Willits City Council
February 25, 2026

111 E. Commercial Street
Willits, California 95490
Tel | 707.459.4601
Fax | 707.459.1562
www.cityofwillits.org

WILLITS CITY COUNCIL
AGENDA
FEBRUARY 25, 2026 | 6:30 PM | CITY COUNCIL CHAMBERS

1. OPENING MATTERS
a. Call to Order. | b. Pledge to Flag. | c. Roll Call.

2. PUBLIC COMMUNICATIONS
The City Council welcomes input from the audience. If there is a matter of business on the agenda that you are interested in, you may address the Council when this matter is considered. If you wish to speak on a matter that is not on the agenda, you may do so at this time. In order for everyone to be heard, please limit your comments to three (3) minutes per person. The Brown Act regulations do not allow action to be taken on audience comments in which the subject is not listed on the agenda.

3. PUBLIC MATTERS

4. ENACTMENT OF ORDINANCES
a. None.

5. CONSENT CALENDAR
The City Council considers matters listed under the Consent Calendar as routine. The Council will take action with a single motion and roll call vote. A Councilmember may request the removal of an item(s) from the Consent Calendar for separate discussion and subsequent action.

The following items as presented are before the City Council for approval or denial:
a. City Council Minutes:
i. January 28, 2026 – Special Meeting.
ii. February 11, 2026 – Regular Meeting.
iii. February 17, 2026 – Special Meeting.
b. Discussion and Possible Introduction of an Amendment to Willits Municipal Code Title 17 – Zoning, Adding Chapter 17.89, “Entertainment Zones”, to Establish Regulations for the Creation of Entertainment Zones,

6. MONTHLY ACTIVITY REPORTS
Matters that do not require action by the City Council but are of public interest. a. None.

7. COMMISSIONS, AGENCIES AND AUTHORITIES
The Willits City Council meets concurrently as the City of Willits Planning Commission & City of Willits Successor Agency.

8. CITY MANAGER REPORTS AND RECOMMENDATIONS
a. Verbal Reports – No Action.
i.

Willits City Council Agenda – February 25, 2026.

9. DEPARTMENT RECOMMENDATIONS (ACTION ITEMS)
a. Presentation of Audit Conducted by Moss, Levy & Hartzheim Regarding Audited Financial Report for Fiscal Year Ending June 30, 2024.

10. DEPARTMENT MONTHLY REPORTS – (presented at the second meeting of each month) a. Airport. b. Community Dev. c. Finance. d. Police Dept. e. Services & Facilities. f. Utilities.

11. CITY COUNCIL ANNOUNCEMENTS, COMMUNICATIONS AND REPORTS

12. GOOD & WELFARE

13. CLOSED SESSION NOTICE
a. None.

14. ADJOURNMENT
Right to Appeal - Persons who are dissatisfied with the decisions of the City Council may have the right to a review of that decision by a court. The City has adopted Section 1094.6 of the Code of Civil Procedure, which generally limits to 90- days, the time within an individual and/or entity may judicially challenge the decisions of the City Boards and Agencies.

I hereby certify under penalty of perjury under the laws of the State of California that I posted the foregoing Agenda on the bulletin board at the main entrance of the City of Willits City Hall, located at 111 East Commercial Street, Willits, California, not less than 72 hours prior to the meeting set forth on this Agenda.

Dated this 20th day of February 2026.

Delores Pedersen, City Clerk
Americans with Disabilities Act (ADA) Compliance
If you need assistance to attend or participate in a City Council meeting, please contact the City Clerk’s office at (707) 459-7113 or Fax (707) 459-1562. Notification at least 48-hours prior to the meeting will assist the City Clerk in assuring the implementation of reasonable accommodations to provide accessibility to the meeting. Our meeting room is wheelchair accessible and ADA parking is available.

Additional Meeting Information for Interested Parties
Materials related to an item on this Agenda submitted to the Willits City Council, Planning Commission, or Community Development Agency after distribution of the agenda packet are available for public inspection at City Clerk’s office at 111 E. Commercial Street, Willits, during normal business hours, Monday through Thursday 9 AM to 5:30 PM. 111 E. COMMERCIAL STREET
WILLITS, CALIFORNIA 95490
(707) 459-4601 TEL
(707) 459-1562 FAX

WILLITS CITY COUNCIL

SPECIAL MEETING

MINUTES
WEDNESDAY JANUARY 28, 2026
Mayor Allman called a regular meeting of the City Council to order at 6:00 p.m., in Council Chambers.

Roll Call: Councilmembers Larry Stranske, Gerardo Gonzalez, Bruce Burton, Vice Mayor Matthew Alaniz and Mayor Tom Allman were present.

Also present were staff members: Bob Richardson, Interim City Manager; Walter Kolon, Services and Facilities Director; and Delores Pedersen, City Clerk.

2. CLOSED SESSION NOTICE
a. Pursuant to Government Code §54957 – Public Employee Performance Evaluation – Interim City Manager.
b. Conference regarding Labor Negotiation Pursuant to Government Code §54957.6 – Agency Negotiator Interim City Manager Richardson. Employee Organization(s): International Brotherhood of Electrical Worker (IBEW), Willits Police Officers Association (WPOA) and Employee Organizations; Management Team and Unrepresented Employees
Public Comment: None.

3. Adjournment
The City Council reconvened to open session at 6:30 pm, and reported direction was given to staff.

Mayor Allman declared the meeting adjourned at 6:30 p.m. ___________________________________
THOMAS ALLMAN, Mayor
City Council for the City of Willits
ATTEST:
________________________________
DELORES PEDERSEN, City Clerk
111 E. COMMERCIAL STREET
WILLITS, CALIFORNIA 95490
(707) 459-4601 TEL
(707) 459-1562 FAX

WILLITS CITY COUNCIL

MINUTES
WEDNESDAY FEBRUARY 11, 2026
Mayor Allman called a regular meeting of the City Council to order at 6:30 p.m., in Council Chambers. The meeting was preceded by the pledge to the flag.

Roll Call: Councilmembers Gerardo Gonzalez, Larry Stranske, Bruce Burton, Vice Mayor Matthew Alaniz and Mayor Tom Allman were present.

Also, present were staff members: Bob Richardson, Interim City Manager; Jim Lance, City Attorney; Dusty Duley, Community Development Director; Manuel Orozco, Finance Director; Walter Kolon, Services and Facilities Director; Davey Bowles, Building Official; Brian Fay, Police Chief; and Delores Pedersen, City Clerk.

Mayor Allman and Vice Mayor Alaniz recognized the longevity of the following City Employees that were in attendance.

Sargeant Rodrigo Avalos – 5 years
Dusty Duley, Community Development Director – 10 years.

Nicole (Nici) Caldwell, Sewer Plant Operator – 15 years Delores Pedersen, City Clerk – 20 Years
Clarence Tarver, Water Plant Operator – 25 years

2. Public Communications
 Melinda Clarks inquired if the Council would be willing to protect the Citizens of Willits if ICE comes to Willits.
 Dingane Jackson, owner of Smokey’s BBQ, asked what the process was when a claim is filed. Delores Pedersen, City Clerk, responded that the claim had been sent to the insurance company and that they would be sending Mr. Jackson an update on his claim.  Steven Adams expressed concern over ICE and how it is affecting the country.  Larry Igulara asked for the City Council to address Land Recognition.

3. Public Matters
None.

4. Enactment of Ordinances
None presented.

5. Consent Calendar
The following item(s) are recommended for approval or denial, as follows:
a. City Council Minutes:
i. January 28, 2026.

Willits City Council Minutes of February 11, 2026 Page 2 of 5  Walter Kolon, Services and Facilities Director, asked that the word potential be added to the following sentence in the minutes:
“The City is now responsible for any potential damage that is happening to the building due to the incorrectly installed culvert.”
Public Comment: None presented.

Moved by Gonzalez/Seconded by Alaniz and carried unanimously to approve Consent Calendar item(s) (a).

6. Monthly Activity Reports
Matters that do not require action by the City Council but are of public interest. a. Accounts Payable Activity Report: January 2026.
b. Building Permit Activity Report: January 2026.
c. Business License Activity Report: January 2026.

7. Commissions, Agencies and Authorities
None presented.

8. City Manager Reports and Recommendations
a. Verbal Reports – No Action.
 Bob Richardson, Interim City Manager, reports that the week of February 16th council would be receiving the draft recruitment materials for the City Manager Position. He would like Council to look at it and make any changes or edits. As soon as council agrees with the document the City will begin the process.
 Andy Heath, Finance Consultant, completed the mid-year budget. Mr. Richardson reports that it is better than originally expected.
 Davey Bowles gave a presentation to update the council on the Bud Snider Park Pavillion and Bathroom Remodel Project that is funded by the Clean California Grant.

The last time this was discussed the City was in the design phase of the project. SHN Engineering has some minor corrections to make with the Design Drawings as well as back up work for the bid schedule and bid items to help roll them into City documents that are used to advertise for bids. SHN anticipates this will be done in March and the City will be able to advertise for the project. This typically takes two months to bid and get under contract, Mr. Bowles states that we should be able to award a bid and be under contract by May. There are hopes to be complete with the bathroom remodel and pavilion by December. This does not include the playground, city has already purchased the playground equipment, this will be under a separate contract.

Public Comment:
 Mark Walker expressed concern about on time completion. If the project is not complete on time is there a penalty?

9. Department Recommendations (Action Items)
a. Discussion on Right-of-Way Abandonment Request #RA 23-01 for an Unimproved Alley Between West Oak Street and State Highway 20 in the City of Willits.

Presenting staff member: Dusty Duley, Community Development Director  Council Member Burton recused himself from the discussion due to a conflict of interest.

Mr. Burton owns property within 500 feet of the project which requires him to abstain from the discussion.
 Mr. Duley presented council with a PowerPoint and continuation of discussion of the project.

Willits City Council Minutes of February 11, 2026 Page 3 of 5 Public Comment:
 Ken Sizemore, owner of Earths Treasures, spoke in support of the ally’s abandonment.  Amy Grooms spoke against the ally’s abandonment.
 Miguel Jimenez spoke in support of the ally’s abandonment.  Omaya Sizemore, owner of Earths Treasures, spoke in support of the ally abandonment.  Nicole Caldwell stated that the City should contact the six residents that did not respond to the Adjoining Property Owner Contact Form. Right now, there are ten no’s and six yeses. Ms. Caldwell states that the ally is used by residents for different purposes to access their backyard.
 Mark Walker inquired about the city’s easement for the ally. Should it be identified on the deed to his home. Jim Lance, City Attorney, responded that Mr. Walkers’ deed should make reference to the subdivision map act that was recorded in 1902, the law presumes that Mr. Walkers’s property is subject to that map and the ally way that is depicted on the map.
 Nicolas Casagrande spoke in support of the ally’s abandonment.  Basima Sizemore spoke in support of the ally’s abandonment.  Council Member Gonzalez asked if the City abandoned the ally and only some of the residents extend their fences, who is responsible for the maintenance and upkeep of the areas that do not have the fences extended? Mr. Lance responded that if the City has a hearing and makes the findings that the ally is not necessary for any present of prospective public use and that abandonment is in the public interest, this is recorded on a resolution and now the easement is extinguished, those parcels are no longer subject to the easement, the property owners then assume any liability for the conditions of what used to be an ally.
 Mayor Allman states that the ally does not serve a public purpose other than to the residents that live there to allow them access to their backyards. The City of Willits can not justify keeping the ally as access, the city has no purpose for it. Mr. Allman cannot support this for public supporting private backyard usage.  Vice Mayor Alaniz states that he sees this as a minority of people that are trying to use the local government to force their neighbors to do something that they cannot force them to do themselves. Mr. Alaniz feels that everyone has a good argument and feels that if they are not able to convince their neighbors he is not sure it is up to local government to determine.
 Council Member Gonzalez would like to hear from the Fire Department and any utilities on the matter.
 Mr. Duley stated that through the process that has been codified, letters went out from the applicant to the property owners notifying them of the request. City staff has also provided notice of the December 10, 2025 and February 11, 2026 public hearing.

Through the project referral process, staff has contacted AT&T, Comcast, Fire Department etc. and there doesn’t appear to be any utility conflicts in the situation. The Fire Department has not noted any issue with the abandonment.  Direction to staff is to make sure that the City has approval or not from Utilities and the Fire Department. Mr. Duley added that the City received a response from the Little Lake Fire Department and they had no comment on the project.  Jim Lance, City Attorney, stated that if the council would like to move forward with the application, staff will need to notice a hearing and the key determination is going to be, are there findings that this is a necessary part of the City’s road system.  Vice Mayor Alaniz asked how many days are needed to notify a public hearing. Mr.

Duley responded that he would like to refamiliarize himself with the process, we are probably out forty-five to sixty days from now. He also added that the other variable that could extend that timeline is that the City is about to go through some staffing reconfigurations, and that there are some priorities that staff is looking to get through in Willits City Council Minutes of February 11, 2026 Page 4 of 5 the next thirty to forty-five days. Mayor Allman asked if we could estimate April 8th as the date to bring it back to council for a public hearing. Mr. Duley confirmed that staff could estimate April 8th.
b. Discussion of Potential Collaboration between the City of Willits and the County of Mendocino to Relocate Donated Sculptures to a Public Location within the City Highway 20 Park Presenting staff member: Dusty Duley, Community Development Director.  Mr. Duley stated that this is continuation of discussion to relocate sculptures from folk artist Mark Walker that are currently on display on the west side of Highway 20 as you are heading towards CalFire. Staff has identified potential costs related to restoring the sculptures, transporting the sculptures, and building a concrete pad for the sculptures to be placed on should the council want to support the relocation to the Highway 20 park.

In discussion with the Museum, City Staff took the assumption that the City would not be willing or able to participate in the costs of relocating the sculptures. It does appear that money will be coming from the Museum, the County and citizens that have offered up their services to seek fundraising to cover the full cost of their relocation. There are some key questions that are noted in the agenda summary; o Would the City require taking over ownership of the sculptures if it is allowed to have them placed in the Highway 20 Park.
o Are there any specific provisions that the City would want in a maintenance agreement. These would come before council at a later date.
 Karen Matsen, Museum Administrator explained that the museum is working to preserve the sculptures, no matter what the museum is working on a plan to relocate the sculptures. The plan involves restoring the sculptures, moving the sculptures, pouring a pad and having a fence around them. This will be done wherever the sculptures are located.
 Council member Burton would support moving the sculptures in their entirety to the Museum.
 Council member Gonzalez would support it being at the Highway 20 Park but expressed concerns that even with a fence there people would still attempt to climb on them.  Mr. Duley stated that it would be helpful for staff to hear if Council would like staff to continue to work with the County Museum or any one from the County to relocated the statues to the Highway 20 Park, or if there are concerns and that the council does not feel that is an appropriate location. Council member Gonzalez, Stranske, Vice Mayor Alaniz and Mayor Allmam all expressed interest in the City and County continuing the partnership to relocate the time.

