net
OPEB liability 23.05%
VPU's proportionate share of the
net OPEB liability $ 3,777,800
Covered - employee payrol
l $ 5,850,485
VPU's proportionate share of the net
OPEB liability as a percentage of
covered - employee payrol
l 64.57%
VPU's fiduciary net position as a
percentage of the total
OPEB liability 40.03%
City of Vernon
Vernon Public Utilities
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Other Postemployment For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 Benefits Liability and Related Ratios (Continued)
Other Postemployment Benefits ("OPEB") Plan (Continued) 59 ..

Item 11 Page 213 of 405
Fiscal yea
r 2018 2019 2020 2021 2022
Actuarially determined contribution 288,398 $ 400,166 $ 298,886 $ 261,372 $ 289,525 $ Contributions in relation to the
actuarially determined contribution (221,199) (444,230) (605,820) (531,940) (551,938) Contribution deficiency (excess) 67,199 $ (44,064) $ (306,934) $ (270,568) $ (262,413) $ Covered-employee payrol
l $ 5,228,211 3,587,387 $ 4,944,915 $ 5,385,241 $ 5,850,485 $ Contributions as a percentage of covered-employee payroll 6.17% 8.50% 12.25% 9.88% 9.43% 1 Notes to Schedule:

Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry Age Normal Cost Method
Amortization method Level percentage of payroll
Asset valuation method Market valuation of assets
Discount Rate 6.25%
Payroll Growth 3.00%
General Inflation Rate 2.5% per year
Health Trend 5.6 in FY2023, step down 0.5% per year to 3.9% by 2076 The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2022-23 were derived from the June 30, 2020 funding valuation report.

Historical information is presented only for measurement periods after GASB 75 was implemented in fiscal year of 2017-18 (measurement period of 2016-17). Additional years of information will be displayed as it becomes available.

City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Other Postemployment Benefits For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 Other Postemployment Benefits ("OPEB") Plan
Vernon Public Utilities
60 ..

Item 11 Page 214 of 405
Fiscal yea
r 2023
Actuarially determined contribution $ 323,302
Contributions in relation to the
actuarially determined contribution (717,178)
Contribution deficiency (excess) $ (393,876)
Covered-employee payrol
l $ 5,644,571
Contributions as a percentage of covered-employee payroll 12.71% City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Other Postemployment Benefits (Continued) For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 Other Postemployment Benefits ("OPEB") Plan (Continued) Vernon Public Utilities
61 ..

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62 ..

Item 11 Page 216 of 405

SUPPLEMENTARY INFORMATION
63 ..

Item 11 Page 217 of 405
Electric Gas Water Fiber Optics Eliminating
Fund Fund Fund Fund Entry Total
ASSETS
Current assets:

Cash and investment
s $ 16,776,807 117,511,564 $ 17,994,763 $ 1,090,890 $ - $ 153,374,024 $ Accounts receivable, ne
t 191,638 13,592,491 943,517 33,053 - 14,760,699
Interest receivable - 367,547 8,928 - - 376,475
Accrued unbilled revenu
e 1,025,232 17,231,152 1,515,524 - - 19,771,908
Due from other governmen
t - 8,829 - - - 8,829
Due from other City fun
d - - 18,247 36 (18,247) 36
Prepaid expenses - 159,007 4,330 - - 163,337
Inventory - 570,202 - - - 570,202
Total current assets 17,993,677 149,440,792 20,485,309 1,123,979 (18,247) 189,025,510 Noncurrent assets:

Restricted cash and investments 34,278,926 - 2,148,689 - - 36,427,615 Advances to other funds 33,926,562 - - - (33,926,562) - Prepayment to Southern California Public
Power Authority 977,070 - - - - 977,070
Deposits - 2,101,130 - - - 2,101,130
Capital assets:

Capital assets, not being depreciated 63,837,963 - 11,111,271 266,172 - 75,215,406 Capital assets, being depreciated, net 362,862,804 14,672,800 11,302,440 1,012,929 - 389,850,973 Total capital assets 426,700,767 14,672,800 22,413,711 1,279,101 - 465,066,379 Total noncurrent assets 14,672,800 497,984,455 24,562,400 1,279,101 (33,926,562) 504,572,194 Total assets 32,666,477 647,425,247 45,047,709 2,403,080 (33,944,809) 693,597,704

DEFERRED OUTFLOW OF RESOURCES
Pension related 11,703,498 860,759 1,821,009 13,740 - 14,399,006 Other postemployment benefits related 951,376 69,971 148,030 1,117 - 1,170,494 Deferred charges on refunding - 1,731,362 - - - 1,731,362 Total deferred outflow of resources $ 930,730 14,386,236 $ 1,969,039 $ 14,857 $ - $ 17,300,862 $ (Continued)
City of Vernon
Vernon Public Utilities
Combining Statement of Net Position
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 64 ..

