Vernon City Council
January 21, 2025

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

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

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

Schedule of Proportionate Share of the Net Pension Liability and Related Ratios ........................................... 44 Schedule Contributions – Pensions .................................................................................................................... 46 Schedule of Proportionate Share of the Net Other Postemployment Benefits Liability and Related Ratios ..... 48 Schedule Contributions – Other Postemployment Benefits ............................................................................... 50 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 Water Enterprise Fund (the “Water 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 Water Fund, as of June 30, 2024, and the change in financial position, and cash flows thereof for the year then ended, in accordance with accounting principles generally accepted in the United States of America.

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

Emphasis of Matter
As discussed in Note 1, the financial statements present only the Water Fund and do not purport to, and do not, present fairly the financial position of the City as of June 30, 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 the Contributions – Pensions, the Schedule of the Proportionate Share of the Net Other Postemployment Benefits Liability and Related Ratios, and the Schedule of the Contributions – Other Postemployment Benefits be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by Government Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the Required Supplementary Information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

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
4 This page intentionally left blank.

City of Vernon, California
Water Fund
Management’s Discussion and Analysis (Unaudited)
Year ended June 30, 2024
The management of the Water Fund of the City of Vernon (“the City”) offers the following overview and analysis of the basic financial statements of the Water Fund for the fiscal year 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 Water Fund’s basic financial statements. Included as part of the financial statements are three separate statements.

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

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

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

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

FINANCIAL HIGHLIGHTS
Net Position
The table below summarizes the Water 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
Water Fund
Net Position
June 30, 2024 and 2023
2024 2023 $Variance
Assets
Current and other assets $ 22,702,321 $ 20,467,062 $ 2,235,259 Restricted and other assets 21,624 2,148,689 (2,127,065) Due from other funds - 18,247 (18,247)
Capital assets 23,396,376 22,413,711 982,665
Total assets 46,120,321 45,047,709 1,072,612
Deferred Outflows of Resources 1,886,023 1,969,039 (83,016) Liabilities
Current liabilities 1,726,777 2,334,628 (607,851)
Long term liabilities 20,648,946 20,688,409 (39,463)
Total liabilities 22,375,723 23,023,037 (647,314)
Deferred Inflows of Resources 266,718 405,979 (139,261) Net Position
Net investment in capital assets 7,642,067 8,238,109 (596,042) Restricted for debt service 11,299 160,440 (149,141)
Unrestricted (deficit) 17,710,537 15,189,183 2,521,354
Total net position $ 25,363,903 $ 23,587,732 $ 1,776,171 The assets and deferred outflows of resources of the Water Fund exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $25.4 million (net position).

The category of the Water Fund’s net position with the largest balance totaling $17.7 million represents the unrestricted net position that is expected to be used for future projects or other purposes. 6 City of Vernon, California
Water Fund
Management’s Discussion and Analysis (Unaudited) (Continued) Year ended June 30, 2024
FINANCIAL HIGHLIGHTS (Continued)
The second category of net positions, totaling $7.6 million, represents resources that are invested in capital assets, net of related debt.

The remaining category of the Water Fund’s net position, totaling $11,299, represents resources that are subject to external restrictions on how they can be used, in this case, bond debt.

Activities, Net Position
x Current assets increased by $2,235,259 from the prior year due to increases in cash and investments by $1,483,515, accounts receivable by $253,650, and accrued unbilled revenue by $505,541.
x Restricted assets decreased by $2.1 million in 2024 as VPU continued to draw down on the Water System Revenue Bonds, 2020 Taxable Series A to fund capital projects. x Net Capital assets increased by $982,665 from the prior year due to additional water plant investment. (See Note 4)
x Current liabilities decreased by $607,851 from the prior year, primarily due to a decrease in accounts payable of $449,364.
x The net investments in capital assets and net of related debt decreased by $569,042, the restricted for debt service decreased by $149,141, and the unrestricted (deficit) increased by $2.5 million, which resulted in an increase in the total net position by $1,776,171. 7 City of Vernon, California
Water 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 Water Fund’s changes in net position over the current and prior fiscal years. The details of the current year’s changes in net position can be found on page 13 of this report.