Public Comment:
 Mark Walker supports having the Statues on display at the Museum.  Eric Hart, Willits Center for the Arts Center (WCA), stated that the WCA and the art community are on board for this project. They will be working with Karen at the Museum to bring in financial support.
 Amy Grooms expressed concern for the lack of parking on Highway 20.  Gloria Westby asked if there would be money raised just in case someone gets hurt climbing on the sculptures

10. City Council Announcements, Communications and Reports Nothing to report
Public Comment: None presented.

No action taken.

Willits City Council Minutes of February 11, 2026 Page 5 of 5

11. Good & Welfare
Nothing to report.

12. Closed Session Notice
None presented.

13. Adjournment
Mayor Allman declared the meeting adjourned at 8:05 p.m.

For more information on the February 11, 2026 Willits City Council Meeting please view the recording on YouTube.
_____________________________
TOM ALLMAN, Mayor
City Council for the City of Willits
ATTEST:
__________________________

DELORES PEDERSEN
City Clerk
111 E. COMMERCIAL STREET
WILLITS, CALIFORNIA 95490
(707) 459-4601 TEL
(707) 459-1562 FAX

WILLITS CITY COUNCIL

SPECIAL MEETING

MINUTES
TUESDAY, FEBRUARY 17, 2026
Vice Mayor Alaniz called a regular meeting of the City Council to order at 6:00 p.m., in Council Chambers.

Roll Call: Councilmembers Larry Stranske, Gerardo Gonzalez, Bruce Burton, Vice Mayor Matthew Alaniz and Mayor Tom Allman were present.

Also present were staff members: Bob Richardson, Interim City Manager; Walter Kolon, Services and Facilities Director; and Delores Pedersen, City Clerk.

2. CLOSED SESSION NOTICE
a. Conference regarding Labor Negotiation Pursuant to Government Code §54957.6 – Agency Negotiator Interim City Manager Richardson. Employee Organization(s): International Brotherhood of Electrical Worker (IBEW), Willits Police Officers Association (WPOA) and Employee Organizations; Management Team and Unrepresented Employees
Public Comment: None.

3. Adjournment
The City Council reconvened to open session at 7:09 pm, and reported direction was given to staff.

Mayor Allman declared the meeting adjourned at 7:10 p.m. ___________________________________
MATTHEW ALANIZ, Vice Mayor
City Council for the City of Willits
ATTEST:
________________________________
DELORES PEDERSEN, City Clerk
Item No. 5b
Meeting Date: February 25th, 2026

AGENDA SUMMARY REPORT
To: Honorable Mayor and Council Members
From: Connor Stack, City Planner
Agenda Title: DISCUSSION AND POSSIBLE INTRODUCTION OF AN AMENDMENT TO WILLITS MUNICIPAL CODE TITLE 17 – ZONING, ADDING CHAPTER 17.89, “ENTERTAINMENT ZONES”, TO ESTABLISH

REGULATIONS FOR THE CREATION OF ENTERTAINMENT ZONES
Type: Presentation Consent Regular Agenda Public Hearing Urgent Time: 30 minutes.

Summary of Request: Staff is requesting the City Council to review and provide direction of the Draft Entertainment Zone Ordinance, which would give the City of Willits the ability to establish Entertainment Zones through resolution..

Establishing Entertainment Zones has the potential to create a positive economic impact by encouraging visitors to spend more time downtown, increasing customer traffic for restaurants, retailers, and entertainment venues, and attracting new cultural and community events. In turn, this can strengthen the local economy and generate additional sales tax revenue.

The purpose of this discussion is to receive Council input on what adjustments or changes best support the City’s goals of economic vitality, safe and family-friendly events, and protection of public health and safety. Staff will incorporate Council direction into a final ordinance for future consideration.

Background: SB 969 (Effective Jan 1, 2025) authorizes California cities to create Entertainment Zones where regulated public alcohol consumption is allowed during permitted events. This provides new tools for cities to activate downtowns and enhance event programming while maintaining control over public safety and sanitation.

The city has received increased interest from local businesses seeking to operate and take advantage of Entertainment Zones during City events. In response to growing community interest and recent updates to State Law, the City Council directed staff to prepare amendments to the Willits Municipal Code to accommodate Entertainment Zones.

Recommended Action: Conduct a public hearing and Introduce, reading the title of, and waiving further reading of a proposed ordinance to amend Title 17 (Zoning) of the Willits Municipal Code adding Chapter 17.89, “Entertainment Zones” to establish regulations for Entertainment Zones.

Alternative(s): Provide directions to staff to modify Ordinance Language and bring back revised Ordinance for adoption at a future meeting.

Fiscal Impact: Adoption of the ordinance is not expected to have a significant direct fiscal impact. Staff time for permitting, coordination, and oversight may be required during activation of an Entertainment Zone, along with potential costs for signage, security, and cleanup. These costs may be offset through permit fees or cost-recovery measures. The program may also generate indirect economic benefits through increased downtown activity and sales tax revenue.

Personnel Impact: Implementation of the ordinance will require staff time for permit processing, interdepartmental coordination, and event oversight. Law enforcement and public works personnel may also be involved during activation of an Entertainment Zone. Impacts are expected to be manageable within existing staffing levels and coordinated as part of event planning.

Identified City Council Conflict of Interest: None.
2021 Adopted Goals: Develop and implement economic development strategies for the City of Willits that will promote the development and maintenance of a strong business sector including business retention and attraction, tourism, marketing and revenue generation.

California Environmental Quality Act: Adoption of An Entertainment Zone Ordinance is exempt under the CEQA “common-sense exemption” (CEQA Guidelines §15061(b)(3)), as there is no possibility that the activity may have a significant effect on the environment. In addition, the Ordinance is not a “project” and has no potential to result in a direct or reasonably foreseeable indirect physical change to the environment.

This Item Relates to the following General Plan Element : N/A Land Use Circulation Conservation and Open Space Noise Housing Public Services and Facilities, Parks and Recreation Economic Development
Reviewed by: Interim City Manager City Attorney City Clerk Finance Director Human Resources Council Action: Approved Denied Other: ________________________________________ Records: Agreement Resolution #_________ Ordinance #_________ Other _________

CITY COUNCIL AGENDA STAFF REPORT
MEETING MEETING DATE: February 25, 2026 AGENDA ITEM NO: XX STAFF REPORT: ENTERTAINMENT ZONE
PAGE 1
TO: Honorable Mayor and Members of the City Council
PREPARED BY: Connor Stack, City Planner
ITEM:

ENVIRONMENTAL
DETERMINATION:

RECOMMENDATION:

DISCUSSION AND POSSIBLE INTRODUCTION OF AN
AMENDMENT TO WILLITS MUNICIPAL CODE TITLE 17 –
ZONING, ADDING CHAPTER 17.89, “ENTERTAINMENT
ZONES”, TO ESTABLISH REGULATIONS FOR THE

CREATION OF ENTERTAINMENT ZONES
The Ordinance is exempt from the requirements of the
California Environmental Quality Act (“CEQA”) pursuant to State CEQA Guidelines, as the Ordinance is not a “project” and has no potential to result in a direct or reasonably foreseeable indirect physical change to the environment.

Introduce an Ordinance adding Chapter 17.89 to the Willits Municipal Code to add regulations for Entertainment Zones.

BACKGROUND
In 2024, the California Legislature adopted Senate Bill 969, which allows local municipalities and counties to designate “entertainment zones”. An entertainment zone is a defined area where the open consumption of alcoholic beverages is allowed on public streets, sidewalks, or public rights-of-way during specified days and hours. SB 969 expanded upon a law that had previously applied only in the City and County of San Francisco (SB 76), to allow entertainment zones to be established in any jurisdiction in the state.

Key requirements of SB 969 include:
• Only licensed establishments within a Zone may sell alcohol for public consumption.
• Alcohol must be served in non-glass, non-metal containers. • No alcohol deliveries to consumers in the Zone.
• Cities must consult with law enforcement prior to designation.

Entertainment zones must be established through a local ordinance and follow the regulations established by the California Department of Alcoholic Beverage Control STAFF REPORT: ENTERTAINMENT ZONE
PAGE 2
(ABC). Eligible ABC licensees may participate in the entertainment zone by allowing their patrons to leave the premises with an open alcoholic beverage container for purposes of consumption within that entertainment zone. This is only allowed during the days and hours approved by the City Council. Alcoholic beverages purchased at the licensed premises may not leave the premises in an open glass or metal container. Participants cannot bring their own outside drinks; they must be purchased from participating businesses. The law requires collaboration with local law enforcement and a review of the entertainment zone every two years following its adoption.

The concept of establishing an Entertainment Zone in downtown Willits was initially suggested by the Willits Chamber of Commerce to the City Manager, who then recommended that the City Council consider the idea.

The concept of the Entertainment Zone and potential ordinance options were presented to the Willits City Council on August 27, 2025, at which time public input was received.

Following discussion, the Council directed staff to prepare a formal ordinance and agendize the item for further discussion and Council consideration.

DISCUSSION.

The proposed ordinance would add Chapter 17.89 – Entertainment Zones to the City Code, authorizing the City to designate specific areas in which public alcohol consumption may be permitted during City-approved events, subject to defined regulations and oversight.

Upon establishment of an Entertainment Zone by the City Council, members of the public may apply for permits through an administrative review process to utilize the zone for qualifying events. This ordinance establishes the regulatory framework for the creation and administration of Entertainment Zones.

Example Zone Locations: At the August 27 meeting, the Council provided input regarding the formation of an Entertainment Zone within the downtown area.

Attachment B depicts the initial proposed zone, which includes the public right-of-way and abutting sidewalks along Main Street between Wood Street and Commercial Street, and along East Commercial Street between Main Street and Humboldt Street. The City parking lot at East Van Lane and Schmidbauer Lane is also included within the proposed boundary.

Subsequently, staff received interest to consider expanding the potential zone to include businesses located along North Main Street, including those currently operating and those in the process of opening. The two maps below illustrate the originally proposed zone (left) and the updated potential Entertainment Zone boundary (right).

STAFF REPORT: ENTERTAINMENT ZONE
PAGE 3
Example Operational Requirements: To ensure that Entertainment Zones are managed safely and effectively, the following operational requirements may be applied to permitted events. These measures are designed to promote public safety, maintain compliance with state and local regulations, and provide clear expectations for event organizers.

1. City-issued zoning permit required for each event. A planned event like “First Friday” could be approved under one zoning permit.

2. Defined hours (e.g., Fridays 12–9 PM; Saturdays 12–9 PM; City approved festivals).

3. Boundaries clearly marked with signage, barriers, and staff checkpoints

4. Non-glass, non-metal containers only; branded wristbands or cups may be required for age verification.

5. ABC compliance measures

6. Security and post event cleanup plans tailored to each event STAFF REPORT: ENTERTAINMENT ZONE
PAGE 4
Entertainment Zone Management Plan: The Management Plan is intended to serve as a practical guide for all events utilizing an Entertainment Zone. It would outline the minimum elements that event organizers must address to ensure public safety, regulatory compliance, and effective communication with the community. The plan is intended to provide consistency across events while allowing flexibility for organizers to tailor details to their specific operations. Required elements may include:

1. Zone Operator designation with 24/7 contact;

2. Security and public safety plan (subject to FBPD review);

3. Trash and cleanup plan;

4. Boundary markings (signage, fencing, decals);

5. Procedures for age verification;

6. ABC compliance protocol;

7. Incident reporting procedures.

Public Survey Data: During open public events where the city held a booth and online through the Community Development Facebook page, a survey open to the public was given. The results of the questions addressing Entertainment Zones are provided as Attachment F.

RECOMMENDATION
Accept report and provide direction and feedback to staff regarding the development and implementation of an ordinance allowing Entertainment Zone(s) in the City of Willits pursuant to Senate Bill 969.

ATTACHMENTS
Attachment A: Draft Entertainment Zone Ordinance
Attachment B: Draft Downtown Entertainment Zone Boundaries Attachment C: Draft Entertainment Zone Management Plan
Attachment D: Senate Bill 969 Text
Attachment E: ABC FAQ
Attachment F: Public Survey Data
ORDINANCE NO. ________

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF WILLITS, CALIFORNIA, ADOPTING AN AMENDMENT TO TITLE 17 (ZONING) OF THE WILLITS MUNICIPAL CODE INCLUDING THE ADDITION OF CHAPTER 17.89 ENTERTAINMENT ZONES.

WHEREAS, Senate Bill 969 (SB 969), signed into law in 2024, authorizes cities and counties in California to establish "Entertainment Zones" in which patrons may consume alcoholic beverages in the public right-of-way under specified conditions; and WHEREAS, the City of Willits seeks to activate its downtown core, enhance community events, and support small businesses by allowing for regulated outdoor consumption of alcoholic beverages during City-approved special events; and
WHEREAS, the Department of Alcoholic Beverage Control (ABC) requires cities establishing Entertainment Zones to adhere to certain requirements, including consultation with law enforcement and ongoing review to ensure public safety; and WHEREAS, the City Council finds that this ordinance is consistent with the City’s General Plan, and Economic Development goals.

WHEREAS, the City Council finds and declares:

1. The ordinance is consistent with the City’s General Plan as it would promote economic development, activate Main Street as a vibrant commercial and cultural core of the city, and support community use of public space.

2. The ordinance would not result in risks to public health or safety as all events would be Cityapproved events with built-in revocation authority.

3. Approval of this Ordinance is categorically exempt from CEQA because:
a. It can be seen with certainty that there is no potential for significant environmental impact because the permitted activity is only temporary in nature. Exemption 15061(b)(3), and
b. It involves the operation or licensing of existing public rights-of-way involving negligible or no expansion of existing use. Exemption 15301(c).

NOW, THEREFORE, BE IT RESOLVED that the City Council does hereby authorize Section 1. The Recitals set forth above are true and correct and incorporated herein as findings.

Section 2. Chapter 17.89 titled “Entertainment Zones” is hereby added to Title 17 “Willits zoning ordinance” of the Willits Municipal Code as follows:

Chapter 17.89 – Entertainment Zones

17.89.010 – Purpose and Intent

17.89.020 – Definitions

17.89.030 – Establishment of Entertainment Zones

17.89.040 – ABC Compliance

17.89.050 – Management Plan Requirement

17.89.060 – Law Enforcement and Review

17.89.070 – Noncompliance and Enforcement

17.89.010 – PURPOSE AND INTENT
This chapter establishes regulations for the creation of Entertainment Zones pursuant to the authority granted under California Business & Professions Code § 25623, as amended by SB 969.

The purpose is to promote economic development, enhance community events, and allow the regulated consumption of alcoholic beverages in designated public areas during approved special events. The Willits Municipal Code authorizes the City to regulate the use of public rights-of-way and to require permits and conditions for temporary street closures, traffic control, and events.

17.89.020 – DEFINITIONS
For the purposes of this chapter:

A. “Entertainment Zone” or “Zone “means an area designated by resolution of the City Council where alcoholic beverages may be consumed in public rights-of-way during approved events.