Item 11 Page 218 of 405
Electric Gas Water Fiber Optics Eliminating
Fund Fund Fund Fund Entry Total

LIABILITIES
Current liabilities:

Accounts payable $ 53,542 14,053,698 $ 1,279,568 $ $ 10,683 $ 15,397,491 - $ Accrued wages and benefits 21,106 369,773 31,872 - - 422,751 Accrued interest payable - 6,826,980 237,281 - - 7,064,261 Due to other funds - 2,953,113 110,329 - (18,247) 3,045,195 Customer deposits payable 13,558 410,497 236,888 - - 660,943 Compensated absences, due within one yea
r 14,283 334,712 34,155 178 - 383,328
Bonds payable, due within one year - 51,835,000 265,000 - 52,100,000 - Note payable, due within one year - - 139,535 - 139,535 - Total current liabilities 102,489 76,783,773 2,334,628 10,861 (18,247) 79,213,504 Noncurrent liabilities:

Advances from other funds 29,405,104 - - 4,521,458 (33,926,562) - Compensated absences, due in
more than one yea
r 28,567 669,422 68,311 356 766,656 -
Bonds payable, due in more than one yea
r - 338,642,538 14,601,753 - 353,244,291 -
Note payable, due in more than one yea
r - - 941,860 - 941,860 -
Net pension liability 2,173,732 29,555,620 4,598,715 34,699 - 36,362,766 Net other postemployment benefits liabilit
y 225,833 3,070,592 477,770 3,605 - 3,777,800
Total noncurrent liabilities 31,833,236 371,938,172 20,688,409 4,560,118 (33,926,562) 395,093,373 Total liabilities 31,935,725 448,721,945 23,023,037 4,570,979 (33,944,809) 474,306,877

DEFERRED INFLOWS OF RESOURCES
Pension related 1,479,229 108,793 230,161 1,737 - 1,819,920 Other postemployment benefits related 1,129,968 83,106 175,818 1,327 - 1,390,219 Total deferred inflows of resources 191,899 2,609,197 405,979 3,064 - 3,210,139

NET POSITIO
N
Net investment in capital assets 167,320,725 14,672,800 8,238,110 1,279,101 - 191,510,736 Restricted for:

Debt service - 33,955,595 160,440 - - 34,116,035
Assembly Bill 1890 - 2,933,017 - - - 2,933,017
Unrestricted (deficit) (13,203,217) 6,271,004 15,189,182 (3,435,207) - 4,821,762 Total net position $ 1,469,583 210,480,341 $ 23,587,732 $ (2,156,106) $ - $ 233,381,550 $ (Concluded)
City of Vernon
Vernon Public Utilities
Combining Statement of Net Position (Continued)
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 65 ..

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Item 11 Page 220 of 405
Electric Gas Water Fiber Optics
Fund Fund Fund Fund Total p
OPERATING REVENUES:

Charges for services $ 19,064,515 233,135,904 $ 9,844,537 $ 525,140 $ 262,570,096 $ Total operating revenues 19,064,515 233,135,904 9,844,537 525,140 262,570,096 OPERATING EXPENSES:

Cost of sales 151,898,323 17,474,385 6,226,053 272,564 175,871,325 Depreciation expense 22,734,810 706,361 575,512 210,161 24,226,844 Total operating expenses 18,180,746 174,633,133 6,801,565 482,725 200,098,169 OPERATING INCOME 883,769 58,502,771 3,042,972 42,415 62,471,927 NONOPERATING REVENUES (EXPENSES):

Investment income 4,198,611 181,160 327,529 5,998 4,713,298 Net decrease in fair value of investments (1,626) - - - (1,626) Interest expense (14,190,777) - (551,437) - (14,742,214) Transfers to the City of Vernon (491,542) - - - (491,542) Gain (loss) on disposal of assets (1,004,046) - 14,889 - (989,157) Total nonoperating revenues (expenses) 181,160 (11,489,380) (209,019) 5,998 (11,511,241) CHANGE IN NET POSITION 1,064,929 47,013,391 2,833,953 48,413 50,960,686 NET POSITION:

Beginning of year 163,466,950 404,654 20,753,779 (2,204,519) 182,420,864 End of year 210,480,341 $ 1,469,583 $ 23,587,732 $ (2,156,106) $ 233,381,550 $ City of Vernon
Vernon Public Utilities
Combining Statement of Revenues, Expenses, and Changes in Net Position For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 67 ..

