2 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.
Auditor’s 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 auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS and Government Auditing Standards, we exercise professional judgment and maintain professional skepticism throughout the audit. identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed. evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, the Schedule of the Proportionate Share of the Net Pension Liability and Related Ratios, the Schedule of the Contributions - Pensions, the Schedule of Proportionate Share of the Net Other Postemployment Benefits Liability and Related Ratios, and the Schedule of Contributions – Other Postemployment Benefits be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by Government Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the Required Supplementary Information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. . .
Item 15 Page 174 of 295
To the Honorable Mayor and Members of the City Council
of the City of Vernon
Vernon, California
3 Supplementary Information
Our audit was conducted for the purpose of forming opinion on the financial statements that collectively comprise the VPU’s basic financial statements. The Combining and Individual Fund Financial Statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the Combining and Individual Fund Financial Statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Other Information
Management is responsible for the other information included in this annual report. The other information comprises the Introductory Section but does not include the basic financial statements and our auditor’s 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 8, 2026 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 8, 2026
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City of Vernon, California
Vernon Public Utilities
Management’s Discussion and Analysis (Unaudited)
Year ended June 30, 2025
5 The management of the Vernon Public Utilities (“VPU”), the electric, gas, water, and fiber optics utilities of the City of Vernon (the “City”), offers the following overview and analysis of the basic financial statements of the VPU for the fiscal year ending June 30, 2025. Management encourages readers to utilize information in the Management’s Discussion and Analysis (“MD&A”) in conjunction with the accompanying basic financial statements.
OVERVIEW OF BASIC FINANCIAL STATEMENTS
The MD&A is intended to serve as an introduction to the VPU’s basic financial statements. Included as part of the financial statements are three separate statements.
The statement of net position presents information on the VPU’s total assets and deferred outflows of resources and total liabilities and deferred inflows of resources, with the difference between the two reported as net position.
The statement of revenues, expenses, and changes in net position presents information showing how the VPU’s net position changed during the most recent fiscal year. Financial results are recorded using the accrual basis of accounting. Under this method, all changes in net position are reported as soon as the underlying events occur, regardless of the timing of cash flows. Thus, revenues and expenses reported in this statement for some items may affect cash flows in a future fiscal period (examples include billed but uncollected revenues and employee earned but unused vacation leave).
The statement of cash flows reports cash receipts, cash payments, and net changes in cash and cash equivalents from operations, noncapital financing, capital and related financing, and investing activities.
The notes to the financial statements provide additional information essential to fully understanding the data provided in the financial statements.
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City of Vernon, California
Vernon Public Utilities
Management’s Discussion and Analysis (Unaudited) (Continued) Year ended June 30, 2025
6 FINANCIAL HIGHLIGHTS
Net Position
The table below summarizes the VPU’s net position as of the current fiscal year, which ended June 30, 2025, and the prior fiscal year, which ended June 30, 2024. The current year’s summary details can be found on pages 12-13 of this report.
City of Vernon
Vernon Public Utilities
Net Position
June 30, 2025 and 2024
2025 2024 $Variance
Assets
Current and other assets $ 261,788,618 $ 215,839,326 $ 45,949,292 Restricted and other assets 36,185,202 36,614,904 (429,702) Capital assets 472,849,702 457,552,314 15,297,388
Total assets 770,823,522 710,006,544 60,816,978
Deferred Outflows of Resources 12,510,797 15,587,385 (3,076,588) Liabilities
Current liabilities 84,213,841 73,762,316 10,451,525
Long term liabilities 271,150,038 334,159,365 (63,009,327) Total liabilities 355,363,879 407,921,681 (52,557,802)
Deferred Inflows of Resources 1,391,791 1,988,057 (596,266)
Net Position
Net investment in capital assets 267,705,683 216,779,121 50,926,562 Restricted for debt service 28,015,891 31,509,213 (3,493,322) Restricted for AB1890 5,277,830 2,754,353 2,523,477
Unrestricted (deficit) 125,579,245 64,641,505 60,937,740 Total net position $ 426,578,649 $ 315,684,192 $ 110,894,457 The assets and deferred outflows of resources of the VPU exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $426.6 million (net position).
The category of the VPU’s net position with the largest balance, totaling $267.7 million, represents resources that are invested in capital assets.
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City of Vernon, California
Vernon Public Utilities
Management’s Discussion and Analysis (Unaudited) (Continued) Year ended June 30, 2025
7 FINANCIAL HIGHLIGHTS (CONTINUED)
The second category, restricted for debt services totaling $28.0 million, represents resources that are subject to external restrictions on their use, in this case, bond debt.
The third category of net positions, restricted for AB1890 totaling $5.3 million, is for the Electric Fund’s Public Benefits program under Assembly Bill 1890.
The remaining category of the VPU’s net position, unrestricted (deficit) totaling $125.6 million, represents the unrestricted net position that is expected to be used for future projects or other purposes.
Activities, Net Position
The total current assets increased by $45.9 million from the prior year while restricted and other assets decreased by $0.4 million.
Capital assets increased by $15.3 million from the prior year. Current liabilities increased by $10.5 million from the prior year. Long-term liabilities decreased by $63.0 million from the prior year, primarily due to a decrease in bonds payable of $63.0 million. The VPU’s total net position increased by $110.9 million from the prior year, primarily due to an increase in the unrestricted net position of $60.9 million and an increase in the net investment in capital assets of $50.9 million.
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Item 15 Page 179 of 295
City of Vernon, California
Vernon Public Utilities
Management’s Discussion and Analysis (Unaudited) (Continued) Year ended June 30, 2025
8 FINANCIAL HIGHLIGHTS (CONTINUED)
Changes in Net Position
The table below summarizes the VPU’s changes in net position over the current and prior fiscal years. The details of the current year’s changes in net position can be found on page 15 of this report.
City of Vernon
Vernon Public Utilities
Changes in Net Position
June 30, 2025 and 2024
2025 2024 $Variance
Operating Revenues
Charges for services $ 260,432,768 $ 241,036,593 $ 19,396,175
Operating Expenses
Cost of sales $ 130,724,436 $ 135,410,616 $ (4,686,180) Depreciation 25,927,653 25,037,099 890,554
Total operating expenses 156,652,089 160,447,715 (3,795,626)
Operating income 103,780,679 80,588,878 23,191,801
Nonoperating revenues (expenses)
Investment income 7,111,674 7,622,930 (511,256)
Net decrease in fair value of investments 432,121 119,187 312,934 Interest expense (9,236,716) (10,979,826) 1,743,110
Capital contribution 9,262,207 300,000 8,962,207
Transfer Out (173,828) (382,111) 208,283
Gain (loss) on disposition of assets (126,952) (285,027) 158,075 Net nonoperating revenues (expenses) 7,268,506 (3,604,847) 10,873,353
Change in net position 111,049,185 76,984,031 34,065,154
Net position - beginning of year 315,684,193 238,700,162 76,984,030
Restatement of net position (154,729) - (154,729)
Net position - end of year 426,578,649 315,684,193 110,894,456 The VPU’s operating income of $103.8 million, plus nonoperating revenues (expenses) of $7.3 million, resulted in an increase in net position of $111.0 million during the current year. This increase is primarily due to higher operating revenues and a capital contribution which totaled $9.3 million. .
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Item 15 Page 180 of 295
City of Vernon, California
Vernon Public Utilities
Management’s Discussion and Analysis (Unaudited) (Continued) Year ended June 30, 2025
9 CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
As of June 30, 2025, the VPU’s investment in capital assets amounted to $472.8 million (net of accumulated depreciation). This investment includes land, intangible assets, construction in progress, buildings, utility system improvements, and machinery and equipment.
Additional information on the VPU’s capital assets can be found in Note 5 of this report.
Outstanding Debt
As of June 30, 2025, the following Electric Fund debt remains outstanding:
$34,530,000 City of Vernon Electric System Revenue Bonds, 2008 Taxable Series A $2,865,000 City of Vernon Electric System Revenue Bonds, 2012 Taxable Series B $41,075,000 City of Vernon Electric System Revenue Bonds, 2015 Taxable Series A $19,305,000 City of Vernon Electric System Revenue Bonds, 2020 Series A $109,700,000 City of Vernon Electric System Revenue Bonds, 2021 Series A $42,495,000 City of Vernon Electric System Revenue Bonds, 2022 Series A The City of Vernon Electric System Revenue Bonds, 2008 Taxable Series A were issued to provide funds to (i) finance the cost of certain capital improvements to the City’s Electric System, (ii) fund a deposit to the Debt Service Reserve Fund, and (iii) to pay costs of issuance of the 2008 Bonds.
The City of Vernon Electric System Revenue Bonds, 2012 Taxable Series B were issued to provide funds to (i) refund the $28,680,000 aggregate principal amount of the 2009 Bonds maturing on August 1, 2012, (ii) to pay a portion of the costs of the 2012 Project, and (iii) to pay costs of issuance of the 2012 Taxable Series B Bonds.
The City of Vernon Electric System Revenue Bonds, 2015 Taxable Series A were issued to provide funds to (i) refund a portion of the Outstanding Electric System Revenue Bonds, 2009 Series A; (ii) finance the costs of certain capital improvements to the City’s Electric System by reimbursing the Electric System for the prior payment of such costs from the Light and Power Fund; (iii) fund a deposit to the Debt Service Reserve Fund; and (iv) pay costs of issuance of the 2015 Bonds.
The City of Vernon Electric System Revenue Bonds, 2020 Series A were issued to provide funds to (i) finance the acquisition and construction of certain capital improvements to the Electric System of the City, (ii) to refund all of the City’s outstanding Electric System Revenue Bonds, 2009 Series A, and (iii) to pay costs of issuance of the 2020 Bonds.
The City of Vernon Electric System Revenue Bonds, 2021 Series A were issued to provide funds: (i) to pay the costs of the acquisition by the City of Vernon of a 134-megawatt natural gas-fired generating facility located within the city limits on the land owned by the City, together with certain related electrical interconnection facilities and other assets, property, and contractual rights, (ii) to fund a deposit to the Debt Service Reserve Fund in satisfaction of the Debt Service Reserve Requirement, and (iii) to pay cots of issuance of the 2021 Bonds.
The City of Vernon Electric System Revenue Bonds, 2022 Series A were issued to (i) refund and defease all of the City’s outstanding Electric System Revenue Bonds, 2012 Series A and a portion of the City’s outstanding Electric System Revenue Bonds, 2012 Taxable Series B and (ii) to pay costs of issuance of the 2022 Bonds. .
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Item 15 Page 181 of 295
City of Vernon, California
Vernon Public Utilities
Management’s Discussion and Analysis (Unaudited) (Continued) Year ended June 30, 2025
10 CAPITAL ASSET AND DEBT ADMINISTRATION (CONTINUED)
As of June 30, 2025, the following Water Fund debt remains outstanding:
$13,810,000 City of Vernon Water System Revenue Bonds, 2020 Series A $802,325 City of Vernon agreement with the Water Replenishment District of Southern California The City of Vernon Water System Revenue Bonds, 2020 Series A were issued to provide funds to (i) finance the acquisition and construction of certain capital improvements to the Water System of the City, (ii) purchase a municipal bond debt service reserve insurance policy for deposit in the Reserve Fund in satisfaction of the Reserve Requirement, and (iii) to pay costs of issuance of the 2020 Bonds.
As of June 30, 2025, the ratings on all Electric System Revenue Bonds of the City are Baa1/Positive by Moody’s and A-/Stable by S&P. The rating on the Water System Revenue Bonds is A-/Stable by S&P and is not rated by Moody’s.
Additional information on the Electric Fund’s long-term debt can be found in Note 6 of this report.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES
These factors were considered in preparing the VPU’s FY 2024-25 operating and capital budgets. VPU continues to respond to inflation, tariffs, and supply chain issues, including higher costs for materials and supplies, chemicals, and construction costs to maintain its generation, transmission, and distribution infrastructure, and to make capital investments to continue to provide exceptionally reliable service and competitively priced utilities.
In support of the City’s business development plans, VPU continues to collaborate with City staff to attract new businesses and industries to Vernon, especially in the development of green commerce. VPU is a dedicated partner invested in the stability and growth of the Vernon community. VPU is committed to maintaining a strong financial and operational position for the future, which includes implementing its multi-year capital plan as well as continuous improvement in its operations for efficiency and cost savings.
REQUESTS FOR INFORMATION
This report is designed to provide a general overview of the FY 2024-25 financial results for the VPU’s electric, gas, water, and fiber optics utilities of the City of Vernon. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Director of Finance at the City of Vernon, 4305 Santa Fe Avenue, Vernon, California, 90058. .
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FINANCIAL STATEMENTS
11 .
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ASSETS
Current assets:
Cash and cash equivalents $ 202,569,198
Investments 17,808,087
Accounts receivable, net 15,242,076
Interest receivable 166,731
Accrued unbilled revenue 24,911,377
Prepaid items 619,338
Inventory 471,811
Total current assets 261,788,618
Noncurrent assets:
Restricted cash and investments 28,364,291
Prepayment to Southern California Public
Power Authority 934,159
Deposits 6,886,752
Capital assets:
Capital assets, not being depreciated 79,838,390
Capital assets, being depreciated, net 392,774,024
Intangible assets, being amortized, net 237,288
Total capital assets, net 472,849,702
Total noncurrent assets 509,034,904
Total assets 770,823,522
DEFERRED OUTFLOWS OF RESOURCES
Pension related 10,124,154
Other postemployment benefits related 1,059,245
Deferred charges on refunding 1,327,398
Total deferred outflows of resources 12,510,797
(Continued)
City of Vernon
June 30, 2025
Statement of Net Position
Vernon Public Utilities
See accompanying Notes to the Basic Financial Statements. 12 .