B. “Licensed Premises” refers to an establishment licensed by the Department of Alcoholic Beverage Control (ABC) for the sale of alcoholic beverages for on-site or off-site consumption.

C. “Zone Operator” means the person or entity designated in the Entertainment Zone Management Plan responsible for compliance with this chapter and all applicable laws.

D. “Open Container” refers to any unsealed alcoholic beverage container in a non-glass, non-metal cup or receptacle.

17.89.030 – ESTABLISHMENT OF ENTERTAINMENT ZONES
A. The City Council may, by resolution, establish Entertainment Zones. The resolution shall specify:

1. Geographic boundaries of the Zone;

2. Authorized hours and days of operation;

3. Types of alcoholic beverages permitted;

4. Open Container requirements;

5. Identification mechanisms (e.g., wristbands, stamps) for verifying age compliance;

6. Special conditions or limitations deemed necessary for public health and safety.

B. Entertainment Zones shall only be active during City-authorized special events with an approved Zoning Permit with built in revocation authority.

C. Changes or alternative designated zones, boundaries, hours, or requirements may be adopted by future City Council resolution without amending this ordinance.

D: Prior to establishing a new or modifying an existing Entertainment Zone, the City shall provide notice to all businesses and residents within or adjacent to proposed Zone boundaries and hold a public hearing.

E. Any Entertainment Zones created will utilize existing infrastructure with no zoning or land use changes.

17.89.040 – ABC COMPLIANCE
A. Only ABC-Licensed Premises located within the boundaries of an Entertainment Zone may sell alcoholic beverages for off-site consumption in the Zone, subject to compliance with the following:
a. The type of alcohol provided for consumption in the Zone is authorized by the Resolution establishing the Zone.
b. Only specified beverage containers (no glass or metal) are allowed for on-the-go consumption; all containers must display the City or other approved event seal. c. Deliveries of alcoholic beverages to consumers located within the Entertainment Zone are prohibited, unless the delivery is made to a licensed private business or residential address within the Zone.
d. Patrons with Open Containers must exit Licensed Premises directly into the Entertainment Zone. Alcoholic beverages may not be consumed outside the designated boundaries or during unauthorized hours.
e. Otherwise comply with any applicable ABC requirement.

B. The Zone Operator shall be responsible for implementation of the measures outlined in the approved Management Plan submitted pursuant to Section 17.89.050.

C. Licensees must notify ABC and the City of their intent to participate in an established Entertainment Zone annually.

17.89.050 – MANAGEMENT PLAN REQUIREMENT
A. An approved Entertainment Zone Management Plan shall be required for each event and shall include:

1. Zone Operator designation with 24/7 contact;

2. Security and public safety plan (subject to Willits Police Department review);

3. Trash and cleanup plan;

4. Boundary markings (signage, fencing, decals);

5. Procedures for age verification;

6. ABC compliance protocol;

7. Incident reporting procedures.

B. No alcohol consumption may occur within an Entertainment Zone without a City approved Management Plan.

C. Event Organizers are responsible for costs related to signage, barriers, and compliance.

D. The Management Plan is subject to review and approval of the Community Development Director or his/her designee.

17.89.60 – LAW ENFORCEMENT AND REVIEW
A. Prior to establishing any Entertainment Zone, the Willits Police Department shall review the proposed Zone regarding public safety concerns, mitigation strategies, and proposed boundaries, hours, and event types.

B. Every two years, unless requested sooner by the Chief of Police, the City shall review the operation and impacts of each established Entertainment Zone in consultation with the Willits Police Department. Reports may be provided to ABC upon request.

17.89.70 – NONCOMPLIANCE AND ENFORCEMENT
A. Noncompliance with this Chapter or the approved Management Plan may lead to loss of the security deposit and could affect the Zone Operator’s eligibility to obtain a Zoning Permit to host any future event in the Entertainment Zone.

B. The City reserves the right to suspend or revoke the use of an Entertainment Zone at any time if deemed necessary to protect public health and safety.

C. The City reserves the right to suspend or revoke the use of an Entertainment Zone at any time if the event becomes noncompliant with the management plan.

Section 3. Severability. If any section, subsection, sentence, clause, or If any section, subsection, sentence, clause or phrase of this Ordinance is for any reason held by a court of competent jurisdiction to be invalid or unconstitutional, such decision shall not affect the validity of the remaining portions of the Ordinance. The City Council of the City of Willits hereby declares that it would have passed this Ordinance and each section, subsection, sentence, clause and phrase thereof irrespective of the fact that one or more sections, subsections, sentences, clauses or phrases may be held invalid or unconstitutional.

Section 4. Effective Date and Publication. This ordinance shall be in full force and effect from and after thirty (30) days after the date of its passage.

PASS, APPROVED AND ADOPTED, this ____ day of _____ 2026 ______________________________________
Tom Allman, Mayor
ATTEST:

I, Delores Peterson, City Clerk of the City of Willits, do hereby certify that the foregoing Resolution was duly and regularly passed, approved, and adopted by the City Council of the City of Willtis, California, at its regular meeting held on the ___________ day of ______ 2026, by the following vote.

AYES:

NOES:

ABSENT:
_______________________________________________________ Delores Peterson, City Clerk

City of Willits
Entertainment Zone Management Plan
To be completed and submitted as part of the Zoning Permit application

1. Event Information
Event Name: Event Date(s):

Event Hours (Start – End): Location / Zone Area:

Event Organizer / Organization:

Contact Name & Phone: Email Address:

2. Zone Operator Designation
Zone Operator Name: Cell Phone (24/7 Access):

Zone Operator Required Duties:
 Act as point of contact for City and emergency personnel  Be familiar with and ensure compliance with EZ regulations and event-specific conditions  Coordinate set-up, supervision, and breakdown

3. Alcohol Sales & Service
List of Participating Alcohol Vendors:

Type of Alcohol Allowed (e.g., Beer, Wine, Spirits)
ABC License Numbers:

4. Age Verification & Beverage Controls
 Wristband Required for 21+ Participants? ☐ Yes ☐ No
 Compostable Cups Used? ☐ Yes ☐ No
 Designated Alcohol Service Areas Marked? ☐ Yes ☐ No
 Alcohol Only Served by ABC-Licensed Vendors? ☐ Yes ☐ No  Prohibited Containers Enforced? (No glass or metal) ☐ Yes ☐ No  Will“No Alcohol Beyond This Point” signage be posted at all exits? ☐ Yes ☐ No  Will perimeter be marked with barriers or fencing? ☐ Yes ☐ No

5. Zone Boundaries & Signage
Attach a detailed site map showing:
 Zone perimeter
 Entry/exit points
 Vendor locations
 Restrooms,trash/recycling, stage areas

6. Security & Public Safety
Security Firm (if applicable): # of Security Personnel:
 WPD Coordination Confirmed? ☐ Yes ☐ No
 First Aid / EMS Available On-Site? ☐ Yes ☐ No
Attach:
 Security staffing plan if needed
 Crowd control measures if needed
 Emergency response protocol

7. Sanitation & Waste Management
 Trash/Recycling Stations Provided? ☐ Yes ☐ No
 Restroom Facilities Available? ☐ Yes ☐ No
 Post-Event Cleanup Plan:
 Cleanup Contractor (if applicable):

8. Community Notification & Access
 Nearby Businesses Notified of Event? ☐ Yes ☐ No
 ADA Accessibility Ensured? ☐ Yes ☐ No
 Noise or Street Closure Impacts Mitigated? ☐ Yes ☐ No

9. Incident Reporting & Enforcement
All incidents involving safety, alcohol violations, or disruptions must be:
 Reported to WPD within 24 hours
 Documented in an Incident Log

10. Special Event Procedures (include any additional event management procedures)

11. Acknowledgment & Signature
I certify that I have read and understand the requirements for operating within the Entertainment Zone and will ensure full compliance with the Willits Municipal Code, ABC regulations, and all event-specific conditions.

Signature of Organizer / Zone Lead: Date:

Reserved for City Use Only
Management Plan Reviewed and Approved By: _____________________Date:________________ Special Conditions

Frequently Asked Questions
Frequently asked questions about entertainment zones.

What is an entertainment zone?
An entertainment zone is a defined public area (e.g., public roadway, sidewalk, etc.) within a local jurisdiction that allows for the open consumption of specified alcoholic beverages during specified days and hours.

How are entertainment zones established?
Entertainment zones are established by a city, county, or city and county ordinance.

How does the establishment of an entertainment zone affect ABC licensees? Eligible ABC licensees may participate in the privileges associated with an entertainment zone by allowing their patrons to leave the premises with an open alcoholic beverage container for purposes of consumption within that entertainment zone.

What licensees may participate in an established entertainment zone? Unless statutory restrictions or certain operating conditions dictate otherwise, beer manufacturers, winegrowers, and on-sale licensees whose premises are located within the defined boundaries of an established entertainment zone are eligible to participate.

What do licensees need to do prior to participating in an entertainment zone? Licensees should ensure their license type is eligible and that the premises is located within the defined boundaries of the established entertainment zone.

Additionally, licensees must notify ABC of their intent to participate in an established entertainment zone annually.

Are there restrictions on the types of alcoholic beverages allowable within an entertainment zone?
The ordinance establishing an entertainment zone will specify which alcoholic beverages are allowable. Additionally, licensees may only sell or allow consumption of those alcoholic beverages specified by their license type.

Are there restrictions on the types of containers licensees use for purposes of participating in an established entertainment zone?
Yes. Alcoholic beverages purchased at the licensed premises may not leave the premises in an open glass or metal container.

Are there restrictions on the days and hours that licensees may participate in an established entertainment zone?
The ordinance establishing the entertainment zone will specify the days and hours of the entertainment zone. Participating licensees may only exercise their entertainment zone privileges during these specified days and hours and only if they do not conflict with any operating conditions that are contrary to the specified days and hours.

I have an operating condition that limits my sales and/or consumption of alcoholic beverages to 10:00 P.M. each day of the week. But the entertainment zone allows for consumption of alcoholic beverages until midnight. May I participate up until midnight due to the entertainment zone’s privileges? No. You must still abide by the operating condition which restricts the sales and/or consumption of alcoholic beverages at your premises to 10:00 P.M. You may be able to request a modification of your conditions. Please reach out to your local ABC office for additional information on that process.

I have an operating condition that prohibits me from selling alcoholic beverages for off-site consumption. Does this prohibit me from participating in an established entertainment zone?
No. An exception was provided in the new law which allows a licensee with an operating condition impacting their off-sale privileges to participate in an established entertainment zone. However, this exception only applies to the removal of open alcoholic beverage containers from the licensed premises for purposes of consumption within the entertainment zone.

May a participating licensee deliver alcoholic beverages to consumers located within the entertainment zone?
No. The sale and removal of alcoholic beverages for purposes of consumption within the established entertainment zone must occur at the participating licensed premises.

Survey Results
Q1: Q1:How Often do you currently visit downtown Willits (Main Street Area)? Q2:Do you Support the creation of an Entertainment District? Q3: What types of Activities would you most like to see in the Entertainment District? (Select all that apply.)
Q4: What concerns do you have about an Entertainment District? (Select all that apply.) Q5: What benefits do you think an Entertainment District could bring to Willits? (Select all that apply.)
Item No. 9a
Meeting Date: February 25, 2026

AGENDA SUMMARY REPORT
To: Honorable Mayor and Council Members
From: Manuel J. Orozco, Finance Director
Agenda Title: PRESENTATION OF AUDIT CONDUCTED BY MOSS, LEVY & HARTZHEIM REGARDING AUDITED FINANCIAL REPORT FOR FISCAL YEAR ENDING JUNE 30, 2024.

Type: Presentation Consent Regular Agenda Public Hearing Urgent Time: 15 minutes.

Summary of Request: The firm Moss, Levy & Hartzheim LLP issued an opinion on the City of Willits financial statements for the fiscal year ending June 30, 2024.

The Financial Report is presented in three sections: Independent Auditors Report, Management Discussion and Analysis and Financial Statements, including the notes to the Financial Statements. The Independent Auditor’s Report section discusses the standards that were used to formulate the basis of the Auditor’s Opinion. The Management Discussion and Analysis is part of the report where management provides an overview of the City’s financial performance over the previous year and its current financial condition.

Please read the Management Discussion and Analysis for an overview of the financial statements. The Notes to the Financial Statements are an integral part of understanding the financial statements.

Recommended Action: Accept the Financial Statements for the Fiscal Year Ending June 30, 2024.

Alternative(s): N/A
Fiscal Impact: None.

Personnel Impact: N/A
Identified City Council Conflict of Interest: None.
2021 Adopted Goals: The request conforms with the recommendation listed as Goal #1, Policy #1.4 under Administration…Provide the community with annual report on the use of increasing revenues related to Measure K, cannabis revenues and tourism revenues (annual City reporting).

California Environmental Quality Act: Does not apply.

This Item Relates to the following General Plan Element : N/A Land Use Circulation Conservation and Open Space Noise Housing Public Services and Facilities, Parks and Recreation Economic Development
Reviewed by: Interim City Manager City Attorney City Clerk Finance Director Human Resources Council Action: Approved Denied Other: ________________________________________ Records: Agreement Resolution #_________ Ordinance #_________ Other _________

CITY OF WILLITS
Annual Financial Report
Fiscal Year Ended June 30, 2024

CITY OF WILLITS

ANNUAL FINANCIAL REPORT
Fiscal Year Ended June 30, 2024

TABLE OF CONTENTS
I. FINANCIAL SECTION
A. Independent Auditor’s Report ................................................................................................ 1 B. Management’s Discussion and Analysis ................................................................................ 4 C. Basic Financial Statements:

Government-wide Financial Statements:

Statement of Net Position ............................................................................................. 17 Statement of Activities ................................................................................................. 18 Fund Financial Statements:

Governmental Funds:

Balance Sheet ......................................................................................................... 20 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position ......................................................................... 21 Statement of Revenues, Expenditures, and Changes in Fund Balances ................ 22 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ......................................................................................................... 23 Proprietary Funds:

Statement of Net Position ...................................................................................... 24 Statement of Revenues, Expenses, and Changes in Net Position .......................... 25 Statement of Cash Flows ...................................................................................... 26 Fiduciary Funds:

Statement of Fiduciary Net Position ...................................................................... 27 Statement of Changes in Fiduciary Net Position ................................................... 28 Notes to Basic Financial Statements ................................................................................. 29 D. Required Supplementary Information:

General Fund – Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual ........................................................................ 55 Transportation Sales Tax Special Revenue Fund – Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual ....................... 56 Measure K Sales Tax Special Revenue Fund – Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual ....................... 57 Schedule of the City’s Proportionate Share of the Net Pension Liability ......................... 58 Schedule of Pension Contributions ................................................................................... 59 E. Other Supplemental Information
Capital Outlay Capital Projects Fund– Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual ..................................................... 61

CITY OF WILLITS

ANNUAL FINANCIAL REPORT
Fiscal Year Ended June 30, 2024

TABLE OF CONTENTS
II. FINANCIAL SECTION (Continued)
Nonmajor Governmental Funds
Description of Nonmajor Governmental Funds ........................................................... 63 Combining Balance Sheet ............................................................................................ 64 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ....................................................................................................... 66 Schedules of Revenues, Expenditures, and Changes in Fund Balances- Budget and Actual:

Gas Tax Special Revenue Fund ............................................................................. 68 LEAA Program Special Revenue Fund ................................................................. 69 Narcotic Forfeiture Special Revenue Fund ............................................................ 70 H&S Restitution Special Revenue Fund ................................................................ 71 Nonmajor Proprietary Funds
Description of Nonmajor Proprietary Funds................................................................ 72 Combining Statement of Net Position.......................................................................... 73 Combining Statement of Revenues, Expenses, and Changes in Net Position..............74 Combining Statement of Cash Flows........................................................................... 75 OFFICES: BEVERLY HILLS ∙ CULVER CITY ∙ SANTA MARIA
MEMBER AMERICAN INSTITUTE OF C.P.A.’S ∙ CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS ∙ CALIFORNIA ASSOCIATION OF SCHOOL

BUSINESS OFFICIALS
1 PARTNERS COMMERCIAL ACCOUNTING & TAX SERVICES GOVERNMENTAL AUDIT SERVICES CRAIG A HARTZHEIM, CPA 8383 WILSHIRE BLVD., SUITE 800 5800 E. HANNUM, SUITE E HADLEY Y HUI, CPA BEVERLY HILLS, CA 90210 CULVER CITY, CA 90230 ADAM V GUISE, CPA TEL: 310.670.2745 TEL: 310.670.2745
TRAVIS J HOLE, CPA FAX: 310.670.1689 FAX: 310.670.1689
WILSON LAM, CPA www.mlhcpas.com www.mlhcpas.com

INDEPENDENT AUDITOR’S REPORT
The Members of the City Council of the
City of Willits
Willits, California
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Willits, California as of and for the fiscal year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents.