Item 11 Page 221 of 405
Electric Gas Water Fiber Optics
Fund Fund Fund Fund Total
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash receipts from customers and users 230,220,383 $ 19,668,732 $ 9,900,629 $ 636,340 $ 260,426,084 $ Cash paid to suppliers for goods and services (137,074,541) (16,731,644) (5,024,168) (272,394) (159,102,747) Cash paid to employees for services (13,451,748) (1,141,181) (2,053,190) (14,536) (16,660,655) Net cash
provided by operating activities 1,795,907 79,694,094 2,823,271 349,410 84,662,682

CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES:

Transfer to the City (491,542) - - - (491,542)
Receipt from other funds 61,570 6,178,906 294,880 667,766 7,203,122 Payment to other funds (6,858,636) (71,583) - (36) (6,930,255) Net cash provided by (used in) noncapital
financin
g activities 6,107,323 (7,288,608) 294,880 667,730 (218,675)

CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:

Acquisition of capital assets (24,759,717) - (6,721,212) (426,102) (31,907,031) Proceed from sale of capital assets 37,406 - 14,889 - 52,295 Principal paid on long-term debt (50,110,000) - (389,535) - (50,499,535) Interest paid on long-term debt (19,480,488) - (575,726) - (20,056,214) Net cash (used in) capital and related
financin
g activities - (94,312,799) (7,671,584) (426,102) (102,410,485) CASH FLOWS FROM INVESTING ACTIVITIES:

Interest received 3,914,187 181,160 323,049 5,998 4,424,394 Net cash
provided by investing activities 181,160 3,914,187 323,049 5,998 4,424,394 Net increase (decrease) in cash and
cash e
quivalents 8,084,390 (17,993,126) (4,230,384) 597,036 (13,542,084) CASH AND CASH EQUIVALENTS:

Beginning of year 169,783,616 8,692,417 24,373,836 493,854 203,343,723 End of yea
r $ 16,776,807 151,790,490 $ 20,143,452 $ 1,090,890 $ 189,801,639 $ CASH AND CASH EQUIVALENTS:

Cash and investment 117,511,564 $ 16,776,807 $ 17,994,763 $ 1,090,890 $ 153,374,024 $ Restricted cash and investment 34,278,926 - 2,148,689 - 36,427,615 Total cash and cash e
quivalents $ 16,776,807 151,790,490 $ 20,143,452 $ 1,090,890 $ 189,801,639 $ (Continued)
City of Vernon
Vernon Public Utilities
Combining Statement of Cash Flows
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 68 ..

Item 11 Page 222 of 405
Electric Gas Water Fiber Optics
Fund Fund Fund Fund Total

OPERATING INCOME TO NET CASH PROVIDED B
Y
OPERATING ACTIVITIES:

Operating income 58,502,771 $ 883,769 $ 3,042,972 $ 42,415 $ 62,471,927 $ Adjustments to reconcile operating income to net cash
provided by operating activities:

Depreciation 22,734,810 706,361 575,512 210,161 24,226,844 Change in assets and liabilities:
(Increase) decrease in accounts receivable (1,196,444) 388,462 198,421 111,200 (498,361) (Increase) decrease in accrued unbilled revenue (819,370) 215,755 (142,329) - (745,944) (Increase) decrease in inventories and prepaid items (56,968) - (4,330) - (61,298) (Increase) decrease in customer deposits (899,707) - - - (899,707) (Increase) decrease in deferred outflows
of resources related to pension (7,687,121) (463,477) (903,730) (5,881) (9,060,209) (Increase) decrease in deferred outflows
of resources related to OPEB (453,246) (20,698) (34,265) (142) (508,351) Increase (decrease) in accounts payable (1,774,693) (161,580) (135,694) (3,051) (2,075,018) Increase (decrease) in accrued wages and benefits 35,859 (6,926) (12,423) (363) 16,147 Increase (decrease) in deposits payable (14,929) - 175,704 - 160,775 Increase (decrease) in compensated absences (104,689) 17,719 18,258 291 (68,421) Increase (decrease) in net pension liabilities 17,094,440 941,127 1,752,772 10,315 19,798,654 Increase (decrease) in OPEB liabilities 752,822 (3,431) (51,573) (931) 696,887 Increase (decrease) in deferred inflows
of resources related to pension (6,362,346) (666,861) (1,560,735) (13,608) (8,603,550) Increase (decrease) in deferred inflows
of resources related to OPEB (57,095) (34,313) (95,289) (996) (187,693) Total adjustment 21,191,323 912,138 (219,701) 306,995 22,190,755 Net cash
provided by operating activities $ 1,795,907 79,694,094 $ 2,823,271 $ 349,410 $ 84,662,682 $ (Concluded)
Combining Statement of Cash Flows (Continued)
City of Vernon
Vernon Public Utilities
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 69 ..

