Vernon City Council
January 21, 2025

Electric Enterprise Fund
of the City of Vernon
Vernon, California
Financial Statements and
Independent Auditors’ Reports
For the Year Ended June 30, 2024

Electric Enterprise Fund of the City of Vernon
For the Year Ended June 30, 2024
Table of Contents
Page
INTRODUCTORY SECTION (UNAUDITED):

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

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

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

Schedule of Proportionate Share of the Net Pension Liability and Related Ratios ........................................... 52 Schedule Contributions – Pensions .................................................................................................................... 54 Schedule of Proportionate Share of the Net Other Postemployment Benefits Liability and Related Ratios ..... 56 Schedule Contributions – Other Postemployment Benefits ............................................................................... 58 This page intentionally left blank.

Vernon Public Utilities
4305 Santa Fe Avenue, Vernon, CA, 90058
323.583.8811 | CityofVernon.org
Message from the General Manager
Vernon Public Utilities (VPU) is more than just a provider of essential utility services. We are a dedicated partner invested in the stability and growth of the Vernon community. We
understand that businesses seeking to establish or expand in Vernon require not only reliable and competitively priced utilities, but also a responsive and forward-thinking utility partner. VPU is committed to meeting these needs while
maintaining a strong financial and operational foundation to support the long-term stability and growth of the City of Vernon.

In line with our commitment to evolve and adapt, we are actively supporting a transition towards clean commerce in Vernon. This involves strategically targeting growth and investing in critical infrastructure, while supporting our financial and operational goals.

Over the past year, we have achieved significant milestones that demonstrate our dedication to this strategy:
x Completion of the Prime Substation ahead of schedule and on budget: Enhancing our transmission and distribution system to meet growing demands, especially the data center industry.
x Planning the expansion of connections with Southern California Edison: Building an even more robust energy grid with increased capacity, ensuring access to diverse energy resources, while meeting customer growth needs.
x Development and adoption of the VPU Financial Reserves Policy: Reinforcing our long-term financial stability.
x Establishment and implementation of the 5-year capital infrastructure plan:

Guiding strategic investments in our electric system to support future growth and maintain industry best reliability.
x Completion of the 2024 Cost-of-Service Study: Ensuring competitive rates and maintaining VPU’s high standards of reliability.
x Completion of the 2024 Integrated Resources Plan: Charting a course for a sustainable, affordable energy future.
x Completion of the City’s Sustainability Plan: Aligning VPU operations with broader community sustainability goals.

These achievements underscore VPU's commitment to navigating utility challenges and ensuring the continued resilience and growth of our services.

Furthermore, we are proud to announce that in April 2024, Standard & Poor's upgraded VPU's credit rating to A- from BBB+. This upgrade cites "improved risk management practices including, for example, hedging," and is a testament to our Vernon Public Utilities
4305 Santa Fe Avenue, Vernon, CA, 90058
323.583.8811 | CityofVernon.org
strong financial management. The improved credit rating, along with VPU’s stable outlook, presents various opportunities for VPU, which includes accessing more favorable financing terms and reducing our cost of capital; and broadening our pool of potential energy counterparties to support new avenues for growth and enhancing our financial health.

VPU is dedicated to being a proactive partner in building a thriving and sustainable future for Vernon. We look forward to continuing to work with all stakeholders to achieve our shared goals.

Sincerely,
Todd Dusenberry
General Manager of Public Utilities
3 iii

ELECTRIC FUND
Introduction
Vernon Public Utilities (VPU) is committed to providing the Vernon community with reliable, safe, and competitive energy while also achieving California's clean energy goals. As a publicly owned utility, VPU is focused on its customers, responsible operations, and a sustainable future. This commitment is reflected in its transparent operations, competitive rates, and policies tailored to the community's needs. By embracing emerging technologies and strategic opportunities, VPU is building a full-service utility that will shape a sustainable energy future for Vernon in partnership with the local community.

Awards
Since 2016, VPU has maintained its Reliable Public Power Provider (RP3) designation from the American Public Power Association (APPA) for its excellence in reliability. APPA designates the RP3 award to utilities that demonstrate exceptional proficiency in four key areas: safety, reliability, workforce development, and system improvement.

VPU has earned the highest designation for the RP3 award – Diamond Level –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 currently one of only 113 of the more than 2,000 public power utilities across the United States to achieve Diamond Level RP3 designation.

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.

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) - represents the average number of power outages an average customer experiences in a year.

System Average Interruption Duration Index (SAIDI) - measures the average amount of time that an average customer experiences power outages in a year.
iv
Customer Average Interruption Duration Index (CAIDI) - measures the average length of time it takes for a customer's power to be restored after an outage.

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 of 2023, VPU’s average
customer experienced 0.52 outages for 29.7
minutes. The restoration time was
approximately 56.9 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.

0.52 1.05

0.82 0.69

0.0 0.2

0.4 0.6

0.8 1.0

1.2 Vernon IOU POU CA Utilities
System Average Interruption Frequency
Index

56.9 115.4

92.3 109.3
0 20
40 60
80 100
120
140
Vernon IOU POU CA Utilities
Customer Average Interruption Duration Index

29.7 124.5

63.4 77.2
0 20
40 60
80 100
120
140
Vernon IOU POU CA Utilities
System Average Interruption Duration Index
v
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. The Other category
includes single instances of storm damage, direct
strike, and equipment damage.

Metallic Balloon
34%
Equipment
failure
9%
Bird
13%
Vehicle Accident
19%
Inclement
weather
6%
Fallen Branches,
Broken Trees
6%
Vandalism
6%
Operational Error
3%
Other
3%
Outage Causes
vi
Energy Resources
VPU is actively shifting its energy generation portfolio to comply with state mandates for renewable energy and zero-carbon sources. Currently, VPU participates in the California Independent System Operator (CAISO) wholesale energy markets, and its energy mix is summarized in the chart below.

To meet California's ambitious goals, VPU has an updated Integrated Resource Plan, approved by City Council in October 2023, with a state mandated goal of increasing renewable energy generation to 60% by 2030. This plan reflects VPU's commitment to a cleaner energy future for Vernon.

Market Purchases
44%
Renewables
17%
Nuclear
9%
Large hydro
1%
City-owned
generation
(Natural Gas)
29%
Vernon Public Utilities Energy Mix
2024
vii
Distribution System Capital Improvement Plan
Vernon's electric utility is committed to providing reliable and sustainable power. To achieve this, VPU is investing significantly in its infrastructure through a Five-Year Capital Improvement Plan (CIP).

This plan, updated annually, focuses on key upgrades to the distribution system that:
x Improve reliability: Proactive programs like replacing aging wood poles and upgrading conductors enhance the stability of the electrical grid, minimizing outages. x Increase safety: Modernizing equipment and transitioning to higher voltage lines (7kV to 16kV) reduces risk of outages associated with vehicles, weather and foreign objects. x Enhance flexibility: New substations along with equipment upgrades on a number of circuits prepares the system to support future energy demands. x Reduce environmental impact: VPU is actively working to minimize its carbon footprint.

