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 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 Discussion and Analysis, the Schedule of the Proportionate Share of the Net Pension Liability and Related Ratios, the Schedule of Contributions – Pensions, the Schedule of the Proportionate Share of the Net Other Postemployment Benefits Liability and Related Ratios, and the Schedule of the 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 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
Electric Fund
Management’s Discussion and Analysis
Year ended June 30, 2023
5 The management of the Electric Fund of the City of Vernon (the “City”) offers the following overview and analysis of the basic financial statements of the Electric Fund 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 Electric Fund’s basic financial statements.

Included as part of the financial statements are three separate statements.

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

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

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

The notes to the financial statements provide essential additional information. ..

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

City of Vernon
Electric Fund
Net Position
June 30, 2023 and 2022
2023 2022 $ Variance
Current assets $ 149,440,792 $ 160,376,143 $ (10,935,351) Restricted and other assets 71,283,688 68,301,074 2,982,614 Capital assets 426,700,767 425,717,312 983,455
Total assets 647,425,247 654,394,529 (6,969,282)
14,386,236 6,447,852 7,938,384
Current liabilities 76,783,773 75,002,152 1,781,621
Long term liabilities 371,938,172 413,344,641 (41,406,469) Total liabilities 448,721,945 488,346,793 (39,624,848)
2,609,197 9,028,638 (6,419,441)
Net investment in capital assets 167,320,726 145,563,396 21,757,330 Restricted for debt service 33,955,595 32,836,544 1,119,051 Restricted for AB1890 2,933,017 - 2,933,017
Unrestricted (deficit) 6,271,003 (14,932,990) 21,203,993 Total net position $ 210,480,341 $ 163,466,950 $ 47,013,391 Deferred Inflows of Resources
Assets
Deferred Outflows of Resources
Liabilities
Net Position
The category of the Electric Fund’s net position with the largest balance totaling $167.3 million represents resources that are invested in capital assets, net of related debt.

The second category, restricted for debt services totaling $33.9 million, represents resources that are subject to external restrictions on how they can be used, in this case, bond debt.

The remaining category of the Electric Fund’s net position, totaling $9.2 million, includes $2.9 million for the Electric Fund’s Public Benefits program under AB 1890. ..

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City of Vernon, California
Electric Fund
Management’s Discussion and Analysis (Continued)
Year ended June 30, 2023
7 FINANCIAL HIGHLIGHTS (Continued)
Activities, Net Position  Current assets decreased by $10.9 million from the prior year while restricted and other assets increased by $2.9 million from the prior year.
 Capital assets increased by approximately $1 million from the prior year mainly due to the continued capital investment in Electric Fund’s utility infrastructure.

Current liabilities increased by approximately $1.8 million from the prior year, while long-term liabilities decreased by $41.4 million from the prior year, mainly due to lower debt service requirements of $59.2 million offset by higher net pension liability expenses of $17.1 million.  The total net position of the Electric Fund increased by $47 million from the prior year primarily due to a $21.8 million increase in net investment in capital assets, an increase of $1.1 million in debt service restrictions, an increase in funds restricted for AB1890 (Public Benefits program) of $2.9 million, and an increase in the unrestricted (deficit) of $21.2 million. ..

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City of Vernon, California
Electric Fund
Management’s Discussion and Analysis (Continued)
Year ended June 30, 2023
8 FINANCIAL HIGHLIGHTS (Continued)
Changes in Net Position
The table below summarizes the Electric Fund’s changes in net position over the current and prior fiscal years. The details of the current year’s changes in net position can be found on page 21 of this report.

City of Vernon
Electric Fund
Changes in Net Position
June 30, 2023 and 2022
2023 2022 $ Variance
Charges for services $ 233,135,904 $ 208,539,519 $ 24,596,385 Total operating revenue 233,135,904 208,539,519 24,596,385 Cost of sales 151,898,323 144,582,543 7,315,780
Depreciation and amortization 22,734,810 16,510,921 6,223,889 Total operating expenses 174,633,133 161,093,464 13,539,669 Operating income 58,502,771 47,446,055 11,056,716
Intergovernmental - 665,887 (665,887)
Investment income 4,198,611 269,257 3,929,354
Net decrease in fair value of investments (1,626) (8,231) 6,605 Interest expense (14,190,777) (13,599,589) (591,188)
Transfer Out (491,542) - (491,542)
Gain/(loss) on disposition of assets (1,004,046) (1,900,009) 895,963 Net nonoperating revenues (expenses) (11,489,380) (14,572,685) 3,083,305 32,873,370 47,013,391 14,140,021
163,466,950 130,593,580 32,873,370
$ 210,480,341 $ 163,466,950 $ 47,013,391
Change in net position
Net position - beginning of year
Net position - end of year
Operating Revenues
Operating Expenses
Nonoperating revenues (expenses)
The Electric Fund’s operating income of $58.5 million, less nonoperating revenues (expenses) of $11.5 million, resulted in an increase in net position of $47 million during the current year. The Electric Fund’s $47 million increase in the change in net position is primarily due to a higher billed amount to customers, management of operating expenses, and higher than expected investment income for FY 2022-23. ..

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City of Vernon, California
Electric Fund
Management’s Discussion and Analysis (Continued)
Year ended June 30, 2023
9 CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
The Electric Fund’s investment in capital assets as of June 30, 2023, amounted to $426.7 million (net of accumulated depreciation). This investment in capital assets includes land, intangible assets, construction in progress, building, utility system improvements, and machinery and equipment. Additional information on the Electric Fund'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 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 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 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) to pay costs of issuance of the 2022 Bonds. ..

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City of Vernon, California
Electric Fund
Management’s Discussion and Analysis (Continued)
Year ended June 30, 2023
10 As of June 30, 2023, the ratings on all Electric System Revenue Bonds of the City were BBB+/Stable rating by S&P and Baa1/Stable rating by Moody’s.

Additional information on the Electric Fund's long-term debt can be found in Note 6 on pages 38-42 of this report.

ECONOMIC FACTORS AND NEW YEAR’S BUDGET AND RATES
These factors were considered in preparing the Electric Fund’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 energy, natural gas, materials and supplies, and construction costs to maintain the generation, transmission, and distribution infrastructure to continue to provide exceptionally reliable service.  Manage and control operating and maintenance expenses, implement the recommendations of the Electric Cost of Service Analysis and Rate Design study and the 2023 Integrated Resource Plan.

REQUESTS FOR INFORMATION
This report is designed to provide an overview of the Electric Fund's FY 2022-23 results. Questions concerning the fund’s financial results can be addressed to the Finance Department, City of Vernon, 4305 Santa Fe Avenue, Vernon, California, 90058. ..

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FINANCIAL STATEMENTS
11 ..

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ASSETS
Current assets:

Cash and investments $ 117,511,564
Accounts receivable, ne
t 13,592,491
Interest receivable 367,547
Accrued unbilled revenue 17,231,152
Due from other government 8,829
Prepaid items 159,007
Inventory 570,202
Total current assets 149,440,792
Noncurrent assets:

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

Capital assets, not being depreciated 63,837,963
Capital assets, being depreciated, net 362,862,804
Total capital assets 426,700,767
Total noncurrent asset
s 497,984,455
Total assets 647,425,247

DEFERRED OUTFLOW OF RESOURCES
Pension related 11,703,498
Other postemployment benefits related 951,376
Deferred charges on refunding 1,731,362
Total deferred outflow of resources $ 14,386,236
(Continued)
Electric Enterprise Fund of the City of Vernon
June 30, 2023
Statement of Net Position
See accompanying Notes to the Basic Financial Statements. 12 ..

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LIABILITIES
Current liabilities:

Accounts payable $ 14,053,698
Accrued wages and benefits 369,773
Accrued interest payable 6,826,980
Due to other funds 2,953,113
Customer deposits 410,497
Compensated absences, due within one yea
r 334,712
Bonds payable, due within one year 51,835,000
Total current liabilities 76,783,773
Noncurrent liabilities:

Compensated absences, due in more than one year 669,422 Bonds payable, due in more than one year 338,642,538
Net pension liability 29,555,620
Net other postemployment benefits liabilit
y 3,070,592
Total noncurrent liabilities 371,938,172
Total liabilities 448,721,945

DEFERRED INFLOWS OF RESOURCES
Pension related 1,479,229
Other postemployment benefits related 1,129,968
Total deferred inflows of resources 2,609,197

NET POSITION
Net investment in capital assets 167,320,725
Restricted for:

Debt service 33,955,595
Assembly Bill 1890 2,933,017
Unrestricted 6,271,004
Total net
position $ 210,480,341
(Concluded)
Electric Enterprise Fund of the City of Vernon
Statement of Net Position (Continued)
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 13 ..

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OPERATING REVENUES:

Charges for services $ 233,135,904
Total operating revenues 233,135,904
OPERATING EXPENSES:

Cost of sales 151,898,323
Depreciation expense 22,734,810
Total operating expenses 174,633,133
OPERATING INCOME 58,502,771
NONOPERATING REVENUES (EXPENSES):

Investment income 4,198,611
Net decrease in fair value of investments (1,626)
Interest expense (14,190,777)
Transfers ou
t (491,542)
Gain (loss) on disposal of assets (1,004,046)
Total nonoperating revenues (expenses) (11,489,380)
CHANGE IN NET POSITION 47,013,391
NET POSITION:

Beginning of year 163,466,950
End of year $ 210,480,341
Electric Enterprise Fund of the City of Vernon
Statement of Revenues, Expenses, and Change in Net Position For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 15 ..

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CASH FLOWS FROM OPERATING ACTIVITIES:

Cash receipts from customers and users $ 230,220,383
Cash paid to suppliers for goods and services (137,074,541) Cash paid to employees for services (13,451,748)
Net cash
provided by operating activities 79,694,094

CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES:

Transfer to the City (491,542)
Receipt from other funds 61,570
Payment to other funds (6,858,636)
Net cash (used in) nonca
pital financing activities (7,288,608)

CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:

Acquisition of capital assets (24,759,717)
Proceed from sale of capital assets 37,406
Principal paid on long-term debt (50,110,000)
Interest paid on long-term debt (19,480,488)
Net cash (used in) ca
pital and related financing activities (94,312,799)
CASH FLOWS FROM INVESTING ACTIVITIES:

Interest received 3,914,187
Net cash provided by investing activities 3,914,187
Net (decrease) in cash and cash equivalents (17,993,126) CASH AND CASH EQUIVALENTS:

Beginning of year 169,783,616
End of yea
r $ 151,790,490
CASH AND CASH EQUIVALENTS:

Cash and investment $ 117,511,564
Restricted cash and investment 34,278,926
Total cash and cash e
quivalents $ 151,790,490
(Continued)
Electric Enterprise Fund of the City of Vernon
Statement of Cash Flows
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 16 ..

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OPERATING INCOME TO NET CASH PROVIDED B
Y
OPERATING ACTIVITIES:

Operating income $ 58,502,771
Adjustments to reconcile operating income to net cash
provided by operating activities:

Depreciation 22,734,810
Change in assets and liabilities:
(Increase) decrease in accounts receivable (1,196,444)
(Increase) decrease in accrued unbilled revenue (819,370) (Increase) decrease in inventories and prepaid items (56,968) (Increase) decrease in customer deposits (899,707)
(Increase) decrease in deferred outflows
of resources related to pension (7,687,121)
(Increase) decrease in deferred outflows
of resources related to OPEB (453,246)
Increase (decrease) in accounts payable (1,774,693)
Increase (decrease) in accrued wages and benefits 35,859 Increase (decrease) in deposits payable (14,929)
Increase (decrease) in compensated absences (104,689)
Increase (decrease) in net pension liabilities 17,094,440 Increase (decrease) in OPEB liabilities 752,822
Increase (decrease) in deferred inflows
of resources related to pension (6,362,346)
Increase (decrease) in deferred inflows
of resources related to OPEB (57,095)
Total adjustment 21,191,323
Net cash
provided by operating activities $ 79,694,094
(Concluded)
Statement of Cash Flows (Continued)
Electric Enterprise Fund of the City of Vernon
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 17 ..