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Item 11 Page 224 of 405
Electric Enterprise Fund
of the City of Vernon
Vernon, California
Financial Statements and
Independent Auditors’ Reports
For the Year Ended June 30, 2023
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Item 11 Page 226 of 405
Electric Enterprise Fund of the City of Vernon
For the Year Ended June 30, 2023
Table of Contents
Page
INTRODUCTORY SECTION (UNAUDITED):

A Message From The General Manager of Vernon Public Utilities .................................................................... i FINANCIAL SECTION:

Independent Auditors’ Report on the Audit of the Financial Statements ........................................................... 1 Management’s Discussion and Analysis (Required Supplementary Information) (Unaudited) ....................... 5 Basic Financial Statements:

Statement of Net Position ............................................................................................................................ 12 Statement of Revenues, Expenses, and Changes in Net Position ................................................................ 15 Statement of Cash Flows ............................................................................................................................. 16 Notes to the Basic Financial Statements ...................................................................................................... 23 Required Supplementary Information (Unaudited):

Schedule of Proportionate Share of the Net Pension Liability and Related Ratios ........................................... 50 Schedule Contributions – Pensions .................................................................................................................... 52 Schedule of Proportionate Share of the Net Other Postemployment Benefits Liability and Related Ratios ..... 54 Schedule Contributions – Other Postemployment Benefits ............................................................................... 56 ..

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A Message From the General Manager Goes Here.
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ELECTRIC FUND
Introduction
Vernon Public Utilities (VPU) remains dedicated to its core mission of providing reliable, safe, and affordable energy while meeting California's clean energy goals. VPU is building a full-service utility that embraces emerging technologies and capitalizes on strategic opportunities.

VPU goes beyond electricity, offering water, natural gas, and fiber optic services. As a publicly owned utility, it prioritizes customer focus, responsible operations, and a sustainable future for the Vernon community. With local control, VPU ensures transparency, competitive rates, and tailored policies to serve the community's needs. In partnership with the local community, VPU is shaping a sustainable energy future for Vernon.

Awards
The American Public Power Association (APPA) designates Reliable Public Power Provider recognition (RP3) to utilities that demonstrate exceptional proficiency in four key areas: safety, reliability, workforce development, and system improvement. Consistent with its mission, VPU strives for excellence in these areas.

APPA has awarded VPU its highest – Diamond Level – RP3 designation for three consecutive terms, encompassing nine years from 2016 to 2025. VPU earned these honors by providing exceptionally reliable and safe electric service. VPU is one of only 26 of the more than 2,000 public power utilities across the United States to achieve Diamond Level RP3 designation from 2022 to 2025. APPA also awarded VPU the Safety Award for Excellence every year since 2018, recording no reportable safety incidents for 2023.

Reliability
VPU emphasizes operational reliability as a cornerstone of its strategic vision. VPU utilizes IEEE’s beta methodology to track reliability metrics to assess and enhance the resilience and dependability of VPU’s services. By tracking and analyzing key reliability indicators, VPU proactively identifies areas for improvement, allocates resources effectively, and implements targeted strategies to maintain an unwavering commitment to providing consistent and uninterrupted power supply to its valued customers. ..

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Three Reliability Indicators
VPU tracks three reliability indicators that the electric utility industry uses to assess and improve the performance of power distribution systems.

System Average Interruption Frequency Index (SAIFI)
Quantifies the frequency of power outages per customer within a year.

System Average Interruption Duration Index (SAIDI)
Measures the duration of power outages experienced by the average customer over a year.

Customer Average Interruption Duration Index (CAIDI)
Provides the average time it takes to restore power after an outage, calculated by dividing SAIDI by SAIFI.

VPU leverages data and industry benchmarks to improve service quality, minimize downtime, and ensure a reliable power supply. VPU benchmarks its performance against data from the U.S. Energy Information Administration (EIA) to ensure alignment with industry standards and best practices.