City of Vernon
Water Fund
Changes in Net Position
June 30, 2024 and 2023
2024 2023 $Variance
Operating Revenues
Charges for services $ 9,259,134 $ 9,844,537 $ (585,403) Operating Expenses
Cost of sales 7,097,861 6,226,053 871,808
Depreciation 708,447 575,512 132,935
Total operating expenses 7,806,308 6,801,565 1,004,743
Operating income 1,452,826 3,042,972 (1,590,146)
Nonoperating revenues (expenses)
Investment income 928,649 327,529 601,120
Interest expense (538,249) (551,437) 13,188
Capital contribution (40,524) - (40,524)
Gain (loss) on disposition of assets (26,531) 14,889 (41,420) Net nonoperating revenues (expenses) 323,345 (209,019) 532,364 Change in net position 1,776,171 2,833,953 (1,057,782)
Net position - beginning of year 23,587,732 20,753,779 2,833,953 Net position - end of year $ 25,363,903 $ 23,587,732 $ 1,776,171 The Water Fund’s change in net position for FY 2023-24 was $1.8 million, primarily due to an operating income of $1.5 million and higher total nonoperating revenues (expenses) of $323,345 when compared to the prior year. Although operating revenues decreased by $585,403 and total operating expenses increased by $1.0 million compared to the prior year, the change in net position for FY 2023-24 remained positive. 8 City of Vernon, California
Water 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 Water Fund’s investment in capital assets amounted to $23.4 million (net of accumulated depreciation). This investment includes land, construction in progress, and utility system improvements.

Additional information on the Water Fund’s capital assets can be found in Note 4 of this report.

Outstanding Debt
As of June 30, 2024, the following Water Fund debt remains outstanding:
x $14,085,000 City of Vernon Water System Revenue Bonds, 2020 Taxable Series A x $941,860 City of Vernon agreement with the Water Replenishment District of Southern California The City of Vernon Water System Revenue Bonds 2020 Taxable Series A were issued to provide funds to (i) finance the acquisition and construction of certain capital improvements to the Water System of the City, (ii) purchase a municipal bond debt service reserve insurance policy for deposit in the Reserve Fund in satisfaction of the Reserve Requirement, and (iii) to pay costs of issuance of the 2020 Bonds.

As of June 30, 2024, the rating on the Water System Revenue Bonds is A-/Stable.

Additional information on the Water Fund’s long-term debt can be found in Note 5 of this report.

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES
These factors were considered in preparing the Water 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 operating and capital costs, to maintain infrastructure investment, and to continue to provide exceptionally reliable service.

REQUESTS FOR INFORMATION
This report is designed to provide an overview of the Water 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. 9 This page intentionally left blank.
10 FINANCIAL STATEMENTS
11 ASSETS
Current assets:

Cash and cash equivalents $ 11,070,299
Investments 8,407,980
Accounts receivable, net 1,197,167
Interest receivable 90
Accrued unbilled revenue 2,021,065
Prepaid items 5,720
Total current assets 22,702,321
Noncurrent assets:

Restricted cash and investments 21,624
Capital assets:

Capital assets, not being depreciated 6,936,269
Capital assets, being depreciated, net 16,460,107
Total capital assets 23,396,376
Total noncurrent assets 23,418,000
Total assets 46,120,321

DEFERRED OUTFLOW OF RESOURCES
Pension related items 1,801,182
Other postemployment benefits related items 84,841
Total deferred outflow of resources $ 1,886,023
(Continued)
Water Enterprise Fund of the City of Vernon
Statement of Net Position
June 30, 2024
See accompanying Notes to the Basic Financial Statements. 12 LIABILITIES
Current liabilities:

Accounts payable $ 830,205
Accrued wages and benefits 16,732
Accrued interest payable 231,760
Customer deposits payable 193,988
Compensated absences, due within one year 39,557
Bonds payable, due within one year 275,000
Note payable, due within one year 139,535
Total current liabilities 1,726,777
Noncurrent liabilities:

Compensated absences, due in more than one year 79,115
Bonds, due in more than one year 14,307,673
Note payable, due in more than one year 802,325
Net pension liability 5,031,749
Net other postemployment benefits liability 428,084
Total noncurrent liabilities 20,648,946
Total liabilities 22,375,723

DEFERRED INFLOWS OF RESOURCES
Pension related items 154,795
Other postemployment benefits related items 111,923
Total deferred inflows of resources 266,718

NET POSITION
Net investment in capital assets 7,642,067
Restricted for debt service 11,299
Unrestricted 17,710,537
Total net position $ 25,363,903
(Concluded)
Water 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 $ 9,259,134
Total operating revenues 9,259,134
OPERATING EXPENSES:

Cost of sales 7,097,861
Depreciation expense 708,447
Total operating expenses 7,806,308
OPERATING INCOME 1,452,826
NONOPERATING REVENUES (EXPENSES):

Investment income 928,649
Interest expense (538,249)
Loss on disposal of assets (6,227)
Total nonoperating revenues (expenses) 384,173

INCOME BEFORE CONTRIBUTIONS
1,836,999
TRANSFERS AND CAPITAL CONTRIBUTIONS:

Transfers out (20,304)
Capital contribution to the City of Vernon (40,524)
Total transfers and capital contributions (60,828)
CHANGE IN NET POSITION 1,776,171
NET POSITION:

Beginning of year 23,587,732
End of year $ 25,363,903
Water Enterprise Fund of the City of Vernon
Statement of Revenues, Expenses, and Changes in Net Position For the Year Ended June 30, 2024
See accompanying Notes to the Basic Financial Statements. 15 $ 8,499,943
(5,202,325)
(2,061,020)
1,236,598
18,247
(110,329)
(92,082)
(1,758,167)
(404,535)
(562,850)
(2,725,552)
(8,408,124)
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:

Receipt from other funds
Payment to other 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
Interest received
937,631
Net cash provided by investing activities (7,470,493)
Net (decrease) in cash and cash equivalents (9,051,529) CASH AND CASH EQUIVALENTS:

Beginning of year 20,143,452
End of year $ 11,091,923
CASH AND CASH EQUIVALENTS:

Cash and investment $ 11,070,299
Restricted cash and investment 21,624
Total cash and cash equivalents $ 11,091,923
(Continued)
Water 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 $ 1,452,826
Adjustments to reconcile operating income to net cash
provided by operating activities:

Depreciation 708,447
Change in assets and liabilities:
(Increase) decrease in accounts receivable (253,650)
(Increase) decrease in accrued unbilled revenue (505,541) (Increase) decrease in prepaid items (1,390)
(Increase) decrease in deferred outflows
of resources related to pension 19,827
(Increase) decrease in deferred outflows
of resources related to OPEB 63,189
Increase (decrease) in accounts payable (449,363)
Increase (decrease) in accrued wages and benefits (15,140) Increase (decrease) in deposits payable (42,900)
Increase (decrease) in compensated absences 16,206
Increase (decrease) in net pension liabilities 433,034
Increase (decrease) in OPEB liabilities (49,686)
Increase (decrease) in deferred inflows
of resources related to pension (75,366)
Increase (decrease) in deferred inflows
of resources related to OPEB (63,895)
Total adjustment (216,228)
Net cash provided by operating activities $ 1,236,598
(Concluded)
Statement of Cash Flows (Continued)
Water 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.

Water Enterprise Fund of the City of Vernon
Index of Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
21 Note 1 – Summary of Significant Accounting Policies ....................................................................................... 23 A. Basis of Accounting and Measurement Focus ..................................................................................... 23 B. Pooled Cash ......................................................................................................................................... 23 C. Cash, Cash Equivalents, and Investments ............................................................................................ 23 D. Fair Valur Measurement ...................................................................................................................... 24 E. Interfund Transactions ......................................................................................................................... 24 F. Accounts Receivables. ......................................................................................................................... 24 G. Prepaid Items ....................................................................................................................................... 24 H. Capital Assets ....................................................................................................................................... 24 I. Deferred Outflows and Inflows of Resources ...................................................................................... 25 J. Compensated Absences ........................................................................................................................ 25 K. Long-Term Obligations ........................................................................................................................ 25 L. Pensions ............................................................................................................................................... 25 M. Other Postemployment Benefits (“OPEB”) ......................................................................................... 26 N. Net Position .......................................................................................................................................... 26 O. Use of Estimates................................................................................................................................... 26 Note 2 – Cash, Cash Equivalents, and Investments ............................................................................................ 27 A. Equity in the Cash Pool of the City of Vernon .................................................................................... 27 B. Investments .......................................................................................................................................... 27 C. Fair Value Measurement ...................................................................................................................... 28 D. Risk Disclosures ................................................................................................................................... 28 Note 3 – Accounts Receivable ............................................................................................................................... 29 Note 4 – Capital Assets .......................................................................................................................................... 29 Note 5 – Long-Term Debt ..................................................................................................................................... 30 Note 6 – Risk Management ................................................................................................................................... 31 Note 7 – Pension Plan ............................................................................................................................................ 32 A. General Information about the Pension Plans ...................................................................................... 32 B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions ........................................................................... 34 Note 8 – Other Postemployment Benefits (“OPEB”) ......................................................................................... 37 A. General Information about the OPEB Plan .......................................................................................... 37 B. Net OPEB Liabilities, OPEB Expenses, and Deferred
Outflows/Inflows of Resources Related to OPEB ............................................................................... 38 Note 9 – Net Investment in Capital Assets ........................................................................................................... 42 22 This page intentionally left blank.

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

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

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

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

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

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

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

Water 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 Receivables
Accounts receivables are shown net of an allowance for uncollectible accounts. Allowances for uncollectible accounts were $50,684 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.

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 water distribution mains, water wells, and pumping stations. The capitalization threshold for all capital assets is $5,000. Capital assets used in operations are depreciated using the straight-line method over their estimated useful lives in the government-wide and proprietary funds statements.

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

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

Water 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) 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 Water Fund will pay the employee all accumulated vacation leave at 100% of the employee’s base hourly rate.

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

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

The following timeframes are used for pension reporting:

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

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

The following timeframes are reported OPEB reporting:

Valuation Date June 30, 2022
Measurement Date June 30, 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.