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LIABILITIES
Current liabilities:
Accounts payable 14,098,428
Accrued wages and benefits 644,631
Accrued interest payable 5,256,268
Unearned revenue 5,808,390
Customer deposits payable 528,569
Due to the City of Vernon 3,574
Subscription liabilities, due within one year 53,798
Compensated absences, due within one year 520,648
Bonds payable, due within one year 57,160,000
Note payable, due within one year 139,535
Total current liabilities 84,213,841
Noncurrent liabilities:
Subscription liabilities, due in more than one year 16,336 Compensated absences, due in more than one year 1,041,297 Bonds payable, due in more than one year 228,715,501
Note payable, due in more than one year 662,790
Net pension liability 38,072,894
Net other postemployment benefits liability 2,641,220
Total noncurrent liabilities 271,150,038
Total liabilities 355,363,879
DEFERRED INFLOWS OF RESOURCES
Pension related items 842,218
Other postemployment benefits related items 549,573
Total deferred inflows of resources 1,391,791
NET POSITION
Net investment in capital assets 267,705,683
Restricted for:
Debt service 28,015,891
Assembly Bill 1890 5,277,830
Unrestricted 125,579,245
$ 426,578,649
(Concluded)
Vernon Public Utilities
Total net position
June 30, 2025
Statement of Net Position (Continued)
City of Vernon
See accompanying Notes to the Basic Financial Statements. 13 .
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OPERATING REVENUES:
Charges for services $ 260,432,768
Total operating revenues 260,432,768
OPERATING EXPENSES:
Cost of sales 130,724,436
Depreciation and amortization expense 25,927,653
Total operating expenses 156,652,089
OPERATING INCOME 103,780,679
NONOPERATING REVENUES (EXPENSES):
Investment income 7,111,674
Net increased in fair value of investments 432,121
Interest expense (9,236,716)
Loss on disposal of assets (126,952)
Total nonoperating revenues (expenses) (1,819,873)
INCOME BEFORE CAPITAL CONTRIBUTION 101,960,806
AND TRANSFERS
CAPITAL CONTRIBUTION AND
TRANSFERS:
Capital contribution 9,262,207
Transfers out to the City of Vernon (173,828)
Total capital contribution and transfers 9,088,379
CHANGE IN NET POSITION 111,049,185
NET POSITION:
Beginning of year, as restated (Note 11) 315,529,464
End of year $ 426,578,649
City of Vernon
Statement of Revenues, Expenses, and Changes in Net Position Vernon Public Utilities
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 15 .
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Item 15 Page 187 of 295
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash receipts from customers and users $ 261,044,574
Cash paid to suppliers for goods and services (107,239,153) Cash paid to employees for services (17,774,125)
Net cash provided by operating activities 136,031,296
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES:
Transfer to the City (173,828)
Receipt from other City funds 52,125
Payment to other City funds (47,851)
Net cash (used in) noncapital financing activities (169,554)
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:
Acquisition of capital assets (31,944,346)
Proceeds from sale of capital assets 15,283
Principal paid on long-term debt (54,974,572)
Interest paid on long-term debt (15,881,049)
Net cash (used in) capital and related financing activities (102,784,684) CASH FLOWS FROM INVESTING ACTIVITIES:
Receipt from matured investments 15,494,000
Interest received 7,161,664
Net cash provided by investing activities 22,655,664
Net increase in cash and ash equivalents 55,732,722
CASH AND CASH EQUIVALENTS:
Beginning of year 175,200,767
End of year $ 230,933,489
CASH AND CASH EQUIVALENTS:
Cash $ 202,569,198
Restricted cash and investment 28,364,291
Total cash and cash equivalents $ 230,933,489
NONCASH:
Unrealized gain in fair value of investments $ 432,121
Capital contribution $ 9,262,207
Acquisition of subscription asset $ (160,722)
Issuance of subscription liability $ 160,722
(Continued)
City of Vernon
Statement of Cash Flows
Vernon Public Utilities
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 16 .
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Item 15 Page 188 of 295
OPERATING INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Operating income $ 103,780,679
Adjustments to reconcile operating income to net cash
provided by operating activities:
Depreciation and amortization 25,927,653
Change in assets and liabilities:
(Increase) decrease in accounts receivable (2,442,902)
(Increase) decrease in accrued unbilled revenue 346,417 (Increase) decrease in inventories and prepaid items 297,146 (Increase) decrease in customer deposits (3,100,099)
(Increase) decrease in deferred outflows
of resources related to pension 3,301,465
(Increase) decrease in deferred outflows
of resources related to OPEB (426,859)
Increase (decrease) in accounts payable 2,761,576
Increase (decrease) in accrued wages and benefits 323,731 Increase (decrease) in deposits payable (76,604)
Increase (decrease) in unearned revenue 5,808,390
Increase (decrease) in compensated absences 109,251
Increase (decrease) in net pension liabilities 567,344
Increase (decrease) in OPEB liabilities (549,627)
Increase (decrease) in deferred inflows
of resources related to pension (311,592)
Increase (decrease) in deferred inflows
of resources related to OPEB (284,673)
Total adjustment 32,250,617
Net cash provided by operating activities $ 136,031,296 (Concluded)
City of Vernon
Vernon Public Utilities
Statement of Cash Flows (Continued)
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 17 .
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19 NOTES TO THE BASIC FINANCIAL STATEMENTS
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City of Vernon
Vernon Public Utilities
Index to the Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2025
21 Note 1 – Summary of Significant Accounting Policies ....................................................................................... 23 A. Financial Reporting Entity ...................................................................................................................... 23 B. Basis of Accounting and Measurement Focus ........................................................................................ 23 C. Pooled Cash ............................................................................................................................................. 24 D. Cash, Cash Equivalents and Investments ................................................................................................ 24 E. Fair Value Measurement ......................................................................................................................... 24 F. Interfund Transactions ............................................................................................................................. 24 G. Receivables.............................................................................................................................................. 24 H. Prepaid Items ........................................................................................................................................... 24 I. Capital Assets .......................................................................................................................................... 25 J. Deferred Outflows and Inflows of Resources ......................................................................................... 25 K. Compensated Absences ........................................................................................................................... 25 L. Subscription liabilities ............................................................................................................................. 25 M. Long-Term Debt ...................................................................................................................................... 26 N. Pensions ................................................................................................................................................... 26 O. Postemployment Benefits Other than Pensions (OPEB) ......................................................................... 26 P. Net Pension ............................................................................................................................................. 27 Q. Use of Estimates ...................................................................................................................................... 27 R. Implementation of New GASB Pronouncements .................................................................................... 27 Note 2 – Cash, Cash Equivalents, and Investments ............................................................................................ 28 A. Equity in the Cash Pool of the City of Vernon ........................................................................................ 28 B. Investments.............................................................................................................................................. 29 C. Local Agency Investment Fund (“LAIF”) .............................................................................................. 29 D. Fair Value Measurement ......................................................................................................................... 29 E. Risk Disclosures ...................................................................................................................................... 30 Note 3 – Accounts Receivable ............................................................................................................................... 31 Note 4 – Interfund Transactions .......................................................................................................................... 31 A. Due to the City of Vernon ....................................................................................................................... 31 B. Advances From/To Other Funds ............................................................................................................. 31 Note 5 – Capital Assets .......................................................................................................................................... 32 Note 6 – Long-Term Debt ..................................................................................................................................... 33 Note 7 – Risk Management ................................................................................................................................... 39 Note 8 – Pension Plan ............................................................................................................................................ 40 A. General Information about the Pension Plans ......................................................................................... 40 B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows and Inflows of Resources Related to Pensions ........................................................................ 41 .
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City of Vernon
Vernon Public Utilities
Index to the Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2025
22 Note 9 – Other Postemployment Benefits (OPEB) ............................................................................................. 46 A. General Information about the OPEB Plan .......................................................................................... 46 B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows and Inflows of resources related to OPEB ............................................................................................................... 47 Note 10 – Net Investment in Capital Assets ......................................................................................................... 50 Note 11 – Restatement of Beginning Net Position ............................................................................................... 51 Note 12 – Southern California Public Power Authority .................................................................................... 51 A. Take or Pay Contract ............................................................................................................................... 51 B. Power Purchase Commitments ................................................................................................................ 52 .
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Item 15 Page 194 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements
For the Year Ended June 30, 2025
23 Note 1 – Summary of Significant Accounting Policies
The accompanying financial statements present only the Vernon Public Utilities (“VPU”) of the City of Vernon, California (the “City”), and do not fairly present the financial position and results of the operations of the City. The VPU accounts for the independent operations and the maintenance of the City’s electric, gas, water, and fiber optics utilities. A fund, or utility, administered by the VPU is an independent fiscal and accounting entity with a self-balancing set of accounts recording resources, related liabilities, obligations, reserves, and equities, segregated for the purpose of carrying out specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations.
For additional information regarding the City, refer to the City’s annual financial report.
The financial statements of the VPU have been prepared in conformity with the U.S. generally accepted accounting principles (“U.S. GAAP”). The Governmental Accounting Standards Board (“GASB”) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The significant accounting policies of the VPU are described below.
A. Financial Reporting Entity
Ordinance No. 1242, adopted May 16, 2017, requires each utility of the City to be independent with its assets, liabilities, and equities segregated, budgeted, and accounted for in separate funds. Each of the City’s utilities, namely the electric, gas, water, and fiber optics utilities, was established by the City under and by virtue of the City Charter and the City Code enacted in 1988. Prior to July 1, 2016, the electric and gas utilities were consolidated and reported as the Light & Power Enterprise for financial reporting purposes. Ordinance No. 1242 continues to require each utility to be independent with its assets, liabilities, and equities segregated, budgeted, and accounted for in separate funds, while Ordinance No. 1240 enables the consolidated financial reporting of those independent utilities for better oversight and management. Ordinance No. 1240, adopted March 21, 2017, consolidates all utilities-related services under the management of the stand-alone entity “Vernon Public Utilities” for better oversight and management of the day-to-day activities of such independent utilities.
B. Basis of Accounting and Measurement Focus
The VPU’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.
VPU distinguishes operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the Electric, Gas, Water, and Fiber Optics Enterprise funds are charges to customers for sales and services. Operating expenses for the proprietary funds include the costs of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. .
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Item 15 Page 195 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
24 Note 1 – Summary of Significant Accounting Policies (Continued) C. Pooled Cash
Part of the VPU’s operating cash balance is pooled with other City funds for deposit purposes. The share of each fund in the pooled cash account is recorded in each of the funds’ book of accounts, and interest income is apportioned to the participating funds based on the relationship of their average monthly balances to the total of the pooled cash.
D. Cash, Cash Equivalents, and Investments
For purposes of the statement of cash flows, the VPU considers all highly liquid investments (including restricted cash and investments) with an original maturity of three months or less when purchased to be cash equivalents.
Investment transactions are recorded on the settlement date. Investments in nonparticipating interest-earning investment contracts are reported at cost and all other investments are reported at fair value.
E. Fair Value Measurement
U.S. GAAP defines fair value, establishes a framework for measuring fair value and establishes disclosure about fair value measurement. Investments, unless otherwise specified at fair value in the financial statements, are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Levels of inputs are as follows:
Level 1 – Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level 2 – Inputs, other than quoted prices included in Level 1, that are observable for the assets or liabilities through corroboration with market data at the measurement date. Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the assets or liabilities at the measurement date.
F. Interfund Transactions
Outstanding short-term borrowing between funds are reported as “due from/to other City funds”. Long-term interfund loans are classified as “advances to/from other City funds” on the statement of net position.
G. Receivables
Trade receivables are shown net of an allowance for uncollectible accounts. Allowances for uncollectible accounts of $1,423,003 as of June 30, 2025, consists of $1,347,558 for Electric Enterprise Fund, $12,944 for Gas Enterprise Fund, $45,701 for Water Enterprise Fund, and $16,800 for Fiber Optics Enterprise Fund. 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.
H. Prepaid Items
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements by using purchase method.
The VPU made a prepayment to Southern California Public Power Authority (“SCPPA”) for the VPU’s share of SCPPA’s payoff of the Hoover Center and Air Slots debt. This prepaid amount is amortized over the life of the debt based on the annual debt service obligations. See Note 12 for further information regarding SCPPA. .
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Item 15 Page 196 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
25 Note 1 – Summary of Significant Accounting Policies (Continued) I. Capital Assets
Capital assets are recorded at cost where historical records are available and at an estimated original cost where no historical records exist. Donated capital assets are valued at their acquisition value. Capital assets include intangible assets with indefinite lives and public domain (infrastructure) general capital assets consisting of certain improvements including water wells, pumping stations, electric generation, transmission, and distribution improvement assets. The capitalization threshold for all capital assets is $5,000. Capital assets used in operations are depreciated using the straight-line method over their estimated useful lives in the government-wide and proprietary funds statements.
Capital assets used in operations are depreciated over their estimated useful lives using the straight-line method.
Assets Years
Utility Plant 3-50
Maintenance and repairs are charged to operations when incurred. Betterments and major improvements, which significantly increase values, change capacities or extend useful lives, are capitalized. Upon sale or retirement of capital assets, the cost and related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in the statement of revenues, expenses, and changes in net position.
J. Deferred Outflows and Inflows of Resources
The statement of net position reports separate sections for deferred outflows of resources and deferred inflows of resources, when applicable.
Deferred Outflows of Resources represents consumption of net assets that applies to future periods.
Deferred Inflows of Resources represents acquisition of net assets that applies to future periods.
K. Compensated Absences
Accumulated vacation and sick leave are accrued when incurred and more likely than not to be used or paid. Upon termination of employment, the VPU will pay the employee all accumulated vacation leave at 100% of the employee’s base hourly rate.