For the data year 2021, VPU’s average customer experienced 0.5 outages for 38.2 minutes. The restoration time was approximately 76.4 minutes. These metrics place VPU among the top 25 percent of the electric industry in reliability. Being in the top quartile of electric utility reliability benchmarking signifies VPU’s commitment to excellence, ensuring that the utility consistently delivers dependable service, promotes customer satisfaction, and contributes positively to the overall health of the community it serves. ..

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Cause of Outages
Virtually all outages in the City of Vernon are from
accidental causes. Contact with metallic balloons is the primary cause of outages (indicated as a “foreign object” in the chart below). The Other category includes single instances of storm damage, direct strike, and equipment damage. ..

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Energy Resources
VPU’s generation portfolio continues to evolve with state mandates for renewable energy and zerocarbon generation. Vernon participates in the CAISO wholesale energy markets under a metered subsystem agreement (MSSA). Five years ago, natural gas generation from MGS and market purchases supplied approximately 59 percent of VPU’s energy resource mix. The remaining energy came from 7.7 percent nuclear, 1.6 percent large hydroelectric, and approximately 32 percent renewables.

One of VPU’s central goals of the updated Integrated Resource Plan, approved by the City Council in October 2023, is to increase its renewable generation penetration to 60 percent by 2030 as directed by California statute. The chart below shows VPU’s Fiscal Year (FY) 2022-23 Energy Resource Mix. ..

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Natural Gas Resources
Malburg Generating Station (MGS)
MGS is a 139 MW combined-cycle
(CC) plant in the City of Vernon. MGS
includes two Siemens GTXI00
natural gas-fired combustion turbine
generators (CTGs) and a steam
turbine generator (STG). MGS has
duct burners, evaporative inlet air
coolers, and filters that enable the
units to achieve higher levels of
power output in selected modes of
operation.

H. Gonzales Generating Station
Units 1 & 2
The H. Gonzales Generating Station
Unit 1 and Unit 2, located within the
City of Vernon, is a natural gas-fueled
facility powered by two Allison
571-KA combustion turbines (CTs),
each rated at 5.75 MW, operating
solely as peaking units. Both CT units
began commercial operation in 1988.

Each unit is restricted by air quality
regulators to run on natural gas for
no more than six hours per day. ..

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Zero-Emission Resources
Palo Verde Nuclear Station
The Palo Verde Nuclear Generating Station
(PVNGS) is in Tonopah, Arizona,
approximately 55 miles west of Phoenix. It
generates the largest capacity of electricity
in the United States, with the second-largest
rated capacity. The plant consists of three
nuclear electric generating units totaling
3,937 MW. In 1981, VPU signed a “take or
pay” contract with the Southern California
Public Power Authority (SCPPA) for 11 MW
of power from Palo Verde. Under the Power
Purchase Agreement (PPA), VPU must pay
for its proportionate share of power
generated and operating and maintenance
expenses, regardless of the amount of
power taken.

Hoover Dam Hydroelectric Power Plant
The Hoover Dam Hydroelectric Power Plant is
located on the Arizona-Nevada border,
approximately 25 miles southeast of Las
Vegas. This hydropower plant is part of the
larger Hoover Dam facility, which was
completed in 1935 and controls the flow of
the Colorado River. The Hoover Dam facility
consists of 17 generating units and two
service generating units with a total installed
capacity of 2,080 MW. In 1987, Vernon
entered a PPA to purchase 22 MW of firm
capacity from the Western Area Power
Administration (WAPA). SCPPA and other
contractor allocations of Hoover power have
been extended for 50 years beyond the PPA’s
original expiration in 2017, which now expires
in 2067. ..

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Renewable Energy Resources
Puente Hills Landfill Gas Plant
The Puente Hills Landfill Gas-to-Energy
facility is a 46 MW conventional Rankine
Cycle Steam Power Plant that uses
landfill gas as fuel to generate electricity.

The Los Angeles County Sanitation
District (LACSD) constructed the facility
and began full commercial operation in
January 1987.

SCPPA entered a PPA with LACSD for 43
MW of generating capacity from the
facility. VPU, through SCPPA, is entitled
to 10 MW of renewable capacity from
the facility. The PPA expires on
December 31, 2030.

Astoria II Solar Photovoltaic Facility
The Astoria II Solar PV facility is sited on
approximately 840 acres between Los
Angeles and Kern Counties, and
interconnects with the CAISO system at
the SCE Whirlwind Substation. The City
of Vernon, in conjunction with five other
SCPPA municipal utilities, participated in
a PPA with Recurrent Energy to purchase
the output from the Astoria II Solar
facility for 20 years. The PPA entitled
Vernon to 20 MW of capacity from
January 2017 to December 2021.