N. Net Position
The Water Fund financial statements utilize a net position presentation. Net position is classified as follows.

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

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

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

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

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

Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
27 Note 2 – Cash, Cash Equivalent, and Investments
The Water Fund has the following cash and investments at June 30, 2024:

Cash and investments $ 19,478,279
Restricted cash and investments 21,624
Total cash and investments $ 19,499,903
The Water Fund cash and investments at June 30, 2024, in more detail:

Cash and cash equivalents:

Equity in pooled cash 3,383,522 $
Money Market Funds 7,686,777
Total cash and cash equivalents 11,070,299
Investments:

U.S. Governmment Sponsored Enterprise Securities 8,407,980 Investments with fiscal agents:

Money Market Funds 21,624
Total $ 19,499,903
A. Equity in the Cash Pool of the City of Vernon
The Water Fund has equity in the cash pool managed by the City. The Water Fund is a voluntary participant in that pool and the pool is governed by and under the regulatory oversight of the Investment Policy adopted by the City Council of the City. The Water Fund has not adopted an investment policy separate from that of the City. The amount of the Water Fund’s cash in this pool is reported in the accompanying financial statements based upon the Water Fund’s pro rata share of the amount calculated by the City. The balance available for withdrawal is based on the accounting records maintained by the City.

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

Maximum Maximum
Maximum Percentage Investments in
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, 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.

Water 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 and Cash Equivalents (Continued)
C. 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:

Significant
Other Observable
Investment Type Inputs (Level 2) Uncategorized Total
U.S. Governmment Sponsored
Enterprise Securities $ 8,407,980 $ - $ 8,407,980
Investments with fiscal agents:

Money Market Funds - 21,624 21,624
Total $ 8,407,980 $ 21,624 $ 8,429,604
D. Risk Disclosures
Interest Rate Risk - As a means of limiting its exposure to fair value losses arising from rising interest rates, the City’s investment policy limits investments to a maximum maturity of five years.

At June 30, 2024, the Water Fund had the following investment maturities:
1 Year 3 Years to
Investment Type or Less 5 Years Total
U.S. Governmment Sponsored
Enterprise Securities $ 8,407,980 - $ $ 8,407,980
Investments with fiscal agents:

Money Market Funds 21,624 21,624
Total $ 21,624 $ 8,407,980 $ 8,429,604
Remaining Maturity (in Years)
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
at Legal
Investment Type June 30, 2024 Rating AAA
U.S. Governmment Sponsored
Enterprise Securities 8,407,980 $ AAA 8,407,980 $
Investments with fiscal agents:

Money Market Funds 21,624 AAA 21,624
Total $ 8,429,604 8,429,604 $
Water 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 Cash Equivalents (Continued)
D. Risk Disclosures (Continued)
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 Water Fund’s accounts receivable at June 30, 2024 are as follows:

Accounts receivable $ 1,247,851
Less: allowance for uncollectible accounts (50,684)
Total accounts receivable, net $ 1,197,167
Note 4 – Capital Assets
A summary of changes in the capital assets for the Water Fund for the year ended June 30, 2024 is as follows:

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

Water Utility - Water $ 467,640 $ - $ - $ - $ 467,640
Water Utility - Construction in Progress 10,643,631 1,401,035 (5,576,037) - 6,468,629 Total capital assets, not being depreciated 11,111,271 1,401,035 (5,576,037) - 6,936,269 Capital assets, being depreciated:

Water Utility Plant 26,707,369 357,132 (685,144) 5,490,729 31,870,086 Total capital assets, being depreciated 26,707,369 357,132 (685,144) 5,490,729 31,870,086 Less accumulated depreciation for:

Water Utility Plant (15,404,929) (708,447) 678,917 24,480 (15,409,979) Total accumulated depreciation (15,404,929) (708,447) 678,917 24,480 (15,409,979) Total capital assets, being depreciated, net 11,302,440 (351,315) (6,227) 5,515,209 16,460,107 Total capital assets, net $ 22,413,711 $ 1,049,720 $ (6,227) $ (60,828) $ 23,396,376 The Water Fund’s total depreciation expense for the year was $708,447.

Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
30 Note 5 – Long-Term Debt
A summary of changes in long-term debt for the Water 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:
2020 Taxable Revenue Bonds - Series A - Water 14,350,000 $ - $ (265,000) $ 14,085,000 $ 275,000 $ 13,810,000 $ Unamortized Premiums/(Discounts):
2020 Taxable Revenue Bonds - Series A - Water 516,753 - (19,080) 497,673 - 497,673 Total Public Offering 14,866,753 (284,080) - 14,582,673 275,000 14,307,673 Direct Borrowing:

Water Replenishment District Note Payable 1,081,395 (139,535) - 941,860 139,535 802,325 Total Direct Borrowing 1,081,395 (139,535) - 941,860 139,535 802,325 Compensated absences 102,466 95,072 (78,866) 118,672 39,557 79,115 Total business-Type activities $ 16,050,614 $ 95,072 $ (502,481) $ 15,643,205 $ 454,092 $ 15,189,113 $14,840,000 Water System Revenue Bonds (2020 Series A)
The bonds are special obligation bonds which are secured by an irrevocable pledge of water revenues payable to bondholders. Under the Indenture of Trust dated May 6, 2020, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Water Enterprise (as those terms are defined in the Indenture of Trust). The total unpaid balance as of June 30, 2024, was $14,085,000.