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19 NOTES TO THE BASIC FINANCIAL STATEMENTS
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Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
21 Page
Note 1 – Summary of Significant Accounting Policies ....................................................................................... 23 A. Basis of Accounting and Measurement Focus ..................................................................................... 23 B. Pooled Cash ......................................................................................................................................... 23 C. Cash, Cash Equivalents and Investments ............................................................................................. 23 D. Fair Value Measurement ...................................................................................................................... 24 E. Interfund Transactions ......................................................................................................................... 24 F. Accounts Receivable ............................................................................................................................ 24 G. Prepaid Items ....................................................................................................................................... 24 H. Capital Assets ....................................................................................................................................... 24 I. Deferred Outflows and Inflows of Resources ...................................................................................... 25 J. Compensated Absences ........................................................................................................................ 25 K. Long-Term Debt .................................................................................................................................. 25 L. Pensions ............................................................................................................................................... 25 M. Postemployment Benefits Other than Pensions (OPEB)...................................................................... 26 N. Net Position .......................................................................................................................................... 26 O. Use of Estimates................................................................................................................................... 27 Note 2 – Cash and Cash Equivalents ................................................................................................................... 27 A. Equity in the Cash Pool of the City of Vernon .................................................................................... 27 B. Investments .......................................................................................................................................... 28 C. Local Agency Investment Fund (“LAIF”) ........................................................................................... 28 D. Fair Value Measurement ...................................................................................................................... 28 E. Risk Disclosures ................................................................................................................................... 29 Note 3 – Accounts Receivable ............................................................................................................................... 30 Note 4 – Internal Transactions ............................................................................................................................. 30 A. Due From/To Other City Funds ........................................................................................................... 30 B. Advances From/To Other City Funds .................................................................................................. 30 Note 5 – Capital Assets .......................................................................................................................................... 31 Note 6 – Long-Term Debt ..................................................................................................................................... 32 Note 7 – Risk Management ................................................................................................................................... 36 Note 8 – Pension Plan ............................................................................................................................................ 37 A. General Information about the Pension Plans ...................................................................................... 37 B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions ........................................................................... 39 Note 9 – Other Postemployment Benefits (“OPEB”) ......................................................................................... 43 A. General Information about the OPEB Plan .......................................................................................... 43 B. Net OPEB Liabilities, OPEB Expenses, and Deferred
Outflows/Inflows of Resources Related to OPEB ............................................................................... 43 Note 10 – Southern California Public Power Authority .................................................................................... 46 A. Take or Pay Contract ............................................................................................................................ 46 B. Power Purchase Commitments ............................................................................................................ 47 ..

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Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
23 Note 1 – Summary of Significant Accounting Policies
The accompanying financial statements present only the Electric Enterprise Fund (“Electric Fund”) of the City of Vernon, California (“the City”), and do not present fairly the financial position and results of the operations of the City.

The Electric Fund accounts for the independent operations and the maintenance of the City’s electric utility. The Electric Fund is administered as an independent fiscal and accounting entity with a self-balancing set of accounts recording resources, related liabilities, obligations, reserves, and equities, segregated for the purpose of carrying out specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations.

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

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

A. Basis of Accounting and Measurement Focus
The Electric Fund’s financial statements are reported 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.

The Electric Fund distinguishes operating revenues and expenses from nonoperating items. Operating revenues, such as charges for services, result from exchange transactions associated with the sale of electricity. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities. Operating expenses include the cost of sales and services, administrative expenses and depreciation on capital assets. All expenses not meeting this definition are reported as nonoperating expenses.

B. Pooled Cash
Part of the Electric Fund’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 fund’s 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.

C. Cash, Cash Equivalents and Investments
For purposes of the statement of cash flows, the Electric Fund considers all highly liquid investments (including restricted cash and investments) with an original maturity of three months or less when purchased to be cash equivalents. Investment transactions are recorded on the settlement date. Investments in nonparticipating interestearning investment contracts are reported at cost and all other investments are reported at fair value. ..

Item 11 Page 273 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
24 Note 1 – Summary of Significant Accounting Policies (Continued) 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 City funds”. Long-term interfund loans are classified as “advances to/from other City funds” on the statement of net position.

F. Accounts Receivable
Accounts receivables are shown net of an allowance for uncollectible accounts. Allowances for uncollectible accounts were $1,135,631 as 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.

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

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Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
25 Note 1 – Summary of Significant Accounting Policies (Continued) H. Capital Assets (Continued)
Capital assets used in operations are depreciated over their estimated useful lives using the straight-line method.

Utility Infrastructure and Buildings 25 to 50 Years
Improvements 10 to 20 Years
Machinery and Equipment 3 to 35 Years
Maintenance and repairs are charged to operations when incurred. Betterments and major improvements, which significantly increase values, change capacities or extend useful lives, are capitalized. Upon sale or retirement of capital assets, the cost and related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in the statement of revenues, expenses, and changes in net position.

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

K. 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.

L. 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
..

Item 11 Page 275 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
26 Note 1 – Summary of Significant Accounting Policies (Continued) L. Pensions (Continued)
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.

M. 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
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.

N. Net Position
The Electric Fund 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. ..

Item 11 Page 276 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
27 Note 1 – Summary of Significant Accounting Policies (Continued) N. Net Position (Continued)
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.

O. 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 Electric Fund has the following cash and investments at June 30, 2023:

Cash and investments 117,511,564 $
Restricted cash and investments 34,278,926
Total cash and investments $ 151,790,490
The Electric Fund cash and investments at June 30, 2023, in more detail:

Equity in pooled cash $ 21,994,411
Deposits with financial institutions 2,494,609
Investments 127,301,470
Total cash and investments $ 151,790,490
A. Equity in the Cash Pool of the City of Vernon
The Electric Fund has equity in the cash pool managed by the City. The Electric Fund is a voluntary participant in that pool and the pool is governed by and under the regulatory oversight of the Investment Policy adopted by the City Council of the City. The Electric Fund has not adopted an investment policy separate from that of the City.

The amount of the Electric Fund’s cash in this pool is reported in the accompanying financial statements based upon the Electric Fund’s pro rata share of the amount calculated by the City. The balance available for withdrawal is based on the accounting records maintained by the City. ..

Item 11 Page 277 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
28 Note 2 – Cash and Cash Equivalents (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 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 Electric Fund 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 Electric Fund had $636,435 invested in LAIF. The fair value of the Electric Fund’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 - - 62,677,283 62,677,283
US Treasury bills 29,402,775 - - 29,402,775
Negotiable Certificates of Deposit* - 496,620 - 496,620 Investment with fiscal agent:

Money Market Funds - - 34,088,357 34,088,357
Total $ 496,620 29,402,775 $ 63,313,718 $ 127,301,470 $ *Priced based on significant observable inputs.

Measurement Input
..

Item 11 Page 278 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
29 Note 2 – Cash and Cash Equivalents (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 Electric Fund 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 62,677,283 - - 62,677,283
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 34,088,357 - - 34,088,357
Total $ 247,137 126,804,850 $ 249,483 $ 127,301,470 $
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 62,677,283 AAA 62,677,283 - -
US Treasury bills 29, N/A 29,402,775 402,775 - -
Negotiable Certificates of Deposit 496,620 N/A - 496,620 - Investment with fiscal agent:

Money Market Funds 34,088,357 34,088,357 - -
Total $ 126,168,415 127,301,470 $ 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 279 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
30 Note 3 – Accounts Receivable
The Electric Fund’s accounts receivable at June 30, 2023 are as follows:

Accounts receivabe 14,728,122 $
Less: allowance for uncollectible accounts (1,135,631)
Total accounts receivable, net 13,592,491 $
Note 4 – Interfund Transactions
A. Due From/To Other City Funds
At June 30, 2023, the Electric Fund had the following due to other City funds:

Due to Other City Funds General Fund Water Fund Total
Electric Fund 2,934,866 $ 18,247 $ 2,953,113 $
The interfund balances resulted from borrowing of cash for temporary purposes. All balances are expected to be reimbursed within the subsequent year.

B. Advances From/To Other City Funds
At June 30, 2023, the Electric Fund had the following advances to other City funds:

Fiber Optics
Advances to Other City Funds Gas Fund Fund Total
Electric Fund 29,405,104 $ 4,521,458 $ 33,926,562 $
The advances between the other City funds and Electric Fund do not accrue interest due to the nature that the City’s operational relationship and capital projects funded by the Electric Fund that benefits both. On November 6, 2012, the City adopted Resolution No. 2012-215 extending the repayment of the advances to the other City funds from 15 months to a period of over 10 years. ..

Item 11 Page 280 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
31 Note 5 – Capital Assets
A summary of changes in the capital assets for the Electric Fund 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 $ 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 Total capital assets, not being depreciated 1,447,810 63,421,951 (1,022,030) (9,768) 63,837,963 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 Total capital assets, being depreciated 23,311,907 482,785,511 (98,179) 9,768 506,009,007 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) Total accumulated depreciation (22,734,810) (120,490,150) 78,757 - (143,146,203) Total capital assets, being depreciated, net 577,097 362,295,361 (19,422) 9,768 362,862,804 Total Capital assets, net $ 2,024,907 425,717,312 $ (1,041,452) $ - $ 426,700,767 $ The Electric Fund’s depreciation expense for the year ended June 30, 2023 was $22,734,810. ..

Item 11 Page 281 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
32 Note 6 – Long-Term Debt
A summary of changes in long-term debt for the Electric Fund for the year ended June 30, 2023 is as follows:

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

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 Total Revenue Bonds 406,310,000 - (50,110,000) 356,200,000 51,835,000 304,365,000 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 Total Unamortized Premiums/(Discounts) 41,626,477 - (7,348,939) 34,277,538 - 34,277,538 Total Public Offering 447,936,477 - (57,458,939) 390,477,538 51,835,000 338,642,538 Compensated absences 1,108,823 706,633 (811,322) 1,004,134 334,712 669,422 Total $ 706,633 449,045,300 $ (58,270,261) $ 391,481,672 $ 52,169,712 $ 339,311,960 $ $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 $
..

Item 11 Page 282 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
33 Note 6 – Long-Term Debt (Continued)
$35,100,000 Electric System Revenue Bonds (2012 Taxable Series B) On January 10, 2012, the City issued Electric System Revenue Bonds, 2012 Series B, in the amount of $35,100,000.

During the 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 $
$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 $
..

Item 11 Page 283 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
34 Note 6 – Long-Term Debt (Continued)
$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 $
$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 $
..

Item 11 Page 284 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
35 Note 6 – Long-Term Debt (Continued)
$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.

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 $
Compensated Absences
The balance outstanding at June 30, 2023, was $1,004,134.

Expense Stabilization Fund
The Electric Fund 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 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. ..

Item 11 Page 285 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
36 Note 6 – Long-Term Debt (Continued)
Right to Accelerate Upon Default
Notwithstanding anything contrary in the indenture or in the bonds, upon the occurrence of an event of default, the Trustee may, with the consent of each credit provider whose consent is required by a supplemental indenture or a credit support agreement, and shall, at the direction of the owners of a majority in principal amount of outstanding bonds (other than bonds owned by or on behalf of the City) by written notice to the City, declare the principal of the outstanding bonds and the interest thereon to be immediately due and payable, whereupon such principal and interest shall, without further action, become and be immediately due and payable.

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

Note 7 – Risk Management
The Electric Fund 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 2010, the City chose to establish Risk Financing in the General Fund, whereby assets are set aside for claim-litigation settlements associated with the abovementioned risks up to their self-insured retentions or policy deductibles. Athens Administrators Inc. is the Third-Party Administrator for the City’s workers’ compensation program and they provide basic services for general liability claims and litigation. ..

Item 11 Page 286 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
37 Note 7 – 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 F
L $50,000,000 -
Government Crim
e $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 Pipelin
e
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 Shooter
Special Events $2,000,000 $1,000,000 Each Occurrence
Note 8 – 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 287 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
38 Note 8 – 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 dat
e January 1, 2013 January 1, 2013
Benefit formula 2.7% @ 55 2% @ 62
Benefit vesting schedul
e 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
Classic PEPRA
Prior to On or After
Hire dat
e January 1, 2013 January 1, 2013
Benefit formul
a 3.0% @ 50 2.7% @ 57
Benefit vesting schedul
e 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
respectively
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
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 288 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
39 Note 8 – 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 Electric Fund’ share of employer contributions made to the plans was $3,021,673.

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
Entry Age Normal

6.90%

2.30%
Varies by Entry Age and Service
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
(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. ..

Item 11 Page 289 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
40 Note 8 – 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: Assume dAsset
Allocation
Global Equity - Cap-weighte
d 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.