This includes replacing equipment that uses sulfur hexafluoride (SF6) with more eco-friendly alternatives.

Most notably, VPU completed the Prime Substation for the development of Prime Data Center ahead of schedule and under budget. VPU's dedication to system improvements ensures a reliable and sustainable electric grid, supporting the City's growth and providing superior service to its customers. The estimated budget for the Fiscal Year 2024-25 CIP is $20 million, demonstrating our commitment to critical infrastructure.
viii

WATER FUND
Introduction
The VPU Water Division has been working for over a century to ensure that this critical infrastructure is able to provide safe, dependable, and affordability priced water to more than 800 customers, distributing around 1.4 billion gallons of water annually.

To accomplish its mission, the VPU Water Division proactively maintains the water infrastructure, responds to any issues as soon as possible, and proactively plans for the future needs of the water system in order to guarantee that the water delivered meets the highest quality and service standards. By prioritizing reliability, sustainability, and affordability, the VPU Water Division ensures that the Water Fund continues to succeed financially and operationally.

Reliability
With a network of 7 Wells, 3 pumping 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 mitigate water loss, and a state-of-the-art real-time water quality analyzer.

Capital Projects
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; new reservoir mixing systems; 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. ix

GAS FUND
Introduction
The VPU Gas Division provides reliable and competitive natural gas service to Vernon residents and businesses. Our commitment to safety and customer service has earned national recognition, and our team of experts are available 24/7.

VPU Gas operates a state-of-the-art system delivering natural gas to over 125 customers, including residential, commercial, and industrial customer. Customers can save money and reduce their environmental impact with VPU’s gas rebates and incentives for energysaving upgrades. VPU’s skilled technicians ensure the safety and reliability of our system with prompt leak detection and repair. VPU’s gas division maintain a strong safety record through rigorous pipeline inspections, a robust Integrity Management Plan, and annual joint training with local emergency responders.

Awards
In 2021, the division received the APGA Safety Management Excellence Award, which highlights comprehensive and effective safety management systems. Furthermore, the division has been honored with the APGA Safety Award for six continuous years: 2018, 2020, 2021, 2022, 2023, and 2024. This consistent recognition of excellence in safety practices underscores the VPU Gas Division's dedication to maintaining a safe working environment and prioritizing the well-being of its employees and the community.

Gas Energy Efficiency Rebate
The VPU Gas Division supports its commercial and industrial gas customers in their efforts to decrease energy consumption and greenhouse gas (GHG) emissions through 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 fleet for lower or zeroemission vehicles and forklifts. x

FIBER OPTICS FUND
The VPU Fiber Optics Division offers high-speed fiber optic internet service to residents and businesses in Vernon. VPU’s 2023 network upgrades deliver bidirectional speeds up to 1GB with a 100GB system capacity, exceeding AT&T speeds by up to 5 times. VPU fiber offers dedicated service lines, 24/7 technical support, consistent bi-directional high-speed connection, and 99.9% uptime, ensuring a reliable and high-performance connection. Dark fiber leases are also available. Recent upgrades have been made keeping in mind the future growth of the fiber system and to meet the system needs of our customers.
xi
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200 E. Sandpointe Avenue, Suite 600
Santa Ana, California 92707
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and Members of the City Council
of the City of Vernon
Vernon, California
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the Electric Enterprise Fund (the “Electric Fund”) of the City of Vernon, California (the “City”), as of and for the year ended June 30, 2024, and the related notes to the financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of the Electric Fund as of June 30, 2024, and the change in financial position, and cash flows for the year then ended, in accordance with accounting principles generally accepted in the United States of America.

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

Emphasis of Matter
As discussed in Note 1, the financial statements present only the Electric Fund and do not purport to, and do not, present fairly the financial position of the City as of June 30, 2024, the changes in its financial position, or where applicable, 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.

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 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.

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 January 15, 2025 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
January 15, 2025
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City of Vernon, California
Electric Fund
Management’s Discussion and Analysis (Unaudited)
Year ended June 30, 2024
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, 2024.

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 additional information essential to fully understanding the data provided in the financial statements.
5 City of Vernon, California
Electric Fund
Management’s Discussion and Analysis (Unaudited) (Continued) Year ended June 30, 2024

FINANCIAL HIGHLIGHTS
Net Position
The table below summarizes the Electric Fund’s net position as of the current fiscal year, which ended June 30, 2024, and the prior fiscal year, which ended June 30, 2023. The current year’s summary details can be found on pages 12-13 of this report.

City of Vernon
Electric Fund
Net Position
June 30, 2024 and 2023
2024 2023 $Variance
Assets
Current and other assets $ 174,574,905 $ 154,759,404 $ 19,815,501 Restricted and other assets 69,812,709 71,283,688 (1,470,979) Capital assets 418,454,712 426,700,767 (8,246,055)
Total assets 662,842,326 652,743,859 10,098,467
Deferred Outflows of Resources 12,835,580 14,386,236 (1,550,656) Liabilities
Current liabilities 71,623,405 76,783,773 (5,160,368)
Long term liabilities 310,985,980 371,938,172 (60,952,192) Total liabilities 382,609,385 448,721,945 (66,112,560)
Deferred Inflows of Resources 1,598,901 2,609,197 (1,010,296) Net Position
Net investment in capital assets 193,435,827 167,320,726 26,115,101 Restricted for debt service 31,497,914 33,955,595 (2,457,681) Restricted for AB1890 2,754,353 2,933,017 (178,664)
Unrestricted (deficit) 63,781,526 11,589,615 52,191,911 Total net position $ 291,469,620 $ 215,798,953 $ 75,670,667 The assets and deferred outflows of resources of the Electric Fund exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $291.5 million (net position).

The category of the Electric Fund’s net position with the largest balance totaling $193.4 million represents resources that are invested in capital assets, net of related debt. 6 City of Vernon, California
Electric Fund
Management’s Discussion and Analysis (Unaudited) (Continued) Year ended June 30, 2024
FINANCIAL HIGHLIGHTS (Continued)
The second category, unrestricted (deficit) totaling $63.8 million, represents the unrestricted net position that is expected to be used for future projects or other purposes.

The third category of net positions, restricted for debt services totaling $31.5 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 $2.8 million is for the Electric Fund’s Public Benefits program under AB 1890.

Activities, Net Position
x Current assets increased by $19.8 million from the prior year while restricted and other assets decreased by $1.5 million.
x Capital assets decreased by $8.2 million from the prior year. x Current liabilities decreased by $5.2 million from the prior year. Long-term liabilities also decreased by $61.0 million from the prior year, primarily due to a decrease in bonds payable of $61.2 million.
x The total net position of the Electric Fund increased by $75.7 million from the prior year primarily due to an increase in the unrestricted (deficit) of $52.2 million, an increase in the net investment in capital assets of $26.1 million, and a decrease in funds restricted for debt service of $2.5 million. 7 City of Vernon, California
Electric Fund
Management’s Discussion and Analysis (Unaudited) (Continued) Year ended June 30, 2024
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 15 of this report.