Opinions
In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities, the general fund, and the aggregate remaining fund information of the City of Willits, as of June 30, 2024, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.

In our opinion, except for the possible effects of the matter described in the Basis for Qualified and Unmodified Opinions section of our report, the accompanying financial statements present fairly, in all material respects, the respective financial position of the business-type activities and the Water, Wastewater, and Airport Enterprise Funds of the City of Willits, as of June 30, 2024, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

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

We were unable to obtain sufficient appropriate audit evidence supporting the cash receipts of the business-type activities and the Water, Wastewater, and Airport Enterprise Funds because the City's records regarding cash receipts were inadequate and lacking supporting documentation. Consequently, we were unable to determine whether any adjustments to these amounts were necessary. 2 Responsibilities 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; this includes 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.

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 the City’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.

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 opinions.

Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards 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 generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.

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

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4 through 15, Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget to Actual – General Fund, and the Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget to Actual – Sales Tax Special Revenue Fund, Schedule of Changes in the Net Pension Liability and Related Ratios, and Schedule of Pension Contributions on pages 57 through 61 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting 3 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 auditing standards generally accepted in the United States of America, 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.

Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Willits’s basic financial statements. The Budgetary Comparison Schedules for the Capital Outlay Major Capital Projects Fund and Nonmajor Governmental Funds; the Combining Financial Statements for the Nonmajor Governmental Funds, and the Nonmajor Enterprise Funds listed in the table of contents are presented for purposes of additional analysis and are not required parts of the basic financial statements.

The Budgetary Comparison Schedules for the Capital Outlay Major Capital Projects Fund and Nonmajor Governmental Funds; the Combining Financial Statements for the Nonmajor Governmental Funds, and the Nonmajor Enterprise Funds are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in our 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 financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 20, 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 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 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.

Moss, Levy & Hartzheim, LLP
Culver City, California
February 20, 2026

CITY OF WILLITS
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
4 This discussion and analysis provide an overview of the City of Willits’ financial performance for the fiscal year ended June 30, 2024. This report has been prepared in accordance with Accounting Principles Generally Accepted in the United States of America (GAAP) as established by the Governmental Accounting Standard Board (GASB). We encourage our readers to consider this information in conjunction with the information provided in the accompanying basic financial statements and notes.

FINANCIAL HIGHLIGHTS
Financial highlights of the fiscal year ending June 30, 2024, include the following:

Government-wide:
 The City’s total net position was $31,567,386 as of June 30, 2024. This was a decrease of $3,097,304 or 9% from the prior fiscal year's restated beginning net position of $34,664,690.  Of this total, $6,447,418 was governmental net position (a decrease of $871,216) and $25,119,968 was business-type net position (a decrease of $2,226,088).  Governmentwide primary government revenues were $8,695,696 and were $37,823 or less than 1% lower than the prior fiscal year ($8,733,519). They include program revenues of $4,814,169 and general revenues and transfers of $3,881,527.
 Governmentwide primary government expenses were $9,566,912 and were $3,071,490 or 47% more than the prior fiscal year ($6,495,422) , driven predominantly by General Government, Public Safety, and Public Works.
 Business-type revenues were $7,172,583 including transfers and were $108,727 or 2% more than the prior fiscal year ($7,063,856). They include program revenues of $6,792,045 and general revenues and transfers of $380,538.
 Business-type expenses were $9,398,671 and were $2,442,659 or 35% more than the prior fiscal year ($6,956,012), with Water and Sewer operations constituting the largest segments.

Fund Level:
 Governmental fund balances decreased by $1,643,425 or 18% in fiscal year 2024, reporting a combined ending fund balance of $7,514,005 compared to a restated beginning balance of $9,157,430.
 Governmental fund revenues were $8,331,124 in fiscal year 2024. This represents a decrease of $376,542 or 4% from the prior year's revenues of $8,707,666.  Governmental fund expenditures were $10,339,121, representing an increase of $350,634 or 4% from the prior year's total of $9,988,487.
 General Fund revenues were $5,287,511 in 2024, representing a decrease from the prior year's $6,831,067. This decrease is primarily attributable to the structural reclassification of Measure K revenues into a separate fund.
 General Fund expenditures were $7,099,943, an increase of $624,791 or 10% from the prior year's $6,475,152.
 General Fund balance was $484,943 as of June 30, 2024, a decrease of $2,307,716 from its restated beginning balance of $2,792,659. When comparing the General Fund to the 2023 reported ending balance of $5,604,343, it is critical to note that the 2023 figures included Measure K revenues and reserves. For fiscal year 2024, the City reclassified these major sales tax revenues, separating the Measure K Sales Tax into its own distinct special revenue fund. This restructuring accounts for the significant change in the General Fund's standalone balance.  Measure K Sales Tax Fund, reported independently for the first time in 2024, ended the year with a strong balance of $4,655,821, generated largely from $1,368,302 in direct sales and use tax revenues during the year.
 Transportation Sales Tax Fund reported an ending fund balance of $2,259,753, representing a decrease of $205,544 from the year's restated beginning balance.  Proprietary (Enterprise) Funds: At the fund level, the Water Fund's net position decreased by $754,848 to end at $15,033,139 (compared to $15,709,679 in 2023). The Sewer Fund's net position decreased by $1,174,911 to end at $10,974,507 (compared to $11,959,848 in 2023).

CITY OF WILLITS
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
5 OVERVIEW OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT The financial section of this report consists of five parts.  Independent Auditor's Report
 Management Discussion and Analysis (Unaudited)
 Basic Financial Statements, which include: Government-Wide Financial Statements, Fund Financial Statements and Notes to Basic Financial Statements  Required Supplementary Information (Unaudited)
 Supplementary Information, which includes Combining Fund Statements The Statement of Net Position and Statement of Activities provide information about the activities of the City, presenting an aggregate view of the City’s finances. The basic financial statements also include notes explaining pertinent information in the financial statements and provide more detailed data.

The Basic Financial Statements for the District are presented as "Government-Wide" and Governmental or Enterprise Fund financial statements. The chart below provides an overview of the major features of the financial statements.

The Government-Wide financial statements provide a comprehensive, long-term view of the City’s entire operations using full accrual accounting, which recognizes all assets, liabilities, revenues, and expenses regardless of when cash changes hands.

In contrast, the fund financial statements focus on specific activities and operate differently depending on the fund type. Governmental fund statements use modified accrual accounting to measure short-term financial resources, reporting only current assets and liabilities, and tracking near-term inflows and outflows without including capital assets or long-term debt.

Proprietary fund statements, however, operate similarly to private businesses and the government-wide statements, utilizing full accrual accounting to report both short- and long-term financial and capital information for the City's enterprise activities, such as the water and wastewater systems.

Go vernmental F unds P ro prietary F unds
Entire City government The activities of the City that are not proprietary or fiduciary, such
as police, fire, and parks
Activities the City operates similar
to private businesses: such as
water and wastewater systems.

Statement of net position Balance sheet Statement of net position Statement of activities Statement of revenues,
expenditures, and changes in fund
balances
Statement of revenues expenses,
and changes in net position
Statement of cash flows
Accrual accounting and economic
resources measurement focus
M odified accrual accounting and
current financial resources
measurement focus
Accrual accounting and economic
resources measurement focus
All revenues and expenses during
year, regardless of when cash is
received or paid
Revenues for which cash is
received during or soon after the
end of the year; expenditures when
goods or services have been
received and payment is due during
the fiscal year or soon thereafter
All revenues and expenses during
year, regardless of when cash is
received or paid
T ype o f
inflo w/ o utflo w
info rmatio n
A cco unting basis
and measurement
fo cus
F und Statements
Sco pe
R equired financial
statements
Major Features of City of Willits' Government-wide and Fund Financial Statements F igure A
T ype o f
asset/ liability
info rmatio n
All assets and liabilities, both
financial and capital, and short-term
and long-term
Only assets expected to be used
up and liabilities that come due
during the fiscal year or soon
thereafter; no capital assets or
long-term liabilities included
All assets and liabilities, both
financial and capital, and shortterm and long-term
Go vernment-wide Statements

CITY OF WILLITS
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
6 Government-wide Financial Statements
The Government-wide financial statements provide a longer-term view of the City’s activities as a whole and comprise the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the City as a whole, including all of its capital assets and long-term liabilities on the full accrual basis, similar to that used by corporations.

The Statement of Activities provides information about all the City’s revenues and all of its expenses, also on the full accrual basis, with the emphasis on measuring net revenues or expenses of each of the City’s programs. The Statement of Activities explains in detail the change in net positions for the fiscal year.

All of the City’s activities are grouped into governmental activities and business-type activities, as explained below. The amounts in the Statement of Net Position and the Statement of Activities are separated into governmental activities and business-type activities in order to provide a summary of these two activities for the City as a whole.

Government-wide financial statements are prepared on the accrual basis, which mean they measure the flow of all economic resources of the City as a whole.

The Statement of Net Position and the Statement of Activities present information about the following:

Governmental Activities – All of the City’s basic services are considered to be governmental activities. These services are supported by the general City revenues such as taxes, and by specific program revenues such as user fees and charges.

Business-type Activities – The City’s enterprise activities consist of water, wastewater, solid waste and airport are reported in this area. Unlike governmental services, these services are supported by charges paid by users based on the amount of service they use.

Fund Financial Statements
The fund financial statements report on the City’s operations in more detail than the Government-wide statements and focus primarily on the short-term activities of the City’s General Fund and other governmental funds. The fund financial statements measure only current revenues and expenditures and fund balances; they exclude capital assets, long-term debt, and other long-term amounts.

The fund financial statements provide detailed information about each of the City’s most significant funds, called major funds. Major funds account for the major financial activities of the City and are presented individually, while the activities of non-major funds are presented in summary, with subordinate schedules presenting the detail for each of these other funds. The concept of major funds, and the determination of which funds are major, was established by the Governmental Accounting Standards Board (GASB) Statement No. 34 and replaces the concept of combining like funds and presenting them in total. Instead, each major fund is presented individually, with all non-major funds summarized and presented only in a single column. Subordinate schedules present detail of these non-major funds. Major funds present the major activities of the City for the fiscal year and may change from year to year as a result of changes in the pattern of the City’s activities.

The fund statements report on four major governmental funds: the General Fund, Sales Tax Special Revenue Fund, Measure K Sales Tax Special Revenue Fund and Capital Outlay Capital Projects.

The major business-type or enterprise funds are Water and Wastewater (Sewer) and two non-major enterprise funds.

Fund financial statements include governmental and proprietary funds as discussed below.

Governmental fund financial statements are prepared on the modified accrual basis, which means they measure only current financial resources and uses. Capital assets and other long-lived assets, along with

CITY OF WILLITS
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
7 long-term liabilities, are not presented in the governmental fund financial statements.

Proprietary fund financial statements are prepared on the full accrual basis and include all assets and liabilities, current and long-term.

FINANCIAL ACTIVITIES OF THE CITY AS A WHOLE
This analysis focuses on the net positions of the City as a whole. Table 1 below is a summary of the Statement of Net Position for the City as a whole combining the governmental and business-type activities.

GOVERNMENTAL ACTIVITIES
Tables 2 and 3 below focus on the City’s Governmental Statement of Net Position and Statements of Activities. 2024 2023 Dollar
Change
Percent
Change
Assets
Cash and investments $ 14,701,081 $ 16,621,661 $ (1,920,580) -12% Other assets 2,735,637 3,136,136 (400,499) -13%
Capital assets, net 44,658,815 46,580,122 (1,921,307) -4% Total Assets $ 62,095,533 $ 66,337,919 $ (4,242,386) -6% Deferred Outflows of Resources
Pension related $ 4,413,880 $ 4,585,324 $ (171,444) -4% Total Deferred Outflows $ 4,413,880 $ 4,585,324 $ (171,444) -4% Liabilities
Long term liabilities $ 33,087,563 $ 32,951,644 $ 135,919 0% Other liabilities 1,149,415 2,058,739 (909,324) -44%
Total Liabilities $ 34,236,978 $ 35,010,383 $ (773,405) -2% Deferred Inflows of Resources
Pension related $ 705,049 $ 1,056,130 $ (351,081) -33%
Total Deferred Inflows $ 705,049 $ 1,056,130 $ (351,081) -33% Net Position
Net investment in capital assets $ 24,537,597 $ 26,260,180 $ (1,722,583) -7% Restricted 2,916,896 3,003,076 (86,180) -3%
Unrestricted 4,112,893 5,593,474 (1,480,581) -26%
Total Net Position 31,567,386 $ $ 34,856,730 $ (3,289,344) -9% 2024 2023
Assets
Cash and investments $ 4,840,204 $ 6,594,574 $ (1,754,370) -27% Other assets 3,214,739 2,973,088 241,651 8%
Capital assets, net 5,462,908 5,397,416 65,492 1%
Total Assets 13,517,851 14,965,078 (1,447,227) -10%
Deferred Outflows of Resources
Pension related 3,452,689 3,586,798 (134,109) -4%
Total Deferred Outflows 3,452,689 3,586,798 (134,109) -4% Liabilities
Long term liabilities 9,190,973 8,936,134 254,839 3%
Other liabilities 780,635 1,035,930 (255,295) -25%
Total Liabilities 9,971,608 9,972,064 (456) 0%
Deferred Inflows of Resources
Pension related 551,514 826,141 (274,627) -33%
Total Deferred Inflows 551,514 826,141 (274,627) -33%
Net Position
Net investment in capital assets 5,462,908 5,397,416 65,492 1% Restricted 2,916,896 3,003,076 (86,180) -3%
Unrestricted (1,932,386) (646,821) (1,285,565) 199%
Total Net Position $ 6,447,418 $ 7,753,671 $ (1,306,253) -17% Dollar Change
Percent
Change

CITY OF WILLITS
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
8 The City’s governmental net position amounted to $ 6,447,418 as of June 30, 2024, a decrease of $1,306,253 or 17% over 2023. The City’s net position as of June 30, 2024, comprised the following:

Cash and investments comprised $4,840,204. Substantially all of these amounts were held in shortterm investments in government securities, as detailed in Note 3 to the financial statements Other assets comprised $1,304,992 in accounts receivable, $225,481 of notes receivable, $1,371,094 due from other funds, and $313,172 of inventory totaling $3,214,739.