Asset Class
1 Real Return1,2
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 290 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
41 Note 8 – Pension Plan (Continued)
B. Net 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 Electric Fund The Electric Fund’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 Electric Fund’s proportionate share of the aggregate net pension liability was based on the Electric Fund’s current year share of contributions of the pension plans relative to the City’s total current year contributions to the pension plans.

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

Total Pension Plan Fiduciary Net Net Pension
Liabilit
y Position Liability/(Asset) Proportionate
(a) (b) (c) = (a) - (b) Share
Balance at 6/30/21 (Valuation Date) 69,252,712 $ 56,791,532 $ 12,461,180 $ 14.16% Balance at 6/30/22 (Measurement Date) 96,273,975 66,718,355 29,555,620 18.74% Net Changes during 2021-2022 27,021,263 9,926,823 17,094,440 4.58% Increase (Decrease)
Pension Expense and Deferred Outflows and Inflows of Resources For the measurement period ended June 30, 2022, the Electric Fund recognized its proportionate share of the aggregate pension expense totaled $792,954. At June 30, 2023, the Electric Fund reported its proportionate share of the 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 $ - 3,021,673 $
Changes of assumptions 2,708,856 (205,784)
Difference between expected and actual experien
c - 903,935
Net difference between projected and actual earning
on pension plan investments 4,504,716 -
Adjustment due to differences in proportions 564,318 -
Difference betwwen City contributions and proportionate share of contribution - (1,273,445) Total $ 11,703,498 $ (1,479,229) $3,021,673 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 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: ..

Item 11 Page 291 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
42 Note 8 – 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) Measurement Period
Ending June 30 Total
2023 2,162,528 $
2024 1,620,089
2025 713,357
2026 2,706,622
Total 7,202,596 $
Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the Electric Fund’s proportionate share of the Plans’ aggregate net pension liability, calculated using a discount rate of 6.90%, as well as what the Electric Fund’s proportionate share of the Plans’ aggregate 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 16,171,119 $ 10,605,423 $ 6,061,032 $ Safety Plan 26,909,955 $ 18,950,197 $ 12,444,894 $
Electric Fund'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 Electric Fund had no outstanding amount of contributions to the pension plans required for the year ended June 30, 2023. ..

Item 11 Page 292 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
43 Note 9 – 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 Electric Fund’s share of the net pension liability of the City’s OPEB Plan is reported as a cost-sharing plan in these financial statements since the Electric Fund’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 Electric Fund’s proportionate share of contributions made to the trust was $288,336, and $294,586 for retiree premiums, resulting in a total contribution of $582,922.

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. ..

Item 11 Page 293 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
44 Note 9 – Other Postemployment Benefits (“OPEB”) (Continued) B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of Resources Related to OPEB (Continued)
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

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%
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
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%
Tota
l 100.00%
* Preliminary estimate, pending confirmation by CalPERS ..

Item 11 Page 294 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
45 Note 9 – Other Postemployment Benefits (“OPEB”) (Continued) B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of Resources Related to OPEB (Continued)
The Electric Fund’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 3,877,225 $ 1,559,455 $ 2,317,770 $ 14.16% Balance at June 30, 2022 (Measurement Date) 5,120,558 2,049,966 3,070,592 18.74% Net changes during 2021-22 1,243,333 490,511 752,822 4.58% Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the Electric Fund’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%)
$ 3,070,592 3,652,450 $ 2,582,787 $
Plan's Net OPEB Liability
Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates The following presents the Electric Fund’s proportionate share of the net OPEB liability if it were calculated using a healthcare cost trend rates that are 1% point lower (5.3% 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%
$ 3,070,592 2,847,670 $ 3,286,271 $
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 Electric Fund recognized its proportionate share of the OPEB credit of $(131,489). At June 30, 2023, the Electric Fund 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 582,922 $ - $ Changes in assumptions 155,069 (481,295)
Difference between expected and actual experience 19,694 (648,673) Net difference between projected and actual earning on
OPEB plan investments 193,691 -
Total 951,376 $ (1,129,968) $
..

Item 11 Page 295 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
46 Note 9 – Other Postemployment Benefits (“OPEB”) (Continued) B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of Resources Related to OPEB (Continued)
The $582,922 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 (366,163) $
2024 (363,578)
2025 (44,666)
2026 59,090
2027 (31,282)
Thereafter (14,915)
Total (761,514) $
Payable to the OPEB Plan
At June 30, 2023, the Electric Fund had no outstanding amount of contributions to the OPEB plan required for the year ended June 30, 2023.

Note 10 – 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.

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 296 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
47 Note 10 – 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 297 of 405
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
48 Note 10 – 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. ..

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REQUIRED SUPPLEMENTARY INFORMATION
(UNAUDITED)
49 ..

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Fiscal year 2017 2018 2019 2020 2021
Measurement period 2015-16 2016-17 2017-18 2018-19 2019-20 Electric Fund's proportionate share of the
net pension liability 9,913,819 $ 11,622,798 $ 12,037,649 $ 13,198,355 $ 16,262,340 $ $ 2,844,009 1,368,926 $ 3,119,774 $ 3,153,590 $ 2,971,068 $ Electric Fund's proportionate share of the net
pension liability as a percentage of
covered payroll 724.20% 408.68% 385.85% 418.52% 547.36% Electric Fund 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 Growth 2.750%
Investment rate of return
Retirement age
Mortality
Electric Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Pension Liability and Related Ratios 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 Electric Fund. Additional years of information will be displayed as it becomes available.

Covered payroll
2 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 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. 50 ..

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Fiscal year 2022 2023
Measurement period 2020-21 2021-22
Electric Fund's proportionate share of the
net pension liability $ 29,555,620 12,461,180 $
Covered payroll
2 $ 4,037,276 2,763,712 $
Electric Fund's proportionate share of the net
pension liability as a percentage of
covered payroll 450.89% 732.07%
Electric Fund Fiduciary Net Position as a
percentage of the total pension liability 85.45% 69.30% Electric Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the 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 51 ..

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Fiscal year 2017 2018 2019 2020 2021

10.41% 10.60% 10.61% 10.93% 12.03%
Actuarially determined contribution 947,914 $ 1,005,691 $ 1,158,143 $ 1,347,573 $ 1,518,109 $ Contributions in relation to the
actuarially determined contribution (947,914) (1,005,691) (1,158,143) (1,347,573) (1,518,109) Contribution deficiency (excess) - $ - $ - $ - $ - $
Covered payroll
2 $ 3,119,774 2,844,009 $ 3,153,590 $ 2,971,068 $ 2,763,712 $ Contributions as a percentage of covered payroll. 33.33% 32.24% 36.72% 45.36% 54.93% 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
Electric Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions
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 pension liability to the Electric Fund. Additional years will be displayed as it becomes available.

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 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. 52 ..

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Fiscal year 2022 2023

14.17% 18.74%
Actuarially determined contribution $ 2,012,496 $ 3,021,673 Contributions in relation to the
actuarially determined contribution (3,021,673) (2,012,496) Contribution deficiency (excess) $ - - $
Covered payroll
2 $ 4,150,320 4,037,276 $
Contributions as a percentage of covered payroll. 49.85% 73% Electric Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions (Continued)
For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 California Public Employees' Retirement System Defined Pension Plan 52 ..

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Fiscal year 2018 2019 2020 2021 2022
Measurement period 2016-17
1 2017-18 2018-19 2019-20 2020-21
Electric Fund's proportion of the net
OPEB liability 6.43% 10.61% 10.93% 12.02% 14.16%
Electric Fund's proportionate share of the
net OPEB liability 2,333,037 $ 2,449,998 $ 2,394,613 $ 2,429,343 $ 2,317,770 $ Covered - employee payrol
l $ 2,152,941 2,153,877 $ 3,731,469 $ 3,491,517 $ 3,810,495 $ Electric Fund's proportionate share of the net
OPEB liability as a percentage of
covered - employee payrol
l 108.32% 113.80% 64.17% 69.58% 60.83%
Electric Fund's Fiduciary Net Position as a
percentage of the total
OPEB liability 2.83% 8.62% 16.30% 25.73% 40.22%
1 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.

For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 Benefits Liability and Related Ratios
Electric Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Other Postemploymen t
54 ..

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Fiscal year 2023
Measurement period 2021-22
Electric Fund's proportion of the net
OPEB liability 18.74%
Electric Fund's proportionate share of the
net OPEB liability $ 3,070,592
Covered - employee payrol
l $ 4,755,269
Electric Fund's proportionate share of the net
OPEB liability as a percentage of
covered - employee payrol
l 64.57%
Electric Fund's Fiduciary Net Position as a
percentage of the total
OPEB liability 40.03%
Other Postemployment Benefits ("OPEB") Plan
For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 Benefits Liability and Related Ratios (Continued)
Electric Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Other Postemploymen t
55 ..

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Fiscal yea
r 2018 2019 2020 2021 2022
Actuarially determined contribution $ 173,080 $ 285,605 $ 211,038 $ 184,942 $ 217,810 Contributions in relation to the
actuarially determined contribution (132,751) (317,055) (427,758) (376,391) (415,223) Contribution deficiency (excess) $ 40,329 $ (31,450) $ (216,720) $ (191,449) $ (197,413) Covered-employee payrol
l $ 3,731,469 2,152,941 $ 3,491,517 $ 3,810,495 $ 4,755,269 $ Contributions as a percentage of covered-employee payroll. 6.17% 8.50% 12.25% 9.88% 8.73% 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.

Fiscal Year 2018 was the first year of implementation, therefore only six years are shown.

Electric Enterprise Fund of the 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
56 ..

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Fiscal yea
r 2023
Actuarially determined contribution $ 262,835
Contributions in relation to the
actuarially determined contribution (582,922)
Contribution deficiency (excess) $ (320,087)
Covered-employee payrol
l $ 4,587,902
Contributions as a percentage of covered-employee payroll. 12.71% Electric Enterprise Fund of the 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
57 ..

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58 ..

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Water 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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Water 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 Auditor’s 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 ........................................... 44 Schedule Contributions – Pensions ................................................................................................................... 46 Schedule of Proportionate Share of the Net Other Postemployment Benefits Liability and Related Ratios .... 48 Schedule Contributions – Other Postemployment Benefits .............................................................................. 50 ..

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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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xx

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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xxi
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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Item 11 Page 334 of 405
2121 North California Blvd., Suite 290
Walnut Creek, California 94596
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and Members of the City Council
of the City of Vernon
Vernon, California
Report on the Audit of the Vernon Public Utilities Financial Statements Opinions
We have audited the accompanying financial statements of the Water Enterprise Fund (the “Water 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 Water Fund as of June 30, 2023, and the change in financial position, and cash flows thereof 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 City 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 Water 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. ..

Item 11 Page 335 of 405
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 Discussion and Analysis, the Schedule of the Proportionate Share of the Net Pension Liability and Related Ratios, the Schedule of the Contributions – Pensions, the Schedule of the Proportionate Share of the Net Other Postemployment Benefits Liability and Related Ratios, and the Schedule of the 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 336 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 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
Water Fund
Management’s Discussion and Analysis (Unaudited)
Year ended June 30, 2023
5 The management of the Water Fund of the City of Vernon (“the City”) offers the following overview and analysis of the basic financial statements 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 Water Fund’s basic financial statements. Included as part of the financial statements are three separate statements.

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

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

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

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

Item 11 Page 339 of 405
City of Vernon, California
Water Fund
Management’s Discussion and Analysis (Unaudited)(Continued) Year ended June 30, 2023
6 FINANCIAL HIGHLIGHTS
Net Position
The table below summarizes the Water Fund’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
Water Fund
Net Position
June 30, 2023 and 2022
2023 2022 $ Variance
Current and other assets $ 20,467,062 $ 19,535,358 $ 931,704 Restricted assets 2,148,689 7,358,059 (5,209,370)
Due from other funds 18,247 202,798 (184,551)
Capital assets 22,413,711 16,268,011 6,145,700
Total assets 45,047,709 43,364,226 1,683,483
Deferred Outflows of Resources 1,969,039 1,031,044 937,995 Current liabilities 2,334,628 2,180,835 153,793
Long term liabilities 20,688,409 19,398,653 1,289,756
Total liabilities 23,023,037 21,579,488 1,443,549
405,979 2,062,003 (1,656,024)
Net investment in Capital Assets 8,238,109 6,869,387 1,368,722 Restricted for debt 160,440 - 160,440
Unrestricted (deficit) 15,189,183 13,884,392 1,304,791
Total net position $ 23,587,732 $ 20,753,779 $ 2,833,953 Assets
Liabilities
Net Position
Deferred Inflows of Resources
The assets and deferred outflows of resources of the Water Fund exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $23.6 million (net position).