Starting in January 2022 and extending
until the PPA’s expiration in
December 2036, VPU is entitled to 30
MW of power. ..

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Antelope DSR 1 Solar PV Facility
The Antelope DSR 1 Solar PV facility is in the
City of Lancaster, Los Angeles County. It was
developed by the Sustainable Power Group
(sPower) and came online in December 2016.

Through SCPPA, VPU owns a PPA with
Antelope DSR 1 LLC (a subsidiary of sPower)
for 25 MW of output, 50 percent of the
facility’s 50 MW capacity, through
December 31, 2036. In conjunction with the
solar facility, the cities of Riverside and
Vernon negotiated an energy storage option
in the PPA, which provides for the potential to
design, build, and operate an energy storage
facility at the site when economically feasible.

Desert Harvest 2 REC Solar PV Project
On December 17, 2020, SCPPA executed a PPA with EDF Renewables for 70 MW of solar PV capacity from the Desert Harvest 2 Solar PV project. The project is a fixed-tilt PV system that interconnects at the Marketplace substation and is located on 1,200 acres of Bureau of Land Management (BLM) land in Desert Center, California. The REC + Index agreement serves the cities of Anaheim, Burbank, and Vernon.

VPU is entitled to 17.14 percent of the Project’s output or about 12 MW. This PPA, which expires at the end of 2045, only provides renewable energy credits (RECs). ..

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Daggett Solar PV and BESS Project
The Daggett Solar plus BESS project is a single-axis tracker 65 MW solar with a 33 MW 4-hour Lithium-Ion BESS. The commercial operation date (COD) was December 12, 2023. The project, located in the City of Daggett in San Bernardino County, is a portion of an approximately 482 MW solar PV facility. The project is being developed by Clearway Energy Group and is owned by Daggett Solar Power 2 LLC.

On June 24, 2022, SCPPA executed a PPA for 65 MW for the cities of Vernon and Cerritos. The PPA entitles VPU to 60 MW of solar PV output and 30 MW of energy storage. The PPA expires on December 31, 2044.

Sapphire Solar and BESS Project
The Sapphire Solar project is a solar PV and BESS facility being developed by EDF Renewables. Located on 1,140
acres of private land in Riverside County, the project will generate 117 MW of solar power paired with a 59 MW 4-hour Lithium-Ion BESS with a total capacity of 236 MWh.

The project will interconnect on an existing Desert
Harvest transmission line and deliver to the CAISO
System. The bundled energy products include renewable
energy, RECs, Resource Adequacy, and other energy
attributes. The estimated COD is December 31, 2026. VPU has executed a PPA for 39 MW of solar output combined
with 19.67 MW of BESS. The PPA expires on
December 1, 2046. ..

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Distribution System Capital Improvement Plan
Investing in infrastructure is crucial for a reliable
electric utility. As such, Vernon proactively assesses its distribution system, identifying opportunities to
bolster reliability, enhance safety, optimize efficiency, and increase operational flexibility. These upgrades
will ensure a robust and adaptable electric
distribution system, powering a brighter future for the City and its customers.

For the past three years, from 2020 through 2023,
VPU has been working on a distribution Capital
Improvement Plan (CIP) focused on strengthening its
infrastructure to prevent outages and grid resiliency
to sustain reliability and maintain high service quality.

The result is VPU’s Five-Year CIP, which is updated as
part of the annual budget process. The plan focuses
on infrastructure upgrades to help achieve a strategic
vision that addresses its five-square-mile service
territory and the unique industrial characteristics that make up the City. The plan defined strategies that involve in-depth evaluation of the condition of the electric system, performing detailed engineering analysis of distribution system capability and performance, and listed construction and upgrade projects to help transform the system into an intelligent, increasingly automated, and technologically advanced electric system.

The CIP addresses the key areas and
construction required for
replacements or upgrades. The
success of the CIP results in the
improved electric system reliability
provided to the City of Vernon
residential and business customers.

The plan also aims to reduce VPU's
carbon footprint by removing
greenhouse gas (GHG) emissions
from the system. The plan includes
replacing switches and circuit
breakers that use sulfur
hexafluoride (SF6) for insulation and
leverages new technologies for replacing and upgrading these units. The plan aims to increase system ..

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reliability for the local electric grid and environmental improvements for a sustainable future for the community. VPU estimates that the FY 2024-25 CIP is $25 million. ..