Capital assets of $5,462,908, net of accumulated depreciation, which included all the City’s capital assets used in governmental activities.

Current liabilities, including accounts payable, deposits, and other amounts due currently, total $780,635.

Long-term liabilities of $9,190,973. The liability is primarily related to the City’s Net Pension Liabilities and compensated absences.

Net investment in capital assets of $5,462,908, representing the City’s investment in capital assets used in governmental activities, net of accumulated depreciation and amounts borrowed to finance those capital assets.

Unrestricted net position, the part of net position that can be used to finance day-to-day operations without constraints net of debt covenants or other legal requirements or restrictions, was $(1,932,386) as of the June 30, 2024 fiscal year, a decrease of $1,285,565 from the prior fiscal year 2023.

The Statement of Activities presents program revenues, expenses, and general revenues. Program revenues are charges for services and grants/contributions that are generally restricted to funding all or a portion of expenses for specific services. Table 3 below summarizes the governmental revenues by program, general and transfers, and expenses.
2024 2023
Expenses
General Government $ 3,452,469 $ 1,326,066 $ 2,126,403 160% Public Safety 2,829,058 2,238,397 590,661 26%
Community Development 817,445 1,093,302 (275,857) -25%
Public Works 2,162,930 1,203,480 959,450 80%
Parks and Recreation 305,010 338,603 (33,593) -10%
Planning 295,574 (295,574) -100%
Total Expenses 9,566,912 6,495,422 3,071,490 47%
Revenues
Program revenues
Charges for services 1,146,257 663,458 482,799 73%
Operating grants and contributions 2,199,346 916,571 1,282,775 140% Capital grants and contributions 1,468,566 1,715,915 (247,349) -14% Total program revenues 4,814,169 3,295,944 1,518,225 46% General revenues and transfers
Taxes 3,077,035 4,559,446 (1,482,411) -33%
Use of money and property 183,759 84,683 99,076 117%
Other revenue 256,161 767,593 (511,432) -67%
Transfers 364,572 25,853 338,719 1310%
Total general revenues and transfers 3,881,527 5,437,575 (1,556,048) -29% Total Revenues and Transfers 8,695,696 8,733,519 (37,823) 0% Change in Net Position (871,216) 2,238,097 (3,109,313) -139% Net Position - Beginning of Fiscal Year 7,753,671 5,515,574 2,238,097 41% Prior Period Adjustments (435,037) (435,037)
Net Position - Beginning of Fiscal Year, Restated 7,318,634 5,515,574 1,803,060 33% Net Position - End of Fiscal Year $ 6,447,418 $ 7,753,671 $ (1,306,253) -17% Dollar
Change
Percent
Change

CITY OF WILLITS
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
9 As Table 3 shows, $4,814,169, or 55%, of the City’s fiscal year 2024 governmental revenue came from program revenues, and $3,881,527, or 45%, came from general revenues such as taxes, interest, and transfers. This represents a significant shift from general tax revenues to program revenues compared to the prior year, largely because Measure K was pulled out of the General Fund and established as its own special revenue fund; consequently, this dedicated sales tax revenue is now reported as program income rather than general revenue.

Program revenues were composed of charges for services of $1,146,257, which included permit revenues, fees, and charges; $2,199,346 of operating grants and contributions; and $1,468,566 of capital grants and contributions. General revenues are not allocable to programs and are used to pay for the net cost of governmental services. When evaluating the net cost of these services and the significant year-over-year increase in total expenses, it is critical to note that government-wide expenditures are reported on a full accrual basis and can be widely affected by GASB 68 actuarial adjustments. These annual non-cash pension expense calculations can cause substantial volatility in reported departmental expenses that operate completely independently of the City's actual day-to-day operational spending.

Governmental Revenues
Governmental revenues are primarily from taxes ($3,077,035, or 35%), operating grants and contributions ($2,199,346, or 25%), capital grants and contributions ($1,468,566, or 17%), and charges for services ($1,146,257, or 13%). When comparing 2024 to 2023, there is a significant shift from general tax revenues to program revenues. This variance is heavily driven by the fact that Measure K was pulled out of the General Fund and established as its own special revenue fund. Consequently, this dedicated sales tax revenue no longer shows up as general revenue, but is instead reported as program income.

Governmental Expenses
Governmental expenses include current fiscal year expenses and depreciation, but do not include capital outlays, which are added to the City’s capital assets. Public safety, public works, and general government make up 88% of the total governmental expenses. Total expenses of $9,566,912 were driven predominantly by General Government ($3,452,469), Public Safety ($2,829,058), and Public Works ($2,162,930).

When analyzing the significant increase in expenses from the prior year, it is critical to note that governmentwide expenditures are reported on a full accrual basis and can be widely affected by GASB 68 actuarial adjustments. The annual non-cash pension expense adjustments calculated by actuaries can cause substantial volatility in reported departmental expenses (such as the increases seen in General Government and Public Works) that operate completely independently of the City's actual day-to-day operational spending.

CITY OF WILLITS
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
10 BUSINESS-TYPE ACTIVITIES
The Statement of Net Position and Statement of Activities present a summary of the City’s Business-type activities that are composed of the City’s enterprise funds. In Table 4 below, the net position of business-type activities decreased by $1,983,091, or 7%, from the prior fiscal year ending balance.

From the Statement of Activities, Table 5 summarizes the changes in net position for all the enterprise funds. Program revenues were $6,792,045 for the fiscal year 2024, which is $204,303 less than the prior fiscal year. The program revenues make up 95% of the total revenues available to fund the enterprises. The expenses for fiscal year 2024 were $9,398,671, which was $2,442,659, or 35%, more than the prior fiscal year.
2024 2023
Assets
Current Assets $ 9,381,775 $ 11,157,144 $ (1,775,369) -16% Capital assets, net 39,195,907 41,182,706 (1,986,799) -5% Total Assets 48,577,682 52,339,850 (3,762,168) -7%
Deferred Outflows of Resources
Pension related 961,191 998,526 (37,335) -4%
Total Deferred Outflows 961,191 998,526 (37,335) -4%
Liabilities
Long term liabilities 21,685,364 23,444,484 (1,759,120) -8% Current liabilities 2,580,006 2,560,844 19,162 1%
Total Liabilities 24,265,370 26,005,328 (1,739,958) -7% Deferred Inflows of Resources
Pension related 153,535 229,989 (76,454) -33%
Total Deferred Inflows 153,535 229,989 (76,454) -33%
Net Position
Net investment in capital assets 19,074,689 20,862,764 (1,788,075) -9% Unrestricted 6,045,279 6,240,295 (195,016) -3%
Total Net Position $ 25,119,968 $ 27,103,059 $ (1,983,091) -7% Dollar
Change
Percent
Change

CITY OF WILLITS
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
11 The Sewer Fund operating revenues decreased by $396,561, or 10%, in fiscal year 2024 and operating expenses increased by $1,445,144, or 49%, resulting in a net operating loss of $943,312 for fiscal year 2024. Most of the increase in expenses is related to operations, materials and supplies, and non-cash pension adjustments. The fund's net position decreased by $1,174,911 to a new total of $10,974,507. Of this amount, $6,572,179 was net investment in capital assets and $4,402,328 was unrestricted.

The Water Fund operating revenues increased by $143,364, or 5%, in fiscal year 2024. Operating expenses increased by $1,276,931, or 43%, in fiscal year 2024, resulting in an operating loss of $1,088,729. The fund's net position decreased by $754,848 in the fiscal year 2024. As of June 30, 2024, the fund's net position was $15,033,139, of which $11,380,283 was net investment in capital assets, and $3,652,856 was unrestricted. 2024 2023
Expenses
Water 4,294,452 $ 2,978,401 $ 1,316,051 $ 44%
Wastewater 4,642,553 3,550,081 1,092,472 31%
Solid Waste 179,231 155,986 23,245 n/a
Airport 282,435 271,544 10,891 4%
Total Expenses 6,956,012 9,398,671 2,442,659 35%
Revenues
Program revenues
Charges for services 6,792,045 6,995,670 (203,625) -3%
Operating grants and contributions 678 (678) -100%
Total program revenues 6,996,348 6,792,045 (204,303) -3% General revenues and transfers
Use of money and property 284,357 93,361 190,996 205%
Other revenue 460,753 460,753 #DIV/0!
Transfers (364,572) (25,853) (338,719) 1310%
Total general revenues and transfers 67,508 380,538 313,030 464% Total Revenues and Transfers 7,063,856 7,172,583 108,727 2% Change in Net Position 107,844 (2,226,088) (2,333,932) -2164% Net Position - Beginning of Fiscal Year 26,995,215 27,103,059 107,844 0% Prior Period Adjustments 242,997 242,997 Net Position - End of Fiscal Year $ 27,103,059 25,119,968 $ (1,983,091) $ -7% Dollar
Change
Percent
Change

CITY OF WILLITS
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
12 ANALYSIS OF GOVERNMENTAL FUNDS
From the Fund Statement of Revenues, Expenditures, and Changes in Fund Balance, Table 6 below, summarizes the activity for the General Fund and other governmental funds. The revenues and expenditures are on a modified accrual basis and include capital outlay expenditures.

The General Fund revenues of $5,287,511 decreased by $1,543,556 from the prior fiscal year. This change is entirely structural and planned. In 2023, Measure K revenues were grouped within the General Fund. For 2024, the City recognized these revenues in their own distinct special revenue fund, shifting the associated tax revenue from the General Fund column into the "Other Governmental Funds" column.

General Fund expenditures were $7,099,943, an increase of $624,791 or 10%, from the prior year. This expenditure increase was mainly driven by higher General Government operational costs.

As of June 30, 2024, the General Fund's fund balance totaled $484,943. Following the structural separation of Measure K, the unassigned portion of the General Fund Balance was $171,771.

The Other Governmental funds include the newly separated Measure K Sales Tax fund, the Transportation Sales Tax fund, the Capital Outlay fund, and the Gas Tax fund, which collectively account for major dedicated capital expenditures, maintenance, rehabilitation, reconstruction, and construction of City streets and infrastructure.
2024 2023 2024 2023 2024 2023
Revenue
Taxes $ 3,077,035 $ 4,559,446 $ 2,261,194 $ 882,658 $ 5,338,229 $ 5,442,104 Licenses and Permits 79,461 97,999 79,461 97,999
Interest 112,968 33,774 70,791 50,909 183,759 84,683
Charges for Services 1,087,088 653,683 59,169 9,775 1,146,257 663,458 Intergovernmental 831,044 816,571 575,674 933,257 1,406,718 1,749,828 Other 99,915 669,594 76,785 176,700 669,594
Total Revenues 5,287,511 6,831,067 3,043,613 1,876,599 8,331,124 8,707,666 Expenses
Current:

General Government 2,949,570 2,008,717 7,500 2,949,570 2,016,217 Planning 295,574 - 295,574
Public Safety 2,624,710 2,984,449 27,339 65,481 2,652,049 3,049,930 Public Works 342,724 224,507 1,143,982 978,973 1,486,706 1,203,480 Parks & Recreation 305,010 338,603 305,010 338,603
Community Development 799,059 623,302 18,386 470,000 817,445 1,093,302 Capital Outlay 78,870 2,049,471 1,991,381 2,128,341 1,991,381 Total Expenditures 7,099,943 6,475,152 3,239,178 3,513,335 10,339,121 9,988,487 (1,812,432) 355,915 (195,565) (1,636,736) (2,007,997) (1,280,821) Other Financing Sources (Uses)
Transfers In 224,846 41,722 1,393,797 1,398,649 1,618,643 1,440,371 Transfers Out (720,130) (533,941) (1,414,518) (1,254,071) (1,414,518) Total Other Financing Sources
(Uses) (495,284) 41,722 859,856 (15,869) 364,572 25,853 (2,307,716) 397,637 664,291 (1,652,605) (1,643,425) (1,254,968) 2,316,824 5,206,706 6,214,908 4,579,994 8,531,732 9,786,700 Prior Period Adjustments 475,836 149,863 625,699 - $ 484,944 $ 5,604,343 $ 7,029,062 $ 2,927,389 $ 7,514,006 $ 8,531,732 General Fund Other Governmental Funds Total Governmental Funds Fund Balances, End of Year
Fund Balances, Beginning of Year
Net Change in Fund Balances
Excess (Deficiency) of Revenues
over Expenditures

CITY OF WILLITS
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
13 CAPITAL ASSETS
GASB Statement No. 34 required the City to record all its capital assets including infrastructure, which was not recorded prior to GASB Statement No. 34. Infrastructure includes roads, bridges, signals, and similar assets used by the entire population.

In fiscal year 2024, the City reported the cost of all its infrastructure assets and computed the amounts of accumulated depreciation for these assets based on their original acquisition dates. At the end of fiscal year 2024, the cost of infrastructure and other capital assets recorded on the City’s financial statements is as shown in Table 7 below.

Details on capital assets, current fiscal year additions and construction in progress can be found in the Notes under Note 5. The City depreciates all its capital assets over their estimated useful lives, as required by GASB Statement No. 34. The purpose of depreciation is to spread the cost of a capital asset over the years of its useful life so that an allocable portion of the cost of the asset is borne by all users. Additional information on depreciable lives may be found in the Notes to the financial statements.

LONG TERM DEBT AND LIABILITIES
The City issues debt financing for capital improvements primarily for water and wastewater enterprises. The long-term liabilities are employee compensated absences, Net Pension from CalPERS and Landfill Post-Closure costs. The City’s debt issues and Landfill costs are discussed in detail in Note 7 of the financial statements. The Pension liabilities are discussed in Note 12.