L. Subscription Liabilities
The City recognizes subscription liabilities with an initial, individual value of $15,000 or more with a subscription term greater than one year in the government-wide and proprietary fund financial statements. Variable payments based on future performance of the City or usage of the underlying asset are not included in the measurement of the subscription liability.
At the commencement of a subscription, the City initially measures the subscription liability at the present value of payments expected to be made during the lease term. Subsequently, the subscription liability is reduced by the principal portion of subscription payments made.
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Item 15 Page 197 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
26 Note 1 – Summary of Significant Accounting Policies (Continued) M. Long-Term Debt
Long-term debt and other long-term obligations are reported as liabilities in the appropriate activities. Bonds payable are reported net of the applicable bond premium or discount. Debt issuance costs except for any portion related to prepaid insurance were recognized as expense in the period incurred. Premium or discount not considered as part of the reacquisition price was amortized over the life of the bond.
N. 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, 2023
Measurement Date June 30, 2024
Measurement Period July 1, 2023 to June 30, 2024
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.
O. Postemployment Benefits Other than Pensions (OPEB)
For the purpose of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City’s OPEB Plan and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined on the same basis as they are reported by the Plan. For this purpose, the OPEB Plan recognizes benefit payments when due and payable in accordance with the benefit terms. Investments are reported at fair value, except for money market investments, which are reported at amortized cost.
The following timeframes are reported OPEB reporting:
Valuation Date June 30, 2023
Measurement Date June 30, 2024
Measurement Period July 1, 2023 to June 30, 2024
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Item 15 Page 198 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
27 Note 1 – Summary of Significant Accounting Policies (Continued) O. Postemployment Benefits Other than Pensions (OPEB) (Continued) Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. The first amortized amounts are recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense. The amortization period differs depending on the sources of gain or loss. The difference between projected and actual earnings is amortized on a straight-line basis over 5 years. All other amounts are amortized on a straight-line basis over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) at the beginning of the measurement period.
P. Net Position
The VPU financial statements utilize a net position presentation. Net position is classified as follows.
Net Investment in Capital Assets – This component of net position consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of retention payable and debt that are attributable to the acquisition, construction, or improvement of those assets, and related deferred outflows and inflows of resources, net of unspent debt proceeds.
Restricted – This component of net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets.
Unrestricted – This component of net position is the amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position.
When expenses are incurred for purposes for which both restricted and unrestricted components of net position are available, the VPU’s policy is to apply the restricted component of net position first, then the unrestricted component of net position as needed.
Q. 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.
R. Implementation of New GASB Pronouncements
GASB Statement No. 101 – In June 2022, the GASB issued Statement No. 101, Compensated Absences. The objective of this Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. That objective is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures. The requirements of this Statement are effective for fiscal years beginning after December 15, 2023, and all reporting periods thereafter. Implementation of this Statement resulted in a restatement of the beginning net position as of July 1, 2024, as presented in Note 11. . .
Item 15 Page 199 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
28 Note 2 – Cash, Cash Equivalents, and Investments
The VPU has the following cash and investments at June 30, 2025:
Total VPU Electric Gas Water Fiber Optics
Cash and cash equivalents 202,569,198 $ 171,910,827 $ 18,026,356 $ 12,608,230 $ 23,785 $ Investments 17,808,087 9,238,544 - 8,569,543 -
Restricted cash and investments 28,364,291 28,363,878 - 413 - Total cash and investments $ 209,513,249 248,741,576 $ 18,026,356 $ 21,178,186 $ 23,785 $ Enterprise Funds
The VPU’s cash and investments at June 30, 2025, in more detail:
Total VPU Electric Gas Water Fiber Optics
Cash and cash equivalents:
Equity in pooled cash 71,463,265 $ 61,987,707 $ 5,339,708 4,112,065 23,785 $ Deposits with financial institutions 13,739,336 2,705,027 11,034,309 - - Local Agency Investment Fund 702,975 702,975 - - -
Money Market Funds 116,663,622 106,515,118 1,652,339 8,496,165 - Total cash and cash equivalents 202,569,198 171,910,827 18,026,356 12,608,230 23,785 Investments:
U.S. Government Sponsored
Enterprise Securities 15,583,687 7,014,144 - 8,569,543 - Negotiable Certificates of Deposit 2,224,400 2,224,400 - - - Total investments 17,808,087 9,238,544 - 8,569,543 -
Investments with fiscal agents:
Money Market Funds 28,364,291 28,363,878 - 413 -
Total $ 209,513,249 248,741,576 $ 18,026,356 $ 21,178,186 $ 23,785 $ Enterprise Funds
A. Equity in the Cash Pool of the City of Vernon
The VPU has equity in the cash pool managed by the City. The VPU is a voluntary participant in that pool and the pool is governed by and under the regulatory oversight of the Investment Policy adopted by the City Council of the City. The VPU has not adopted an investment policy separate from that of the City. The amount of the VPU’s cash in this pool is reported in the accompanying financial statements based upon the VPU’s pro rata share of the amount calculated by the City. The balance available for withdrawal is based on the accounting records maintained by the City.
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Item 15 Page 200 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
29 Note 2 – Cash, Cash Equivalents, and Investments (Continued) B. Investments
Under the provisions of the City’s investment policy, and in accordance with California Government Code, the following investments are authorized:
Maximum Maximum
Maximum Percentage Investments in
Authorized Investment Type Maturity Allowed1 One Issuer United States Treasury Bills, Bonds and Notes 5 Years None None United States Government Sponsored Agency Securities 5 Years None None Local Agency Bonds 5 Years None None
California State and Local Agency Bonds 5 Years 30% None Negotiable Certificates of Deposit 5 Years 30% None
Corporate Notes 5 Years 30% None
Non-Government issued Mortgage-backed pass-through
securities, collateralized Mortgage obligations and Asset-backed securities
5 Years 20% None
Repurchasement Agreement 1 year None None
Banker's Acceptance Notes 180 Days 40% 30%
Commercial Paper 270 Days 25% 10% of the issuer outstanding paper Reverse Repurchase Agreements 92 Days 20% None
Mutual Funds N/A 20% 10% of the issuer outstanding paper Local Agency Investment Fund (LAIF) N/A None None
N/A - Not Applicable
1 Excluding amounts held by bond trustee that are not subject to California Government Code restrictions.
C. Local Agency Investment Fund (“LAIF”)
The VPU is a participant in LAIF which is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. As of June 30, 2025, the VPU had $702,975 invested in LAIF.
The fair value of the VPU’s portion in the pool is the same as the value of the pool shares and reported at amortized cost, which approximates fair value.
D. Fair Value Measurement
At June 30, 2025, 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, 2025:
Significant
Other Observable
Investment Type Inputs (Level 2) Uncategorized Total
U.S. Government Sponsored
Enterprise Securities 15,583,687 $ - $ 15,583,687 $
Negotiable Certificates of Deposit* 2,224,400 - 2,224,400 Investments with fiscal agents:
Money Market Funds - 28,364,291 28,364,291
Total $ 28,364,291 17,808,087 $ 46,172,378 $
* Priced based on significant observable inputs.
Measurement Input
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Item 15 Page 201 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
30 Note 2 – Cash, Cash Equivalents, and Investments (Continued) D. Fair Value Measurement (Continued)
Money market funds are valued on amortized cost, which approximates fair value. Accordingly, under the fair value hierarchy these investments are uncategorized.
Level 2 investments are valued using quoted prices for similar assets in active markets based on matrix pricing.
E. Risk Disclosures
Interest Rate Risk - As a means of limiting its exposure to fair value losses arising from rising interest rates, the City’s investment policy limits investments to a maximum maturity of five years. At June 30, 2025, the VPU had the following investment maturities:
1 Year 1 Year to 3 Years to
Investment Type or Less 3 Years 5 Years Total
U.S. Government Sponsored
Enterprise Securities - $ 8,569,543 $ 7,014,144 $ 15,583,687 $ Negotiable Certificates of Deposit 492,109 1,732,291 - 2,224,400 Investments with fiscal agents:
Money Market Funds 28,364,291 - - 28,364,291
Total $ 10,301,834 28,856,400 $ 7,014,144 $ 46,172,378 $ Remaining Maturity
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, 2025 for each investment type:
Fair Value Minimum Not Required
at Legal to be
Investment Type June 30, 2025 Rating AAA Rated
U.S. Government Sponsored
Enterprise Securities 15,583,687 $ AAA 15,583,687 $ - $ Negotiable Certificates of Deposit 2,224,400 N/A - 2,224,400 Investments with fiscal agents:
Money Market Funds 28,364,291 AAA 28,364,291 -
Total $ 43,947,978 46,172,378 $ 2,224,400 $
N/A - Not Required
Concentration of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in any one issuer excluding a 10% limitation on commercial papers, mutual funds, and money market mutual funds and a 30% limitation on bankers’ acceptances. The City’s investment policy places no limit on the amount of debt proceeds held by a bond trustee that the trustee may invest in one issuer that is governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City’s investment policy. .
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Item 15 Page 202 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
31 Note 2 – Cash, Cash Equivalents, and Investments (Continued) E. Risk Disclosures (Continued)
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, 2025, none of the City’s deposits or investments were exposed to custodial credit risk.
Note 3 – Accounts Receivable
The VPU’s accounts receivable at June 30, 2025 are as follows:
Total VPU Electric Gas Water Fiber Optics
Accounts Receivable 16,665,079 $ 14,267,903 $ 779,434 $ 1,577,646 $ 40,096 $ Less: Allowance for Uncollectible Accounts (1,423,003) (1,347,558) (12,944) (45,701) (16,800) Total accounts Receivable, Net 15,242,076 $ 12,920,345 $ 766,490 $ 1,531,945 $ 23,296 $ Enterprise Funds
Note 4 – Interfund Transactions
A. Due to the City of Vernon
Due from the City in the amount of $3,574 resulted from lending of cash for temporary purposes. All balances are expected to be reimbursed within the subsequent year.
B. Advances From/To Other Funds
At June 30, 2025, the VPU had the following advances that were eliminated within the VPU:
Gas Fiber Optics
Advances To Other Funds Enterprise Fund Enterprise Fund Total Electric Enterprise Fund 28,745,823 $ 4,425,756 $ 33,171,579 $ Advances From Other Funds
The advances between the Electric Enterprise Fund and the Gas and Fiber Optics Enterprise Funds do not accrue interest due to the nature of the City’s operational relationship and capital projects funded by the Electric Enterprise Fund that benefit all City operations. On November 6, 2012, the City adopted Resolution No. 2012-215 extending the repayment term of the advance from 15 months to a period of over 10 years. .
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Item 15 Page 203 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
32 Note 5 – Capital Assets
A summary of changes in the capital assets for the VPU for the year ended June 30, 2025 is as follows:
Balance Balance
July 1, 2024 Additions Deletions Transfers June 30, 2025 Capital assets, not being depreciated:
Electric utility - Land 13,193,594 $ - $ - $ - $ 13,193,594 $ Water utility - Water 467,640 - - - 467,640
Electric utility - Intangibles - Environmental credits 4,032,117 124,123 (142,235) - 4,014,005 Electric utility - Construction in progress 48,029,962 9,710,978 - - 57,740,940 Water utility - Construction in progress 6,468,629 503,386 - (2,549,804) 4,422,211 Total capital assets, not being depreciated 10,338,487 72,191,942 (142,235) (2,549,804) 79,838,390 Capital assets, being depreciated:
Electric utility - Production plant 213,205,825 - - - 213,205,825 Electric utility - Transmission plant 3,572,945 - - - 3,572,945 Electric utility - Distribution plant 291,452,868 30,040,008 - - 321,492,876 Electric utility - General plant 10,486,873 532,350 (26,326) - 10,992,897 Water utility plant 31,870,086 168,534 - 2,549,804 34,588,424 Gas utility plant 27,245,131 - - - 27,245,131
Fiber Optic utility plant 4,848,490 127,174 - - 4,975,664 Total capital assets, being depreciated 30,868,066 582,682,218 (26,326) 2,549,804 616,073,762 Less accumulated depreciation for:
Electric utility - Production plant (47,962,499) (14,298,020) - - (62,260,519) Electric utility - Transmission plant (2,551,421) (71,717) - - (2,623,138) Electric utility - Distribution plant (107,950,887) (9,170,961) - - (117,121,848) Electric utility - General plant (7,213,957) (533,538) 26,326 - (7,721,169) Water utility plant (15,409,979) (813,883) - - (16,223,862) Gas utility plant (13,217,879) (697,038) - - (13,914,917) Fiber Optic utility plant (3,174,515) (259,770) - - (3,434,285) Total accumulated depreciation (25,844,927) (197,481,137) 26,326 - (223,299,738) Total capital assets, being depreciated, net 5,023,139 385,201,081 - 2,549,804 392,774,024 Intangible assets, being amortized
Electric utility - Right-to-use subscription assets 209,511 160,722 - - 370,233 Total intangible assets, being amortized 160,722 209,511 - - 370,233 Less accumulated amortization for:
Electric utility - Right-to-use subscription assets (50,219) (82,726) - - (132,945) Total accumulated amortization (82,726) (50,219) - - (132,945) Total intangible assets, being amortized, net 77,996 159,292 - - 237,288 Business-type activities capital assets, net $ 15,439,622 457,552,315 $ (142,235) $ - $ 472,849,702 $ The VPU’s total depreciation expense for the year was $25,037,099, broken down as follows:
Electric Fund 24,156,962 $
Gas Fund 697,038
Water Fund 813,883
Fiber Optics Fund 259,770
Total depreciation and amortization expense $ 25,927,653 .