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Customer Service
VPU continues to educate its business community on the importance of efficiency through its no-cost energy audit services. Over the years, businesses have successfully leveraged VPU's energy audit services to identify various efficiency opportunities. The utility's longstanding Custom Incentive Program has consistently provided incentives for commercial electric customers that implement efficiency upgrades that produce above building code savings. For FY 2022-23, VPU's energy efficiency programs generated 3,157 MWh of energy savings, along with $212,934 of efficiency rebates issued to VPU customers for lighting retrofits and refrigeration control upgrades.

VPU has also been a key partner
throughout the customer’s
electrification journey, providing
incentives and expertise in the
transition towards increased
sustainability and GHG emission
reduction. In particular, the utility
issued electric vehicle and charger
rebates for customers who switched
to all-electric equipment. In July 2023,
the utility also opened its first fast
charging depot at 3805 S. Soto Street
to support the growing number of
electric vehicles on the road and help
expand public charging infrastructure
in the region.

VPU customers who are in the cold
storage and food processing business sectors continue to explore refrigeration control upgrades to achieve energy savings. The optimization of refrigeration controls often involves system hardware and software upgrades to maximize efficiency. To help support these complex energy efficiency projects, VPU works with a third-party engineering consultant to conduct the evaluation, measurement, and verification studies to confirm the validity of the savings generated. In addition, LED Lighting retrofits continue to account for a majority of energy savings through VPU's Customized Incentive Program. Customers with 24/7 operations and large warehouses can realize significant savings by upgrading from non-LED to LED lighting technology.
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WATER FUND
Introduction
The water supply in Vernon is extremely important for
the well-being of the public, economic growth, and
environmental sustainability. The VPU Water Division
has been working for over a century to ensure that this critical infrastructure is able to provide safe,
dependable, and affordable water services to more
than 800 customers. They distribute around 1.8 billion
gallons of water annually.

To accomplish its mission, the VPU Water Division
consists of professionals who are dedicated to
maintaining the water infrastructure, responding to
any issues as soon as possible, and proactively
planning for the future needs of the water system.

Their knowledge and commitment guarantee that the
water delivered meets the highest quality and service
standards. By prioritizing reliability, sustainability, and affordability, the VPU Water Division team ensures
that the Water Fund continues to succeed financially
and operationally.

Reliability
With a network of 7 Wells, 2 booster plants, and reservoirs with a total capacity of 16.6 million gallons spanning the City, as well as a direct connection to the Metropolitan Water District, the VPU Water Division ensures a consistent supply of high-quality water even during periods of peak demand or drought.

This commitment to reliability is further bolstered by a comprehensive water quality monitoring program that meets rigorous Federal and State regulations.

The VPU Water Division pursues innovative technologies and best practices to ensure high-quality and reliable water service. This includes a bidirectional flushing program, valve exercising programs, prompt repair of leaks to save water loss, and a state-of-the-art real-time UV spectrometer water quality analyzer. ..

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Capital Improvement Plan
The Water Fund continues to implement major capital investments that began in FY 2019-20. The VPU Water Division has made significant capital investments in such projects as the construction of the first new groundwater well since 1989, Well 22; well and reservoir rehabilitation; and an entirely new Supervisory Control and Data Acquisition (SCADA) system along with electrical and fiber service upgrades to ensure the continued reliability of the Water system. This eight-year capital investment program represents a total investment of almost $30 million.
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GAS FUND
Introduction
The VPU Gas Division is a reliable and cost-effective natural gas provider for businesses and residents in Vernon. They operate a state-of-the-art natural gas distribution and transmission system that serves over 125 customers. The Division is committed to providing its customers safe,
reliable, and affordable natural gas service and has been nationally recognized for its strong safety record. The VPU Gas Division is staffed with highly qualified technicians who are available 24/7 to respond to emergencies.

In addition to providing natural gas service, the VPU Gas Division offers various energy efficiency rebate programs and incentives to help customers reduce their GHG
emissions.

The services offered by the VPU Gas Division include:

Natural Gas Service
Provides natural gas services to residential, commercial, and industrial customers.

Energy Efficiency Programs
Offers a variety of energy efficiency programs and incentives to help customers reduce their GHG emissions.

Leak Detection and Repair
A team of experienced technicians who can detect and repair leaks immediately to ensure the continued reliability and safety of customers.

Awards
The VPU Gas Division has received the 2021 Safety Management Excellence Award and the Safety Award for calendar years 2018, 2020, 2021, and 2022 from the American Public Gas Association.