The City's long-term debt and liability balances as of June 30 were as follows:
2024 2023 2024 2023 2024 2023
Land $ 150,963 $ 150,963 $ 1,804,213 $ 1,804,213 $ 1,955,176 $ 1,955,176 Buildings and improvements 1,938,567 1,938,567 8,965,632 8,945,492 10,904,199 10,884,059 Machinery and Equipment 2,150,242 2,150,242 10,500,825 10,555,553 12,651,067 12,705,795 Infrastructure 3,384,023 2,889,725 48,586,083 47,255,228 51,970,106 50,144,953 Construction in progress 820,955 2,244,131 108,864 1,490,857 929,819 3,734,988 Less : Accumulated Depreciation (2,981,842) (3,976,212) (30,769,710) (28,868,637) (33,751,552) (32,844,849) Total $ 5,462,908 $ 5,397,416 $ 39,195,907 $ 41,182,706 $ 44,658,815 $ 46,580,122 Governmental Activities Business Type Activities Total
2024 2023 2024 2023 2024 2023
Compensated Absences $ 667,407 $ 479,393 $ 214,484 $ 73,477 $ 881,891 $ 552,870 Net Pension Liability 8,763,263 8,456,741 2,439,599 2,146,964 11,202,862 10,603,705 Total Pension and Leave Liability 9,430,670 8,936,134 2,654,083 2,220,441 12,084,753 11,156,575 2012 Safe Drinking Water State Revolving Fund 2,224,297 2,330,216 2,224,297 2,330,216 2015 Wastewater Tax Compliance Certificates 2,037,505 2,224,134 2,037,505 2,224,134 2020 Wastewater Refunding Bonds 15,340,000 15,545,000 15,340,000 15,545,000 Total Bond and Loan Liabitlties 19,601,802 20,099,350 19,601,802 20,099,350 Landfill Post- Closure costs 881,592 881,592 881,592 881,592 Total Long-Term Liabilities $ 9,430,670 $ 8,936,134 $ 23,137,477 $ 23,201,383 $ 32,568,147 $ 32,137,517 Governmental Activities Business Type Activities Total

CITY OF WILLITS
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
14 Total long-term debt and liabilities for the City experienced a marginal net increase of $135,921 during the fiscal year. This overall change was composed of a $391,855 increase in the City's combined net pension liability and a $260,852 increase in compensated absences, which were substantially offset by decreases in outstanding debt of $516,786 resulting from scheduled principal repayments and premium amortization. The City successfully made all scheduled repayments on its current debt obligations during the year.

ECONOMIC CONDITION, OUTLOOK, AND ACTIVITY
The passing of Measure K has continued to play a vital role in stabilizing the City’s finances and addressing deferred maintenance. While the overall Financial Position of the City decreased by $3,097,304 in 2024 (prior to restatement adjustments), a major financial milestone reflected in this year's report is the structural isolation of the Measure K initiative funds. By partitioning Measure K revenues into their own special revenue fund, the City has established greater transparency and security for this vital revenue flow, which successfully generated $1,368,302 during the fiscal year.

At the time, the City continued to work on several capital and infrastructure projects to combat the historical deterioration of its infrastructure. Staff completed or advanced several key initiatives in 2024, including the 2024 Pavement Preservation Project, necessary infrastructure repairs at the Rodeo Grounds, and significant downtown beautification projects—such as improvements to Main Street, East Commercial Street, and various City parks—supported by the Caltrans Clean California Local Grant Program.

Staff expected to complete or advance a robust roster of projects in 2025 and beyond. Management had several initiatives including the construction of the Rail with Trail Project (bolstered by millions in external grant allocations), Phase I of the Blosser Lane Rehabilitation Project, the 2025 Pavement Preservation Project on W. Mendocino Avenue, Water and Sewer line replacement projects and the Baechtel Road sidewalk and road widening improvements. Additionally, the City initiated key studies and upgrades at the Airport, including pavement management and wildlife hazard assessments, to secure its viability for the future.

The City is also highly focused on the continued viability of its Utility Programs. With operating expenses and non-cash pension adjustments increasing in both the Water and Sewer enterprise funds, the City continues to carefully evaluate utility rates and infrastructure needs to ensure sustainable service delivery over the next five years. Concurrently, city streets and roadways were actively maintained, paved, and rid of potholes utilizing the Transportation sales tax revenues, guided by the updated Local Road Safety Action Plan.

At the time, the City Council and management were united in their dedication to ongoing, longterm initiatives such as the General Plan Update, which encompasses comprehensive land use planning, capital financing, code enforcement, and essential street rehabilitation. Although the goal was to continue to move forward on projects and infrastructure remediation, the implementation of new financial software identified a financial turn that needed to be addressed. Prior to implementation, payroll expenses were not accounted for in the prior financial software, this was because of a movement to an online payroll processing service that was unable to provide the necessary reporting that would apply the payroll cost to the various funds. Therefore, in the subsequent months after the close of the fiscal year, the City began to make changes to the operations of the city that drastically cut the ongoing spending of contracted services.

CITY OF WILLITS
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
15 CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This Basic Financials report is intended to provide citizens, taxpayers, and creditors with a general overview of the City’s finances. Questions about this report should be directed to the City of Willits, at 111 E Commercial St, Willits, CA 95490.
16 Page Intentionally Left Blank
Governmental Business-type
Activities Activities Total
Assets:

Cash and Investments 4,840,204 $ 9,860,877 $ $ 14,701,081 Accounts Receivable 1,304,992 698,798 2,003,790
Notes Receivable 225,481 225,481
Internal Balances 1,371,094 (1,371,094)
Inventory 313,172 193,194 506,366
Capital Assets, Not Being Depreciated 971,918 1,913,077 2,884,995 Capital Assets, Net of Accumulated Depreciation 4,490,990 37,282,830 41,773,820 Total Assets 13,517,851 48,577,682 62,095,533
Deferred Outflows of Resources:

Pension related 3,452,689 961,191 4,413,880
Total Deferred Outflows of Resources 3,452,689 961,191 4,413,880 Liabilities:

Accounts Payable 488,416 295,520 783,936
Interest Payable 221,992 221,992
Deposits Payable 52,522 90,965 143,487
Noncurrent Liabilities:

Net Pension Liability 8,763,263 2,439,599 11,202,862
Due Within One Year 239,697 607,431 847,128
Due in More Than One Year 427,710 20,609,863 21,037,573 Total Liabilities 9,971,608 24,265,370 34,236,978
Deferred Inflows of Resources:

Pension related 551,514 153,535 705,049
Total Deferred Inflows of Resources 551,514 153,535 705,049 Net Position:

Net Investment in Capital Assets 5,462,908 19,074,689 24,537,597 Restricted for:

Community Development 380,498 380,498
Streets and Roads 2,427,099 2,427,099
Public Safety 109,299 109,299
Unrestricted (1,932,386) 6,045,279 4,112,893
Total Net Position $ 6,447,418 $ 25,119,968 $ 31,567,386

CITY OF WILLITS
Statement of Net Position
June 30, 2024
The notes to the financial statements are an integral part of this statement. 17 Operating Capital
Charges for Grants and Grants and
Expenses Services Contributions Contributions
Primary Government:

Governmental Activities:

General Government 3,452,469 $ 1,087,088 $ 2,199,346 $ 164,057 $ Public Safety 2,829,058 59,169
Community Development 817,445
Public Works 2,162,930 - 1,304,509
Parks and Recreation 305,010
Total Governmental Activities 9,566,912 1,146,257 2,199,346 1,468,566 Business-type Activities:

Water 4,294,452 3,166,603 -
Sewer 4,642,553 3,458,178
Solid Waste 179,231
Airport 282,435 167,264
Total Business-type Activities 9,398,671 6,792,045 -
Total Primary Government $ 18,965,583 $ 7,938,302 $ 2,199,346 $ 1,468,566 Taxes:

Property Taxes
Sales and Use Taxes
Business License Taxes
Franchise
Transient Occupancy Taxes
Other Taxes
Licenses and Permits
Investment Earnings
Other Revenue
Transfers
Total General Revenues and Transfers
Change in net position
Net Position - Beginning of Fiscal Year
Prior Period Adjustment
Net Position - Beginning of Fiscal Year, Restated
Net Position - End of Fiscal Year
Functions
General Revenues:

Program Revenues
The notes to the financial statements are an integral part of this statement.

CITY OF WILLITS
Statement of Activities
For the Fiscal Year Ended June 30, 2024
18 Net (Expenses) Revenues and Changes in Net Position
BusinessGovernmental type
Activities Activities Total
$ (1,978) $ - $ (1,978)
(2,769,889) (2,769,889)
(817,445) (817,445)
(858,421) (858,421)
(305,010) (305,010)
(4,752,743) (4,752,743)
(1,127,849) (1,127,849)
(1,184,375) (1,184,375)
(179,231) (179,231)
(115,171) (115,171)
(2,606,626) (2,606,626)
(4,752,743) (2,606,626) (7,359,369)
529,242 529,242
1,375,976 1,375,976
130,799 130,799
402,221 402,221
283,515 283,515
355,282 355,282
79,461 79,461
183,759 284,357 468,116
176,700 460,753 637,453
364,572 (364,572)
3,881,527 380,538 4,262,065
(871,216) (2,226,088) (3,097,304)
7,753,671 27,103,059 34,856,730
(435,037) 242,997 (192,040)
7,318,634 27,346,056 34,664,690
$ 6,447,418 $ 25,119,968 $ 31,567,386
19 Capital Projects
Nonmajor Total
Transportation Measure K Governmental Governmental
General Sales Tax Sales Tax Capital Outlay Funds Funds
Assets:

Cash and Investments $ - $ 2,163,405 $ 2,238,082 $ - $ 438,717 $ 4,840,204 Accounts Receivable 810,564 153,078 230,185 76,785 34,380 1,304,992 Due from Other Funds 288,126 2,187,554 2,475,680
Loans Receivable 225,481 225,481
Inventory 313,172 313,172
Total Assets $ 1,411,862 $ 2,316,483 $ 4,655,821 $ 76,785 $ 698,578 $ 9,159,529 Liabilities and Fund Balances:

Liabilities:

Accounts Payable $ 303,911 $ 56,730 $ - $ 108,795 $ 18,980 $ 488,416 Deposits Payable 38,547 9,909 4,066 52,522
Due to Other Funds 584,461 83,084 437,041 1,104,586
Total Liabilities 926,919 56,730 201,788 460,087 1,645,524 Fund Balances:

Nonspendable 313,172 313,172
Restricted for:

Public Safety 109,299 109,299
Public Works 2,259,753 167,346 2,427,099
Community Development 380,498 380,498
Unassigned 171,771 4,655,821 (125,003) (418,652) 4,283,937 Total Fund Balances 484,943 2,259,753 4,655,821 (125,003) 238,491 7,514,005 Total Liabilities and Fund Balances $ 1,411,862 $ 2,316,483 $ 4,655,821 $ 76,785 $ 698,578 $ 9,159,529

CITY OF WILLITS
Balance Sheet
Governmental Funds
June 30, 2024
The notes to the financial statements are an integral part of this statement.

Special Revenue
20 Total fund balances - governmental funds $ 7,514,005 In governmental funds, only current assets are reported. In the statement of net position, all assets are reported, including capital assets and accumulated depreciation.

Capital assets at historical cost 9,765,010 $
Accumulated depreciation (4,302,102) 5,462,908
(551,514)
3,452,689
In governmental funds, only current liabilities are reported. In the statement of net position, all liabilities, including long-term liabilities, are reported. Long-term liabilities relating to governmental activities consist of:

Net pension liability (8,763,263)
Compensated absences payable (667,407)
Total net position - governmental activities $ 6,447,418 The notes to the financial statements are an integral part of this statement.

Deferred inflows related to pension
Deferred outflows related to pension

CITY OF WILLITS
Reconciliation of the Governmental Funds Balance Sheet
June 30, 2024
to the Statement of Net Position
Deferred outflows and inflows of resources relating to pensions: In governmental funds, deferred outflows and inflows of resources relating to pensions are not reported because they are applicable to future periods. In the statement of net position, deferred outflows and inflows of resources relating to pensions are reported. 21 Capital Projects
Nonmajor Total
Transportation Measure K Governmental Governmental
General Sales Tax Sales Tax Capital Outlay Funds Funds
Revenues
Property Taxes 529,242 $ - $ - $ - $ - $ 529,242 $
Sales and Use Taxes 1,375,976 892,892 1,368,302 3,637,170 Business License Taxes 130,799 130,799
Franchise Fees 402,221 402,221
Transient Occupancy Taxes 283,515 283,515
Other Taxes 355,282 355,282
Licenses and Permits 79,461 79,461
Interest 112,968 61,499 9,292 183,759
Charges for Services 1,087,088 1,146,257 59,169
Intergovernmental 831,044 164,057 411,617 1,406,718
Other 99,915 76,785 176,700
Total Revenues 5,287,511 954,391 1,368,302 240,842 480,078 8,331,124 Expenditures
Current:

General Government 2,949,570 2,949,570
Public Safety 2,624,710 2,652,049 27,339
Public Works 342,724 505,404 139,923 498,655 1,486,706
Parks and Recreation 305,010 305,010
Community Development 799,059 817,445 18,386
Capital Outlay 78,870 120,590 1,928,881 2,128,341
Total Expenditures 7,099,943 625,994 2,068,804 544,380 10,339,121 Excess (Deficiency) of Revenues over
(under) Expenditures 328,397 (1,812,432) 1,368,302 (1,827,962) (64,302) (2,007,997) Other Financing Sources (Uses):

Transfers In 224,846 1,393,797 1,618,643
Transfers Out (720,130) (533,941) (1,254,071)
Total Other Financing Sources (Uses) (495,284) (533,941) 1,393,797 364,572 Net Change in Fund Balances (2,307,716) (205,544) 1,368,302 (434,165) (64,302) (1,643,425) Fund Balances - June 30, 2023 2,437,650 2,316,824 3,287,519 178,920 310,819 8,531,732 Prior Period Adjustments 27,647 475,835 130,242 (8,026) 625,698 Fund Balances - July 1, 2023, Restated 2,465,297 2,792,659 3,287,519 309,162 302,793 9,157,430 Fund Balances - June 30, 2024 $ 2,259,753 484,943 $ 4,655,821 $ (125,003) $ 238,491 $ 7,514,005 $ The notes to the financial statements are an integral part of this statement.

CITY OF WILLITS
Statement of Revenues, Expenditures, and Changes in Fund Balance Governmental Funds
For the Fiscal Year Ended June 30, 2024
Special Revenue
22 Amounts reported for governmental activities in the statement of activities are different because:

Net change in fund balances - total governmental funds $ (1,643,425) Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those capital assets are allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlay exceeded depreciation in the current period.

Capital outlay 1,452,117 $
Depreciation expense (325,890) 1,126,227
Compensated absence expenditures reported in the statement of activities do not require the use of current financial resources and therefore, are not reported as expenditures in a governmental fund. This is the net change in compensated absences for the current period. (188,014)
In governmental funds, pension costs are recognized when employer contributions are made. In the (166,004)
Change in net position of governmental activities $ (871,216) The notes to the financial statements are an integral part of this statement.