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Item 15 Page 204 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
33 Note 6 – Long-Term Debt
The following is a summary of changes in VPU’s long-term liabilities for the year ended June 30, 2025:
July 1, 2024 Balance Due within Due in More
(As Restated) Additions Deletions June 30, 2025 One Year Than One Year Business-Type activities
Public Borrowings:
Revenue Bonds:
2008 Taxable Revenue Bonds - Series A - Electric 35,750,000 $ - $ (1,220,000) $ 34,530,000 $ 1,330,000 $ 33,200,000 $ 2012 Taxable Revenue Bonds - Series B - Electric 4,170,000 - (1,305,000) 2,865,000 1,390,000 1,475,000 2015 Taxable Revenue Bonds - Series A - Electric 65,660,000 - (24,585,000) 41,075,000 25,780,000 15,295,000 2020 Revenue Bonds - Series A - Electric 19,305,000 - - 19,305,000 - 19,305,000 2021 Revenue Bonds - Series A - Electric 132,100,000 - (22,400,000) 109,700,000 23,530,000 86,170,000 2022 Revenue Bonds - Series A - Electric 47,380,000 - (4,885,000) 42,495,000 5,130,000 37,365,000 2020 Revenue Bonds - Series A - Water 14,085,000 - (275,000) 13,810,000 - 13,810,000 Total Revenue Bonds 318,450,000 - (54,670,000) 263,780,000 57,160,000 206,620,000 Unamortized Premiums/(Discounts):
2008 Taxable Revenue Bonds - Series A - Electric (1,831) - 131 (1,700) - (1,700) 2012 Taxable Revenue Bonds - Series B - Electric (36,393) - 16,797 (19,596) - (19,596) 2015 Taxable Revenue Bonds - Series A - Electric (385,385) - 355,739 (29,646) - (29,646) 2020 Revenue Bonds - Series A - Electric 5,738,633 - (438,621) 5,300,012 - 5,300,012 2021 Revenue Bonds - Series A - Electric 13,664,932 - (4,940,838) 8,724,094 - 8,724,094 2022 Revenue Bonds - Series A - Electric 8,499,792 - (856,047) 7,643,745 - 7,643,745 2020 Revenue Bonds - Series A - Water 497,673 - (19,081) 478,592 - 478,592 Total Unamortized Premiums/(Discounts) 27,977,421 - (5,881,920) 22,095,501 - 22,095,501 Total Public Offering 346,427,421 - (60,551,920) 285,875,501 57,160,000 228,715,501 Direct Borrowing:
Water Replenishment District Note Payable 941,860 - (139,535) 802,325 139,535 662,790 Total Direct Borrowing 941,860 - (139,535) 802,325 139,535 662,790 Subscription liabilities - Electric 74,449 160,722 (165,037) 70,134 53,798 16,336 Compensated absences 1,452,694 109,251 - 1,561,945 520,648 1,041,297 Total business-Type activities $ 269,973 348,896,424 $ (60,856,492) $ 288,309,905 $ 57,873,981 $ 230,435,924 $ $43,765,000 Electric System Revenue Bonds (2008 Taxable Series A) The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. Under the Bond Indenture of Trust, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Light and Power Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Electric System Revenue Bonds, 2008 Taxable Series A were issued to provide funds to (i) finance the cost of certain capital improvements to the City’s Electric System, (ii) fund a deposit to the Debt Service Reserve Fund, and (iii) to pay costs of issuance of the 2008. The total unpaid balance as of June 30, 2025, was $34,530,000.
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Item 15 Page 205 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
34 Note 6 – Long-Term Debt (Continued)
$43,765,000 Electric System Revenue Bonds (2008 Taxable Series A) (Continued) The future annual debt service requirements for the Taxable Revenue Bonds, Series 2008A are as follows:
Year Ending
June 30, Principal Interest Total
2026 1,330,000 $ 2,909,004 $ 4,239,004 $
2027 1,450,000 2,789,603 4,239,603
2028 1,580,000 2,659,464 4,239,464
2029 1,720,000 2,517,729 4,237,729
2030 1,875,000 2,363,324 4,238,324
2031-2035 12,220,000 8,969,249 21,189,249
2036-2039 14,355,000 2,598,690 16,953,690
Total $ 24,807,063 34,530,000 $ 59,337,063 $
$35,100,000 Electric System Revenue Bonds (2012 Taxable Series B) On January 10, 2012, the City issued Electric System Revenue Bonds, 2012 Series B, in the amount of $35,100,000.
During the fiscal year ended 2022, a portion of the Electric System Revenue Bonds were refunded with the issuance of the Electric System Revenue Bonds 2022 Series A. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. Under the Bond Indenture of Trust, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Light and Power Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Electric System Revenue Bonds, 2012 Taxable Series B were issued to provide funds to (i) refund the $28,680,000 aggregate principal amount of 2009 Bonds maturing on August 1, 2012, (ii) to pay a portion of the Costs of the 2012 Project, and (iii) to pay costs of issuance of the 2012 Taxable Series B Bonds. The total unpaid balance as of June 30, 2025, was $2,865,000.
The future annual debt service requirements for the Taxable Revenue Bonds, Series 2012B are as follows:
Year Ending
June 30, Principal Interest Total
2026 1,390,000 $ 140,181 $ 1,530,181 $
2027 1,475,000 47,938 1,522,938
Total $ 188,119 2,865,000 $ 3,053,119 $
$111,720,000 Electric System Revenue Bonds (2015 Taxable Series A) The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. Under the Bond Indenture of Trust, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Light and Power Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Electric System Revenue Bonds, 2015 Taxable Series A were issued to provide funds to (i) refund a portion of the Outstanding Electric System Revenue Bonds, 2009 Series A; (ii) finance the costs of certain capital improvements to the City’s Electric System by reimbursing the Electric System for the prior payment of such Costs from the Light and Power Fund; (iii) fund a deposit to the Debt Service Reserve Fund; and (iv) pay costs of issuance of the 2015 Bonds. The total unpaid balance as of June 30, 2025, was $41,075,000. . .
Item 15 Page 206 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
35 Note 6 – Long-Term Debt (Continued)
$111,720,000 Electric System Revenue Bonds (2015 Taxable Series A) (Continued) The future annual debt service requirements for the Taxable Revenue Bonds, Series 2015A are as follows:
Year Ending
June 30, Principal Interest Total
2026 25,780,000 $ 1,341,193 $ 27,121,193 $
2027 15,295,000 370,904 15,665,904
$ 1,712,097 41,075,000 $ 42,787,097 $
$71,990,000 Electric System Revenue Bonds (2020 Series A) The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. Under the Bond Indenture of Trust, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Light and Power Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Electric System Revenue Bonds, 2020 Series A were issued to provide funds to (i) finance the acquisition and construction of certain capital improvements to the Electric System of the City, (ii) to refund all the City’s outstanding Electric System Revenue Bonds, 2009 Series A, and (iii) to pay costs of issuance of the 2020 Bonds. The total unpaid balance as of June 30, 2025, was $19,305,000.
The future annual debt service requirements for the Revenue Bonds, Series 2020A are as follows:
Year Ending
June 30, Principal Interest Total
2026 - $ 965,250 $ 965,250 $
2027 - 965,250 965,250
2028 - 965,250 965,250
2029 1,525,000 927,125 2,452,125
2030 1,605,000 848,875 2,453,875
2031-2035 9,340,000 2,923,250 12,263,250
2036-2038 6,835,000 524,125 7,359,125
Total 19,305,000 $ 8,119,125 $ 27,424,125 $
$183,815,000 Electric System Revenue Bonds (2021 Series A) In December 2021, the City of Vernon issued 2021A Electric System Revenue Bonds in the amount of $183,815,000 (i) to pay the costs of the acquisition by the City of Vernon of a 134-megawatt natural gas-fired generating facility located within the City limits on land owned by the City, together with certain related electrical interconnection facilities and other assets, property, and contractual rights; (ii) to fund a deposit to the Debt Service Reserve Fund in satisfaction of the Debt Service Reserve Requirement; and (iii) to pay costs of issuance of the 2021 bonds.
The bonds bear interest rates between 4.00%-5.00% that are payable on a semi-annual basis on April 1 and October 1, commencing April 1, 2022. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The total unpaid balance as of June 30, 2025, was $109,700,000. .
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Item 15 Page 207 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
36 Note 6 – Long-Term Debt (Continued)
$183,815,000 Electric System Revenue Bonds (2021 Series A) (Continued) The future annual debt service requirements for the Revenue Bonds, Series 2021A are as follows:
Year Ending
June 30, Principal Interest Total
2026 23,530,000 $ 5,190,875 $ 28,720,875 $
2027 31,255,000 3,917,875 35,172,875
2028 54,915,000 2,059,375 56,974,375
Total 109,700,000 $ 11,168,125 $ 120,868,125 $
$52,070,000 Electric System Revenue Bonds (2022 Series A) In December 2021, the City of Vernon issued 2022A Electric System Revenue Bonds in the amount of $52,070,000 to refund the 2012A Electric System Revenue Bonds, a portion of the 2012B Electric Revenue Bonds, and provide for the costs of issuing the bonds.
Under the Bond Indenture of Trust, interest and principal on the bonds are payable from Net Revenues (or Revenues less Operation and Maintenance Expenses) and/or amounts in the Light and Power Enterprise (as those terms are defined in the Indenture of Trust). The City of Vernon Electric System Revenue Bonds, 2022 Series A were issued to (i) refund and defease all of the City’s outstanding Electric System Revenue Bonds, 2012 Series A and a portion of the City’s outstanding Electric System Revenue bonds, 2012 Taxable Series B and (ii) pay costs of issuance of the 2022 Bonds.
The bonds bear interest rates between 4.00%-5.00% that are payable on a semi-annual basis beginning February 1 and August 1, commencing on August 1, 2022. The bonds are special obligation bonds which are secured by an irrevocable pledge of electric revenues payable to bondholders. The total unpaid balance as of June 30, 2025, was $42,295,000.
The future annual debt service requirements for the Revenue Bonds, Series 2022A are as follows:
Year Ending
June 30, Principal Interest Total
2026 5,130,000 $ 1,996,500 $ 7,126,500 $
2027 5,405,000 1,733,125 7,138,125
2028 950,000 1,574,250 2,524,250
2029 1,000,000 1,525,500 2,525,500
2030 1,055,000 1,474,125 2,529,125
2031-2035 6,120,000 6,504,500 12,624,500
2036-2040 11,420,000 4,676,750 16,096,750
2041-2042 11,415,000 577,875 11,992,875
Total 42,495,000 $ 20,062,625 $ 62,557,625 $
$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, 2025, was $13,810,000. .
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Item 15 Page 208 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
37 Note 6 – Long-Term Debt (Continued)
$14,840,000 Water System Revenue Bonds (2020 Series A) (Continued) The future annual debt service requirements for the Revenue Bonds, Series 2020A are as follows:
Year Ending
June 30, Principal Interest Total
2026 - $ 542,475 $ 542,475 $
2027 - 542,475 542,475
2028 - 542,475 542,475
2029 - 542,475 542,475
2030 - 542,475 542,475
2031-2035 1,985,000 2,265,750 4,250,750
2036-2040 2,180,000 1,725,625 3,905,625
2041-2045 2,680,000 1,264,100 3,944,100
2046-2050 3,180,000 718,025 3,898,025
2051 3,785,000 66,238 3,851,238
Total 13,810,000 $ 8,752,113 $ 22,562,113 $
Water Replenishment District Note Payable – Direct Borrowing In May 2019, the City entered into an agreement with Water Replenishment District of Southern California (WRD) for assistance with the construction of a new groundwater well or rehabilitation of an existing groundwater well. The promissory note is unsecured and has no interest basis for an amount not to exceed $1,500,000. As of June 30, 2022, WRD has disbursed all of the funds under the agreement to the City. The note is payable in quarterly principal payments commencing September 1, 2020, in an amount which, together with all quarterly payments, will be sufficient to fully amortize the principal balance of the note by the maturity date of April 1, 2031. The total unpaid balance as of June 30, 2025, was $802,325.
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
2026 139,535 $ - $ 139,535 $
2027 139,535 - 139,535
2028 139,535 - 139,535
2029 139,535 - 139,535
2030 139,535 - 139,535
2031 104,650 - 104,650
Total 802,325 $ - $ 802,325 $
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Item 15 Page 209 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
38 Note 6 – Long-Term Debt (Continued)
Subscription liabilities
The City entered into subscription agreements with various vendors for software. The agreements expire from October 18, 2026 to July 22, 2029, with interest rates ranging from 2.450% of 3.764%.
The future annual subscription payments are as follows:
Year Ending
June 30, Principal Interest Total
2026 53,798 $ 2,341 $ 56,139 $
2027 16,336 464 16,800
Total 70,134 $ 2,805 $ 72,939 $
Compensated Absences
Under certain circumstances and according to the negotiated labor agreements, VPU employees are allowed to accumulate annual leave.
The following is a summary of compensated absences payable transactions for the year ended June 30, 2025:
Balance
July 1, 2024 Balance Due within Due in More
(As Restated) Additions Deletions June 30, 2025 One Year Than One Year Electric Enterprise Fund 1,281,663 $ 93,834 $ - $ 1,375,497 $ 458,499 $ 916,998 $ Gas Enterprise Fund 32,853 13,908 - 46,761 15,587 31,174 Water Enterprise Fund 136,989 1,435 - 138,424 46,141 92,283 Fiber Optics Enterprise Fund 1,189 74 - 1,263 421 842
Total VPU 1,452,694 $ 109,251 $ - $ 1,561,945 $ 520,648 $ 1,041,297 $ Expense Stabilization Fund
The VPU maintains an Expense Stabilization Fund held by a Trustee in such amounts, at such times and from sources as shall be determined by the City in its sole discretion. If an Event of Default under the Indenture has occurred and is continuing, the Trustee shall transfer all moneys in this fund to the debt service interest account and principal account as provided in the Indenture.