The category of the Water Fund’s net position with the largest balance totaling $15.2 million represents the unrestricted net position that is expected to be used for future projects or other purposes. The remaining category of net position, totaling $8.2 million, represents resources that are invested in capital assets, net of related debt. ..

Item 11 Page 340 of 405
City of Vernon, California
Water Fund
Management’s Discussion and Analysis (Unaudited)(Continued) Year ended June 30, 2023
7 FINANCIAL HIGHLIGHTS (Continued)
Activities, Net Position  Current assets increased by $931,704 from the prior year due to increases in cash and investments by $978,986 and a decrease in accounts receivable by $198,421.  Restricted assets decreased by $5.2 million in 2023 as VPU continue to draw down on the Water System Revenue Bonds, 2020 Taxable Series A to fund capital projects.  Net Capital assets increased $6.1 million from the prior year due to additional water plant investment. (See Note 5)
 Current liabilities decreased by $153,793 from the prior year, primarily due to a decrease in Accounts Payable of $135,694.
 The net investments in capital assets and net of related debt increased by $1.4 million, and the unrestricted (deficit) increased by $1.3 million, which resulted in an increase in the total net position by $2.8 million.
..

Item 11 Page 341 of 405
City of Vernon, California
Water Fund
Management’s Discussion and Analysis (Unaudited)(Continued) Year ended June 30, 2023
8 FINANCIAL HIGHLIGHTS (Continued)
Changes in Net Position
The table below summarizes the Water Fund’s changes in net position over the current and prior fiscal years.

The details of the current year’s changes in net position can be found on page 21 of this report.

City of Vernon
Water Fund
Changes in Net Position
June 30, 2023 and 2022
2023 2022 $ Variance
Charges for services $ 9,844,537 $ 10,845,652 $ (1,001,115) Cost of sales 6,226,053 7,743,964 (1,517,911)
Depreciation 575,512 500,102 75,410
Total operating expenses 6,801,565 8,244,066 (1,442,501) Operating income 3,042,972 2,601,586 441,386
Intergovernmental - 194,487 (194,487)
Investment income 327,529 11,991 315,538
Interest expense (551,437) (563,865) 12,428
Gain/Loss on disposition of assets 14,889 (409,841) 424,730 Net nonoperating revenue (expenses) (209,019) (767,258) 558,239 2,833,953 1,834,328 999,625
20,753,779 18,919,451 1,834,328
$ 23,587,732 $ 20,753,779 $ 2,833,953
Charge in net position
Net position - beginning of year
Net position - end of year
Operating Revenues
Operating Expenses
Nonoperating revenues (expenses)
The Water Fund’s change in net position for FY 2022-23 was $2,833,953, primarily due to an operating income of $3,042,972 and lower total nonoperating revenues (expenses) of ($209,019) when compared to the prior year.

Although operating revenues decreased by $1,001,115 compared to the prior year due to the loss of a major customer, it was more than offset by lower operating expenses of $1,517,911. ..

Item 11 Page 342 of 405
City of Vernon, California
Water Fund
Management’s Discussion and Analysis (Unaudited)(Continued) Year ended June 30, 2023
9 CAPITAL ASSET AND DEBT ADMINISTRATION

CAPITAL ASSETS
The Water Fund’s investment in capital assets as of June 30, 2023 amounted to $6.1 million (net of accumulated depreciation). This investment in capital assets includes land, construction in progress, and utility system improvements.

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

OUTSTANDING LONG-TERM DEBT
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, S&P's rating on Water System Revenue Bonds is A-/Stable.

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

ECONOMIC FACTORS AND NEW YEAR’S BUDGET AND RATES
These factors were considered in preparing the Water Fund’s 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 chemical and construction costs, to maintain infrastructure investment, and to continue to provide exceptionally reliable service.
 The final phase of the multi-year water rate adjustment plan approved by the City Council was implemented in January 2024.

REQUESTS FOR INFORMATION
This report is designed to provide an overview of the Water Fund's FY 2022-23 financial results. Questions concerning the fund’s financial results can be addressed to the Finance Department, City of Vernon, 4305 Santa Fe Avenue, Vernon, California, 90058. ..

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FINANCIAL STATEMENTS
11 ..

Item 11 Page 345 of 405
ASSETS
Current assets:

Cash and investments $ 17,994,763
Accounts receivable, ne
t 943,517
Interest receivable 8,928
Accrued unbilled revenue 1,515,524
Due from other funds 18,247
Prepaid items 4,330
Total current assets 20,485,309
Noncurrent assets:

Restricted cash and investments 2,148,689
Capital assets:

Capital assets, not being depreciated 11,111,271
Capital assets, being depreciated, net 11,302,440
Total capital assets 22,413,711
Total noncurrent asset
s 24,562,400
Total assets 45,047,709

DEFERRED OUTFLOW OF RESOURCES
Pension related items 1,821,009
Other postemployment benefits related items 148,030
Total deferred outflow of resources $ 1,969,039
(Continued)
Water Enterprise Fund of the City of Vernon
Statement of Net Position
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 12 ..

Item 11 Page 346 of 405

LIABILITIES
Current liabilities:

Accounts payable $ 1,279,568
Accrued wages and benefits 31,872
Accrued interest payable 237,281
Due to other funds 110,329
Customer deposits payable 236,888
Compensated absences, due within one year 34,155
Bonds payable, due within one year 265,000
Note payable, due within one year 139,535
Total current liabilities 2,334,628
Noncurrent liabilities:

Compensated absences, due in more than one year 68,311
Bonds, due in more than one year 14,601,753
Note payable, due in more than one year 941,860
Net pension liability 4,598,715
Net other postemployment benefits liabilit
y 477,770
Total noncurrent liabilities 20,688,409
Total liabilities 23,023,037

DEFERRED INFLOWS OF RESOURCES
Pension related items 230,161
Other postemployment benefits related items 175,818
Total deferred inflows of resources 405,979

NET POSITION
Net investment in capital assets 8,238,110
Restricted for debt service 160,440
Unrestricted 15,189,182
Total net
position $ 23,587,732
(Concluded)
Water Enterprise Fund of the City of Vernon
Statement of Net Position (Continued)
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 13 ..

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Item 11 Page 348 of 405
OPERATING REVENUES:

Charges for services $ 9,844,537
Total operating revenues 9,844,537
OPERATING EXPENSES:

Cost of sales 6,226,053
Depreciation expense 575,512
Total operating expenses 6,801,565
OPERATING INCOME 3,042,972
NONOPERATING REVENUES (EXPENSES):

Investment income 327,529
Interest expense (551,437)
Gain on disposal of assets 14,889
Total nonoperating revenues (expenses) (209,019)
CHANGE IN NET POSITION 2,833,953
NET POSITION:

Beginning of year 20,753,779
End of year $ 23,587,732
Water Enterprise Fund of the Citv of Vernon
Statement of Revenues, Expenses, and Changes in Net Position For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 15 ..

Item 11 Page 349 of 405
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash receipts from customers and users $ 9,900,629
Cash paid to suppliers for goods and services (5,024,168) Cash paid to employees for services (2,053,190)
Net cash
provided by operating activities 2,823,271

CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES:

Receipt from other funds 313,127
Payment to other funds (18,247)
Net cash
provided by noncapital financing activities 294,880

CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:

Acquisition of capital assets (6,721,212)
Proceed from sale of capital assets 14,889
Principal paid on long-term debt (389,535)
Interest paid on long-term debt (575,726)
Net cash (used in) ca
pital and related financing activities (7,671,584)
CASH FLOWS FROM INVESTING ACTIVITIES:

Interest received 323,049
Net cash
provided by investing activities 323,049
Net (decrease) in cash and cash equivalents (4,230,384) CASH AND CASH EQUIVALENTS:

Beginning of year 24,373,836
End of yea
r $ 20,143,452
CASH AND CASH EQUIVALENTS:

Cash and investment $ 17,994,763
Restricted cash and investment 2,148,689
Total cash and cash e
quivalents $ 20,143,452
(Continued)
Water Enterprise Fund of the City of Vernon
Statement of Cash Flows
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 16 ..

Item 11 Page 350 of 405

OPERATING INCOME TO NET CASH PROVIDED B
Y
OPERATING ACTIVITIES:

Operating income $ 3,042,972
Adjustments to reconcile operating income to net cash
provided by operating activities:

Depreciation 575,512
Change in assets and liabilities:
(Increase) decrease in accounts receivable 198,421
(Increase) decrease in accrued unbilled revenue (142,329) (Increase) decrease in inventories and prepaid items (4,330) (Increase) decrease in deferred outflows
of resources related to pension (903,730)
(Increase) decrease in deferred outflows
of resources related to OPEB (34,265)
Increase (decrease) in accounts payable (135,694)
Increase (decrease) in accrued wages and benefits (12,423) Increase (decrease) in deposits payable 175,704
Increase (decrease) in compensated absences 18,258
Increase (decrease) in net pension liabilities 1,752,772 Increase (decrease) in OPEB liabilities (51,573)
Increase (decrease) in deferred inflows
of resources related to pension (1,560,735)
Increase (decrease) in deferred inflows
of resources related to OPEB (95,289)
Total adjustment (219,701)
Net cash
provided by operating activities $ 2,823,271
(Concluded)
Statement of Cash Flows (Continued)
Water Enterprise Fund of the City of Vernon
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 17 ..

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19 NOTES TO THE BASIC FINANCIAL STATEMENTS
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Water Enterprise Fund of the City of Vernon
Index to the Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
21 Note 1 – Summary of Significant Accounting Policies ....................................................................................... 23 A. Basis of Accounting and Measurement Focus ..................................................................................... 23 B. Pooled Cash ......................................................................................................................................... 23 C. Cash, Cash Equivalents and Investments ............................................................................................. 23 D. Interfund Transactions ......................................................................................................................... 24 E. Accounts Receivables. ......................................................................................................................... 24 F. Prepaid Items ....................................................................................................................................... 24 G. Capital Assets ....................................................................................................................................... 24 H. Deferred Outflows and Inflows of Resources ...................................................................................... 24 I. Compensated Absences ........................................................................................................................ 24 J. Long-Term Obligations ........................................................................................................................ 25 K. Pensions ............................................................................................................................................... 25 L. Other Postemployment Benefits (“OPEB”) ......................................................................................... 25 M. Net Position .......................................................................................................................................... 26 N. Use of Estimates................................................................................................................................... 26 Note 2 – Cash and Cash Equivalents ................................................................................................................... 26 A. Equity in the Cash Pool of the City of Vernon .................................................................................... 27 B. Investments .......................................................................................................................................... 27 C. Fair Value Measurement ...................................................................................................................... 27 D. Risk Disclosures ................................................................................................................................... 27 Note 3 – Accounts Receivable ............................................................................................................................... 28 Note 4 – Interfund Transactions .......................................................................................................................... 29 A. Due From/To Other City Funds ........................................................................................................... 29 Note 5 – Capital Assets .......................................................................................................................................... 29 Note 6 – Long-Term Debt ..................................................................................................................................... 29 Note 7 – Risk Management ................................................................................................................................... 31 Note 8 – Pension Plan ............................................................................................................................................ 32 A. General Information about the Pension Plans ...................................................................................... 32 B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions ........................................................................... 34 Note 9 – Other Postemployment Benefits (“OPEB”) ......................................................................................... 37 A. General Information about the OPEB Plan .......................................................................................... 37 B. Net OPEB Liabilities, OPEB Expenses, and Deferred
Outflows/Inflows of Resources Related to OPEB ............................................................................... 38 ..

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Item 11 Page 356 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
23 Note 1 – Summary of Significant Accounting Policies
The accompanying financial statements present only the Water Fund (“Water Fund”) of the City of Vernon, California (“the City”), and do not present fairly the financial position and results of the operations of the City. The Water Fund accounts for the independent operations and the maintenance of the City’s water utility. The Water Fund is administered as an independent fiscal and accounting entity with a self-balancing set of accounts recording resources, related liabilities, obligations, reserves, and equities, segregated for the purpose of carrying out specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations.

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

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

A. Basis of Accounting and Measurement Focus
The Water Fund’s financial statements are reported 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.