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

Year Ending
June 30, Principal Interest Total
2025 275,000 $ 549,350 $ 824,350 $
2026 - 542,475 542,475
2027 - 542,475 542,475
2028 - 542,475 542,475
2029 - 542,475 542,475
2030-2034 1,985,000 2,365,000 4,350,000
2035-2039 2,180,000 1,834,625 4,014,625
2040-2044 2,680,000 1,354,550 4,034,550
2045-2049 3,180,000 829,325 4,009,325
2050-2051 3,785,000 198,713 3,983,713
Total 14,085,000 $ 9,301,463 $ 23,386,463 $
Water Replenishment District Note Payable – Direct Borrowing In May 2019, the City entered into an agreement with Water Replenishment District of Southern California (WRD) for assistance with the construction of a new groundwater well or rehabilitation of an existing groundwater well. The promissory note is unsecured and has no interest basis for an amount not to exceed $1,500,000. As of June 30, 2024, WRD has disbursed all of the funds under the agreement to the City. The note is payable in quarterly principal payments commencing September 1, 2020, in an amount which, together with all quarterly payments, will be sufficient to fully amortize the principal balance of the note by the maturity date of April 1, 2031. The total unpaid balance as of June 30, 2024, was $941,860.

Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
31 Note 5 – Long-Term Debt (Continued)
Water Replenishment District Note Payable – Direct Borrowing (Continued) Upon an event of default, WRD may declare any or all of the outstanding and unpaid principal balance immediately due and payable, without presentment, demand, protest, notice of protest, notice of acceleration or of intention to accelerate or any other notice, declaration or act of any kind, all of which are hereby expressly waived by the City.

The future annual debt service requirements are as follows:

Year Ending
June 30, Principal Interest Total
2025 139,535 $ - $ 139,535 $
2026 139,535 - 139,535
2027 139,535 - 139,535
2028 139,535 - 139,535
2029 139,535 - 139,535
2030-2031 244,185 - 244,185
Total $ - 941,860 $ 941,860 $
Compensated Absences
The balance outstanding at June 30, 2024, was $118,672.

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 Water System Revenue Bonds were A- stable by S&P and not rated by Moody’s.

Note 6 – Risk Management
The Water Fund is in the City’s self-insurance program as part of its policy to self-insure certain levels of risk within certain separate lines of coverage to maximize cost savings.

The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets, errors, and omissions; injuries to employees, and natural disasters. The City utilizes insurance policy(s) to transfer these risks. Each policy has either self-insured retention or deductible, which are parts of the City’s Risk Financing Program. These expenses are paid on a cash basis as they are incurred. There have been no significant settlements or deductions in insurance coverage during the past three fiscal years. Starting in Fiscal 2010, the City chose to establish Risk Financing in the General Fund, whereby assets are set aside for claim-litigation settlements associated with the above mentioned 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.

Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
32 Note 6 – Risk Management (Continued)
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 7 – 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 pension costs across all funds on a cost-sharing 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.

Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
33 Note 7 – 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% 14.50% Required employer contribution rate (FY23-24) 27.40% 19.78% Required employer contribution rate (FY21-22) 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.

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.

Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
34 Note 7 – Pension Plan (Continued)
A. General Information about the Pension Plans (Continued) Benefits Provided (Continued)
For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death. Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated survivor(s), or to the retiree’s estate.

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

Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute to the difference between the actuarially determined rate and the contribution rate of employees. For the year ended Jun 30, 2024, the Water Fund’s share of employer contributions made to the plans was $490,031.

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
Entry Age Normal

6.90%

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

The lesser of contract COLA or 2.30% until Purchasing Power Protection. Allowance floor on purchasing power applies, 2.30% thereafter
(1)The mortality table used was developed based on CalPERS-specific data. The rates incorporate Generational Mortality to capture ongoing mortality improvement using 80% of Scale MP 2020 published by the Society of Actuaries. For more details, please refer to the 2021 experience study report that can be found on the CalPERS website.

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.

Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
35 Note 7 – Pension Plan (Continued)
B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Long-Term Expected Rate of Return (Continued)
In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.