Moneys on deposit in this Fund may be withdrawn by the City at any time that no Event of Default exists under the Indenture. As of June 30, 2025, this fund has a balance of $44,659,748.
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. .
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Item 15 Page 210 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
39 Note 6 – Long-Term Debt (Continued)
Credit Ratings
As of June 30, 2025, the ratings on all Electric System Revenue Bonds are Baa1 positive by Moody’s and A- stable by S&P and the ratings on all Water System Revenue Bonds are A- by S&P.
Note 7 – Risk Management
The VPU is in the City’s self-insurance program as part of its policy to self-insure certain levels of risk within certain separate lines of coverage to maximize cost savings.
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets, errors, and omissions; injuries to employees, and natural disasters. The City utilizes insurance policy(s) to transfer these risks. Each policy has either self-insured retention or deductible, which are parts of the City’s risk financing program. These expenses are paid on a cash basis as they are incurred. There have been no significant settlements or deductions in insurance coverage during the past three fiscal years.
Starting in fiscal year 2010, the City chose to establish risk financing in the City’s General Fund, whereby assets are set aside for claim-litigation settlements associated with the abovementioned risks up to their self-insured retentions or policy deductibles. AdminSure Inc. is the third-party administrator for the City’s workers’ compensation program and they provide basic services for general liability claims and litigation.
The insurance limits for the fiscal year 2025 are as follows:
Insurance Type Program Limits Deductible/SIR (Self-Insured Retention) Property - Residential $7,950,653 $2,500
Property - Municipal $59,614,930 $25,000
Standalone Terrorism $100 Million Property Terrorism $0 $5 Million Terrorism Liability
$5 Million Active Shooter
Auto Physical Damage $10,000,000 $5,000
Government Crime $1,000,000 $25,000
Cyber Liability $5,000,000 $100,000
$5,000,000 $25,000
$5,000,000 per Claim $50,000 Utility Locs.
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
Special Events $2,000,000 $1,000,000 Each Occurrence
Property - Power Generating $100,000,000 Various
Excess Liability - Malburg Generating Station $100,000,000 - Property Insurance - Malburg Generating Station $200,000,000 - Commercial Property/EQ and FL - Malburg Generating Station $50,000,000 - Premise Pollution/Environmental Impairment
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Item 15 Page 211 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
40 Note 8 – Pension Plan
A. General Information about the Pension Plans
Plan Descriptions
The City contribution to the California Public Employees Retirement System (“CalPERS”), an agent multipleemployer defined benefit pension plan for miscellaneous employees and a cost-sharing multiple-employer defined benefit plan for safety employees. CalPERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by state statute and City ordinance. A full description of the pension plan regarding number of employees covered, benefit provisions, assumptions (for funding, but not accounting purposes), and membership information are listed in the June 30, 2024 Annual Actuarial Valuation Report. This report and CalPERS’ audited financial statements are publicly available reports that can be obtained at CalPERS’ website under Forms and Publications.
Benefits Provided
CalPERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions under both plans are established by State Statute and City Resolution as follows:
Classic PEPRA
Prior to On or 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 (FY24-25) 8.00% 7.00% Required employer contribution rate (FY24-25) 13.07% 13.07% Required employer contribution rate (FY23-24) 13.17% 13.17% 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
compensation
3%, 50 yrs 2.0% - 2.7%
50 yrs - 57 yrs,
respectively
Required employee contribution rate (FY24-25) 9.00% 14.50% Required employer contribution rate (FY24-25) 28.18% 18.24% Required employer contribution rate (FY23-24) 27.40% 19.78% Miscellaneous
Safety
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Item 15 Page 212 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
41 Note 8 – Pension Plan (Continued)
A. General Information about the Pension Plans (Continued) 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. 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. The lump sum payment increases to $2,000 for any death occurring on or after July 1, 2023 due to SB1168.
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, 2025, the VPU’s share of employer contributions made to the plans was $4,315,758.
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, 2024, using an annual actuarial valuation as of June 30, 2023, rolled forward to June 30, 2024, using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below. .
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Item 15 Page 213 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
42 Note 8 – Pension Plan (Continued)
B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Assumptions (Continued)
Actuarial Cost Method
Actuarial Assumptions:
Discount Rate
Inflation
Salary Increases
Mortality Rate Table(1)
Post Retirement Benefit Increase
(1)The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. Mortality rates incorporate full generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to the 2021 experience study report from November 2021 that can be found on the CalPERS website.
Derived using CalPERS’ Membership Data for all Funds.
The lesser of contract COLA or 2.30% until Purchasing Power Protection. Allowance floor on purchasing power applies, 2.30% thereafter.
Varies by Entry Age and Service
2.30%
6.90%
Entry Age Normal
Long-Term Expected Rate of Return
The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.
In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. Projected returns for all asset classes are estimated and, combined with risk estimates, are used to project compound (geometric) returns over the long term. The discount rate used to discount liabilities was informed by the long-term projected portfolio return. .
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Item 15 Page 214 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
43 Note 8 – Pension Plan (Continued)
B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Long-Term Expected Rate of Return (Continued)
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% 3.84%
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%
Strategic Financing -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 VPU The VPU’s net pension liability for the Plans is measured as the proportionate share of the aggregate net pension liability of the City’s miscellaneous agent multiple-employer plan and safety cost-sharing plan. The VPU’s proportionate share of the aggregate net pension liability was based on the VPU’s current year share of contributions of the pension plans relative to the City’s total current year contributions to the pension plans. .
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Item 15 Page 215 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
44 Note 8 – Pension Plan (Continued)
B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Proportionate Share of Net Pension Liability – Allocation of the City’s Pension Plans to the VPU (Continued) The VPU’s proportionate share of the aggregate net pension liability for the pension plans as of the measurement date ended June 30, 2023 and 2024 were as follows:
Total Pension Plan Fiduciary Net Net Pension
Liability Position Liability/(Asset) Proportionate
(a) (b) (c) = (a) - (b) Share
Balance at June 30, 2023 (Valuation Date):
Electric Enterprise Fund 94,894,530 $ 64,730,559 $ 30,163,971 $ 17.74% Gas Enterprise Fund 7,151,104 4,877,994 2,273,110 1.34% Water Enterprise Fund 15,829,660 10,797,911 5,031,749 2.96% Fiber Optic Enterprise Fund 115,523 78,803 36,720 0.02% Total VPU 117,990,817 $ 80,485,267 $ 37,505,550 $ 22.06% Balance at June 30, 2024 (Measurement Date):
Electric Enterprise Fund 101,126,976 $ 70,699,724 $ 30,427,252 $ 18.18% Gas Enterprise Fund 8,143,936 5,693,575 2,450,361 1.46% Water Enterprise Fund 17,162,839 11,998,855 5,163,984 3.09% Fiber Optic Enterprise Fund 104,017 72,720 31,297 0.02% Total VPU 126,537,768 $ 88,464,874 $ 38,072,894 $ 22.75% Net Changes during 2023-2024
Electric Enterprise Fund 6,232,446 $ 5,969,165 $ 263,281 $ 0.44% Gas Enterprise Fund 992,832 815,581 177,251 0.12%
Water Enterprise Fund 1,333,179 1,200,944 132,235 0.13% Fiber Optic Enterprise Fund (11,506) (6,083) (5,423) 0.00% Total VPU 8,546,951 $ 7,979,607 $ 567,344 $ 0.69%
Increase (Decrease)
For the measurement period ended June 30, 2024, the VPU recognized its proportionate share of the aggregate pension expense of the plans which totaled $7,086,684. At June 30, 2025, the VPU reported its proportionate share of the aggregate deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Total VPU Electric Gas Water Fiber Optics
Deferred Outflows of Resources:
Contribution made after measurement period 4,316,171 $ 3,449,415 $ 277,788 $ 585,420 $ 3,548 $ Changes of assumptions 585,049 467,562 37,654 79,353 480 Difference between expected and actual experience 3,056,664 2,442,837 196,726 414,588 2,513 Net difference between projected and actual earning
on pension plan investments 1,775,776 1,419,172 114,288 240,856 1,460 Adjustment due to differences in proportions 125,375 100,197 8,069 17,005 104 Difference between City contributions and
proportionate share of contribution 265,119 211,879 17,063 35,959 218 Total $ 8,091,062 10,124,154 $ 651,588 $ 1,373,181 $ 8,323 $ Enterprise Funds
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Item 15 Page 216 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
45 Note 8 – Pension Plan (Continued)
B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Pension Expense and Deferred Outflows and Inflows of Resources Total VPU Electric Gas Water Fiber Optics
Deferred Inflows of Resources:
Contribution made after measurement period - $ - $ - $ - $ - $ Changes of assumptions - - - - -
Difference between expected and actual experience (63,009) (50,356) (4,055) (8,546) (52) Net difference between projected and actual earning
on pension plan investments - - - - -
Adjustment due to differences in proportions (541,852) (433,039) (34,874) (73,494) (445) Difference between City contributions and
proportionate share of contribution (237,357) (189,692) (15,276) (32,194) (195) Total (842,218) $ (673,087) $ (54,205) $ (114,234) $ (692) $ Enterprise Funds
$4,316,171 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, 2026. 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 VPU Electric Gas Water Fiber Optics 2025 1,886,937 $ 1,508,009 $ 121,444 $ 255,932 $ 1,552 $ 2026 3,822,158 3,054,607 245,993 518,415 3,143
2027 (165,617) (132,359) (10,659) (22,463) (136)
2028 (577,711) (461,697) (37,181) (78,357) (476)
Thereafter - - - - -
Total 4,965,767 $ 3,968,560 $ 319,597 $ 673,527 $ 4,083 $ Enterprise Funds
Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the VPU’s proportionate share of the Plans’ combined net pension liability, calculated using a discount rate of 6.90%, as well as what the VPU’s proportionate share of the Plans’ combined net pension liability would be if it were calculated using a discount rate that is a 1-percentage point lower (5.90%) or a 1-percentage point higher (7.90%) than the current rate:
Discount Rate Current Discount Discount Rate
- 1% (5.90%) Rate (6.90%) + 1% (7.90%)
Miscellaneous Plan 21,797,470 $ 14,327,031 $ 8,212,385 $ Safety Plan 33,780,703 $ 23,745,863 $ 15,538,774 $
VPU's Net Pension Liability/(Asset)
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Item 15 Page 217 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
46 Note 8 – Pension Plan (Continued)
B. Net Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Pension Plan Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.
Payable to the Pension Plan
At June 30, 2025, the VPU had no outstanding amount of contributions to the pension plans required for the year ended June 30, 2025.
Note 9 – Other Postemployment Benefits (“OPEB”)
A. General Information about the OPEB Plan
The other postemployment benefits (“OPEB”) described in the following paragraphs relate to the City’s OPEB plan. The VPU’s share of the net pension liability of the City’s OPEB Plan is reported as a cost-sharing plan in these financial statements since the VPU’s operations are handled by City employees who are eligible to participate in the City’s OPEB plan.
Benefits Provided
Generally, the City will provide a postemployment benefit plan for the employee only to those who retire at age sixty (60) or later with twenty (20) years of continuous uninterrupted service up to the age of sixty-five (65).
Alternatively, employees who retire before the age of sixty (60) with twenty (20) years of continuous uninterrupted service, will be permitted to pay their medical and dental premium cost and upon reaching the age of fifty (50), the City will pay the premium for the medical and dental plans until they reach the age of sixty-five (65).
Resolution 2011-129 provided lifetime medical benefits to Police Management employees and their spouses, who have been employed as sworn safety personnel for a minimum of twenty (20) years and a minimum of ten (10) years of that service have been with the City of Vernon. Resolution 2011-127 sets forth the MOU of the Vernon Police Officers’ Benefit Association, provided lifetime medical benefits to those employees and their spouses, who have been employed as sworn safety personnel for a minimum of twenty (20) years and a minimum of ten (10) years of that service has been with the City of Vernon. Resolution 2012-217 granted specific retiree medical benefits to employees who retire during the 2012-2013 fiscal year in order to provide an incentive for early retirement whereby the City authorized the payment of medical and dental insurance premiums for eligible retiring employees and their eligible dependents with at least ten (10) years of service plus 5% for each additional full year of service above the ten (10) years of service, and that this offer be extended as an option to safety and safety management groups, at their discretion, in addition to the related options provided in the Vernon Firefighters Association MOU and the Vernon Police Officers’ Benefit Association MOU. Resolution 2013-06 declared that the retiree medical benefits which had not been a vested right for employees will continue to be nonvested right for employees who continue to be employed by the City on or after July 1, 2013, but will become a vested right for those who retire during the 2012-2013 fiscal year. The City’s plan is considered a substantive OPEB plan and the City recognizes cost in accordance with GASB Statement No 75. The City may terminate its unvested OPEB in the future.
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Item 15 Page 218 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
47 Note 9 – Other Postemployment Benefits (“OPEB”) (Continued) A. General Information about the OPEB Plan (Continued)
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, 2025, the VPU’s proportionate share of contribution made to the trust and retiree premium and implied subsidy was $770,714.
B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of resources related to OPEB The OPEB liability was measured as of June 30, 2024, and total liability used to calculate the net OPEB liability was determined by an actuarial valuation as of June 30, 2024.
Significant Actuarial Assumptions Used for Total OPEB Liability The total OPEB liability, measured as of June 30, 2024, 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 6.80% non-Medicare /
4.90% Medicare decreasing gradually to an ultimate rate of 4.04% by 2075
6.40% at June 30, 2024 and 6% at June 30, 2023
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
6.40% at June 30, 2024 and 5.10% at June 30, 2023
Change in assumptions
Discount rate increased from 6% at June 30, 2023 to 6.4% at June 30, 2024.