The Water Fund distinguishes operating revenues and expenses from nonoperating items. Operating revenues, such as charges for services, result from exchange transactions associated with the sale of electricity and gas. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities. Operating expenses include the cost of sales and services, administrative expenses and depreciation on capital assets. All expenses not meeting this definition are reported as nonoperating expenses.

B. Pooled Cash
Part of the Water Fund’s operating cash balance is pooled with 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.

C. Cash, Cash Equivalents, and Investments
For purposes of the statement of cash flows, the Water Fund considers all highly liquid investments (including restricted cash and investments) with an original maturity of three months or less when purchased to be cash equivalents. Investment transactions are recorded on the settlement date. Investments in nonparticipating interestearning investment contracts are reported at cost and all other investments are reported at fair value. ..

Item 11 Page 357 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
24 Note 1 – Summary of Significant Accounting Policies
D. 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.

E. Accounts Receivables
Accounts receivables are shown net of an allowance for uncollectible accounts. Allowances for uncollectible accounts were $48,256 as 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.

F. 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.

G. 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.

H. 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.

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

Item 11 Page 358 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
25 Note 1 – Summary of Significant Accounting Policies (Continued) J. Long-Term Obligations
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.

K. 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.

L. 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.

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. ..

Item 11 Page 359 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
26 Note 1 – Summary of Significant Accounting Policies (Continued) L. Other Postemployment Benefits (“OPEB”) (Continued)
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.

M. Net Position
The Water Fund 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 City’s policy is to apply the restricted component of net position first, then the unrestricted component of net position as needed.

N. 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 Water Fund has the following cash and investments at June 30, 2023:

Cash and investments $ 17,994,763
Restricted cash and investments 2,148,689
Total cash and investments $ 20,143,452
The Water Fund cash and investments at June 30, 2023, in more detail:

Equity in pooled cash $ 3,539,326
Deposits with financial institutions 16,540
Investments 16,587,586
Total cash and investments $ 20,143,452
..

Item 11 Page 360 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
27 Note 2 – Cash and Cash Equivalents (Continued)
A. Equity in the Cash Pool of the City of Vernon
The Water Fund has equity in the cash pool managed by the City. The Water Fund is a voluntary participant in that pool and the pool is governed by and under the regulatory oversight of the Investment Policy adopted by the City Council of the City. The Water Fund has not adopted an investment policy separate from that of the City. The amount of the Water Fund’s cash in this pool is reported in the accompanying financial statements based upon the Water Fund’s pro rata share of the amount calculated by the City. The balance available for withdrawal is based on the accounting records maintained by the City.

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% NoneA
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. 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:

Investment Type Uncategorized
Money Market Funds $ 14,438,897
Investment with fiscal agent:

Money Market Funds 2,148,689
Total $ 16,587,586
D. 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. ..

Item 11 Page 361 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
28 Note 2 – Cash and Cash Equivalents (Continued)
D. Risk Disclosures (Continued)
At June 30, 2023, the Water Fund had the following investment maturities:

Remaining Maturity
1 Year
Investment Type or Less
Money Market Funds 14,438,897 $
Investment with fiscal agent:

Money Market Funds 2,148,689
Total $ 16,587,586
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
at Lega
l
Investment Type June 30, 2023 Rating AAA
Money Market Funds 14,438,897 AAA 14,438,897
Investment with fiscal agent:

Money Market Funds 2,148,689 AAA 2,148,689
Total $ 16,587,586 $ 16,587,586
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 Water Fund’s accounts receivable at June 30, 2023 are as follows:

Accounts Receivabe $ 991,773
Less: Allowance for Uncollectible Accounts (48,256)
. Total accounts Receivable, Net $ 943,517 .

Item 11 Page 362 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
29 Note 4 – Interfund Transactions
A. Due From/To Other City Funds
At June 30, 2023, the Water Fund was due $18,247 from the Electric Fund.

At June 30, 2023, the Water Fund had $110,329 due to the General Fund of the City.

The interfund balances resulted from borrowing of cash for temporary purposes. All balances are expected to be reimbursed within the subsequent year.

Note 5 – Capital Assets
A summary of changes in the capital assets for the Water Fund 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:

Water Utility - Water $ 467,640 $ - $ - $ 467,640 - $
Water Utility - Construction in Progress 6,914,299 5,933,375 (2,204,043) - 10,643,631 Total capital assets, not being depreciated 7,381,939 5,933,375 (2,204,043) - 11,111,271 Capital assets, being depreciated:

Water Utility Plant 23,730,271 787,837 (14,782) 2,204,043 26,707,369 Total capital assets, being depreciated 23,730,271 787,837 (14,782) 2,204,043 26,707,369 Less accumulated depreciation for:

Water Utility Plant (14,844,199) (575,512) 14,782 (15,404,929) - Total accumulated depreciation (14,844,199) (575,512) 14,782 (15,404,929) - Total capital assets, being depreciated, net 8,886,072 212,325 2,204,043 - 11,302,440 Total capital assets, net $ 16,268,011 $ 6,145,700 $
- $ 22,413,711 - $
The Water Fund’s total depreciation expense for the year was $575,512.

Note 6 – Long-Term Debt
A summary of changes in long-term debt for the Water Fund for the year ended Jun 30, 2023 is as follows:

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

Revenue Bonds:
2020 Taxable Revenue Bonds - Series A - Water 14,600,000 $ - $ (250,000) $ 14,350,000 $ 265,000 $ 14,085,000 $ Unamortized Premiums/(Discounts):
2020 Taxable Revenue Bonds - Series A - Water 535,833 - (19,080) 516,753 - 516,753 Total Public Offering 15,135,833 - (269,080) 14,866,753 265,000 14,601,753 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 84,208 121,522 (103,264) 102,466 34,155 68,311 Total business-Type activities $ 121,522 16,440,971 $ (511,879) $ 16,050,614 $ 438,690 $ 15,611,924 $ ..

Item 11 Page 363 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
30 Note 6 – Long-Term Debt (Continued)
$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
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, 2023, 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 $
..

Item 11 Page 364 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
31 Note 6 – Long-Term Debt (Continued)
Compensated Absences
The balance outstanding at June 30, 2023, was $102,466.

Right to Accelerate Upon Default
Notwithstanding anything contrary in the indenture or in the bonds, upon the occurrence of an event of default, the Trustee may, with the consent of each credit provider whose consent is required by a supplemental indenture or a credit support agreement, and shall, at the direction of the owners of a majority in principal amount of outstanding bonds (other than bonds owned by or on behalf of the City) by written notice to the City, declare the principal of the outstanding bonds and the interest thereon to be immediately due and payable, whereupon such principal and interest shall, without further action, become and be immediately due and payable.

Credit Ratings
As of June 30, 2023, the ratings on Water System Revenue Bonds were A- stable by S&P and not rated by Moody’s.

Note 7 – Risk Management
The Water Fund is in the City’s self-insurance program as part of its policy to self-insure certain levels of risk within 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 2010, the City chose to establish Risk Financing in the General Fund, whereby assets are set aside for claim-litigation settlements associated with the abovementioned risks up to their self-insured retentions or policy deductibles. Athens Administrators Inc. is the Third-Party Administrator for the City’s workers’ compensation program and they provide basic services for general liability claims and litigation. ..

Item 11 Page 365 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
32 Note 7 – 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 F
L $50,000,000-
Government Crim
e $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 Pipelin
e
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 8 – 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 366 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
33 Note 8 – 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 Afte
r
Hire date January 1, 2013 January 1, 2013
Benefit formula 2.7% @ 55 2% @ 62
Benefit vesting schedul
e 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,
respectively

1.0%-2.0%,
52 yrs -62 yrs,
respectively
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 Afte
r
Hire date January 1, 2013 January 1, 2013
Benefit formula 3.0% @ 50 2.7% @ 57
Benefit vesting schedul
e 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
respectively
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
Safety
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. ..

Item 11 Page 367 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
34 Note 8 – Pension Plan (Continued)
A. General Information about the Pension Plans (Continued) Benefits Provided (Continued)
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 Water Fund’s share of employer contributions made to the plans was $470,851.

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 The lesser of contract COLA or 2.30% until Purchasing Power Protection. Allowance floor on purchasing power applies, 2.30% thereafter
(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.

Entry Age Normal

6.90%

2.30%
Varies by Entry Age and Service
Derived using CalPERS’ Membership Data for all Funds.

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. ..

Item 11 Page 368 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
35 Note 8 – 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 (Continued)
In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.

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

Assumed 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.

Proportionate Share of Net Pension Liability – Allocation of the City’s Pension Plans to the Water Fund The Water Fund’s net pension liability for the Plans is measured as the proportionate share of the aggregate net pension liability of the City’s miscellaneous agent multiple-employer plans and safety cost-sharing plan. The Water Fund’s proportionate share of the aggregate net pension liability was based on the Water Fund’s current year share of contributions of the pension plans relative to the City’s total current year contributions to the pension plans. ..

Item 11 Page 369 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
36 Note 8 – Pension Plan (Continued)
B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Proportionate Share of Net Pension Liability – Allocation of the City’s Pension Plans to the Water Fund The Water Fund’s proportionate share of the aggregate net pension liability for the pension plans as of the measurement dare ended June 30, 2021 and 2022 were as follows:

Total Pension Plan Fiduciary Net Net Pension
Liability Position Liability/(Asset) Proportionate
(a) (b) (c) = (a) - (b) Share
Balance at 6/30/21 (Valuation Date) 20,712,814 17,866,870 2,845,944 $ 3.23% Balance at 6/30/22 (Measurement Date) 14,979,776 10,381,061 4,598,715 2.92% Net c
hanges during 2021-2022 (5,733,038) (7,485,809) 1,752,771-0.31% Increase (Decrease)
Pension Expense and Deferred Outflows and Inflows of Resources For the measurement period ended June 30, 2022, the Water Fund recognized its proportionate share of the aggregate pension expense of the Plans totaled $123,562. At June 30, 2023, the Water Fund reported its proportionate share of the Plans’ 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 period 470,158 $ - $ Changes of assumptions 421,485 (32,019)
Difference between expected and actual experien
c - 140,648
Net difference between projected and actual earning
on pension plan investments 700,913 -
Adjustment due to differences in proportions 87,805 -
Difference betwwen City contributions and proportionate share of contribution - (198,142)
Total$ 1,821,009$ (230,161)
$470,158 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 336,479 $
2024 252,078
2025 110,995
2026 421,138
Total $ 1,120,690
..

Item 11 Page 370 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
37 Note 8 – Pension Plan (Continued)
B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the Water Fund’s proportionate share of the Plans’ aggregate net pension liability, calculated using a discount rate of 6.90%, as well as what the Water Fund’s proportionate share of the Plans’ aggregate 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$ 2,516,150$ 1,650,154$ 943,068
Safety Plan$ 4,187,062$ 2,948,561$ 1,936,367
Water Fund'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 Water Fund had no outstanding amount of contributions to the pension plans required for the year ended June 30, 2023.

Note 9 – 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 Water Fund’s share of the net pension liability of the City’s OPEB Plan is reported as a cost-sharing plan in these financial statements since the Water Fund’s operations are handled by City employees who are eligible to participate in the City’s OPEB plan.

Benefits Provided
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 371 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
38 Note 9 – 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.

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 Water Fund’s proportionate share of contributions made to the trust was $44,864, $45,836 for retiree premiums, resulting in a total contribution of $90,700.

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. ..

Item 11 Page 372 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
39 Note 9 – Other Postemployment Benefits (“OPEB”) (Continued) B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of Resources Related to OPEB (Continued)
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

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%
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
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
The long-term expected rate of return was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are aggregate to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. ..

Item 11 Page 373 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
40 Note 9 – Other Postemployment Benefits (“OPEB”) (Continued) B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of Resources Related to OPEB (Continued)
Long-Term Expected Rate of Return (Continued)
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%
100.00%
* Preliminary estimate, pending confirmation by CalPERS The Water Fund’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 (Valuation Date) 885,514 $ 356,717 $ 529,343 $ 3.23% Balance at June 30, 2022 (Measurement Date) 796,735 318,965 477,770 2.92% Net changes during 2021-22 (88,779) (37,752) (51,573) -0.31% Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the Water Fund’s proportionate share of the net OPEB liability if it were calculated using a discount rate that is 1% point lower (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%)
$ 477,770 568,304 $ 401,870 $
Plan's Net OPEB Liability
Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates The following presents the Water Fund’s proportionate share of the net OPEB liability if it were calculated using a healthcare cost trend rates that are 1% point lower (5.3% 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: ..