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

Assumed Asset
Asset Class1 Allocation Real Return1,2
Global Equity - Cap-weighted 30.00% 4.54%
Global Equity - Non-Cap-weighted 12.00% 3.80%
Private Equity 13.00% 7.28%
Treasury 5.00% 0.27%
Mortgage-backed Securities 5.00% 0.50%
Investment Grade Corporates 10.00% 1.56%
High Yield 5.00% 2.27%
Emerging Market Debt 5.00% 2.48%
Private Debt 5.00% 3.57%
Real Assets 15.00% 3.21%
Leverage -5.00% -0.59%
100%
1 An expected inflation of 2.30% used for this period.
2 Figures are based on the 2021 Asset Liability Management study.

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

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

Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
36 Note 7 – Pension Plan (Continued)
B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Proportionate Share of Net Pension Liability – Allocation of the City’s Pension Plans to the Water Fund The Water Fund’s proportionate share of the aggregate net pension liability for the pension plans as of the measurement dare ended June 30, 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) 14,979,776 $ 10,381,061 $ 4,598,715 $ 2.92% Balance at 6/30/23 (Measurement Date) 15,829,660 10,797,911 5,031,749 2.96% Net changes during 2022-2023 $ 849,884 $ 416,850 $ 433,034 0.04% Increase (Decrease)
Pension Expense and Deferred Outflows and Inflows of Resources For the measurement period ended June 30, 2023, the Water Fund recognized its proportionate share of the aggregate pension expense of the Plans totaled $822,051. At June 30, 2024, the Water Fund reported its proportionate share of the Plans’ aggregate deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows
of Resources of Resources
Contribution made after measurement period $ 490,031 $ - Changes of assumptions 243,421 -
Difference between expected and actual experience 355,554 (19,785) Net difference between projected and actual earning
on pension plan investments 652,451 -
Adjustment due to differences in proportions 40,075 (32,513) Difference betwwen City contributions and
proportionate share of contribution 19,650 (102,497)
Total $ 1,801,182 $ (154,795)
$490,031 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the collective net pension liability in the year ending June 30, 2024. Differences between projected and actual investment earnings are amortized on a five-year straight-line basis and all other amounts are amortized over the expected average remaining service lives of all members that are provided with benefits. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Measurement Period
Ending June 30 Total
2024 389,002 $
2025 249,052
2026 499,833
2027 18,469
Thereafter -
Total 1,156,356 $
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
37 Note 7 – Pension Plan (Continued)
B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the Water Fund’s proportionate share of the Plans’ aggregate net pension liability, calculated using a discount rate of 6.90%, as well as what the Water Fund’s proportionate share of the Plans’ aggregate net pension liability would be if it were calculated using a discount rate that is a 1-percentage point lower (5.90%) or a 1-percentage point higher (7.90%) than the current rate:

Discount Rate Current Discount Discount Rate
- 1% (5.90%) Rate (6.90%) + 1% (7.90%)
Miscellaneous Plan $ 2,813,873 $ 1,883,966 $ 1,123,737
Water Fund's Net Pension Liability
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
The Water Fund had no outstanding amount of contributions to the pension plans required for the year ended June 30, 2024.

Note 8 – Other Postemployment Benefits (“OPEB”)
A. General Information about the OPEB Plan
The other postemployment benefits (“OPEB”) described in the following paragraphs relate to the City’s OPEB plan. The Water Fund’s share of the net pension liability of the City’s OPEB Plan is reported as a cost-sharing plan in these financial statements since the Water Fund’s operations are handled by City employees who are eligible to participate in the City’s OPEB plan.

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

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

Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
38 Note 8 – Other Postemployment Benefits (“OPEB”) (Continued) A. General Information about the OPEB Plan (Continued)
Benefits Provided (Continued)
Resolution 2011-129 provided lifetime medical benefits to Police Management employees and their spouses, who have been employed as sworn safety personnel for a minimum of twenty (20) years and a minimum of ten (10) years of that service have been with the City of Vernon. Resolution 2011-127 sets forth the MOU of the Vernon Police Officers’ Benefit Association, provided lifetime medical benefits to those employees and their spouses, who have been employed as sworn safety personnel for a minimum of twenty (20) years and a minimum of ten (10) years of that service has been with the City of Vernon. Resolution 2012-217 granted specific retiree medical benefits to employees who retire during the 2012-2013 fiscal year in order to provide an incentive for early retirement whereby the City authorized the payment of medical and dental insurance premiums for eligible retiring employees and their eligible dependents with at least ten (10) years of service plus 5% for each additional full year of service above the ten (10) years of service, and that this offer be extended as an option to safety and safety management groups, at their discretion, in addition to the related options provided in the Vernon Firefighters Association MOU and the Vernon Police Officers’ Benefit Association MOU. Resolution 2013-06 declared that the retiree medical benefits which had not been a vested right for employees will continue to be nonvested right for employees who continue to be employed by the City on or after July 1, 2013, but will become a vested right for those who retire during the 2012-2013 fiscal year. The City’s plan is considered a substantive OPEB plan and the City recognizes cost in accordance with GASB Statement No 75. The City may terminate its unvested OPEB in the future.