Discount Rate
The discount rate used to measure the total OPEB liability was 6.4%. 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.
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Item 15 Page 219 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
48 Note 9 – Other Postemployment Benefits (“OPEB”) (Continued) B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of resources related to OPEB (Continued) Long-Term Expected Rate of Return
Long-term
Target Expected Real
Asset Class Allocation Rate of Return
Global Equity 49.00% 6.90%
Fixed Income 23.00% 4.10%
Global Real Estate (REITs) 20.00% 6.30%
Treasury Inflation Protected Securities (TIPS) 5.00% 3.90% Commodities 3.00% 4.60%
Total 100.00%
The VPU’s proportionate share of the net OPEB liability as of the measurement dates ended June 30, 2023 and 2024 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, 2023 (Measurement Date):
Electric Enterprise Fund 4,909,317 $ 2,343,067 $ 2,566,250 $ 17.74% Gas Enterprise Fund 370,828 177,439 193,389 1.34%
Water Enterprise Fund 819,142 391,058 428,084 2.96%
Fiber Optic Enterprise Fund 6,009 2,885 3,124 0.02%
Total VPU 6,105,296 $ 2,914,449 $ 3,190,847 $ 22.06%
Balance at June 30, 2024 (Measurement Date):
Electric Enterprise Fund 5,039,135 $ 2,928,314 $ 2,110,821 $ 18.18% Gas Enterprise Fund 404,683 234,695 169,988 1.46%
Water Enterprise Fund 856,487 498,247 358,240 3.09%
Fiber Optic Enterprise Fund 5,544 3,373 2,171 0.02%
Total VPU 6,305,849 $ 3,664,629 $ 2,641,220 $ 22.75%
Net Changes during 2023-2024
Electric Enterprise Fund 129,818 $ 585,247 $ (455,429) $ 0.44% Gas Enterprise Fund 33,855 57,256 (23,401) 0.12%
Water Enterprise Fund 37,345 107,189 (69,844) 0.13%
Fiber Optic Enterprise Fund (465) 488 (953) 0.00%
Total VPU 200,553 $ 750,180 $ (549,627) $ 0.69%
Increase (Decrease)
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Item 15 Page 220 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
49 Note 9 – Other Postemployment Benefits (“OPEB”) (Continued) B. Net OPEB Liabilities, OPEB Expenses, and Deferred Outflows/Inflows of resources related to OPEB (Continued) Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the VPU’s proportionate share of the net OPEB liability if it were calculated using a discount rate that is 1% point lower (5.40%) or 1% point higher (7.40%) than the current rate:
Discount Rate Current Discount Discount Rate
-1% (5.40%) Rate (6.40%) +1 % (7.40%)
$ 2,641,220 3,300,242 $ 2,083,139 $
Plan's Net OPEB Liability
Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates The following presents the VPU’s proportionate share of the net OPEB liability if it were calculated using healthcare cost trend rates that are 1 percentage-point lower or 1 percentage-point higher than the current healthcare cost trend rates:
Healthcare Cost Healthcare Cost Healthcare Cost
Trend Rate - 1% Trend Rate Trend Rate + 1%
$ 2,641,220 2,387,483 $ 2,900,336 $
Plan's Net OPEB Liability
OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB For the measurement period ended June 30, 2024, the VPU recognized its proportionate share of the OPEB credit of $(492,445). At June 30, 2025, the VPU reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:
Total VPU Electric Gas Water Fiber Optics
Deferred Outflows of Resources:
Contribution made after measurement period 770,714 $ 615,942 $ 49,603 $ 104,535 $ 634 $ Changes of assumptions 104,098 83,193 6,700 14,119 86
Difference between expected and actual experience 184,433 147,396 11,870 25,016 151 Net difference between projected and actual earning
on OPEB plan investments - - - - -
Total $ 846,531 1,059,245 $ 68,173 $ 143,670 $ 871 $
Enterprise Funds
Total VPU Electric Gas Water Fiber Optics
Deferred Inflows of Resources:
Contribution made after measurement period - $ - $ - $ - $ - $ Changes of assumptions (267,544) (213,817) (17,219) (36,288) (220) Difference between expected and actual experience (269,708) (215,546) (17,358) (36,582) (222) Net difference between projected and actual earning
on OPEB plan investments (12,321) (9,847) (793) (1,671) (10) Total $ (439,210) (549,573) $ (35,370) $ (74,541) $ (452) $ Enterprise Funds
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Item 15 Page 221 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
50 Note 9 – Other Postemployment Benefits (“OPEB”) (Continued) B. Net OPEB Liability, OPEB Expenses, and Deferred Outflows/Inflows of resources related to OPEB (Continued) OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB (Continued) The $770,714 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, 2026. 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:
Measurement Period
Ending June 30 Total VPU Electric Gas Water Fiber Optics 2025 (103,754) $ (82,918) $ (6,678) $ (14,073) $ (85) $ 2026 22,202 17,744 1,429 3,011 18
2027 (87,506) (69,933) (5,632) (11,869) (72)
2028 (65,942) (52,700) (4,244) (8,944) (54)
2029 (10,661) (8,520) (686) (1,446) (9)
Thereafter (15,381) (12,294) (989) (2,085) (13)
Total $ (208,621) (261,042) $ (16,800) $ (35,406) $ (215) $ Enterprise Funds
Payable to the OPEB Plan
At June 30, 2025, the VPU had no outstanding amount of contributions to the OPEB plan required for the year ended June 30, 2025.
Note 10 – Net Investment in Capital Assets
The investment in capital assets for VPU is calculated as follows:
Total VPU Electric Gas Water Fiber Optics
Total capital assets, net 472,849,702 $ 434,723,696 $ 13,330,214 $ 23,254,413 $ 1,541,379 $ Unspent capital debt proceed 348,400 348,400 - - -
Deferred loss on refunding debt 795,362 795,362 - - -
Retention payable - - - - -
Capital related debt (206,287,781) (191,196,864) - (15,090,917) - Net investment in capital assets 267,705,683 $ 244,670,594 $ 13,330,214 $ 8,163,496 $ 1,541,379 $ Enterprise Funds
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Item 15 Page 222 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
51 Note 11 – Restatement of Beginning Net Position
The beginning net position was restated due to implementation of GASB 101, compensated absences. The effect is shown in the table below:
Business-Type
Activities Electric Gas Water Fiber Optics
June 30, 2024, as previously reported 315,684,193 $ 291,469,620 $ 1,470,909 $ 25,363,903 $ (2,620,239) $ Change in accounting principle (154,729) (129,514) (6,536) (18,317) (362) June 30, 2024, as restated 315,529,464 $ 291,340,106 $ 1,464,373 $ 25,345,586 $ (2,620,601) $ Enterprise Funds
Note 12 – Southern California Public Power Authority
The Southern California Public Power Authority (“SCPPA”) was formed in 1980 as a not for profit joint powers agency.
SCPPA is currently comprised of 11 Southern California cities and an irrigation district. The SCPPA’s purpose is planning, financing, acquiring, constructing, and operating of projects that generate or transmit electric energy for sale to its participants. The joint powers agreement has a term expiring in 2030 or such later date as all bonds and notes of SCPPA and interest thereon have been paid in full or adequate provisions for payments have been made. A copy of SCPPA’s audited financial statements can be reviewed on their website at www.scppa.org or can be obtained by written request at 1160 Nicole Ct Glendora, CA 91740.
A. Take or Pay Contract
The SCPPA’s interest of entitlements in natural gas generation, and transmission projects are jointly owned with other utilities. Under these arrangements, a participating member has an undivided interest in a utility plant and is responsible for its proportionate share of the costs of construction and operation and is entitled to its proportionate share of the energy, available transmission capacity, or natural gas produced. Each joint plant participant, including the SCPPA, is responsible for financing its share of construction and operating costs. The City has the following “take or pay” contract with the SCPPA:
Palo Verde Project
The SCPPA purchases a 5.91% interest in the Palo Verde Nuclear Generating Station (the “Station”), a nuclearfired generating station near Phoenix, Arizona, from Salt River Project Agricultural Improvement and Power District, and a 6.55% share of the right to use certain portions of the Arizona Nuclear Power Project Valley Transmission System. The City has a 4.9% entitlement share of the SCPPA’s interest in the station.
Between 1983 and 2008, the SCPPA issued $3.266 billion in debt of Power Project Revenue Bonds for the Station to finance the bonds and the purchase of the SCPPA’s share of the Station and related transmission right. The bonds are not obligations of any member of the SCPPA or public agency other than the SCPPA. Under a power sales contract with the SCPPA, the City is obliged on a “take or pay” basis for its proportionate share of power generated, as well as to make payments for its proportionate share of the operating and maintenance expenses of the Station, debt service on the bonds and any other debt, whether or not the project or any part thereof or its output is suspended, reduced or terminated. The City took its proportionate share of the power generated and its proportionate share of costs during the fiscal year 2025 was $3,794,993. The City expects no significant increases in costs related to its nuclear resources.
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Item 15 Page 223 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
52 Note 12 – Southern California Public Power Authority (Continued) B. Power Purchase Commitments
The SCPPA has entered into power purchase agreements with project participants. These agreements are substantially “take-and-pay” contracts where there may be other obligations not associated with the of energy. The City has entered into power purchase agreements with the SCPPA related to the following projects:
Astoria 2 Solar Project
On July 23, 2014, the SCPPA entered into a power purchase agreement with Recurrent Energy for solar energy from the Astoria 2 Solar Project. SCPPA is entitled to 35 MW of photovoltaic generating capacity from commercial operation to December 31, 2021 and 45 MW of generating capacity from January 1, 2022 until the expected expiration date of December 31, 2036. The commercial operation date was December 2016. Power and Water Resources Pooling SCPPA, Lodi, Corona, Moreno Valley, and Rancho Cucamonga, are each buying the output of a separate portion of the facility, which is located in Kern County, California.
SCPPA has purchase options in the 10th, 15th, and 20th Contract Years. The project is forecasted to start at a capacity factor of 31% with a 0.5% annual degradation. ACES Power Marketing is the third-party scheduling coordinator for the project. The City contracted to purchase 57.1429% until December 31, 2021, and 66.6667% thereafter, of the output. The City’s proportionate share of costs for fiscal year 2025 was $4,466,171.
Puente Hills Landfill Gas-to-Energy Project
On June 25, 2014, the SCPPA entered into a power purchase agreement with County Sanitation District No. 2 of Los Angeles County for 46 MW of the electric generation from a landfill gas to energy facility, located in Whittier, California. The project began deliveries to the SCPPA on January 1, 2017 for a term of 10 years. The City contacted to purchase 23.2558% of the output. The City’s proportional share of the costs during fiscal year 2025 was $1,605,423.
Antelope DSR 1 Solar Project
On July 16, 2015, the SCPPA, entered into a power purchase agreement with Antelope DSR 1, LLC for 50 MW solar photovoltaic generating capacity from the Antelope DSR 1 Solar Facility. The facility is located near Lancaster, California, and commercial operation occurred on December 16, 2016 for a term of 20 years. The City’s proportionate share of costs during fiscal year 2025 was $2,707,676.
Hoover Dam Hydroelectric Power Plant
The Hoover Dam Hydroelectric Power Plant is located on the Arizona-Nevada border, approximately 25 miles southeast of Las Vegas. This hydropower plant is part of the larger Hoover Dam facility, which was completed in 1935 and controls the flow of the Colorado River. The Hoover Dam facility consists of 17 generating units and two service generating units with a total installed capacity of 2,080 MW. In 1987, Vernon entered a power purchase agreement to purchase 22 MW of firm capacity from the Western Area Power Administration. SCPPA and other contractor allocations of Hoover power have been extended for 50 years beyond the power purchase agreement’s original expiration in 2017, which now expires in 2067. The City’s proportionate share of costs during fiscal year 2025 was $624,506.
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Item 15 Page 224 of 295
City of Vernon
Vernon Public Utilities
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
53 Note 12 – Southern California Public Power Authority (Continued) B. Power Purchase Commitments (Continued)
Desert Harvest 2 REC Solar PV Project
On December 17, 2020, SCPPA executed a power purchase agreement with EDF Renewables for 70 MW of solar PV capacity from the Desert Harvest 2 Solar PV project. The project is a fixed-tilt PV system that interconnects at the Marketplace substation and is located on 1,200 acres of Bureau of Land Management land in Desert Center, California. The REC + Index agreement serves the cities of Anaheim, Burbank, and Vernon. VPU is entitled to
17.14 percent of the Project’s output or about 12 MW. This power purchase agreement, which expires at the end of 2045, only provides renewable energy credits (RECs). The City’s proportionate share of costs during fiscal year 2025 was $422,882.
Daggett Solar PV and BESS Project
The Daggett Solar plus BESS project is a single‑axis tracker 65 MW solar with a 33 MW 4‑hour Lithium‑Ion BESS.
The commercial operation date was December 12, 2023. The project, located in the City of Daggett in San Bernardino County, is a portion of an approximately 482 MW solar PV facility. The project was developed by Clearway Energy Group and is owned by Daggett Solar Power 2 LLC.
On June 24, 2022, SCPPA executed a PPA for 65 MW for the cities of Vernon and Cerritos. The PPA entitles VPU to 60 MW of solar PV output and 30 MW of energy storage. The power purchase agreement expires on December 31, 2044. The City’s proportionate share of costs during fiscal year 2025 was $3,940,066. .
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Item 15 Page 225 of 295
54 This page intentionally left blank.
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Item 15 Page 226 of 295
REQUIRED SUPPLEMENTARY INFORMATION
(UNAUDITED)
55 .