Item 11 Page 374 of 405
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
41 Note 9 – Other Postemployment Benefits (“OPEB”) (Continued) B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of Resources Related to OPEB (Continued)
Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates Healthcare Cost Healthcare Cost Healthcare Cost
Trend Rate - 1% Trend Rate Trend Rate + 1%
$ 477,770 443,084 $ 511,328 $
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 Water Fund recognized its proportionate share of the OPEB credit of $(20,488). At June 30, 2023, the Water Fund 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 $ 90,700 $ - Changes in assumptions 24,128 (74,887)
Difference between expected and actual experience 3,064 (100,931) Net difference between projected and actual earning on
OPEB plan investments 30,138 -
Total $ 148,030 $ (175,818)
The $90,700 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 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 OPEB will be recognized as OPEB expense as follows:

Deferred
Measurement Period Outflows/(Inflows)
Ending June 30 of Resources
2023 $ (56,973)
2024 (56,571)
2025 (6,950)
2026 9,194
2027 (4,867)
Thereafter (2,321)
Total $ (118,488)
Payable to the OPEB Plan
At June 30, 2023, the Water Fund had no outstanding amount of contributions to the OPEB plan required for the year ended June 30, 2023. ..

Item 11 Page 375 of 405
42 This page intentionally left blank.
..

Item 11 Page 376 of 405

REQUIRED SUPPLEMENTARY INFORMATION
(UNAUDITED)
43 ..

Item 11 Page 377 of 405
Fiscal year 2017 2018 2019 2020 2021
Measurement period 2015-16 2016-17 2017-18 2018-19 2019-20 Water Fund's proportion of the net
pension liability 3.80% 3.74% 3.11% 3.28% 3.45%
Water Fund's proportionate share of the
net pension liability 3,619,851 $ 4,100,788 $ 3,533,209 $ 3,964,339 $ 4,668,011 $ Covered payroll
2 $ 499,838 $ 1,038,438 $ 1,100,727 $ 925,620 $ 891,592 Water Fund's proportionate share of the net
pension liability as a percentage of
covered payroll 724.20% 394.90% 320.99% 428.29% 523.56% Water Fund 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 Growth 2.750%
Investment rate of return
Water Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Pension Liability and Related Ratios 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 Water Fund. Additional years of information will be displayed as it becomes available.

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. 44 ..

Item 11 Page 378 of 405
Fiscal year 2022 2023
Measurement period 2020-21 2021-22
Water Fund's proportion of the net
pension liability 3.23% 2.92%
Water Fund's proportionate share of the
net pension liability $ 2,845,943 $ 4,598,715
Covered payroll
2 $ 628,181 792,625 $
Water Fund's proportionate share of the net
pension liability as a percentage of
covered payroll 359.05% 732.07%
Water Fund fiduciary net position as a
percentage of the total pension liability 85.45% 69.30% Water Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the 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 45 ..

Item 11 Page 379 of 405
Fiscal year 2017 2018 2019 2020 2021
Actuarially determined contribution 346,113 $ 354,831 $ 339,930 $ 404,765 $ 435,752 $ Contributions in relation to the
actuarially determined contribution (346,113) (354,831) (339,930) (404,765) (435,752) Contribution deficiency (excess) $ - $ - $ - $ - $ -
Covered payroll
2 $ 1,100,727 1,038,438 $ 925,620 $ 891,592 $ 792,625 $ 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
Water Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions
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 Water Fund. Additional years will be displayed as it becomes available.

Includes one year’s payroll growth using 2.80 percent payroll growth assumption for fiscal years ended June 30, 2018-21; 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. 46 ..

Item 11 Page 380 of 405
Fiscal year 2022 2023
Actuarially determined contribution $ 470,851 459,607 $ Contributions in relation to the
actuarially determined contribution (459,607) (470,851) Contribution deficiency (excess) $ - $ -
Covered payroll
2 $ 628,181 $ 645,770
Contributions as a percentage of covered payroll. 73.16% 72.91% Water Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions (Continued)
For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 California Public Employees' Retirement System Defined Pension Plan 47 ..

Item 11 Page 381 of 405
Fiscal year 2018 2019 2020 2021 2022
Measurement period 2016-17
1 2017-18 2018-19 2019-20 2020-21
Water Fund's proportion of the net
OPEB liability 4.08% 3.11% 3.28% 3.45% 3.23%
Water Fund's proportionare share of the
net OPEB liability 1,482,614 $ 719,107 $ 719,261 $ 697,329 $ 529,343 $ Covered employee payroll 1,368,760 $ 1,368,166 $ 1,095,236 $ 1,048,734 $ 1,093,781 $ Water Fund's proportionate share of the net
OPEB liability as a percentage of
covered employee payrol
l 108.32% 52.56% 65.67% 66.49% 48.40%
Water Fund Fiduciary Net Position as a
percentage of the total
OPEB liability 2.83% 8.62% 16.30% 25.70% 40.22%
1 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.

For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 Benefits Liability and Related Ratios
Water Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Other Postemployment 48 ..

Item 11 Page 382 of 405
Fiscal year 2023
Measurement period 2021-22
Water Fund's proportion of the net
OPEB liability 2.92%
Water Fund's proportionare share of the
net OPEB liability $ 477,770
Covered employee payroll $ 739,897
Water Fund's proportionate share of the net
OPEB liability as a percentage of
covered employee payrol
l 64.57%
Water Fund Fiduciary Net Position as a
percentage of the total
OPEB liability 40.03%
Other Postemployment Benefits ("OPEB") Plan
For the Year Ended June 30, 2023
Last Ten Fiscal Years
1 Benefits Liability and Related Ratios (Continued)
Water Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Other Postemployment 49 ..

Item 11 Page 383 of 405
Fiscal yea
r 2018 2019 2020 2021 2022
Actuarially determined contribution $ 109,990 $ 83,829 $ 63,389 $ 53,086 $ 49,744 Contributions in relation to the
actuarially determined contribution (84,361) (93,060) (128,484) (108,041) (94,830) Contribution deficiency (excess) $ 25,629 $ (9,231) $ (65,095) $ (54,955) $ (45,086) Covered-employee payrol
l $ 1,095,236 1,368,166 $ 1,048,734 $ 1,093,781 $ 1,024,922 $ Contributions as a percentage of covered-employee payroll 6.17% 8.50% 12.25% 9.88% 9.25% 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 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.

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.

Water Enterprise Fund of the 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
50 ..

Item 11 Page 384 of 405
Fiscal yea
r 2023
Actuarially determined contribution $ 40,896
Contributions in relation to the
actuarially determined contribution (90,700)
Contribution deficiency (excess) $ (49,804)
Covered-employee payrol
l $ 713,856
Contributions as a percentage of covered-employee payroll 12.71% Water Enterprise Fund of the 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
51 ..

Item 11 Page 385 of 405
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52 ..

Item 11 Page 386 of 405
City of Vernon
AU-C 260 Communication With
Those Charged With Governance
For the Year Ended June 30, 2023
February 20, 2024
February 20, 2024
Item 11 Staff Presentation
..

Item 11 Page 387 of 405
2 CONTENTS • Scope of Work • Required Communications (AU -C 260)
• Overview of Financial Statements • Audit Results
12/7/2022
..

Item 11 Page 388 of 405
3 SCOPE OF WORK
12/7/2022
..

Item 11 Page 389 of 405
4 SCOPE OF WORK • City’s Financial Statement Audit • Vernon Public Utilities Audit • Electric Fund Audit • Water Fund Audit • Agreed-upon Procedures on Appropriation Limit Schedules • Report on Internal Control over Financial Reporting and on Compliance in accordance with Government Auditing Standards (“GAS”) 12/7/2022
..

Item 11 Page 390 of 405
5 Required Communications (AU-C 260)
12/7/2022
..

Item 11 Page 391 of 405
6 • Our Responsibilities in Accordance with Professional Standards • Form and express an opinion about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America
• Plan and perform the audit to obtain “reasonable” assurance (not “absolute” assurance) about whether the financial statements are free of material misstatements • Consider internal control over financial reporting. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control
• Concluded there are no conditions or events that raise substantial doubt about the City’s ability to continue as a going concern.
• Communicate with those charged with governance
12/7/2022
Required Communications (AU-C 260)
..

Item 11 Page 392 of 405
7 Required Communications (AU-C 260)
12/7/2022
• Ethics and Independence • Complied with ALL relevant ethical requirements regarding independence • Significant Accounting Policies • The City of Vernon disclosed all significant accounting policies in Note 1 to the financial statements.
• Implementation of GASB 96 – Subscription Based Information Technology Arrangements • Significant Estimates • Investment Fair Value • Depreciation and amortization on Capital Assets • Net Pension Liability • Net OPEB Liability ..

Item 11 Page 393 of 405
8 Required Communications (AU-C 260)
12/7/2022
• Sensitive Disclosures • Note 1 – Summary of Significant Accounting Policies • Note 9 – Pension Plan • Note 10 – Other Postemployment Benefits (“OPEB”) • Note 12 – Commitments and Contingencies • Misstatements • There were no uncorrected misstatements reported ..

Item 11 Page 394 of 405
9 Required Communications (AU-C 260)
12/7/2022
• Consultation with Other Accountants • Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and other matters. • Significant Difficulties • We encountered no significant difficulties in dealing with management. • Disagreement with Management • We did not have any disagreement with management in terms of accounting treatments nor audit procedures performed.
..

Item 11 Page 395 of 405
10 OVERVIEW OF THE FINANCIAL

STATEMENTS
12/7/2022
..

Item 11 Page 396 of 405
11 City of Vernon
Government-Wide Summary
As of June 30, 2023
12/7/2022
Governmental Business-type Activities Activities Total
Net Position:

Net investment in capital assets $ 161,850,000 $ 191,511,000 $ 353,361,000 Restricted 5,750,000 37,049,000 42,799,000
Unrestricted (63,210,000) 4,822,000 (58,388,000)
Total Net Position $ 104,390,000 $ 233,382,000 $ 337,772,000 ..

Item 11 Page 397 of 405
12 City of Vernon
Government-Wide Summary (Continued)
For the Year Ended June 30, 2023
2/20/2024
Governmental Business-type
Activities Activities Total
Expenses $ 47,560,000 $ 214,840,000 $ 262,400,000
Program Revenues 14,199,000 262,570,000 276,769,000
Net Cost of Services (33,361,000) 47,730,000 14,369,000 General Revenues 62,946,000 3,723,000 66,669,000
Transfers 492,000 (492,000) -
Changes in Net Position $ 30,077,000 $ 50,961,000 $ 81,038,000 Tax revenue $ 59,872,000
Cost of Service to Tax Revenue 56%
..

Item 11 Page 398 of 405
13 City of Vernon
General Fund Summary
Balance Sheet
As of June 30, 2023 and 2022
11/28/2022
2023 2022 Changes
Fund Balance:

Nonspendable $ 116,000 $ 168,000 $ (52,000)
Restricted 5,750,000 4,423,000 1,327,000
Committed 10,000,000 - 10,000,000
Unassigned 26,126,000 23,256,000 2,870,000
Total Fund Balance $ 41,992,000 $ 27,847,000 $ 14,145,000 ..

Item 11 Page 399 of 405
14 City of Vernon
General Fund Summary
Statement of Revenues, Expenditures,
and Changes in Fund Balance
For the Year Ended June 30, 2023 and 2022
11/28/2022
2023 2022 Changes
Revenues $ 78,744,000 $ 74,364,000 4,380,000
Less: Expenditures 65,697,000 63,484,000 (2,213,000)
Revenues Over (Under) Expenditures 13,047,000 10,880,000 2,167,000 Other Financing Sources 1,098,000 - 1,098,000
Net Change in Fund Balance $ 14,145,000 $ 10,880,000 $ 3,265,000 ..

Item 11 Page 400 of 405
15 City of Vernon
Detailed Pension Plans
Measurement Date June 30, 2022 and 2021
12/15/2021
Miscellaneous Safety
Plan Plan Total 2021
Total Pension Liability $ 206,178,000 $ 307,585,000 $ 513,763,000 $ 489,223,000 Fiduciary Net Position 149,583,000 206,458,000 356,041,000 401,192,000 Net Pension Liability $ 56,595,000 $ 101,127,000 $ 157,722,000 $ 88,031,000 Funding Ratio 72.55% 67.12% 69.30% 82.01%
Contribution Made in
FY23 and FY22 $ 6,946,000 $ 9,179,000 $ 16,125,000 $ 14,215,000 2022
..