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

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

For the fiscal year ended June 30, 2024, the Water Fund’s proportionate share of contributions made to the trust was $40,724, $54,595 for retiree premiums, resulting in a total contribution of $95,319.

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.

Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
39 Note 8 – 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% non-Medicare / 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
The long-term expected rate of return was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are aggregate to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.

Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
40 Note 8 – Other Postemployment Benefits (“OPEB”) (Continued) B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of Resources Related to OPEB (Continued)
Long-Term Expected Rate of Return (Continued)
Long-term
Target Expected Real
Asset Class Allocation Rate of Return
Global Equity 49.00% 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%
100.00%
* Preliminary estimate, pending confirmation by CalPERS The Water Fund’s proportionate share of the net OPEB liability as of the measurement dates ended June 30, 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 $ 796,735 $ 318,965 $ 477,770 2.92% Balance at June 30, 2023 (Measurement Date) 819,100 391,016 428,084 2.96% Net changes during 2022-23 22,365 72,051 (49,686) 0.04% Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the Water Fund’s proportionate share of the net OPEB liability if it were calculated using a discount rate that is 1% point lower (5.00%) or 1% point higher (7.00%) than the current rate:

Discount Rate Current Discount Discount Rate
-1% (5.00%) Rate (6.00%) +1 % (7.00%)
$ 520,254 $ 428,084 $ 350,673
Plan's Net OPEB Liability
Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates The following presents the Water Fund’s proportionate share of the net OPEB liability if it were calculated using a healthcare cost trend rates that are 1% 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%
$ 428,084 389,090 $ 466,225 $
Plan's Net OPEB Liability
Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
41 Note 8 – Other Postemployment Benefits (“OPEB”) (Continued) B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of Resources Related to OPEB (Continued)
OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB For the year ended June 30, 2024, the Water Fund recognized its proportionate share of the OPEB expense of $18,151. At June 30, 2024, the Water Fund reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows Deferred Inflows
of Resources of Resources
Contribution made after measurement period 39,889 $ - $ Changes in assumptions 19,019 (41,052)
Difference between expected and actual experience 2,114 (70,871) Net difference between projected and actual earning on
OPEB plan investments 23,819 -
Total 84,841 $ (111,923) $
The $39,889 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ending June 30, 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 OPEB will be recognized as OPEB expense as follows:

Deferred
Measurement Period Outflows/(Inflows)
Ending June 30 of Resources
2024 $ (58,200)
2025 (7,827)
2026 8,561
2027 (5,713)
2028 (2,908)
Thereafter (884)
Total $ (66,971)
Payable to the OPEB Plan
At June 30, 2024, the Water Fund had no outstanding amount of contributions to the OPEB plan required for the year ended June 30, 2024.

Water Enterprise Fund of the City of Vernon
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2024
42 Note 9 – Net Investment in Capital Assets
The investment in capital assets for Water Fund is calculated as follows:

Total capital assets, net $ 23,396,376
Unspent capital debt proceed 10,325
Retention payable (240,101)
Capital related debt (15,524,533)
Net investment in capital assets 7,642,067 $

REQUIRED SUPPLEMENTARY INFORMATION
(UNAUDITED)
43 Fiscal year 2015 2016 2017 2018 2019
Measurement period 2013-14 2014-15 2015-16 2016-17 2017-18 Water Fund's proportion of the net
pension liability 3.70% 3.55% 3.80% 3.74% 3.11%
Water Fund's proportionate share of the
net pension liability 2,906,320 $ 2,715,464 $ 3,619,851 $ 4,100,788 $ 3,533,209 $ Covered payroll1 $ 867,934 872,232 $ 499,838 $ 1,038,438 $ 1,100,727 $ Water Fund's proportionate share of the net
pension liability as a percentage of
covered payroll 333.20% 312.87% 724.20% 394.90% 320.99% Water 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
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, 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.