City of Vernon
Electric Fund
Changes in Net Position
June 30, 2024 and 2023
2024 2023 $Variance
Operating Revenues
Charges for services $ 201,709,947 $ 233,135,904 $ (31,425,957) Operating Expenses
Cost of sales $ 98,104,480 $ 146,579,711 $ (48,475,231) Depreciation 23,352,859 22,734,810 618,049
Total operating expenses 121,457,339 169,314,521 (47,857,182) Operating income 80,252,608 63,821,383 16,431,224
Nonoperating revenues (expenses)
Investment income 6,041,671 4,198,611 1,843,060
Net decrease in fair value of investments 118,048 (1,626) 119,674 Interest expense (10,441,577) (14,190,777) 3,749,200
Capital contribution 320,304 - 320,304
Transfer Out (341,587) (491,542) 149,955
Gain (loss) on disposition of assets (278,800) (1,004,046) 725,246 Net nonoperating revenues (expenses) (4,581,941) (11,489,380) 6,907,439 Change in net position 75,670,667 52,332,003 23,338,664 Net position - beginning of year 215,798,953 163,466,950 52,332,003 Net position - end of year 291,469,620 215,798,953 75,670,667 The Electric Fund’s operating income of $80.3 million, less nonoperating revenues (expenses) of $4.6 million, resulted in an increase in net position of $75.7 million during the current year. This increase is primarily due to lower operating expenses, lower interest expenses, and higher investment income for FY 2023-24. 8 City of Vernon, California
Electric Fund
Management’s Discussion and Analysis (Unaudited) (Continued) Year ended June 30, 2024

CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
As of June 30, 2024, the Electric Fund’s investment in capital assets amounted to $418.5 million (net of accumulated depreciation). This investment includes land, intangible assets, construction in progress, buildings, 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, 2024, the following Electric Fund debt remains outstanding:
x $35,750,000 City of Vernon Electric System Revenue Bonds, 2008 Taxable Series A x $4,170,000 City of Vernon Electric System Revenue Bonds, 2012 Taxable Series B x $65,660,000 City of Vernon Electric System Revenue Bonds, 2015 Taxable Series A x $19,305,000 City of Vernon Electric System Revenue Bonds, 2020 Series A x $132,100,000 City of Vernon Electric System Revenue Bonds, 2021 Taxable Series A x $47,380,000 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 the 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 the 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 cots 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. 9 City of Vernon, California
Electric Fund
Management’s Discussion and Analysis (Unaudited) (Continued) Year ended June 30, 2024
As of June 30, 2024, the ratings on all Electric System Revenue Bonds of the City are Baa1/Stable by Moody’s and A-/Stable by S&P.

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

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES
These factors were considered in preparing the Electric Fund’s FY 2024-25 operating and capital budgets. x VPU is committed to providing dependable, high-quality electric, water, natural gas, and fiber services at competitive rates and the highest standards for reliability. x VPU continues to respond to inflation and supply chain issues, including higher operating and capital costs, to maintain infrastructure investment, and to continue to provide exceptionally reliable service. x VPU is dedicated to managing and controlling operating and maintenance expenses as well as implementing the recommendations of the Electric Cost of Service Analysis and Rate Design study approved by the City Council in August 2023.

REQUESTS FOR INFORMATION
This report is designed to provide an overview of the Electric Fund’s FY 2023-24 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. 10 FINANCIAL STATEMENTS
11 ASSETS
Current assets:

Cash and cash equivalents $ 115,622,939
Investments 24,215,847
Accounts receivable, net 10,888,312
Interest receivable 216,631
Accrued unbilled revenue 22,289,345
Due from other funds 700
Prepaid items 791,171
Inventory 569,092
Total current assets 174,594,037
Noncurrent assets:

Restricted cash and investments 31,831,023
Advances to other funds 33,219,430
Prepayment to Southern California Public Power Authority 956,471 Deposits 3,786,653
Capital assets:

Capital assets, not being depreciated 65,255,673
Capital assets, being depreciated, net 353,039,747
Intangible assets, being amortized, net 159,292
Total capital assets 418,454,712
Total noncurrent assets 488,248,289
Total assets 662,842,326

DEFERRED OUTFLOW OF RESOURCES
Pension related 10,797,601
Other postemployment benefits related 508,599
Deferred charges on refunding 1,529,380
Total deferred outflow of resources $ 12,835,580
(Continued)
Electric Enterprise Fund of the City of Vernon
June 30, 2024
Statement of Net Position
See accompanying Notes to the Basic Financial Statements. 12 LIABILITIES
Current liabilities:

Accounts payable $ 10,131,900
Accrued wages and benefits 289,388
Accrued interest payable 5,988,903
Customer deposits payable 397,627
Subscription liabilities, due within one year 36,537
Compensated absences, due within one year 384,050
Bonds payable, due within one year 54,395,000
Total current liabilities 71,623,405
Noncurrent liabilities:

Subscription liabilities, due in more than one year 37,912 Compensated absences, due in more than one year 768,099 Bonds payable, due in more than one year 277,449,748
Net pension liability 30,163,971
Net other postemployment benefits liability 2,566,250
Total noncurrent liabilities 310,985,980
Total liabilities 382,609,385

DEFERRED INFLOWS OF RESOURCES
Pension related 927,956
Other postemployment benefits related 670,945
Total deferred inflows of resources 1,598,901

NET POSITION
Net investment in capital assets 193,435,827
Restricted for:

Debt service 31,497,914
Assembly Bill 1890 2,754,353
Unrestricted 63,781,526
Total net position $ 291,469,620
(Concluded)
Electric Enterprise Fund of the City of Vernon
Statement of Net Position (Continued)
June 30, 2024
See accompanying Notes to the Basic Financial Statements. 13 This page intentionally left blank.
14 OPERATING REVENUES:

Charges for services $ 201,709,947
Total operating revenues 201,709,947
OPERATING EXPENSES:

Cost of sales 98,104,480
Depreciation expense 23,352,859
Total operating expenses 121,457,339
OPERATING INCOME 80,252,608
NONOPERATING REVENUES (EXPENSES):

Investment income 6,041,671
Net increase in fair value of investments 118,048
Interest expense (10,441,577)
Gain (loss) on disposal of assets (278,800)
Total nonoperating revenues (expenses) (4,560,658)
INCOME BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS: 75,691,950 CAPITAL CONTRIBUTIONS AND TRANSFERS:

Capital contribution 300,000
Transfers in 20,304
Transfers out (341,587)
Total capital contributions and transfers (21,283)
CHANGE IN NET POSITION 75,670,667
NET POSITION:

Beginning of year, as restated (Note 11) 215,798,953
End of year $ 291,469,620
Electric Enterprise Fund of the City of Vernon
Statement of Revenues, Expenses, and Change in Net Position For the Year Ended June 30, 2024
See accompanying Notes to the Basic Financial Statements. 15 $ 197,670,410
(82,959,998)
(13,860,976)
100,849,436
(341,587)
715,961
(2,953,813)
(2,579,439)
(14,951,769)
(51,874,082)
(17,875,462)
(84,701,313)
(23,554,565)
29,144,009
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash receipts from customers and users
Cash paid to suppliers for goods and services
Cash paid to employees for services
Net cash provided by operating activities

CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES:

Transfer to the City
Receipt from other City funds
Payment to other City funds
Net cash (used in) noncapital financing activities

CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:

Acquisition of capital assets
Principal paid on long-term debt
Interest paid on long-term debt
Net cash (used in) capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES:

Payment to acquire investments
Receipt from matured investments
Interest received 6,404,739
Net cash provided by investing activities 11,994,183
Net increase in cash and cash equivalents 25,562,867
CASH AND CASH EQUIVALENTS:

Beginning of year 121,891,095
End of year $ 147,453,962
CASH AND CASH EQUIVALENTS:

Cash and cash equivalents $ 115,622,939
Restricted cash and investment 31,831,023
Total cash and cash equivalents $ 147,453,962
NONCASH ITEM:

Capital contributions $ 300,000
(Continued)
Electric Enterprise Fund of the City of Vernon
Statement of Cash Flows
For the Year Ended June 30, 2024
See accompanying Notes to the Basic Financial Statements. 16 OPERATING INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:

Operating income $ 80,252,608
Adjustments to reconcile operating income to net cash
provided by operating activities:

Depreciation and amortization 23,352,859
Change in assets and liabilities:
(Increase) decrease in accounts receivable 2,704,179
(Increase) decrease in accrued unbilled revenue (5,058,193) (Increase) decrease in inventories and prepaid items 4,708,157 (Increase) decrease in customer deposits (1,685,523)
(Increase) decrease in deferred outflows
of resources related to pension 905,897
(Increase) decrease in deferred outflows
of resources related to OPEB 442,777
Increase (decrease) in accounts payable (3,921,798)
Increase (decrease) in accrued wages and benefits (80,385) Increase (decrease) in deposits payable (12,870)
Increase (decrease) in compensated absences 148,015
Increase (decrease) in net pension liabilities 608,351
Increase (decrease) in OPEB liabilities (504,342)
Increase (decrease) in deferred inflows
of resources related to pension (551,273)
Increase (decrease) in deferred inflows
of resources related to OPEB (459,023)
Total adjustment 20,596,828
Net cash provided by operating activities $ 100,849,436 (Concluded)
Statement of Cash Flows (Continued)
Electric Enterprise Fund of the City of Vernon
For the Year Ended June 30, 2024
See accompanying Notes to the Basic Financial Statements. 17 This page intentionally left blank.
18 19

NOTES TO THE BASIC FINANCIAL STATEMENTS
20 This page intentionally left blank.

Electric Enterprise Fund Of the City of Vernon
Index to the Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
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. Subscription Liabilities ........................................................................................................................ 25 L. Long-Term Debt .................................................................................................................................. 25 M. Pensions ............................................................................................................................................... 26 N. Postemployment Benefits Other than Pensions (OPEB)...................................................................... 26 O. Net Position .......................................................................................................................................... 27 P. Use of Estimates................................................................................................................................... 27 Q. Implementation of New GASB Pronouncements ................................................................................ 27 Note 2 – Cash, Cash Equivalents, and Investments ............................................................................................ 27 A. Equity in the Cash Pool of the City of Vernon .................................................................................... 28 B. Investments .......................................................................................................................................... 28 C. Local Agency Investment Fund (“LAIF”) ........................................................................................... 29 D. Fair Value Measurement ...................................................................................................................... 29 E. Risk Disclosures ................................................................................................................................... 29 Note 3 – Accounts Receivable ............................................................................................................................... 30 Note 4 – Internal Transactions ............................................................................................................................. 31 A. Due From/To Other City Funds ........................................................................................................... 31 B. Advances From/To Other City Funds .................................................................................................. 31 C. Interfund Transfers ............................................................................................................................... 31 Note 5 – Capital Assets .......................................................................................................................................... 32 Note 6 – Long-Term Debt ..................................................................................................................................... 33 Note 7 – Risk Management ................................................................................................................................... 37 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 Electric Enterprise Fund Of the City of Vernon
Index to the Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2024
22 Page
Note 9 – Other Postemployment Benefits (“OPEB”) ......................................................................................... 42 A. General Information about the OPEB Plan .......................................................................................... 42 B. Net OPEB Liabilities, OPEB Expenses, and Deferred
Outflows/Inflows of Resources Related to OPEB ............................................................................... 43 Note 10 – Net Investment in Capital Assets ......................................................................................................... 46 Note 11 – Prior Period Adjustment ...................................................................................................................... 47 Note 12 – Southern California Public Power Authority .................................................................................... 47 A. Take or Pay Contract ............................................................................................................................ 47 B. Power Purchase Commitments ............................................................................................................ 48 Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
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 fairly present 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 revenues, 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 significant accounting policies of the Electric Fund 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 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.

Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
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 $1,021,459 as of June 30, 2024. 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 11 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 electric generation, transmission, and distribution improvement assets. 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.

Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
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. Subscription Liabilities
The City recognizes subscription liabilities with an initial, individual value of $15,000 or more with a subscription term greater than one year in the government-wide and proprietary fund financial statements. Variable payments based on future performance of the City or usage of the underlying asset are not included in the measurement of the subscription liability.

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

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

Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
26 Note 1 – Summary of Significant Accounting Policies (Continued) M. Pensions
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the plans and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value.

The following timeframes are used for pension reporting:

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

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

The following timeframes are reported OPEB reporting:

Valuation Date June 30, 2022
Measurement Date June 30, 2023
Measurement Period July 1, 2022 to June 30, 2023
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.

Valuation Date June 30, 2022
Measurement Date June 30, 2023
Measurement Period July 1, 2022 to June 30, 2023
Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
27 Note 1 – Summary of Significant Accounting Policies (Continued) O. 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.

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.

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

Q. Implementation of New GASB Pronouncements
In June 2022, GASB issued Statement No. 100, Accounting Changes and Error Corrections – an Amendment of GASB Statement No. 62. The primary objective of this Statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability. Application of this statement did not have a significant effect on City’s fiscal year ending June 30, 2024.

Note 2 – Cash, Cash Equivalents, and Investments
The Electric Fund has the following cash and investments at June 30, 2024:

Cash and investments $ 139,838,786
Restricted cash and investments 31,831,023
Total cash and investments $ 171,669,809
Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
28 Note 2 – Cash, Cash Equivalents, and Investments (Continued) The Electric Fund cash and investments at June 30, 2024, in more detail:

Cash and cash equivalents:

Equity in pooled cash 32,425,393 $
Deposits with financial institutions 2,655,788
Local Agency Investment Fund 668,410
Money Market Funds 79,873,348
Total cash and cash equivalents 115,622,939
Investments:

US Treasury Bills 9,864,900
U.S. Government Sponsored Enterprise Securities 11,904,824 Negotiable Certificates of Deposit 2,446,123
Total investments 24,215,847
Investments with fical agents:

Money Market Funds 31,831,023
Total $ 171,669,809
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.