CITY OF WILLITS
Reconciliation of the Statement of Revenues, Expenditures, and Changes in For the Fiscal Year Ended June 30, 2024
Fund Balances of Governmental Funds to the Statement of Activities statement of activities, pension costs are recognized on the accrual basis. This fiscal year, the difference between accrual-basis pension costs and actual employer contributions was:
23 Nonmajor
Sewer Water Enterprise
Fund Fund Funds Total
Assets
Current Assets:

Cash and Investments 5,600,002 $ 4,260,875 $ - $ 9,860,877 $ Accounts Receivable 292,466 327,406 78,926 698,798
Inventory 193,194 193,194
Total Current Assets 5,892,468 4,588,281 272,120 10,752,869 Noncurrent Assets:

Capital Assets:

Land 1,369,269 423,252 11,692 1,804,213
Buildings and Improvements 3,453,985 3,733,794 1,777,853 8,965,632 Machinery and Equipment 2,406,410 8,039,548 54,867 10,500,825 Infrastructure 33,806,621 14,779,462 48,586,083
Construction in Progress 108,864 108,864
Less:

Accumulated Depreciation (16,567,184) (13,480,341) (722,185) (30,769,710) Total Noncurrent Assets 24,469,101 13,604,579 1,122,227 39,195,907 Deferred Outflows of Resources:

Pension Related 623,297 337,894 961,191
Total Deferred Outflows of Resources 623,297 337,894 961,191 Total Assets and Deferred Outflows of Resources 30,984,866 18,530,754 1,394,347 50,909,967 Liabilities
Current Liabilities:

Accounts Payable 105,588 169,362 20,570 295,520
Interest Payable 207,028 14,964 221,992
Due to Other Funds 1,371,094 1,371,094
Deposits Payable 82,196 8,769 90,965
Long Term Debt - Due within One Year 462,927 144,504 607,431 Total Current Liabilities 775,543 411,026 1,400,433 2,587,002 Noncurrent Liabilities:

Compensated Absences 84,376 56,630 141,006
Net Pension Liability 1,581,990 857,609 2,439,599
Long Term Debt - Due in More Than One Year 17,468,888 2,118,377 881,592 20,468,857 Total Noncurrent Liabilities 19,135,254 3,032,616 881,592 23,049,462 Deferred Inflows of Resources:

Pension Related 99,562 53,973 153,535
Total Deferred Inflows of Resources 99,562 53,973 153,535 Total Liabilities and Deferred Inflows of Resources 20,010,359 3,497,615 2,282,025 25,789,999 Net Position
Net Investment in Capital Assets 6,572,179 11,380,283 1,122,227 19,074,689 Unrestricted 4,402,328 3,652,856 (2,009,905) 6,045,279
Total Net Position $ 10,974,507 $ 15,033,139 $ (887,678) $ 25,119,968 The notes to the financial statements are an integral part of this statement.

CITY OF WILLITS
Statement of Net Position
Proprietary Funds
June 30, 2024
Business-type Activities-Enterprise Funds
24 Nonmajor
Sewer Water Enterprise
Fund Fund Funds Total
Operating Revenues:

Charges for Services 3,458,178 $ 3,166,603 $ 167,264 $ 6,792,045 $ Total Operating Revenues 3,458,178 3,166,603 167,264 6,792,045

Operating Expenses:

Operations 1,874,102 1,342,449 201,947 3,418,498
Administrative 381,120 484,622 6,413 872,155
Materials and Supplies 938,765 1,258,766 2,197,531
Maintenance 229,940 292,973 206,319 729,232
Depreciation 977,563 876,522 46,987 1,901,072
Total Operating Expenses 4,401,490 4,255,332 461,666 9,118,488 Operating Income (Loss) (943,312) (1,088,729) (294,402) (2,326,443) Non-operating Revenues (Expenses):

Interest Revenue 164,410 119,947 - 284,357
Interest Expense (241,063) (39,120) (280,183)
Miscellaneous Revenue 11,263 449,490 460,753
Total Non-Operating Revenue (Expenses) (65,390) 530,317 - 464,927 Income (Loss) Before Transfers (1,008,702) (558,412) (294,402) (1,861,516) Transfers
Transfers Out (166,209) (196,436) (1,927) (364,572)
Total Transfers (166,209) (196,436) (364,572)
Change in Net Position (754,848) (1,174,911) (296,329) (2,226,088) Net Position - Beginning of Fiscal Year 11,959,848 15,709,679 (566,468) 27,103,059 Prior Period Adjustment 189,570 78,308 (24,881) 242,997 Net Position - Beginning of the Fiscal Year, Restated 12,149,418 15,787,987 (591,349) 27,346,056 Net Position - End of Fiscal Year 10,974,507 $ 15,033,139 $ (887,678) $ 25,119,968 $ Business-type Activities - Enterprise Funds

CITY OF WILLITS
Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds
For the Fiscal Year Ended June 30, 2024
The notes to the financial statements are an integral part of this statement. 25 Nonmajor
Sewer Water Enterprise
Fund Fund Funds
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash Received from Users 3,779,323 $ 3,238,918 $ 90,201 $ 7,108,442 $ Cash Payments to Suppliers and Contractors (1,480,521) (2,374,967) (474,598) (4,330,086) Cash Payments to Employees (1,795,085) (1,296,031) (3,091,116) Net Cash Provided (Used) By Operating Activities 503,717 (432,080) (384,397) (312,760) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Interfund Borrowing (166,209) (196,436) 597,511 234,866 Intergovernmental 449,490 449,490
Net Cash Provided (Used) By Noncapital Financing Activities (166,209) 253,054 595,584 682,429 CASH FLOWS FROM INVESTING ACTIVITIES:

Interest Received 164,410 119,947 284,357
Net Cash Provided (Used) in Investing Activities 164,410 119,947 284,357

CASH FLOWS FROM CAPITAL AND RELATED FINANCING
ACTIVITIES:

Principal Payments on Debt Borrowings (391,629) (105,919) (497,548) Interest Paid (39,120) (241,063) (280,183)
Acquisition of Property, Plant, and Equipment (292,071) (211,187) (503,258) Net Cash Provided (Used) In Capital and Related
Financing Activities (621,429) 12,380 (211,187) (820,236)

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (46,699) (119,511) - (166,210)
CASH AND CASH EQUIVALENTS, BEGINNING OF FISCAL YEAR 5,719,513 4,307,574 - 10,027,087 CASH AND CASH EQUIVALENTS, END OF FISCAL YEAR 5,600,002 $ 4,260,875 $ - $ 9,860,877 $ Reconciliation to Statement of Net Position:

Cash and Investments 5,600,002 $ 4,260,875 $ - $ 9,860,877 $ $ 4,260,875 5,600,002 $ - $ 9,860,877 $
CASH FLOWS FROM OPERATING ACTIVITIES:

Operating Income (Loss) (943,312) $ (1,088,729) $ (294,402) $ (2,326,443) $

Adjustment to Reconcile Operating Income
(Loss) to Net Cash Provided (Used) by Operating
Activities:

Depreciation 876,522 977,563 46,987 1,901,072
Changes in Assets, Deferred Outflows, Liabilities, and Deferred Inflows:
(Increase) Decrease in Accounts Receivable 321,145 (9,881) (77,363) 233,901 Increase (Decrease) in Accounts Payable 69,304 (255,976) (1,569) (188,241) Increase (Decrease) in Compensated Absences 49,049 30,172 79,221 Increase (Decrease) in Net Pension Liability 29,968 16,246 46,214 Increase (Decrease) in Deposits Payable 300 (434) (134) (Increase) Decrease in Inventory (58,350) (58,350)
Total Adjustments 1,447,029 656,649 (89,995) 2,013,683
Net Cash Provided (Used) By Operating Activities 503,717 $ (432,080) $ (384,397) $ (312,760) $ The notes to the financial statements are an integral part of this statement.

Totals
Business-type Activities - Enterprise Funds

CITY OF WILLITS

PROPRIETARY FUNDS
For the Fiscal Year Ended June 30, 2024

STATEMENT OF CASH FLOWS
26 Private Purpose
Trust Fund
RDA
Successor
Agency
ASSETS
Cash and Investments 710,525 $
Total Assets 710,525

LIABILITIES
Interest Payable 42,148
Accounts Payable 993
Long-term Debt, Due Within One Year 295,250
Total Liabilities 338,391

NET POSITION
Held in Trust for Others 372,134
Total Net Position 372,134 $
The notes to the financial statements are an integral part of this statement. 27 CITY OF WILLITS

FIDUCIARY FUNDS

STATEMENT OF NET POSITION
June 30, 2024
Private Purpose
Trust Fund
RDA
Successor
Agency
Additions:

Intergovernmental 375,480 $
Interest 90
Total Additions 375,570
Deductions:

Community Development 33,576
Interest Expense 7,600
Total Deductions 41,176
Change in Net Position 334,394
Net Position - June 30, 2023 37,740
Net Position - June 30, 2024 372,134 $
28 The notes to the financial statements are an integral part of this statement.

CITY OF WILLITS

FIDUCIARY FUNDS

STATEMENT OF CHANGES IN NET POSITION
For the Fiscal Year Ended June 30, 2024

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
29 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
The City of Willits (City) is a general law City incorporated in the State of California. The City is governed by an elected five-member City Council. The following services are provided by the City to its citizens; public safety (police); streets; drinking water; wastewater collection, treatment and disposal; public improvements, parks and recreation; planning and zoning; and general administrative services.

As required by accounting principles generally accepted in the United States of America (USGAAP), these basic financial statements present the City of Willits (the primary government) and any component units.

Individual Component Unit Disclosures
There are no entities which meet the Governmental Accounting Standards Board (GASB) Statement No.14 as amended by GASB Statement No.39 and GASB Statement No. 61 criteria for disclosure within these financial statements.

Description of Joint Powers Agreements
The City participates in several joint power agreements (JPAs) as described in Note 8. The financial activities of the JPAs are not included in the accompanying basic financial statements because JPAs are administered by governing boards that are separate from and independent of the City.

B. Basis of Presentation
Government-wide Financial Statements
The statement of net position and statement of activities display information about the primary government (the City). These statements include the financial activities of the overall government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. These statements distinguish between the governmental and business-type activities of the City. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely, to a significant extent, on fees charged to external parties.

The statement of activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the City and for each function of the City’s governmental activities. Direct expenses are those that are specifically associated with a program or function and; therefore, are clearly identifiable to a particular function. Program revenues include 1) charges paid by the recipients of goods or services offered by the programs and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented instead as general revenues.

When both restricted and unrestricted net positions are available, unrestricted resources are used only after the restricted resources are depleted.

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
30 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Basis of Presentation (Continued)
Fund Financial Statements
The fund financial statements provide information about the City’s funds, including fiduciary funds.

Separate statements for each fund category – governmental, proprietary, and fiduciary – are presented. The emphasis of fund financial statements is on major governmental and enterprise funds; each displayed in a separate column. All remaining governmental and enterprise funds are separately aggregated and reported as nonmajor funds.

Proprietary funds distinguish operating revenues, such as charges for services, and result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities.

The City reports three major governmental funds:
 The General Fund is used to account for all revenues and expenditures necessary to carry out basic governmental activities of the City that are not accounted for through other funds. For the City, the General Fund includes activities such as public protection, public works and facilities, parks and recreation, and community development.
 The Transportation Sales Tax Special Revenue Fund was established to account for all sales tax revenues set aside for transportation improvements.
 The Measure K Sales Tax Special Revenue Fund was established to account for Measure K sales tax revenues.
 The Capital Outlay Capital Projects Fund was established to account for capital expenditures throughout the City.

The City reports the following two major enterprise funds:
 The Sewer Fund was established to account for the financial activity for the purpose of operation and maintenance of the City’s sewer system including the wastewater treatment plant. The costs of providing these services to the general public are financed or recovered through user charges.  The Water Fund was established to account for the financial activity for the purpose of operation and maintenance of City’s water utility. The costs of providing these services to the general public are financed or recovered through user charges.

Fiduciary Funds
Agency Funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other government units, and/or other funds.

Private Purpose Trust Fund accounts for the operations of the former redevelopment agency.

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
31 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Accounting and Measurement Focus
The government-wide, proprietary, and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time the liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange, include property and sales taxes, grants, entitlements and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenues from sales tax are recognized when the underlying transactions take place. Revenues from grants, entitlements, and donations are recognized in the fiscal year in which all eligible requirements have been satisfied.

Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when susceptible to accrual (i.e., when they are "measurable and available"). "Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The City considers all revenues available if they are collected within 60 days after fiscal year-end. Expenditures are recorded when the related fund liability is incurred, except for debt service expenditures which are recognized when due, and certain compensated absences and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds from long-term debt and capital leases are reported as other financing sources.

Property taxes, transient occupancy taxes, and interest are susceptible to accrual. Sales taxes collected and held by the state at fiscal year-end on behalf of the City are also recognized as revenue.

Other receipts and taxes become measurable and available when cash is received by the City and are recognized as revenue at that time.

Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria are met. Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been met.

D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, Net Position or Equity

1. Deposits and Investments
In order to maximize the flexibility of its investment program and to aid in cash budgeting, the City pools the cash of all funds, except for monies deposited with fiscal agents in accordance with related bond indentures. The cash and investments balance in each fund represents that fund’s equity share of the City’s cash and investment pool. As the City places no restrictions on the deposit or withdrawal of a particular fund’s equity in the pool, the pool operates like a demand deposit account for the participating funds.

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
32 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, Net Position or Equity (Continued)

1. Deposits and Investments (Continued)
Interest income earned on pooled cash and investments is allocated monthly to the various funds based on month-end balances and is adjusted at fiscal year-end. Interest income on restricted cash and investments with fiscal agents is credited directly to the related fund.

In accordance with the State of California Government Code, the City adopts an investment policy annually that, among other things, authorizes types and concentrations of investments and maximum investment terms.

The City’s investments are carried at fair value. The fair value of equity and debt securities is determined based on sales prices or bid-and-asked quotations from SEC-registered securities exchanges or NASDAQ dealers. LAIF determines the fair value of its portfolio quarterly and reports a factor to the City; the City applies that factor to convert its share of LAIF from amortized cost to fair value. Changes in fair value are allocated to each participating fund.

For purposes of the statement of cash flows, the City has defined cash and cash equivalents to be change and petty cash funds, equity in the City’s cash and investment pool, and restricted non-pooled investments with initial maturities of three months or less.

Investments are stated at fair value in accordance with GASB Statement No.31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Short-term investments are reported at cost, which approximates fair value. The fair values are based on quoted market prices, if available, or estimated using quoted market prices for similar securities. Securities traded on national or international exchanges are valued at the last reported sales price at current exchange rates. Interest, dividends, and realized and unrealized gains and losses, based on the specific identification method, are included in interest revenue when earned.

2. Receivables and Payables
Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances”. Advances between funds are reported in the fund financial statements as nonspendable to indicate that they are not available for appropriation and are not available financial resources.

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
33 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, Net Position or Equity (Continued)

2. Receivables and Payables (Continued)
The County of Mendocino assesses properties, bills for, collects, and distributes property taxes for the City per the following schedule:

Secured Unsecured
Valuation dates January 1 January 1
Lien/levy dates July 1 July 1
Due dates 50% on November 1 July 1
50% on February 1
Delinquent as of December 10, April 10 August 31
The term “unsecured” refers to taxes on personal property other than real estate, land, and buildings.