Last Ten Fiscal Years
California Public Employees' Retirement System Defined Pension Plan For the Year Ended June 30, 2024
Water Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Pension Liability and Related Ratios 44 Fiscal year 2020 2021 2022 2023 2024
Measurement period 2018-19 2019-20 2020-21 2021-22 2022-23 Water Fund's proportion of the net
pension liability 3.28% 3.45% 3.23% 2.92% 2.96%
Water Fund's proportionate share of the
net pension liability 3,964,339 $ 4,668,011 $ 2,845,943 $ 4,598,715 $ 5,031,748 $ Covered payroll1 $ 891,592 925,620 $ 792,625 $ 628,181 $ 734,026 $ Water Fund's proportionate share of the net
pension liability as a percentage of
covered payroll 428.29% 523.56% 359.05% 732.07% 685.50% Water 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 Years
California Public Employees' Retirement System Defined Pension Plan Water Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Pension Liability and Related Ratios (Continued) 45 Fiscal year 2015 2016 2017 2018 2019
Measurement period 2013-14 2014-15 2015-16 2016-17 2017-18 Water Fund's Allocation Percentage 3.70% 3.55% 3.80% 3.74% 3.11% Actuarially determined contribution 239,819 $ 293,125 $ 346,113 $ 354,831 $ 339,930 $ Contributions in relation to the
actuarially determined contribution (239,819) (293,125) (346,113) (354,831) (339,930) Contribution deficiency (excess) - $ - $ - $ - $ - $
Covered payroll1 $ 927,331 903,792 $ 1,038,438 $ 1,100,727 $ 925,620 $ Contributions as a percentage of covered payroll. 26.53% 31.61% 33.33% 32.24% 36.72% 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
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 Years
California Public Employees' Retirement System Defined Pension Plan Water Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions
46 Fiscal year 2020 2021 2022 2023 2024
Measurement period 2018-19 2019-20 2020-21 2021-22 2022-23 Water Fund's Allocation Percentage 3.28% 3.45% 3.23% 2.92% 2.96% Actuarially determined contribution 404,765 $ 435,752 $ 459,607 $ 470,851 $ 490,031 $ Contributions in relation to the
actuarially determined contribution (404,765) (435,752) (459,607) (470,851) (490,031) Contribution deficiency (excess) - $ - $ - $ - $ - $
Covered payroll1 $ 792,625 891,592 $ 628,181 $ 734,026 $ 754,579 $ Contributions as a percentage of covered payroll. 45.40% 54.98% 73.16% 64.15% 64.94% For the Year Ended June 30, 2024
Last Ten Fiscal Years
California Public Employees' Retirement System Defined Pension Plan Water Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions (Continued)
47 Fiscal year 2018 2019 2020 2021 2022
Measurement period 2016-171 2017-18 2018-19 2019-20 2020-21 Water Fund's proportion of the net
OPEB liability 4.08% 3.11% 3.28% 3.45% 3.23%
Water Fund's proportionate share of the
net OPEB liability 1,482,614 $ 719,107 $ 719,261 $ 697,329 $ 529,343 $ Covered employee payroll 1,368,760 $ 1,368,166 $ 1,095,236 $ 1,048,734 $ 1,093,781 $ Water Fund's proportionate share of the net
OPEB liability as a percentage of
covered employee payroll 108.32% 52.56% 65.67% 66.49% 48.40% Water Fund Fiduciary Net Position as a
percentage of the total
OPEB liability 2.83% 8.62% 16.30% 25.70% 40.22%
1 Water 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. 48 Fiscal year 2023 2024
Measurement period 2021-22 2022-23
Water Fund's proportion of the net
OPEB liability 2.92% 2.96%
Water Fund's proportionate share of the
net OPEB liability $ 428,084 477,770 $
Covered employee payroll $ 724,665 739,897 $
Water Fund's proportionate share of the net
OPEB liability as a percentage of
covered employee payroll 64.57% 59.07%
Water Fund Fiduciary Net Position as a
percentage of the total
OPEB liability 40.03% 47.74%
Water 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
49 Fiscal year 2018 2019 2020 2021 2022
Actuarially determined contribution $ 109,990 $ 83,829 $ 63,389 $ 53,086 $ 49,744 Contributions in relation to the
actuarially determined contribution (84,361) (93,060) (128,484) (108,041) (94,830) Contribution deficiency (excess) $ 25,629 $ (9,231) $ (65,095) $ (54,955) $ (45,086) Covered-employee payroll $ 1,095,236 1,368,166 $ 1,048,734 $ 1,093,781 $ 1,024,922 $

6.17% 8.50% 12.25% 9.88% 9.25%
1 Notes to Schedule:

Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry Age Normal Cost Method
Amortization method Level percentage of payroll
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%
Water 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
Contributions as a percentage
of covered-employee payroll
Historical information is presented only for measurement periods after GASB 75 was implemented in fiscal year of 2017-18 (measurement period of 2016-17). Additional years of information will be displayed as it becomes available.

The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2023-204 were derived from the June 30, 2022 funding valuation report.
50 Fiscal year 2023 2024
Actuarially determined contribution $ 40,896 $ 40,724
Contributions in relation to the
actuarially determined contribution (90,700) (92,073)
Contribution deficiency (excess) $ (49,804) $ (51,349)
Covered-employee payroll $ 724,665 713,856 $
Contributions as a percentage of covered-employee payroll 12.71% 12.71% Water Enterprise Fund of the City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Other Postemployment Benefits (Continued) For the Year Ended June 30, 2024
Last Ten Fiscal Years1
Other Postemployment Benefits ("OPEB") Plan
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