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

Maximum Maximum
Maximum Percentage Investments in
Authorized Investment Type Maturity Allowed1 One Issuer United States Treasury Bills, Bonds and Notes 5 Years None None United States Government Sponsored Agency Securities 5 Years None None Local Agency Bonds 5 Years None None
California State and Local Agency Bonds 5 Years 30% None Negotiable Certificates of Deposit 5 Years 30% None
Corporate Notes 5 Years 30% None
Non-Government issued Mortgage-backed pass-through securities, collateralized Mortgage obligations and Asset-backed securities 5 Years 20% None Repurchasement Agreement 1 year None None
Banker's Acceptance Notes 180 Days 40% 30%
Commercial Paper 270 Days 25% 10% of the issuer outstanding paper Reverse Repurchase Agreements 92 Days 20% None
Mutual Funds N/A 20% 10% of the issuer outstanding paper Local Agency Investment Fund (LAIF) N/A None None
N/A - Not Applicable
1 Excluding amounts held by bond trustee that are not subject to California Government Code restrictions.

Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
29 Note 2 – Cash and Investments (Continued)
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, 2024, the Electric Fund had $668,410 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, 2024, 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, 2024:

Quoted Prices in Active Significant
Market for Identical Other Observable
Investment Type Assets (Level 1) Inputs (Level 2) Uncategorized Total US Treasury Bills $ 9,864,900 $ - $ - $ 9,864,900
U.S. Government Sponsored
Enterprise Securities 11,904,824 - - 11,904,824
Negotiable Certificates of Deposit* - 2,446,123 - 2,446,123 Investments with fiscal agents:

Money Market Funds 31,831,023 31,831,023
Total $ 9,864,900 $ 14,350,947 $ - $ 56,046,870
*Priced based on significant observable inputs.

Measurement Input
E. Risk Disclosures
Interest Rate Risk - As a means of limiting its exposure to fair value losses arising from rising interest rates, the City’s investment policy limits investments to a maximum maturity of five years. At June 30, 2024, the Electric Fund had the following investment maturities:
1 Year 1 Year to 3 Years to
Investment Type or Less 3 Years 5 Years Fair Value
U.S. Treasury Bills $ 9,864,900 $ - $ 9,864,900 - $
U.S. Government Agency Bonds - 11,904,824 - 11,904,824
Negotiable Certificates of Deposit 248,529 1,948,747 248,847 2,446,123 Investments with fiscal agents:

Money Market Funds 31,831,023 - 31,831,023 -
Total $ 41,944,452 $ 1,948,747 $ 12,153,671 $ 56,046,870 Remaining Maturities (in Years)
Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
30 Note 2 – Cash and Cash Equivalents (Continued)
E. Risk Disclosures (Continued)
Credit Risk – Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City’s investment policy, or debt agreements, and the actual rating, by Standard and Poor’s and Moody’s at June 30, 2024 for each investment type:

Fair Value Minimum Not Required
at Legal to be
Investment Type June 30, 2024 Rating AAA Other Rated
U.S. Treasury Bills $ 9,864,900 AAA $ 9,864,900 $ - $ - U.S. Government Agency Bonds 11,904,824 AAA 11,904,824 - - Negotiable Certificates of Deposit 2,446,123 N/A - 2,446,123 - Investments with fiscal agents:

Money Market Funds 31,831,023 AAA 31,831,023 - -
Total $ 56,046,870 $ 53,600,747 $ 2,446,123 - $
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 bankers’ 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, 2024, none of the City’s deposits or investments were exposed to custodial credit risk.

Note 3 – Accounts Receivable
The Electric Fund’s accounts receivable at June 30, 2024 are as follows:

Accounts receivable $ 11,909,771
Less: allowance for uncollectible accounts (1,021,459)
Total accounts receivable, net $ 10,888,312
Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
31 Note 4 – Interfund Transactions
A. Due From Other Funds
Due from the City of $700 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, 2024, the Electric Fund had the following advances to the City:

Fiber Optics
Advances to Other City Funds Gas Fund Fund Total
Electric Fund 28,745,823 $ 4,473,607 $ $ 33,219,430
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 benefit 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.

C. Interfund Transfers
For the year ended June 30, 2024, the Electric Fund transfer of $341,587 to the City was for the reimbursement of general governmental services. Additionally, the Electric Fund received capital assets of $20,304 from the Water Enterprise Fund.

Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
32 Note 5 – Capital Assets
A summary of changes in the capital assets for the Electric Fund for the year ended June 30, 2024 is as follows:

Balance
July 1, 2023 Balance
(As Restated) Additions Deletions Transfers June 30, 2024 Capital assets, not being depreciated:

Electric Utility - Land 13,193,594 $ - $ - $ - $ 13,193,594 $ Electric Utility - Intangibles - Environmental Credits 4,050,644 142,236 (160,763) 4,032,117 - Electric Utility - Construction in Progress 46,593,725 1,569,419 - (133,182) 48,029,962 Total capital assets, not being depreciated 63,837,963 1,711,655 (160,763) (133,182) 65,255,673 Capital assets, being depreciated:

Electric Utility - Production Plant 212,821,719 384,106 - 213,205,825 - Electric Utility - Transmission Plant 3,616,464 - (43,519) 3,572,945 - Electric Utility - Distribution Plant 279,609,429 12,671,247 (827,808) 291,452,868 - Electric Utility - General Plant 9,961,395 388,781 (31,079) 167,776 10,486,873 Total capital assets, being depreciated 506,009,007 13,444,134 (902,406) 167,776 518,718,511 Less accumulated depreciation for:

Electric Utility - Production Plant (33,668,388) (14,294,111) - (47,962,499) - Electric Utility - Transmission Plant (2,520,742) (73,858) 43,179 (2,551,421) - Electric Utility - Distribution Plant (100,170,962) (8,490,036) 710,111 (107,950,887) - Electric Utility - General Plant (6,786,111) (444,635) 31,079 (14,290) (7,213,957) Total accumulated depreciation (143,146,203) (23,302,640) 784,369 (14,290) (165,678,764) Total capital assets, being depreciated, net 362,862,804 (9,858,506) (118,037) 153,486 353,039,747 Intangible assets, being amortized
Right-to-use subscription assets - 209,511 - - 209,511
Total intangible assets, being amortized - 209,511 - - 209,511 Less accumulated amortization for:

Right-to-use subscription assets - (50,219) - - (50,219) Total accumulated amortization - (50,219) - - (50,219)
Total intangible assets, being amortized, net - 159,292 - - 159,292 Total Capital assets, net $ 426,700,767 $ (7,987,559) $ (278,800) $ 20,304 $ 418,454,712 The Electric Fund’s depreciation and amortization expense for the year ended June 30, 2024 was $23,352,859.

Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
33 Note 6 – Long-Term Debt
A summary of changes in long-term debt for the Electric Fund for the year ended June 30, 2024 is as follows:

Balance Balance Due within Due in More
July 1, 2023 Additions Deletions June 30, 2024 One Year Than One Year Public Offering:

Revenue Bonds:
2008 Taxable Revenue Bonds - Series A - Electric 36,870,000 $ - $ (1,120,000) $ 35,750,000 $ 1,220,000 $ 34,530,000 $ 2012 Taxable Revenue Bonds - Series B - Electric 5,340,000 - (1,170,000) 4,170,000 1,305,000 2,865,000 2015 Taxable Revenue Bonds - Series A - Electric 89,180,000 - (23,520,000) 65,660,000 24,585,000 41,075,000 2020 Taxable Revenue Bonds - Series A - Electric 19,305,000 - - 19,305,000 - 19,305,000 2021 Taxable Revenue Bonds - Series A - Electric 153,435,000 - (21,335,000) 132,100,000 22,400,000 109,700,000 2022 Taxable Revenue Bonds - Series A - Electric 52,070,000 - (4,690,000) 47,380,000 4,885,000 42,495,000 Total Revenue Bonds 356,200,000 - (51,835,000) 304,365,000 54,395,000 249,970,000 Unamortized Premiums/(Discounts):
2008 Taxable Revenue Bonds - Series A - Electric (1,962) - 131 (1,831) - (1,831) 2012 Taxable Revenue Bonds - Series B - Electric (53,190) - 16,797 (36,393) (36,393) - 2015 Taxable Revenue Bonds - Series A - Electric (741,124) 355,739 - (385,385) (385,385) - 2020 Taxable Revenue Bonds - Series A - Electric 6,177,255 (438,622) - 5,738,633 5,738,633 - 2021 Taxable Revenue Bonds - Series A - Electric 19,449,520 (5,784,588) - 13,664,932 13,664,932 - 2022 Taxable Revenue Bonds - Series A - Electric 9,447,039 (947,247) - 8,499,792 8,499,792 - Total Unamortized Premiums/(Discounts) 34,277,538 (6,797,790) - 27,479,748 27,479,748 - Total Public Offering 390,477,538 (58,632,790) - 331,844,748 54,395,000 277,449,748 Subscription liabilities 113,531 - (39,082) 74,449 36,537 37,912 Compensated absences 1,004,134 802,040 (654,025) 1,152,149 384,050 768,099 Total $ 391,481,672 $ 915,571 $ (59,325,897) $ 333,071,346 $ 54,815,587 $ 278,255,759 $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, 2024, was $35,750,000.

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

Year Ending
June 30, Principal Interest Total
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 1,720,000 2,517,729 4,237,729
2030-2034 11,215,000 9,975,782 21,190,782
2035-2039 17,235,000 3,955,480 21,190,480
Total 35,750,000 $ 27,825,588 $ 63,575,588 $
Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
34 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, 2024, was $4,170,000.

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

Year Ending
June 30, Principal Interest Total
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 $ 413,388 4,170,000 $ 4,583,388 $
$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, 2024, was $65,660,000.

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

Year Ending
June 30, Principal Interest Total
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
$ 65,660,000 $ 4,242,715 $ 69,902,715
Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
35 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) 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, 2024, was $19,305,000.

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

Year Ending
June 30, Principal Interest Total
2025 - $ 965,250 $ 965,250 $
2026 - 965,250 965,250
2027 - 965,250 965,250
2028 - 965,250 965,250
2029 1,525,000 927,125 2,452,125
2030-2034 8,885,000 3,378,875 12,263,875
2035-2038 8,895,000 917,375 9,812,375
Total 19,305,000 $ 9,084,375 $ 28,389,375 $
$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 are 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, 2024, was $132,100,000.

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

Year Ending
June 30, Principal Interest Total
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 $ 17,493,125 132,100,000 $ 149,593,125 $
Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
36 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 are 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, 2024, was $47,380,000.

The future annual debt service requirements for the Taxable Revenue Bonds, Series 2022A are as follows:

Year Ending
June 30, Principal Interest Total
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 1,000,000 1,525,500 2,525,500
2030-2034 5,825,000 6,803,125 12,628,125
2035-2039 7,475,000 5,149,125 12,624,125
2040-2042 16,710,000 1,281,000 17,991,000
Total $ 22,309,500 47,380,000 $ 69,689,500 $
Subscription liabilities
The City entered into subscription agreements with various vendors for software. The agreement expires October 18, 2026 with an interest rate of 3.76%.

The future annual subscription payments are as follows:

Year Ending
June 30, Principal Interest Total
2025 36,537 $ 2,802 $ 39,339 $
2025 37,912 1,427 39,339
Total 74,449 $ 4,229 $ 78,678 $
Compensated Absences
The balance outstanding at June 30, 2024, was $1,152,149.

Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
37 Note 6 – Long-Term Debt (Continued)
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 of June 30, 2024, this fund has a balance of $42,427,616.

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, 2024, the ratings on all Electric System Revenue Bonds are Baa1 stable by Moody’s and A- 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.

Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
38 Note 7 – Risk Management
The insurance limits for the fiscal year 2024 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
Excess Liability - Malburg Generating Station $100,000,000 - $1.5 Million Presumptive Loss
Property - Power Generating $100,000,000 Various
Property - Residential $7,950,653 $2,500
Property - Municipal $59,614,930 $25,000
Property - Malburg Generating Station $200,000,000 -
Commercial Property/EQ and FL $50,000,000 -
Government Crime $1,000,000 $25,000
Premise Pollution/Environmental Impairment $5,000,000 $25,000 $5,000,000 per Claim $50,000 Utility Locs.
$100,000 Natural Gas Pipeline
Cyber Liability $5,000,000 $100,000
Auto Physical Damage $10,000,000 $5,000
Residential Property Insurance $7,950,653 $2,500
Terrorism $100 Million Property Terrorism $0
$5 Million Terrorism Liability
$5 Million Active Shooter
Special Events $2,000,000 $1,000,000 Each Occurrence
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. The City allocates its pension liability internally to the stand-alone utilities on a costsharing basis.

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, 2022 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.

Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
39 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 date January 1, 2013 January 1, 2013
Benefit formula 2.7% @ 55 2% @ 62
Benefit vesting schedule 5 years service 5 years service Benefit payments Monthly for life Monthly for life
Retirement age 50 yrs 52 yrs
Monthly benefits, as a % of eligible
compensation

2.0%-2.7%,
50 yrs -55 yrs,
respectively

1.0%-2.0%,
52 yrs -62 yrs,
respectively
Required employee contribution rate (FY23-24) 8.00% 7.00% Required employer contribution rate (FY23-24) 13.17% 13.17% Required employer contribution rate (FY22-23) 11.50% 11.50% Classic PEPRA
Prior to On or After
Hire date January 1, 2013 January 1, 2013
Benefit formula 3.0% @ 50 2.7% @ 57
Benefit vesting schedule 5 years service 5 years service Benefit payments Monthly for life Monthly for life
Retirement age 50 yrs 50 yrs
Monthly benefits, as a % of eligible 3%, 50 yrs 2.0% - 2.7% 50 yrs - 57 yrs
respectively
Required employee contribution rate (FY23-24) 9.00% 13.75% Required employer contribution rate (FY23-24) 27.40% 19.78% Required employer contribution rate (FY22-23) 23.39% 20.70% 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.

Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
40 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 6.0 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, 2024, the Electric Fund’ share of employer contributions made to the plans was $2,937,605.