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Item 15 Page 227 of 295
Fiscal year 2016 2017 2018 2019 2020
Measurement period 2014-15 2015-16 2016-17 2017-18 2018-19 VPU's proportion of the net
pension liability 15.27% 15.41% 15.55% 14.86% 15.47%
VPU's proportionate share of the
net pension liability 11,682,868 $ 14,675,830 $ 17,052,279 $ 16,866,107 $ 18,692,374 $ Covered payroll1 $ 2,026,477 3,734,153 $ 4,210,103 $ 4,577,147 $ 4,418,536 $ VPU's proportionate share of the net
pension liability as a percentage of
covered payroll 312.87% 724.20% 405.03% 368.49% 423.04% VPU Fiduciary Net Position as a
percentage of the total
pension liability 78.15% 78.91% 77.85% 77.68% 76.15%
1 Notes to Schedule:
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry Age Actuarial Cost Method
Amortization method Level percentage of payroll
Asset valuation method Fair Market Value
Inflation 2.300%
Salary increases varies by entry age and service
Payroll Growth 2.800%
Investment rate of return
Retirement age
Mortality
California Public Employees' Retirement System Defined Pension Plan For the Year Ended June 30, 2025
The probabilities of Retirement are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015.
The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and Post-retirement mortality rates include 15 years of projected mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries.
Includes one year’s payroll growth using 2.80 percent payroll growth assumption for fiscal years ended June 30, 2022 through 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 2024-25 were derived from the June 30, 2022 funding valuation report.
6.8% Net of Pension Plan Investment and Administrative Expenses; includes Inflation.
Last Ten Fiscal Years
City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Pension Liability and Related Ratios Vernon Public Utilities
56 .
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Item 15 Page 228 of 295
Fiscal year 2021 2022 2023 2024 2025
Measurement period 2019-20 2020-21 2021-22 2022-23 2023-24 VPU's proportion of the net
pension liability 16.99% 18.82% 23.05% 22.06% 22.75%
VPU's proportionate share of the
net pension liability 22,982,998 $ 16,563,816 $ 36,362,766 $ 37,505,550 $ 38,072,894 $ Covered payroll1 $ 3,902,610 4,203,972 $ 4,967,127 $ 5,471,270 $ 5,624,466 $ VPU's proportionate share of the net
pension liability as a percentage of
covered payroll 546.70% 424.43% 732.07% 685.50% 676.92% VPU Fiduciary Net Position as a
percentage of the total
pension liability 74.79% 85.45% 69.30% 68.21% 69.91%
California Public Employees' Retirement System Defined Pension Plan (Continued) For the Year Ended June 30, 2025
Last Ten Fiscal Years
City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Proportionate Share of the Net Pension Liability and Related Ratios (Continued) Vernon Public Utilities
57 .
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Item 15 Page 229 of 295
Fiscal year 2016 2017 2018 2019 2020
VPU's Allocation Percentage 15.27% 15.41% 15.55% 14.86% 15.47% Actuarially determined contribution 1,272,412 $ 1,403,235 $ 1,475,490 $ 1,622,690 $ 1,908,522 $ Contributions in relation to the
actuarially determined contribution (1,272,412) (1,403,235) (1,475,490) (1,622,690) (1,908,522) Contribution deficiency (excess) - $ - $ - $ - $ - $
Covered payroll1 $ 4,210,103 4,025,399 $ 4,577,147 $ 4,418,536 $ 4,203,972 $ Contributions as a percentage of covered payroll 31.61% 33.33% 32.24% 36.72% 45.40% 1 Notes to Schedule:
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry Age Actuarial Cost Method
Amortization method Level percentage of payroll
Asset valuation method Fair Market Value
Inflation 2.300%
Salary increases varies by entry age and service
Payroll Growth 2.800%
Investment rate of return
Retirement age
Mortality
Last Ten Fiscal Years
California Public Employees' Retirement System Defined Pension Plan Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions
Vernon Public Utilities
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2024-25 were derived from the June 30, 2022 funding valuation report.
6.8% Net of Pension Plan Investment and Administrative Expenses; includes Inflation.
The probabilities of Retirement are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015.
The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and Post-retirement mortality rates include 15 years of projected mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries.
City of Vernon
Includes one year's payroll growth using 2.80 percent payroll growth assumption for fiscal years ended June 30, 2022 through 2024; 2.75 percent payroll growth assumption for fiscal years ended June 30, 2018-2021; 3 percent payroll growth assumption for fiscal years ended June 30, 2014-2017.
For the Year Ended June 30, 2025
58 .
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Item 15 Page 230 of 295
Fiscal year 2021 2022 2023 2024 2025
VPU's Allocation Percentage 16.99% 18.82% 23.05% 22.06% 22.75% Actuarially determined contribution 2,145,491 $ 2,674,893 $ 3,717,613 $ 3,652,586 $ 4,316,171 $ Contributions in relation to the
actuarially determined contribution (2,145,491) (2,674,893) (3,717,613) (3,652,586) (4,316,171) Contribution deficiency (excess) - $ - $ - $ - $ - $
Covered payroll1 $ 4,967,127 3,902,610 $ 5,471,270 $ 5,624,466 $ 5,781,951 $ Contributions as a percentage of covered payroll 54.98% 53.85% 72.81% 64.94% 74.65% For the Year Ended June 30, 2025
Last Ten Fiscal Years
California Public Employees' Retirement System Defined Pension Plan (Continued) City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Pensions (Continued)
Vernon Public Utilities
59 .
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Item 15 Page 231 of 295
Fiscal year 2018 2019 2020 2021 2022
Measurement period 2016-171 2017-18 2018-19 2019-20 2020-21 VPU's proportion of the net
OPEB liability 15.55% 14.86% 15.47% 16.99% 18.82%
VPU's proportionate share of the
net OPEB liability 3,887,475 $ 3,432,725 $ 3,391,408 $ 3,433,306 $ 3,080,913 $ Covered - employee payroll $ 3,587,387 3,588,945 $ 5,228,211 $ 4,944,915 $ 5,385,241 $ VPU's proportionate share of the net
OPEB liability as a percentage of
covered - employee payroll 108.32% 95.69% 64.87% 69.43% 57.21% VPU's fiduciary net position as a
percentage of the total
OPEB liability 2.83% 8.62% 16.30% 25.70% 40.20%
1 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.
Schedule of Proportionate Share of the Net Other Postemployment For the Year Ended June 30, 2025
Last Ten Fiscal Years1
Benefits Liability and Related Ratios
City of Vernon
Vernon Public Utilities
Required Supplementary Information (Unaudited)
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Fiscal year 2023 2024 2025
Measurement period 2021-22 2022-23 2023-24
VPU's proportion of the net
OPEB liability 23.05% 22.06% 22.75%
VPU's proportionate share of the
net OPEB liability $ 3,190,847 3,777,800 $ 2,641,220 $
Covered - employee payroll $ 5,401,408 5,850,485 $ 5,278,338 $ VPU's proportionate share of the net
OPEB liability as a percentage of
covered - employee payroll 64.57% 59.07% 50.04%
VPU's fiduciary net position as a
percentage of the total
OPEB liability 40.03% 47.74% 47.74%
Other Postemployment Benefits ("OPEB") Plan (Continued) Schedule of Proportionate Share of the Net Other Postemployment For the Year Ended June 30, 2025
Last Ten Fiscal Years1
Benefits Liability and Related Ratios (Continued)
City of Vernon
Vernon Public Utilities
Required Supplementary Information (Unaudited)
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Fiscal year 2017 2018 2019 2020 2021
Actuarially determined contribution - $ 288,398 $ 400,166 $ 298,886 $ 261,372 $ Contributions in relation to the
actuarially determined contribution (471,025) (221,199) (444,230) (605,820) (531,940) Contribution deficiency (excess) (471,025) $ 67,199 $ (44,064) $ (306,934) $ (270,568) $ Covered-employee payroll $ 3,587,387 3,588,945 $ 5,228,211 $ 4,944,915 $ 5,385,241 $ Contributions as a percentage of covered-employee payroll 13.12% 6.17% 8.50% 12.25% 9.88% 1 Notes to Schedule:
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry-age normal, level precent of pay Amortization method Closed period, level percent of pay Amortization period 30 years
Inflation 2.30%
Discount Rate 6.40%
Payroll Growth 2.80%
Healthcare trend rates 6.80%, trending down to 4.04%
Rate of return on assets 6.40%
City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Other Postemployment Benefits For the Year Ended June 30, 2025
Last Ten Fiscal Years1
Other Postemployment Benefits ("OPEB") Plan
Vernon Public Utilities
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2024-2025 were derived from the June 30, 2024 funding valuation report.
Historical information is presented only for measurement periods after GASB 75 was implemented in fiscal year of 2017-18 (measurement period of 2016-17). Additional years of information will be displayed as it becomes available. 62 .
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Fiscal year 2022 2023 2024 2025
Actuarially determined contribution 289,525 $ 323,302 $ 303,541 $ 294,535 $ Contributions in relation to the
actuarially determined contribution (551,938) (717,178) (297,316) (770,714) Contribution deficiency (excess) (262,413) $ (393,876) $ 6,225 $ (476,179) $ Covered-employee payroll $ 5,401,408 5,850,485 $ 5,278,338 $ 5,888,732 $ Contributions as a percentage of covered-employee payroll 9.43% 13.28% 5.63% 13.09% Vernon Public Utilities
City of Vernon
Required Supplementary Information (Unaudited)
Schedule of Contributions - Other Postemployment Benefits (Continued) For the Year Ended June 30, 2025
Last Ten Fiscal Years1
Other Postemployment Benefits ("OPEB") Plan (Continued) 63 .
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SUPPLEMENTARY INFORMATION
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Electric Gas Water Fiber Optics Eliminating
Fund Fund Fund Fund Entry Total
ASSETS
Current assets:
Cash and cash equivalents $ 18,026,356 171,910,827 $ 12,608,230 $ 23,785 $ - $ 202,569,198 $ Investments - 9,238,544 8,569,543 - - 17,808,087
Accounts receivable, net 766,490 12,920,345 1,531,945 23,296 - 15,242,076 Interest receivable - 166,730 1 - - 166,731
Accrued unbilled revenue 965,465 22,368,473 1,577,439 - - 24,911,377 Prepaid items - 616,620 2,718 - - 619,338
Inventory - 471,811 - - - 471,811
Total current assets 19,758,311 217,693,350 24,289,876 47,081 - 261,788,618 Noncurrent assets:
Restricted cash and investments 28,363,878 - 413 - - 28,364,291 Advances to other funds 33,171,579 - - - (33,171,579) - Prepayment to Southern California Public
Power Authority 934,159 - - - - 934,159
Deposits - 6,886,752 - - - 6,886,752
Capital assets:
Capital assets, not being depreciated - 74,948,539 4,889,851 - 79,838,390 - Capital assets, being depreciated, net 13,330,214 359,537,869 18,364,562 1,541,379 392,774,024 - Intangible assets, being amortized, net - 237,288 - - 237,288 Total capital assets 434,723,696 13,330,214 23,254,413 1,541,379 - 472,849,702 Total noncurrent assets 13,330,214 504,080,064 23,254,826 1,541,379 (33,171,579) 509,034,904 Total assets 33,088,525 721,773,414 47,544,702 1,588,460 (33,171,579) 770,823,522
DEFERRED OUTFLOW OF RESOURCES
Pension related 8,091,062 651,588 1,373,181 8,323 - 10,124,154 Other postemployment benefits related 846,531 68,173 143,670 871 - 1,059,245 Deferred charges on refunding - 1,327,398 - - - 1,327,398 Total deferred outflow of resources 719,761 10,264,991 1,516,851 9,194 - 12,510,797 (Continued)
City of Vernon
Vernon Public Utilities
Combining Statement of Net Position
June 30, 2025
See accompanying Notes to the Basic Financial Statements. 66 .
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Fund Fund Fund Fund Entry Total
LIABILITIES
Current liabilities:
Accounts payable 199,142 13,226,875 655,564 16,847 14,098,428 - Accrued wages and benefits 33,505 529,462 81,664 - 644,631 - Accrued interest payable - 5,030,237 226,031 - - 5,256,268 Unearned revenue - 5,808,390 - - - 5,808,390
Customer deposits payable 13,558 401,627 113,384 - - 528,569 Due to the City of Vernon - 3,574 - - - 3,574
Subscription liabilities, due within one year - 53,798 - - - 53,798 Compensated absences, due within one year 15,587 458,499 46,141 421 - 520,648 Bonds payable, due within one year - 57,160,000 - - - 57,160,000 Note payable, due within one year - - 139,535 - - 139,535 Total current liabilities 261,792 82,672,462 1,262,319 17,268 - 84,213,841 Noncurrent liabilities:
Advances from other funds 28,745,823 - - 4,425,756 (33,171,579) - Subscription liabilities, due in
more than one year - 16,336 - - - 16,336
Compensated absences, due in
more than one year 31,174 916,998 92,283 842 1,041,297 - Bonds payable, due in more than one year - 214,426,909 14,288,592 - 228,715,501 - Note payable, due in more than one year - - 662,790 - 662,790 - Net pension liability 2,450,361 30,427,252 5,163,984 31,297 - 38,072,894 Net other postemployment benefits liability 169,988 2,110,821 358,240 2,171 - 2,641,220 Total noncurrent liabilities 31,397,346 247,898,316 20,565,889 4,460,066 (33,171,579) 271,150,038 Total liabilities 31,659,138 330,570,778 21,828,208 4,477,334 (33,171,579) 355,363,879
DEFERRED INFLOWS OF RESOURCES
Pension related 673,087 54,205 114,234 692 - 842,218
Other postemployment benefits related 439,210 35,370 74,541 452 - 549,573 Total deferred inflows of resources 89,575 1,112,297 188,775 1,144 - 1,391,791
NET POSITION
Net investment in capital assets 244,670,594 13,330,214 8,163,496 1,541,379 - 267,705,683 Restricted for:
Debt service - 28,015,478 413 - - 28,015,891
Assembly Bill 1890 - 5,277,830 - - - 5,277,830
Unrestricted (deficit) (11,270,641) 122,391,428 18,880,661 (4,422,203) - 125,579,245 Total net position $ 2,059,573 400,355,330 $ 27,044,570 $ (2,880,824) $ - $ 426,578,649 $
(Concluded)
City of Vernon
Vernon Public Utilities
Combining Statement of Net Position (Continued)
June 30, 2025
See accompanying Notes to the Basic Financial Statements. 67 .