Item 11 Page 401 of 405
16 City of Vernon
Other Postemployment Benefits (“OPEB”)
Measurement Date June 30, 2022 and 2021
12/7/2022
2022 2021
Plan Total OPEB Liability $ 27,326,000 $ 27,390,000
Plan Fiduciary Net Position 10,940,000 11,016,000
Net OPEB Liability $ 16,386,000 $ 16,374,000
Funding Ratio 40.04% 40.22%
Contribution Made in FY23 and FY22 $ 3,111,000 $ 2,933,000 ..

Item 11 Page 402 of 405
17 AUDIT RESULTS
12/15/2021
..

Item 11 Page 403 of 405
18 Audit Results
12/7/2022
• Financial Statements • Unmodified opinion • Financial Statements are fairly presented in all material respects • Significant accounting policies have been consistently applied • Estimates are reasonable • Disclosures are properly reflected in the financial statements • AU-C 265, Communicating Internal Control Related Matters Identified in an Audit • None Reported
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HQ
- ORANGE COUNTY
200 E. Sandpointe Avenue
Suite 600
Santa Ana, CA 92707

SAN DIEGO
4660 La Jolla Village Drive
Suite 100
San Diego, CA 92122

SACRAMENTO
1511 Corporate Way
Suite 220
Sacramento, CA 95831

LAS VEGAS
1980 Festival Plaza Drive
Suite 300
Las Vegas, NV 89134

PHOENIX
2 N. Central Avenue
Suite 1800
Phoenix, AZ 85004

WALNUT CREEK
2121 North California Boulevard
Suite 290
Walnut Creek, CA 94596
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City Council Agenda Report
Meeting Date: February 20, 2024
From: Jessica Alcaraz, Financial Services Administrator Department: Finance
Submitted by: Angela Melgar, Finance Manager
Subject
Fiscal Year 2023-24 Mid-Year Financial Update
Recommendation
Adopt Resolution No. 2024-02 authorizing and approving mid-year budget appropriations and amending the Annual Operating and Capital Budget for Fiscal Year 2023-24.

Background
The Mid-Year Financial Update reflects continued efforts to provide timely and accurate financial information to assist the City Council with decision making and achievement of the City’s goals.

As of December 31, 2023, the mid-year point of the current fiscal year, one would expect to be at the 50% mark for revenues and expenditures. However, certain factors may influence the timing, rate, or recognition of such. At mid-year, actual overall expenses for General Fund and Vernon Public Utilities (VPU) were at 44% and revenues were at 46% of budgeted amounts. Staff evaluated the trajectory of actual versus budgeted results and are providing the recommendations to appropriate additional funds for unforeseen circumstances that have arisen since the normal course of budget setting during the prior fiscal year. Pursuant to City Charter Chapter 8.5, Council may amend or supplement the budget by the affirmative vote of a majority of the members of the Council.

General Fund
Viewing the General Fund as a whole, about 46% of the cumulative budgeted revenues were received as opposed to about 41% of cumulative budgeted expenditures. Due to the timing of disbursements, some revenue streams are not linear throughout the year. For example, property and parcel taxes were below the midpoint budgeted total, as the largest disbursements are received near the end of the fiscal year. Conversely, at the mid-year point, utility user tax received over 54% of the budgeted amount for FY 2023-24 due to the seasonality of electric usage.

Investment income has greatly exceeded budgeted expectations 106% due to the higher yield rates and new investments in place. At mid-year, intergovernmental revenues were 18% of budget; however, most of these revenues reimburse corresponding approved Public Works expenditures that are billed when incurred and approved so it is dependent on this timing. At the end of December 2023, salaries and benefits were 42% of budgeted amount and maintenance and operations expenses were at target level; however, the capital projects and equipment category was only at 10% of the budgeted amount due to deferred projects, long lead times for equipment purchases, and other postponed capital expenditures.

Enterprise Funds
As of December 31, 2023, Electric revenues were at 48%, Gas revenues were at 33%, and revenues in the Water Fund were at 45% of budgeted amounts. Fiber Optic revenues were at 31% of budgeted revenue due to the year-end timing of interfund billing. As of mid-year, Gas and Water Funds were at 30% and 39% of budgeted expenditures respectively, Electric Fund was at about 46% of budgeted expenditures. Alternatively, Fiber Optic Fund expenditures have already exceeded the budgeted amount. This is mainly due to increased capital outlay expenses while undergoing major infrastructure upgrades that will give the utility a competitive advantage and ..

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help retain and attract more customers.

Cash Position
At mid-year, approximately 62% of the City’s cash funds are unrestricted, with Electric utility reserves exceeding 180 days of operating expenses. As stated in the FY 2022-23 Annual Comprehensive Financial Report, the General Fund unassigned fund balance is $26 million as of the last audited period ending June 30, 2023.

Proposed Budget Adjustments
A year-end operating surplus occurs when there is an excess of revenues over expenditures in a particular year, generally a result of higher than budgeted revenues, and/or lower than budgeted expenditures. The City concluded FY 2022-23 with an operating surplus of approximately $14.1 million. Per the Council approved budget, $10 million was allocated to committed reserve fund balances as follows: Economic Uncertainties $5 million, Capital $2 million, Post-retirement $1.5 million, Technology Replacement $500,000 and Fleet Replacement $500,000, leaving a remainder of operating surplus of approximately $4.1 million.

Department staff has analyzed their line-item budgets and identified amendments needed for additional expenditures through the end of FY 2023-24 and a recommendation to allocate additional funds to committed reserve fund balances from the General Fund Unassigned Fund Balance. Due to the rising costs of materials, supply chain constraints, and expenditures not known or expected at the adoption of the FY 2023-24 Budget, adjustments are being presented to Council to appropriate and reallocate funds in the General and VPU Funds that are in line with strategic goals and objectives of the City.

Fiscal Impact
Approval of this action would require an appropriation of $2,507,895 in the General Fund, $2,006,500 in the Electric Fund, $39,500 in the Gas Fund and $860,000 in the Fiber Fund from their respective Fund Balances as detailed in Resolution 2024-02.

Attachments

1. Resolution No. 2024-02 ..

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RESOLUTION NO. 2024-02

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON

AUTHORIZING AND APPROVING MID-YEAR BUDGET

APPROPRIATIONS AND AMENDING THE ANNUAL OPERATING AND
CAPITAL BUDGET FOR FISCAL YEAR 2023-24
SECTION 1. Recitals.

A. On June 6, 2023, the City Council of the City of Vernon adopted Resolution No. 2023-09, approving the annual operating and capital budget for Fiscal Year 2023-24.

B. Changes in anticipated expenditures of the City require a revision of the appropriations for Fiscal Year 2023-24 and amendment of the budget by the affirmative vote of a majority of the members of the City Council, pursuant to Charter Chapter 8.5.

C. There are sufficient funds in anticipated revenues and City-wide fund balance to cover the proposed budget adjustments.

NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNON AS FOLLOWS:

SECTION 2. The City Council of the City of Vernon finds and determines that the above recitals are true and correct.

SECTION 3. Pursuant to Chapter 8.5 of the Charter of the City of Vernon, a majority of the members of the City Council hereby approves the mid-year budget appropriations in the table below.

Fund Department/
Division GL Account Description Adjustment Amount
General Human
Resources 011-010-120-514090 Worker's Comp Claims - Miscellaneous Employees $ 80,000 General Finance 011-010-130-529215 Cost Allocation Study 37,895 General Finance 011-010-130-529215 Bloomberg Subscription (Budget Transfer Out) (30,000) General Finance 011-010-130-529225 Bloomberg Subscription (Budget Transfer In) 30,000 General Finance 011-010-130-529225 Municipal Advisory Services Agreement 50,000 General Health 011-020-200-527000 Equipment for Emergency Response Vehicle 20,000 General Police 011-030-300-514090 Worker's Comp Claim Payments - Police Safety 220,000
General Facilities
Maintenance 011-040-415-660000 City Hall Digital Billboard(s) 300,000 General Street
Maintenance 011-040-430-529215 Graffiti Abatement 300,000 ..

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Resolution No. 2024-02

_______________________
Fund Department/
Division GL Account Description Adjustment Amount
General Street
Maintenance 011-040-430-660000 55th Street Soil Remediation and Paving Project 1,500,000 General Fund Balance 011-000-000-301000 General Fund Unassigned Fund Balance (3,000,000) General Fund Balance 011-000-000-301005 Economic Uncertainties Reserve 1,000,000 General Fund Balance 011-000-000-301015 Post-Retirement Reserve 500,000 General Fund Balance 011-000-000-301025 Fleet Replacement Reserve 500,000 General Fund Balance 011-000-000-301030 Paving Reserve 1,000,000 General Fund Subtotal $ 2,507,895
Electric System
Dispatch 055-050-555-660000
Re-appropriate Funds for Uninterruptible
Power Supply Ordered in FY 2022-23, Arrived
in FY 2023-24
56,500
Electric Engineering 055-050-585-660000
SCE Contract Total $11,735,000 for
Engineering and Procurement Related to
Interconnection Facilities
1,200,000
Electric
Malburg
Generation
Station
055-050-586-520231 Establish Initial MGS Safety Budget (Budget Transfer In) 51,500
Electric
Malburg
Generation
Station
055-050-586-520232 MGS Environmental (Budget Transfer Out) (51,500) Electric
Malburg
Generation
Station
055-050-586-660000 MGS Capital Outlay (Budget Transfer Out) (63,840) Electric
Malburg
Generation
Station
055-050-586-660005 EAM Essentials (Hexagon) Software (Budget Transfer In) 63,840
Electric Resource
Management 055-050-590-520150 Energy - Other Hedged Savings (Budget Transfer Out) (3,000,000) Electric Resource
Management 055-050-590-520154
Higher Renewable Energy Credit Purchases
Due to Lower Production on All VPU's
Renewable Projects (Budget Transfer In)
3,300,000
Electric Resource
Management 055-050-590-520160 Natural Gas Expense (Budget Transfer Out) (3,300,000) Electric Resource
Management 055-050-590-520180 Capacity - Other Costs (Budget Transfer In) 3,000,000 Electric Customer
Service 055-450-575-450017 Fuel Cost Adjustment Credit 750,000 Electric Fund Subtotal $ 2,006,500
Gas Gas 056-060-600-529215 Updated Natural Gas Financial Forecast, Cost of Service, and Rate Study 39,500
Gas Fund Subtotal $ 39,500
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Resolution No. 2024-02

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Fund Department/
Division GL Account Description Adjustment Amount
Water Water 058-070-700-529000 Well 17 Repairs and Maintenance (Budget Transfer In) 500,000
Water Water 058-070-700-660000 Well 19 Capital Outlay (Budget Transfer Out) (500,000) Water Fund Subtotal $ -
Fiber
Optic Fiber Optic 059-080-800-529000 Additional Repairs & Maintenance for Fiber Operations 160,000 Fiber
Optic Fiber Optic 059-080-800-660000
Upgrade to the Existing Fiber Optic Network
System and Perform Network Migration
Services
700,000
Fiber Optic Fund Subtotal $ 860,000
31 Grand Total $ 5,413,895
SECTION 4. The Annual Operating and Capital Budget for Fiscal Year 2023-24, adopted by Resolution No. 2023-09, is hereby amended to include the mid-year budget appropriations.

SECTION 5. The City Clerk shall certify the passage and adoption of this resolution and enter it into the book of original resolutions.

APPROVED AND ADOPTED February 20, 2024.
________________________
CRYSTAL LARIOS, Mayor
ATTEST:

LISA POPE, City Clerk
(seal)
APPROVED AS TO FORM:

ZAYNAH N. MOUSSA, City Attorney ..