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, 2023, using an annual actuarial valuation as of June 30, 2022, rolled forward to June 30, 2023, 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
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.

2.30%
Entry Age Normal

6.90%
Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
41 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:

Assumed Asset
Allocation
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.

Asset Class1 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.

Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
42 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 date ended June 30, 2022 and 2023 were as follows:

Total Pension Plan Fiduciary Net Net Pension
Liability Position Liability/(Asset) Proportionate
(a) (b) (c) = (a) - (b) Share
Balance at 6/30/22 (Valuation Date) 96,273,975 66,718,355 29,555,620 18.74% Balance at 6/30/23 (Measurement Date) 94,894,530 64,730,559 30,163,971 17.74% Net changes during 2022-2023 (1,379,445) (1,987,796) 608,351 -1.00% Increase (Decrease)
Pension Expense and Deferred Outflows and Inflows of Resources For the measurement period ended June 30, 2023, the Electric Fund recognized its proportionate share of the aggregate pension expense totaled $4,927,975. At June 30, 2024, 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 period 2,937,605 $ - $ Changes of assumptions 1,459,243 -
Difference between expected and actual experience 2,131,452 (118,606) Net difference between projected and actual earning
on pension plan investments 3,911,266 -
Adjustment due to differences in proportions 240,240 (194,909) Difference betwwen City contributions and
proportionate share of contribution 117,795 (614,441)
Total $ 10,797,601 $ (927,956)
$2,937,605 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, 2025. 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:

Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
43 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
2024 2,331,963 $
2025 1,493,002
2026 2,996,362
2027 110,713
Thereafter -
Total 6,932,040 $
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 16,868,408 $ 11,293,867 $ 6,736,499 $ Safety Plan 26,514,986 $ 18,870,104 $ 12,619,870 $
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, 2024, the Electric Fund had no outstanding amount of contributions to the pension plans required for the year ended June 30, 2024.

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.

Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
44 Note 9 – Other Postemployment Benefits (“OPEB”)
A. General Information about the OPEB Plan (Continued)
Benefits Provided
Generally, the City will provide a postemployment benefit plan for the employee only to those who retire at age sixty (60) or later with twenty (20) years of continuous uninterrupted service up to the age of sixty-five (65).

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

Resolution 2011-129 provided lifetime medical benefits to Police Management employees and their spouses, who have been employed as sworn safety personnel for a minimum of twenty (20) years and a minimum of ten (10) years of that 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, 2024, the Electric Fund’s proportionate share of contributions made to the trust was $244,124, and $327,285 for retiree premiums, resulting in a total contribution of $571,409.

B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of Resources Related to OPEB The OPEB liability was measured as of June 30, 2023, and total liability used to calculate the net OPEB liability was determined by an actuarial valuation as of June 30, 2022.

Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
45 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, 2023, was determined using the following actuarial assumptions:

Actuarial Cost Method
Actuarial Assumptions:

Asset Valuation Method
Inflation
Salary Increases
Long Term return on Assets
Discount Rate
Mortality Improvement
Healthcare Trend
CalPERS 2021 Experience Study; Project with MP Scale 2020 Based on 2022 Getzen model with in inflation rate of 6.50% nonMedicare / 5.40% Medicare decreasing gradually to an ultimate rate of 3.73% by 2076

6.00%
Entry-age normal, level percent of pay
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

5.10%
Change in assumptions
In 2023, there were no changes in assumptions.

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% 6.80%
Fixed Income 23.00% 3.70%
Global Real Estate (REITs) 20.00% 6.00%
Treasury Inflation Protected Securities (TIPS) 5.00% 2.80% Commodities 3.00% 3.40%
Total 100.00%
* Preliminary estimate, pending confirmation by CalPERS Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
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 Electric Fund’s proportionate share of the net OPEB liability as of the measurement dates ended June 30, 2022 and 2023 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, 2022 5,120,558 $ 2,049,966 $ 3,070,592 $ 18.74% Balance at June 30, 2023 (Measurement Date) 4,910,199 2,343,949 2,566,250 17.74% Net changes during 2022-23 (210,359) 293,983 (504,342) -1.00% 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%)
$ 3,118,729 $ 2,566,250 $ 2,102,190
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 would be if it were calculated using healthcare cost trend rates that are 1 percentage-point lower or 1 percentage-point higher than the current healthcare cost trend rates:

Healthcare Cost Healthcare Cost Healthcare Cost
Trend Rate - 1% Trend Rate Trend Rate + 1%
$ 2,566,250 2,332,449 $ $ 2,794,743
Plan's Net OPEB Liability
OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB For the year ended June 30, 2024, the Electric Fund recognized its proportionate share of the OPEB expense of $108,808. At June 30, 2024, 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 239,117 $ - $ Changes in assumptions 114,011 (246,093)
Difference between expected and actual experience 12,671 (424,852) Net difference between projected and actual earning on
OPEB plan investments 142,800 -
Total 508,599 $ (670,945) $
Electric Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
47 Note 9 – Other Postemployment Benefits (“OPEB”) (Continued) B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of Resources Related to OPEB (Continued)
The $239,117 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
2024 (348,888) $
2025 (46,922)
2026 51,319
2027 (34,250)
2028 (17,431)
Thereafter (5,291)
Total $ (401,463)
Payable to the OPEB Plan
At June 30, 2024, the Electric Fund had no outstanding amount of contributions to the OPEB plan required for the year ended June 30, 2024.

Note 10 – Net Investment in Capital Assets
The beginning net position was restated to reflect correction of error on prepaid items as follows:

Total capital assets, net $ 418,454,712
Deferred loss on refunding debt 916,388
Unspent capital debt proceed (74,449)
Capital related debt (226,193,933)
Unspent bond proceeds 333,109
Net investment in capital assets $ 193,435,827
Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
48 Note 11 – Prior Period Adjustment
The beginning net position was restated to report prepaid items previously recognized as expense. The effect of correcting that error is shown in the table below:

Net Position, as previously reported $ 210,480,341
Prepaid items 5,318,612
Net Position, as restated $ 215,798,953
Note 12 – 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:

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 2024 was $3,339,783. The City expects no significant increases in costs related to its nuclear resources.

Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
49 Note 12 – Southern California Public Power Authority (Continued) 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 2024 was $5,132,242.

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 2024 was $2,921,584.

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 2024 was $3,090,085.

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 2024 was $616,011.

Electric Enterprise Fund Of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
50 Note 12 – Southern California Public Power Authority (Continued) B. Power Purchase Commitments (Continued)
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 2024 was $319,879.

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 was 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. The City’s proportionate share of costs during fiscal year 2024 was $5,003,685.

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.