Reliability
As the only public utility in the state with a high-pressure natural gas transmission pipeline and one of the largest public gas systems by volume in the United States, the VPU Gas Division performs an annual assessment of its Integrity Management Plan and routinely surveys its gas system for compliance with regulatory requirements. Further, the VPU Gas Division annually conducts joint training with the Vernon ..

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Police Department and the Los Angeles County Fire Department to provide a continued overall understanding of the City’s natural gas system.

Capital Projects
During FY 2022-23, the VPU Gas Division updated its
remote-access SCADA system by installing electronic
recording devices (ERX) in each regulator station. This new system allows for live monitoring of transmission
and distribution pressures, as well as monitoring of
temperatures and alarms.

Additionally, the high-pressure transmission pipeline
system at the Seville lateral underwent a guided-wave
ultrasonic test, and some gouges were discovered. The
system was swiftly repaired, and the lateral was placed back online.

Lastly, the VPU Gas Division conducted a systemwide
inspection of all transmission and distribution valves.

This critical project focused on maintenance to prevent valve leaks, as required by federal regulations.

Gas Energy Efficiency Rebate
The VPU Gas Division is dedicated to supporting its commercial and industrial gas customers in their efforts to decrease energy consumption and GHG emissions. To achieve this, the division provides an Energy Efficiency Rebate Program, which assists customers in saving money, improving energy efficiency, and reducing GHG emissions. The rebate covers a wide range of projects, such as upgrading to highefficiency equipment, implementing energy-saving retrofits, and replacing customer fleets for lower or zero-emission vehicles and forklifts.
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FIBER OPTICS FUND
Introduction
The VPU Fiber Optics Division offers high-speed
fiber optic internet service to residents and
businesses in Vernon. The service is up to 5 times
faster than AT&T and has a dedicated service line
for businesses and residents. Fiber Internet
includes 24-hour customer care technical
support, consistent bi-directional high-speed
connection, 99.9% up-time, and Dark Fiber
connections for lease.

Vernon customers have access to a high-quality and reliable internet service, which is constantly monitored in real-time to ensure a stable connection. The dedicated support team is available 24/7 to swiftly resolve any issues that may arise. Customers are assured reliable connectivity and significantly faster internet speeds and bandwidth due to fiber optic cables.

Significant benefits of the VPU Fiber Optics Division services include: Smart Grid Infrastructure Support Fiber optic networks support real-time data collection, fault detection, and remote control of grid components, improving grid stability and reducing power outages.

Diversification of Revenue Streams and Community Development Fiber-based internet services generate additional revenue for VPU and promote economic growth by attracting businesses to the City.

Community Development and Economic Growth
Access to high-speed internet is essential for economic development and attracting businesses to the City.

The VPU Fiber Optic Division is vital in bridging the digital divide by providing fiber-based internet services to underserved areas. ..

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Capital Projects
In 2023, the VPU Fiber Optics Division
underwent a major upgrade of the entire fiber
equipment system. This upgrade included the
installation of cutting-edge technology and
advanced equipment, resulting in faster
internet speeds and higher reliability for
customers. The upgraded system has
significantly improved the data transmission
rate, reducing latency and increasing
bandwidth.

The fiber system upgrade was a strategic move by the VPU Fiber Optics Division to meet the growing demand for high-speed internet services. VPU’s fiber upgrade significantly increased capacity, with the system now capable of handling 100 GB and offering customers up to 1GB fiber circuit service. With this upgrade, the fiber system is now capable of providing seamless and uninterrupted internet services to more customers, even during peak usage hours.

Moreover, the upgraded fiber system not only meets the current needs of customers but also secures the future growth of the fiber network. The new equipment and technology installed during the upgrade are designed to extend the life expectancy of the system and support future expansion and upgrades. The VPU Fiber Optics Division can confidently meet the increasing demand for high-speed internet services, ensuring the continued reliability and overall satisfaction of our customers. ..

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200 E. Sandpointe Avenue, Suite 600
Santa Ana, California 92707
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and Members of the City Council
of the City of Vernon
Vernon, California
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of the Electric Enterprise Fund (the “Electric Fund”) of the City of Vernon, California (the “City”), as of and for the year ended June 30, 2023, and the related notes to the financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of the Electric Fund as of June 30, 2023, and the change in financial position, and cash flows 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 (“Government Auditing Standards”). 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 out 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
As discussed in Note 1 to the financial statements, the financial statements present only the Electric Fund and do not purport to, and do not, present fairly the financial position of the City as of June 30, 2023, the changes in its financial position, or its cash flows for the year then, ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.

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

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