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Fund Fund Fund Fund Entry Total
OPERATING REVENUES:
Charges for services $ 13,979,744 236,259,709 $ 9,696,115 $ 497,200 $ - $ 260,432,768 $ Total operating revenues 13,979,744 236,259,709 9,696,115 497,200 - 260,432,768 OPERATING EXPENSES:
Cost of sales 109,568,489 13,016,836 7,640,887 498,224 - 130,724,436 Depreciation and amortization expense 24,156,962 697,038 813,883 259,770 - 25,927,653 Total operating expenses 13,713,874 133,725,451 8,454,770 757,994 - 156,652,089 OPERATING INCOME (LOSS) 265,870 102,534,258 1,241,345 (260,794) - 103,780,679 NONOPERATING REVENUES (EXPENSES):
Investment income 5,942,659 330,469 837,975 571 - 7,111,674 Net increase (decrease) in fair value of investments (1,139) 271,697 161,563 - - 432,121 Interest expense (8,694,817) - (541,899) - - (9,236,716) Loss on disposal of assets (126,952) - - - - (126,952)
Total nonoperating revenues (expenses) 329,330 (2,607,413) 457,639 571 - (1,819,873)
INCOME BEFORE CAPITAL CONTRIBUTIONS
AND TRANSFERS 595,200 99,926,845 1,698,984 (260,223) - 101,960,806
CAPITAL CONTRIBUTION
AND TRANSFERS:
Capital contributions 9,262,207 - - - - 9,262,207
Transfers out - (173,828) - - - (173,828)
Total capital contributions and transfers - 9,088,379 - - - 9,088,379 CHANGE IN NET POSITION 595,200 109,015,224 1,698,984 (260,223) - 111,049,185 NET POSITION:
Beginning of year, as previously reported 291,469,620 1,470,909 25,363,903 (2,620,239) - 315,684,193 Change in accounting principle (129,514) (6,536) (18,317) (362) (154,729) Beginning of year, as restated (Note 11) 291,340,106 1,464,373 25,345,586 (2,620,601) - 315,529,464 End of year 400,355,330 $ 2,059,573 $ 27,044,570 $ (2,880,824) $ - $ 426,578,649 $ City of Vernon
Vernon Public Utilities
Combining Statement of Revenues, Expenses, and Changes in Net Position For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 69 .
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Electric Gas Water Fiber Optics
Fund Fund Fund Fund Total
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash receipts from customers and users 236,856,839 $ 13,864,054 $ 9,804,963 $ 518,718 $ 261,044,574 $ Cash paid to suppliers for goods and services (89,808,500) (11,571,285) (5,158,666) (700,702) (107,239,153) Cash paid to employees for services (14,343,107) (1,100,150) (2,314,477) (16,391) (17,774,125) Net cash provided by (used in)
operating activities 1,192,619 132,705,232 2,331,820 (198,375) 136,031,296
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES:
Transfer to City (173,828) - - - (173,828)
Receipt from other funds 52,125 - - - 52,125
Payment to other funds - - - (47,851) (47,851)
Net cash (used in) noncapital financing activities - (121,703) - (47,851) (169,554)
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:
Acquisition of capital assets (31,145,252) - (671,920) (127,174) (31,944,346) Receipt on sale of capital asset 15,283 - - - 15,283
Principal paid on long-term debt (54,560,037) - (414,535) - (54,974,572) Interest paid on long-term debt (15,314,340) - (566,709) - (15,881,049) Net cash (used in) capital and related
financing activities - (101,004,346) (1,653,164) (127,174) (102,784,684) CASH FLOWS FROM INVESTING ACTIVITIES:
Receipt from matured investments 15,249,000 245,000 - - 15,494,000 Interest received 5,992,560 330,469 838,064 571 7,161,664 Net cash provided by investing activities 575,469 21,241,560 838,064 571 22,655,664 Net increase (decrease) in cash and
cash equivalents 1,768,088 52,820,743 1,516,720 (372,829) 55,732,722 CASH AND CASH EQUIVALENTS:
Beginning of year 147,453,962 16,258,268 11,091,923 396,614 175,200,767 ,, End of year $ 18,026,356 200,274,705 $ 12,608,643 $ 23,785 $ 230,933,489 $ CASH AND CASH EQUIVALENTS:
Cash 171,910,827 $ 18,026,356 $ 12,608,230 $ 23,785 $ 202,569,198 $ Restricted cash and investment 28,363,878 - 413 - 28,364,291 Total cash and cash equivalents $ 18,026,356 200,274,705 $ 12,608,643 $ 23,785 $ 230,933,489 $ NONCASH ITEMS:
Unrealized gain (loss) in fair value of investments 271,697 $ (1,139) $ 161,563 $ - $ 432,121 $ Capital contributions 9,262,207 $ - $ - $ - $ 9,262,207 $ Acquisition of subscription asset (160,722) $ - $ - $ - $ (160,722) $ Issuance of subscription liability 160,722 $ - $ - $ - $ 160,722 $ (Continued)
City of Vernon
Vernon Public Utilities
Combining Statement of Cash Flows
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 70 .
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Electric Gas Water Fiber Optics
Fund Fund Fund Fund Total
OPERATING INCOME TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES:
Operating income 102,534,258 $ 265,870 $ 1,241,345 $ (260,794) $ 103,780,679 $ Adjustments to reconcile operating income to net cash
provided by operating activities:
Depreciation and amortization 24,156,962 697,038 813,883 259,770 25,927,653 Change in assets and liabilities:
(Increase) decrease in accounts receivable (2,032,033) (97,609) (334,778) 21,518 (2,442,902) (Increase) decrease in accrued unbilled revenue (79,128) (18,081) 443,626 - 346,417 (Increase) decrease in inventories and prepaid items 294,144 - 3,002 - 297,146 (Increase) decrease in customer deposits (3,100,099) - - - (3,100,099) (Increase) decrease in deferred outflows
of resources related to pension 2,706,539 162,102 428,001 4,823 3,301,465 (Increase) decrease in deferred outflows
of resources related to OPEB (337,932) (29,846) (58,829) (252) (426,859) Increase (decrease) in accounts payable 3,094,975 57,577 (174,641) (216,335) 2,761,576 Increase (decrease) in accrued wages and benefits 240,074 18,725 64,932 - 323,731 Increase (decrease) in deposits payable 4,000 - (80,604) - (76,604) Increase (decrease) in unearned revenue 5,808,390 - - - 5,808,390 Increase (decrease) in compensated absences 93,834 13,908 1,435 74 109,251 Increase (decrease) in net pension liabilities 263,281 177,251 132,235 (5,423) 567,344 Increase (decrease) in OPEB liabilities (455,429) (23,401) (69,844) (953) (549,627) Increase (decrease) in deferred inflows
of resources related to pension (254,869) (15,724) (40,561) (438) (311,592) Increase (decrease) in deferred inflows
of resources related to OPEB (231,735) (15,191) (37,382) (365) (284,673) Total adjustment 30,170,974 926,749 1,090,475 62,419 32,250,617 Net cash provided by (used in)
operating activities $ 1,192,619 132,705,232 $ 2,331,820 $ (198,375) $ 136,031,296 $ (Concluded)
Combining Statement of Cash Flows (Continued)
City of Vernon
Vernon Public Utilities
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 71 .
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Presentation to the City Council
For the Fiscal Year Ended June 30, 2025
January 20, 2026
City of Vernon
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2 Contents
• Scope of Work
• Required Communications (AU-C 260)
• Financial Audit Results
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3 Scope Of Work
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4 Scope of Work
Compliance Audit Single Audit
State Controller’s Report
Other AU-C 260 Communication with Those Charged with Governance Preparation of Annual Comprehensive Financial Report (ACFR) Financial Statement Audits Audit of the City’s Annual Comprehensive Financial Report (ACFR) Vernon Public Utilities Financial Report
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5 Required Communications (AU-C 260)
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6 Management Responsibilities
• Preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, • 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.
• In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about City of Vernon’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. .
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7 Our Responsibilities
• Express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles.
• 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. • Consider internal control over financial reporting. Such considerations are solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern. .
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8 Other Required Communications
• Ethics and Independence
• Complied with ALL relevant ethical requirements regarding independence • Significant Accounting Policies
• The City disclosed all significant accounting policies in Note 1 to the financial statements. • Significant Estimates
• Investment fair value
• Depreciation and amortization on capital assets
• Net pension liability
• Net other postemployment benefits (“OPEB”) liability
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9 Other Required Communications
• Sensitive Disclosures
• Note 1 – Summary of Significant Accounting Policies
• Note 8 – Pension Plan
• Note 9 – Other Postemployment Benefits (“OPEB”)
• Note 13 – Commitments and Contingencies
• Misstatements
• There were no material uncorrected misstatements.
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10 Other Required Communications
• Consultation with Other Accountants
• Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and other matters. • Significant Difficulties
• We encountered no significant difficulties in dealing with management. • Disagreement with Management
• We did not have any disagreement with management in terms of accounting treatments nor audit procedures performed.
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11 Financial Audit Results
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12 Audit Results
• Unmodified Opinion
• Financial Statements are fairly presented in all material respects • Significant accounting policies have been consistently applied • Estimates are reasonable
• Disclosures are properly reflected in the financial statements • Other Results
• No disagreements with management
• No material weaknesses in internal controls over financial reporting were reported • No accounting issues
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HQ - ORANGE COUNTY
6 Hutton Centre Drive
Suite 1200
Santa Ana, CA 92707
SAN DIEGO
4660 La Jolla Village Dr.
Suite 100
San Diego, CA 92122
BAY AREA
2121 North California Blvd.
Suite 290
Walnut Creek, CA 94596
LAS VEGAS
1980 Festival Plaza Drive
Suite 300
Las Vegas, NV 89135
SACRAMENTO
1511 Corporate Way
Suite 220
Sacramento, CA 95831
PHOENIX
2 N. Central Avenue
Suite 1800
Phoenix, AZ 85004
www.pungroup.cpa
(949) 777-8800
Licensed Certified Public Accountants
California License No. PAR 7601
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Presentation to the City Council
For the Fiscal Year Ended June 30, 2025
January 20, 2026
City of Vernon
1 January 20, 2026
Item 15
Staff Presentation
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2 Contents
• Scope of Work
• Required Communications (AU-C 260)
• Financial Audit Results
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3 Scope Of Work
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4 Scope of Work
Compliance Audit Single Audit
State Controller’s Report
Other AU-C 260 Communication with Those Charged with Governance Preparation of Annual Comprehensive Financial Report (ACFR) Financial Statement Audits Audit of the City’s Annual Comprehensive Financial Report (ACFR) Vernon Public Utilities Financial Report
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5 Required Communications (AU-C 260)
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6 Management Responsibilities
• Preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, • 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.
• In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about City of Vernon’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. .
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7 Our Responsibilities
• Express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles.
• 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. • Consider internal control over financial reporting. Such considerations are solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern. .
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8 Other Required Communications
• Ethics and Independence
• Complied with ALL relevant ethical requirements regarding independence • Significant Accounting Policies
• The City disclosed all significant accounting policies in Note 1 to the financial statements. • Significant Estimates
• Investment fair value
• Depreciation and amortization on capital assets
• Net pension liability
• Net other postemployment benefits (“OPEB”) liability
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9 Other Required Communications
• Sensitive Disclosures
• Note 1 – Summary of Significant Accounting Policies
• Note 8 – Pension Plan
• Note 9 – Other Postemployment Benefits (“OPEB”)
• Note 13 – Commitments and Contingencies
• Misstatements
• There were no material uncorrected misstatements.
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10 Other Required Communications
• Consultation with Other Accountants
• Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and other matters. • Significant Difficulties
• We encountered no significant difficulties in dealing with management. • Disagreement with Management
• We did not have any disagreement with management in terms of accounting treatments nor audit procedures performed.
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11 Financial Audit Results
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12 Audit Results
• Unmodified Opinion
• Financial Statements are fairly presented in all material respects • Significant accounting policies have been consistently applied • Estimates are reasonable
• Disclosures are properly reflected in the financial statements • Other Results
• No disagreements with management
• No material weaknesses in internal controls over financial reporting were reported • No accounting issues
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HQ - ORANGE COUNTY
6 Hutton Centre Drive
Suite 1200
Santa Ana, CA 92707
SAN DIEGO
4660 La Jolla Village Dr.
Suite 100
San Diego, CA 92122
BAY AREA
2121 North California Blvd.
Suite 290
Walnut Creek, CA 94596
LAS VEGAS
1980 Festival Plaza Drive
Suite 300
Las Vegas, NV 89135
SACRAMENTO
1511 Corporate Way
Suite 220
Sacramento, CA 95831
PHOENIX
2 N. Central Avenue
Suite 1800
Phoenix, AZ 85004
www.pungroup.cpa
(949) 777-8800
Licensed Certified Public Accountants
California License No. PAR 7601
13 .
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