REQUIRED SUPPLEMENTARY INFORMATION
(UNAUDITED)
51 Fiscal year 2015 2016 2017 2018 2019
Measurement period 2013-14 2014-15 2015-16 2016-17 2017-18 Electric Fund's proportion of the net
pension liability 10.52% 10.54% 10.41% 10.60% 10.61%
Electric Fund's proportionate share of the
net pension liability 8,268,207 $ 8,062,250 $ 9,913,819 $ 11,622,798 $ 12,037,649 $ Covered payroll1 $ 2,576,908 $ 3,536,668 $ 1,368,926 $ 2,844,009 $ 3,119,774 Electric Fund's proportionate share of the net
pension liability as a percentage of
covered payroll 320.86% 227.96% 724.20% 408.68% 385.85% Electric Fund Fiduciary Net Position as a
percentage of the total
pension liability 77.73% 78.15% 78.91% 77.85% 77.68%
1 Notes to Schedule:

Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry Age Actuarial Cost Method
Amortization method Level percentage of payroll
Asset valuation method Fair Market Value
Inflation 2.300%
Salary increases varies by entry age and service
Payroll Growth 2.800%
Investment rate of return
Retirement age
Mortality
The probabilities of Retirement are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015.

The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and Post-retirement mortality rates include 15 years of projected mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries.

Includes one year’s payroll growth using 2.80 percent payroll growth assumption for fiscal years ended June 30, 2022 and 2023; 2.75 percent payroll growth assumption for fiscal years ended June 30, 2018-21; 3.00 percent payroll growth assumption for fiscal years ended June 30, 2014-

17. The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2023-24 were derived from the June 30, 2021 funding valuation report.

6.8% Net of Pension Plan Investment and Administrative Expenses; includes Inflation.

Last Ten Fiscal Years1
California Public Employees' Retirement System Defined Pension Plan For the Year Ended June 30, 2024
Electric Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Pension Liability and Related Ratios 52 Fiscal year 2020 2021 2022 2023 2024
Measurement period 2018-19 2019-20 2020-21 2021-22 2022-23 Electric Fund's proportion of the net
pension liability 10.93% 12.03% 14.17% 18.74% 17.74%
Electric Fund's proportionate share of the
net pension liability 13,198,355 $ 16,262,340 $ 12,461,180 $ 29,555,620 $ 30,163,971 $ Covered payroll1 $ 2,971,068 3,153,590 $ 2,763,712 $ 4,037,276 $ 4,400,289 $ Electric Fund's proportionate share of the net
pension liability as a percentage of
covered payroll 418.52% 547.36% 450.89% 732.07% 685.50% Electric Fund Fiduciary Net Position as a
percentage of the total
pension liability 76.15% 74.79% 85.45% 69.30% 68.21%
For the Year Ended June 30, 2024
Last Ten Fiscal Years1
California Public Employees' Retirement System Defined Pension Plan 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) 53 Fiscal year 2015 2016 2017 2018 2019

10.52% 10.54% 10.41% 10.60% 10.61%
Actuarially determined contribution 682,263 $ 870,294 $ 947,914 $ 1,005,691 $ 1,158,143 $ Contributions in relation to the
actuarially determined contribution (682,263) (870,294) (947,914) (1,005,691) (1,158,143) Contribution deficiency (excess) - $ - $ - $ - $ - $
Covered payroll1 $ 2,571,203 $ 2,753,258 $ 2,844,009 $ 3,119,774 $ 3,153,590 Contributions as a percentage of covered payroll. 26.53% 31.61% 33.33% 32.24% 36.72% 2 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 2.300%
Salary increases varies by entry age and service
Payroll Growth 2.800%
Investment rate of return
Retirement age
Mortality
The probabilities of Retirement are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015.

The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and Post-retirement mortality rates include 15 years of projected mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries.

Includes one year’s payroll growth using 2.80 percent payroll growth assumption for fiscal years ended June 30, 2022-2024; 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 2023-24 were derived from the June 30, 2021 funding valuation report.

6.8% Net of Pension Plan Investment and Administrative Expenses; includes Inflation.

For the Year Ended June 30, 2024
Last Ten Fiscal Years1
California Public Employees' Retirement System Defined Pension Plan Electric Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions
52 Fiscal year 2020 2021 2022 2023 2024

10.93% 12.03% 14.17% 18.74% 17.74%
Actuarially determined contribution 1,347,573 $ 1,518,109 $ 2,012,496 $ 3,021,673 $ 2,937,605 $ Contributions in relation to the
actuarially determined contribution (1,347,573) (1,518,109) (2,012,496) (3,021,673) (2,937,605) Contribution deficiency (excess) - $ - $ - $ - $ - $
Covered payroll1 $ 2,971,068 $ 2,763,712 $ 4,037,276 $ 4,150,320 $ 4,266,529 Contributions as a percentage of covered payroll. 45.36% 54.93% 49.85% 73% 69% For the Year Ended June 30, 2024
Last Ten Fiscal Years1
California Public Employees' Retirement System Defined Pension Plan Electric Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions (Continued)
52 Fiscal year 2018 2019 2020 2021 2022
Measurement period 2016-171 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 payroll $ 2,153,877 $ 2,152,941 $ 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 payroll 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 Electric Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Other Postemployment For the Year Ended June 30, 2024
Last Ten Fiscal Years1
Benefits Liability and Related Ratios
Other Postemployment Benefits ("OPEB") Plan
Historical information is presented only for measurement periods after GASB 75 was implemented in fiscal year of 2017-18 (measurement period of 2016-17). Additional years of information will be displayed as it becomes available. 56 Fiscal year 2023 2024
Measurement period 2021-22 2022-23
Electric Fund's proportion of the net
OPEB liability 18.74% 17.74%
Electric Fund's proportionate share of the
net OPEB liability $ 3,070,592 $ 2,566,250
Covered - employee payroll $ 4,344,095 4,755,269 $
Electric Fund's proportionate share of the net
OPEB liability as a percentage of
covered - employee payroll 64.57% 59.07%
Electric Fund's Fiduciary Net Position as a
percentage of the total
OPEB liability 40.03% 47.74%
Electric Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Other Postemployment For the Year Ended June 30, 2024
Last Ten Fiscal Years1
Benefits Liability and Related Ratios (Continued)
Other Postemployment Benefits ("OPEB") Plan
57 Fiscal year 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 payroll $ 2,152,941 $ 3,731,469 $ 3,491,517 $ 3,810,495 $ 4,755,269 Contributions as a percentage of covered-employee 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
Amortization period 30 years
Inflation 2.30%
Discount Rate 6.00%
Payroll Growth 2.80%
Healthcare trend rates 7.00%, trending down to 3.73%
Rate of return on assets 5.10%
Electric Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Other Postemployment Benefits For the Year Ended June 30, 2024
Last Ten Fiscal Years1
Other Postemployment Benefits ("OPEB") Plan
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2023-24 were derived from the June 30, 2022 funding valuation report.

Historical information is presented only for measurement periods after GASB 75 was implemented in fiscal year of 2017-18 (measurement period of 2016-17). Additional years of information will be displayed as it becomes available. 58 Fiscal year 2023 2024
Actuarially determined contribution $ 262,835 $ 244,124 Contributions in relation to the
actuarially determined contribution (582,922) (551,945) Contribution deficiency (excess) $ (320,087) $ (307,821) Covered-employee payroll $ 4,587,902 $ 4,344,095
Contributions as a percentage of covered-employee payroll. 12.71% 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, 2024
Last Ten Fiscal Years1
Other Postemployment Benefits ("OPEB") Plan
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