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Fiscal Year 2023
-24
Mid-Year
Financial Update
City Council Meeting
February 20, 2024
February 20, 2024
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Staff Presentations
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Agenda
• Mid-year trend data
• FY 2023-24 budget to actual results
– General Fund revenues and expenditures – Enterprise Funds revenues and expenditures • Cash and investment portfolio • Mid-year budget adjustment requests and additional comments
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FY 2023
-24 General Fund Snapshot
at December 31, 2023
3 Revised Budget Actual % YTD
Revenues $ 76,313,122 $ 35,304,927 46.3%
Operating Transfers In 635,600 - 0.0%
Total Available Resources $ 76,948,722 $ 35,304,927 45.9% Salaries & Benefits $ 38,118,826 $ 15,997,314 42.0%
Maintenance & Operations 32,354,357 16,228,585 50.2%
Capital Projects and Equipment 10,031,429 1,025,843 10.2% Total Expenditures $ 80,504,612 $ 33,251,742 41.3%
Revenues in Excess (Under) $ (3,555,890) $ 2,053,186
General Fund
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FY 2023
-24 General Fund Revenues
at December 31, 2023
4 Revenue Budget Actual Percent Received
Sales and Use Tax 16,328,864 8,289,378 50.8%
Parcel Taxes 15,260,000 7,046,750 46.2%
Utility Users Tax 12,577,911 6,834,286 54.3%
Business License Tax 5,500,000 1,390,426 25.3%
Property Tax 5,405,119 1,404,980 26.0%
In-Lieu Tax 5,400,000 2,608,798 48.3%
Overhead Allocation 3,889,713 1,944,857 50.0%
Intergovernmental Revenues 3,715,500 663,590 17.9%
License and Permits 2,299,400 1,853,252 80.6%
Franchises and Agreements 1,706,000 944,256 55.3%
Investment Income 1,000,000 1,055,742 105.6%
Other Taxes 990,915 17,484 1.8%
Other Revenues 907,000 553,200 61.0%
Charges for Services 835,500 417,673 50.0%
Operating Transfers In 635,600 - 0.0%
Other Government Revenue 350,000 200,438 57.3%
Fines and Forfeitures 147,200 79,815 54.2%
$ 76,948,722 $ 35,304,927
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FY 2023
-24 General Fund Expenditures
at December 31, 2023
5 Expenditure Budget Actual
Percent
Spent
Salaries 18,490,271 8,068,826 43.6%
Retirement 12,802,433 5,305,171 41.4%
Benefits 6,826,122 2,623,316 38.4%
Maintenance and Operations 32,354,357 16,228,585 50.2%
Capital Projects and Equipment 10,031,429 1,025,843 10.2% $ 80,504,612 $ 33,251,742
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General Fund Balance Classifications
6 $(20,000,000)
$(10,000,000)
$-
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
2016
Audited
2017
Audited
2018
Audited
2019
Audited
2020
Audited
2021
Audited
2022
Audited
2023
Audited
2024
Projected
2025
Projected
2026
Projected
Nonspendable Restricted Committed Unassigned
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FY 2023
-24 Enterprise Funds Snapshot
at December 31, 2023
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FY 2023
-24 Highlights
at December 31, 2023
8 • High Return on Investments for All Funds – High
Rates and Diversified Investments
• Enterprise Funds Capital Projects –Increase Diverse
Revenue Sources in Upcoming Years
• Customer Departures – Decreased Enterprise and
General Fund Revenues
• Persistently High Inflation and Interest Rates –
Economic Uncertainty
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Investment Portfolio by Fund
As of December 31, 2023
9 General VPU Total
Statement of net position:

Unrestricted Cash and investments $ 25,294,810 $ 112,099,482 $ 137,394,292 Restricted cash and investments $ 5,988,776 $ 66,596,154 $ 72,584,930 Commited Reserves $ 10,000,000 $ - $ 10,000,000
Total cash and investments $ 41,283,586 $ 178,695,636 $ 219,979,222 Cash and Investments by Fund
General-
Unrestricted
12%
General-Restricted
3% Genenal
-Capital Reserve
1%
General-Post
Retirement
Reserve
1%
General-Technology
Replacement Reserve
General-Fleet 0%
Reserve
0%
General-Economic
Uncertainties Reserve
2%
VPU-Unrestricted
51%
VPU-Restricted
30%
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Mid
-Year Adjustments
10 Department Description Adjustment Amount
Human Resources Worker's Comp Claims - Miscellaneous Employees 80,000 Finance Professional Services, Cost Allocation Study 87,895 Health Equipment for Emergency Response Vehicle 20,000
Police Worker's Comp Claim Payments - Police Safety 220,000 Facilities Maintenance City Hall Digital Billboard(s) 300,000 Street Maintenance Streets Maintenance and Graffiti Abatement 1,800,000 Fund Balance Allocations to Committed Reserves (3,000,000) Fund Balance Economic Uncertainties Reserve 1,000,000
Fund Balance Post-Retirement Reserve 500,000
Fund Balance Fleet Replacement Reserve 500,000
Fund Balance Paving Reserve 1,000,000
$ 2,507,895
General Fund
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Mid
-Year Adjustments
11 Department Description Adjustment Amount
Electric-System Dispatch Uninterrruptible Power Supply 56,500 Electric-Engineering SCE Engineering for Interconnection Facilities 1,200,000 Electric-MGS Transfer Expenditure Budget Funds Within Department - Electric-Resource Mgmt Transfer Expenditure Budget Funds Within Department - Electric-Customer Service Fuel Cost Adjustment Credit 750,000 Gas Updated Cost of Service Study 39,500
Water Transfer Expenditure Budget Funds Within Department - Fiber Optic Repairs and Maintenance and Network Upgrades 860,000 $ 2,906,000
Enterprise Funds
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Economic Outlook
12 Strong Labor Market Sticky Core Inflation
Fed Expected to Cut
Interest Rates Mid to
Late 2024
Commercial Real
Estate Sector
Struggles
Persistent Supply
Chain Delays
Negative Consumer
Sentiment and Lower
Retail Sales
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Conclusion and Direction
13 • Questions or comments • Requested adjustments • Direction ..

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City Council Agenda Report
Meeting Date: February 20, 2024
From: Daniel S. Wall, P.E., Director of Public Works
Department: Public Works
Submitted by: Lissette Melendez, Project Engineer
Subject
Professional Services Agreement with Architerra Design Group for Landscape Architectural Services – City Hall Plaza
Recommendation
A. Find that the proposed action is categorically exempt under the California Environmental Quality Act (CEQA) review, in accordance with CEQA Guidelines Section 15262, because the project only involves feasibility or planning studies for possible future actions which the City has not approved, adopted, or funded; and
B. Approve and authorize the City Administrator to execute a Professional Services Agreement with Architerra Design Group in substantially the same form as submitted, for the design of the Civil Plaza for a total amount not-to-exceed $122,930 for a three-year term.

Background
The City of Vernon hosts multiple community events throughout the year in the area in front of City Hall. The current space was able to comfortably accommodate these public gatherings in the past, but as a result of continuous growth in community participation, the space is no longer sufficient. Following a Request for Proposals (RFP) process, the Department of Public Works selected a firm to design, conduct, and assist in the solicitation of recommendations for the construction of a Civil Plaza in this currently underutilized area. The consulting firm will lead stakeholder meetings/design charrettes with a stakeholder’s committee composed of City Staff, produce preliminary plans and cost estimates for feedback, and present a final conceptual design that addresses all options/suggested changes to preliminary plans open for discussion.

Professional landscape architectural services for hardscape and low maintenance climateappropriate landscape design including irrigation, drainage systems, an outdoor congregation area with a stage, and adjustable lighting and sound system design.

Pursuant to Vernon Municipal Code (VMC) Section 3.32.080, the Engineering Division publicized an RFP for Landscape Architectural Services – City Hall Plaza, as the cost for the service was anticipated to exceed $50,000 and required competitive selection. Because the RFP is for procurement of landscape architecture services, price was not a factor in the determination of the most qualified proposer pursuant to VMC Section 3.32.090. Proposals were rated on demonstrated competence, professional qualifications, and responsiveness to the RFP. The Engineering Division received three proposals by the due date from qualified firms in response to the RFP posted on or about February 7, 2023.

A panel comprised of internal staff evaluated the three proposals received in order to determine the firm best suited to provide the services requested. A comprehensive, fair and impartial evaluation of the proposals was conducted in accordance with the specifications set forth within the RFP document. Established criteria were used in reviewing and comparing the proposals to determine the most suitable firm. At the conclusion of the assessment, it was determined that Architerra Design Group will best meet the needs of the City. Architerra’s proposal demonstrated comprehensive scope of work required to fulfill the services requested by the City and previous projects presented in their proposal demonstrate quality products most similar to the Civil Plaza ..

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concept Public Works is envisioning. Staff recommends that the City enter into a services agreement with Architerra Design Group.

The proposed Services Agreement has been reviewed and approved as to form by the City Attorney’s Office.

Fiscal Impact
The fiscal impact is not-to-exceed $122,930. Sufficient funds are available in General Fund, Public Works, Facilities Maintenance, Capital Outlays Account No. 011-040-415-660000 for the current fiscal year.

Attachments

1. Professional Services Agreement – Architerra Design Group ..

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EXHIBIT A

CONTRACTOR'S PROPOSAL

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EXHIBIT B

SCHEDULE

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LANDSCAPE ARCHITECTURAL SERVICES CITY HALL RENOVATION

FEE SUMMARY SHEET
TASK A. Conceptual Design $19,550.00
(Architerra Design Group $14,050.00)
(Madole & Associates $5,500.00)
TASK B. Design Development $16,755.00
$71,900.00 TASK C. Construction Documents
(Architerra Design Group $42,700.00)
(Madole & Associates $10,000.00)
(JCA Engineering $19,200.00)
TASK D. Construction Administration
(Architerra Design Group $11,325.00)
(JCA Engineering $1,400.00)
$12,725.00
PROFESSIONAL FEE TOTAL: $120,930.00
Estimated Reimbursable Expense Allowance: $2,000.00
GRAND TOTAL (with estimated reimbursable allowance): S122,930.00 Landscape Architect - Architerra Design Group Hourly Billing Rates:

Principal
Director
Project Manager
Landscape Designer
CADD Designer
Clerical
$200.00/Hour
$175.00/Hour
$135.00/Hour
$120.00/Hour
$100.00/Hour
$65.00/Hour
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Civil Engineer - Madole & Associates Hourly Billing Rates:

Principal and Registered Engineer
Principal Engineer
Designer
Drafter
Administration
$223.00/Hour
$185.00/Hour
$165.00/Hour
$148.00/Hour
$110.00/Hour
$305.00/Hour
$185.00/Hour
Two-man Survey Crew
One-man Survey Crew
Electrical Engineer - JCA Engineering Hourly Billing Rates:

Project Engineer/Manager
Designer
Drafting/CADD
$220.00/Hour
$180.00/Hour
$165.00/Hour
Reimbursable Expenses
The following costs shall be reimbursed at cost and are not included in the Basic Fee for Services: • Expense of outside reprographic reproductions for generation of original drawings, plan check submittals and construction bidding, including printing, plotting, Xerox copying, photo reproductions, display photo boards and handouts for community and agency meetings.
• All automobile mileage shall be paid at the standard rate for business automobile use as set forth by the Internal Revenue Service.
•••Cost of postage and shipping expenses other than first class mail.

Photographic services, film and processing.

Cost of models, special rendered exhibits, promotional photography, special process printing, special equipment, special printed reports or publications maps and documents approved in advance by City.
• Agency Processing and fees paid for securing approval of agencies having jurisdiction over the Project (Plan check fees, variance applications, etc.). ••Fees for additional special consultants retained with the approval of City.

Third party soil testing, as required by California Water Efficient Landscape Ordinance AB 1881.
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EXHIBIT C

EQUAL EMPLOYMENT OPPORTUNITY

PRACTICES PROVISIONS
A. Contractor certifies and represents that, during the performance of this Agreement, the contractor and each subcontractor shall adhere to equal opportunity employment practices to assure that applicants and employees are treated equally and are not discriminated against because of their race, religious creed, color, national origin, ancestry, handicap, sex, or age. Contractor further certifies that it will not maintain any segregated facilities.

B. Contractor agrees that it shall, in all solicitations or advertisements for applicants for employment placed by or on behalf of Contractor, state that it is an "Equal Opportunity Employer" or that all qualified applicants will receive consideration for employment without regard to their race, religious creed, color, national origin, ancestry, handicap, sex or age.

C. Contractor agrees that it shall, if requested to do so by the City, certify that it has not, in the performance of this Agreement, discriminated against applicants or employees because of their membership in a protected class.

D. Contractor agrees to provide the City with access to, and, if requested to do so by City, through its awarding authority, provide copies of all of its records pertaining or relating to its employment practices, except to the extent such records or portions of such records are confidential or privileged under state or federal law.

E. Nothing contained in this Agreement shall be construed in any manner as to require or permit any act which is prohibited by law.

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