These taxes are secured by liens on the property being taxed. Property tax revenues are recognized by the City in the fiscal year they are assessed provided they become available as defined above. The City has elected to receive the City’s portion of the property taxes from the county under the county Teeter Bill program. Under this program, the City receives 100 percent of the City’s share of the levied property taxes in periodic payments with the county assuming the responsibility for the delinquencies.

3. Inventories and Prepaid Items
Inventories are valued at cost using the first-in/first-out (FIFO) method. The costs of governmental fund-type inventories are recorded as expenditures when consumed rather than when purchased.

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items.

4. Capital Assets
Capital assets, which include property, plant, equipment and infrastructure assets, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. As a phase 3 government under GASB Statement No.34, the City has elected to restate its capital assets as of July 1, 2008, to report infrastructure assets acquired prior to June 30, 2003. The City has determined that it is preferable to report all City infrastructure to provide for more accurate reporting. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated assets are valued at the fair value of the assets on the date on which they were contributed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the assets’ lives are not capitalized. The City utilizes a capitalization threshold of $10,000.

Depreciation is charged to operations using the straight-line method over the estimated useful lives of the assets as follows:

Buildings and improvements 30 years
Vehicles 5 years
Machinery and equipment 5 to 15 years
Infrastructure 50 to 80 years

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
34 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, Net Position or Equity (Continued)

5. Compensated Absences
Full-time employees accumulate earned vacation, holiday and compensated leave of varying amounts dependent upon length of service with the City. These amounts are deemed fully vested with the employee when earned. The City also provides full time employees with sick leave that generally must be used for sickness and injury-related leave time. However, upon an employee’s retirement after 5 years of employment with the City, an employee is paid 30% of unused sick leave and after 10 years of employment, they are paid 50%. In both cases the limit is 1,000 hours. Therefore, a liability has been recorded for the estimated benefits that will be taken as a result of retirement. These liabilities will be liquidated in their respective business-type funds or the general fund as they are used or upon retirement.

The City does not offer post-employment benefits.

6. Long-term Obligations
In the government-wide financial statements, proprietary and fiduciary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, proprietary or fiduciary fund type statements of net position. Debt premiums and discounts are deferred and amortized over the life of the indebtedness using the straight-line method. Notes payable are reported net of the applicable bond premium or discount.

In the fund financial statements, governmental fund types recognize debt premiums and discounts during the current period. The face amount of debt issued is reported as other financing sources.

Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

7. Net Position
The government-wide financial statements utilize a net position presentation. Net position is categorized as net investment in capital assets, restricted, and unrestricted.

Net Investment In Capital Assets – This category groups all capital assets, including infrastructure, into one component of net position. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construction, or improvement of these assets reduce the balance in this category.

Restricted Net Position – This category presents external restrictions imposed by creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation.

Unrestricted Net Position – This category represents net position of the City, not restricted for any project or other purpose.

When an expense is incurred for purposes for which both restricted and unrestricted resources are available, the City’s policy is to apply restricted resources first.

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
35 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, Net Position or Equity (Continued)

8. Deferred Outflows and Inflows of Resources
Pursuant to GASB Statement No. 68 and 71, the City recognizes deferred outflows and inflows of resources. Deferred outflow and inflow of resources are defined as a consumption or resource of net position by the government that is applicable to a future reporting period.

E. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F. Fund Balance
In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned, or unassigned based primarily on the extent to which the City is bound to honor constraints on how specific amounts can be spent.
• Nonspendable fund balance – amounts that cannot be spent because they are either (a) not spendable in form or (b) legally or contractually required to be maintained intact. • Restricted fund balance – amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. • Committed fund balance – amounts that can only be used for specific purposes determined by formal action of the City’s highest level of decision-making authority (the City Council) and that remain binding unless removed in the same manner. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period. • Assigned fund balance – amounts that are constrained by the City’s intent to be used for specific purposes. The intent can be established at either the highest level of decision making, or by a body or an official designated for that purpose. • Unassigned fund balance – the residual classification for the City’s funds that include amounts not contained in the other classifications.

The City Council establishes, modifies or rescinds fund balance commitments and assignments by passage of an ordinance or resolution.

When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, followed by committed, assigned, and unassigned resources as they are needed.

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
36 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) G. New GASB Pronouncements
Implementation of New Accounting Pronouncements
GASB Statement No. 99 “Omnibus 2022
The objectives of this Statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing (1) practice issues that have been identified during implementation and application of certain GASB Statements and (2) accounting and financial reporting for financial guarantees. The City did not report any significant accounting changes from the implementation of this Statement during the fiscal year ended June 30, 2024.

Future Accounting Pronouncements
GASB Statements listed below will be implemented in future financial statements.

The provisions of Statement Number 100 “Accounting Changes and Error Corrections – an amendment of GASB Statement No. 62” are effective for fiscal years beginning after June 15, 2023.

The provisions of Statement Number 101 “Compensated Absences” are effective for fiscal years beginning after December 15, 2023.

The provisions of Statement Number 102 “Certain Risk Disclosures” are effective for fiscal years beginning after June 15, 2024.

The provisions of Statement Number 103 “Financial Reporting Model Improvements” are effective for fiscal years beginning after June 15, 2025.

NOTE 2 - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
A. Budgetary Information
The City Council adopts an Annual Budget no later than the second meeting of June of each fiscal year for the fiscal year commencing the following July 1. The City follows these procedures in establishing the budgetary data reflected in the financial statements:

1. During May of each fiscal year, the City Manager submits to the City Council a proposed operating budget for the next following fiscal year. The operating budget includes proposed revenues and expenditures.

2. After a review by the City Council, a public hearing is conducted and further comment is received from the City Council and the general public.

3. Upon completion of the hearings and modifications, if any, to the proposed budget, it is adopted by the City Council through passage of an appropriate resolution.

4. Generally, the budget is amended in the middle of the fiscal year and at the end of the fiscal year.

All approved additional appropriations are added to the adopted budget and an amended budget is presented to the City Council, which adopts it after due review.

5. The City Manager is authorized to make transfers between operational expenditure categories within certain departments and funds.

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
37 NOTE 2 - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (Continued)

6. City Council approval is required for all fund to fund transfers, department to department transfers, fund reserve to appropriations transfers, transfers for new revenue sources with offsetting appropriations, and for transfer to/from the capital expenditure category.

7. The Haehl Creek, Business Rehab, Vehicle Abatement, HSG Rehab, H&S Restitution, DNA Cost Reimb, Business Loan, Lateral Repair Loan special revenue funds do not have adopted budgets.

B. Budget/USGAAP Reconciliation
No funds adopted project-length or budgetary basis budgets and, therefore, no schedule reconciling the amounts on the Combined Statement of Revenues, Expenditures, and Changes in Fund BalanceBudget to Actual to the amounts on the Combined Statement of Revenues, Expenditures, and Changes in Fund Balances has been prepared.

C. Excess of Expenditures over Appropriations
For the fiscal year ended June 30, 2024, expenditures exceeded appropriations in the following funds:

Final
Fund Appropriation Expenditure Excess
Major Funds:

Capital Outlay Capital Projects Fund 600,000 $ 2,068,804 $ 1,468,804 $ Nonmajor Funds:

Gas Tax Special Revenue Fund 298,831 402,210 103,379
LEAA Program Special Revenue Fund 5,604 17,095 11,491
D. Deficit Fund Equity
At June 30, 2024, the following funds had accumulated deficits:

Fund Amount
Major Governmental Fund:

Capital Outlay Capital Projects 125,003 $
Nonmajor Governmental Fund:

Vehicle Abatement 5,256
Gas Tax 413,396
Nonmajor Enterprise Fund:

Solid Waste 1,760,160
The City believes that portions if not the majority of the costs and debt associated with the Solid Waste fund are the responsibility of the State or the County. The City is currently in discussions with both entities to securing funding for these and future costs.

The City believes that operations in the subsequent fiscal year will rectify negative fund balances in the other funds listed. Otherwise, the City will make transfers from the General Fund to offset any deficits.

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
38 NOTE 3 – CASH AND INVESTMENTS
Cash and investments as of June 30, 2024 are classified in the accompanying financial statements as follows:

Statement of net position:

Cash and investments 14,701,081 $
Fiduciary funds:

Cash and investments 710,525
Total cash and investments 15, $ 411,606
Cash and investments as of June 30, 2024 consist of the following:

Cash on hand 550 $
Deposits with financial institutions 6,588,460
Investments 8,822,596
Total cash and investments 15,411,606 $
A. Investments Authorized by the California Government Code and the City’s Investment Policy
The table below identifies the investment types that are authorized for the City of Willits (City) by the California Government Code (or the City’s investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the City’s investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk.

This table does not address investments of debt proceeds held by bond trustee that are 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.

Maximum Maximum
Maximum Percentage Investment
Maturity of Portfolio in One Issuer
Bonds issued by the City N/A None None
US Treasury Obligations 5 years None None
Federal Agency Issues 5 years None None
Negotiable Certificates of Deposit 5 years 30% None
Repurchase Agreements 1 year None None
Bankers' Acceptances 180 days 40% 30%
Medium Term Notes 5 years 30% None
Money Market Mutual Funds N/A None 10%
Commercial Paper 270 days 25% None
County Pool Investment Funds N/A None None
Local Agency Investment Fund (LAIF) N/A None $75 Million Collateralized Bank Deposits N/A None None
Mortgage Pass-through Securities 5 years 20% None
Shares of Beneficial Interest by a JPA N/A None None
Authorized Investment Type
The investment policy allows for the above investments which have equal safety and liquidity as all other allowed investments. Maturity depends on the cash needs of the City.

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
39 NOTE 3 – CASH AND INVESTMENTS (Continued)
B. Investments Authorized by Debt Agreements
Investment of debt proceeds held by bond trustees are governed by provisions of the debt agreements rather than the general provisions of the California Government Code or the City’s investment policy.

The table below identifies the Investment types that are authorized for investments held by bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk.

Maximum Maximum
Maximum Percentage Investment
Maturity of Portfolio in One Issuer
Local Agency Bonds N/A None None
U.S. Treasury Obligations N/A None None
State Obligations N/A None None
U.S. Government Agency Issues N/A None None
Money Market Mutual Fund N/A None None
Bankers Acceptances N/A None None
Commercial Paper 270 days None None
Certificates of Deposit N/A None None
Repurchase Agreements N/A None None
Investment Agreements N/A None None
Local Agency Investment Fund (LAIF) N/A None None
Authorized Investment Type
C. Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.

Information about the sensitivity of the fair values of the City’s investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the City’s investments by maturity:
12 Months 13 to 24 25-60 More Than 60
Totals or Less Months Months Months
State Investment Pool (LAIF) 4,887,795 $ 4,887,795 $ - $ - $ - $ Certificates of Deposit 3,934,801 742,810 1,966,244 1,225,747 $ 5,630,605 8,822,596 $ 1,966,244 $ 1,225,747 $ - $
Remaining maturity (in Months)
Investment Type

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
40 NOTE 3 – CASH AND INVESTMENTS (Continued)
D. Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations The City has no investments (including investments held by bond trustees) that are highly sensitive to interest rate fluctuations (to a greater degree than already indicated in the information provided above).

E. Disclosures Relating to 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 as of fiscal year end for each investment type.

Minimum Exempt
Legal From Not
Investment Type Amount Rating Disclosure AAA AA A Rated State Investment Pool 4,887,795 $ N/A - $ - $ - $ - $ 4,887,795 $ Certificates of Deposit 3,934,801 N/A 3,934,801
Total 8,822,596 $ - $ - - $ - $ 8,822,596 $
Rating as of Fiscal Year End
F. Concentration of Credit Risk
The investment policy of the City contains limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. There are no investments in any one issuer (other than money market or external investment pool) that represent 5% or more of total City’s investments.

G. Custodial Credit Risk
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 its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The fair value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.

As of June 30, 2024, all of the City’s deposits with financial institutions in excess of federal depository insurance limits were held in collateralized accounts.

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
41 NOTE 3 – CASH AND INVESTMENTS (Continued)
H. Investment in State Investment Pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the City’s investment in this pool is reported in the accompanying financial statements at amounts based upon the City’s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis.

I. Fair Value Measurements
The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. These principles recognize a three tiered fair value hierarchy as follows:

Level 1 – Investments reflect prices quoted in active markets; Level 2 – Investments reflect prices that are based on similar observable asset either directly or indirectly, which may include inputs in markets that are not considered active; and Level 3 – Investments reflect prices based upon unobservable sources. The City’s investments applicable to recurring fair value measurements as of June 30, 2023 are all shown at fair value.

NOTE 4 – INTERFUND TRANSACTIONS
A. Interfund Receivables and Payables
During the course of normal operations, numerous transactions occur between individual funds that may result in amounts owed between funds. Those related to goods and services type transactions are classified as “due to and from other funds”. The following presents a summary of current interfund balances at June 30, 2024.

Amount Amount
Major Fund: Major Fund:

General Fund 288,126 $ General Fund $ 584,461
Measure K Sales Tax 2,187,554 Capital Outlay 83,084
Totals 2,475,680 $ Nonmajor Enterprise Fund:

Solid Waste 872,496
Airport 498,598
Nonmajor Governmental Fund:

Vehicle Abatement 5,256
Gas Tax 431,785
Totals 2 $ ,475,680
Receivable Fund Payable Fund
B. Transfers between Funds
Transfers are indicative of funding for capital projects, lease payments or debt service, subsidies of various City operations, and re-allocations of special revenues. All inter-fund transfers between individual government funds have been eliminated on the government-wide statements. The following schedule briefly summarizes the City’s transfer activity for the fiscal year ended June 30, 2024:

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
42 NOTE 4 – INTERFUND TRANSACTIONS (CONTINUED)
B. Transfers between Funds (Continued)
Transfers-in Transfers-out
Major Governmental Funds:

General Fund 224,846 $ 720,130 $
Transportation Sales Tax 533,941
Capital Outlay 1,393,797
Major Enterprise Funds:

Water Fund 196,436
Sewer Fund 166,209
Nonmajor Enterprise Funds:

Airport Fund 1,927
Totals 1,618,643 $ 1,618,643 $
Fund
NOTE 5 – CAPITAL ASSETS
Capital Asset activity for the fiscal year ended June 30, 2024 was as follows:

Balance at Prior Period Balance at
June 30, 2023 Additions Deletions Transfers Adjustments June 30, 2024 Governmental activities:

Capital assets, not being depreciated:

Land 150,963 $ - $ - $ - $ - $ 150,963 $
Construction in progress 2,244,131 1,508,266 (56,149) (1,320,260) (1,555,033) 820,955 Total capital assets, not being depreciated 2,395,094 1,508,266 (56,149) (1,320,260) (1,555,033) 971,918 Capital assets, being depreciated:

Buildings and improvements 1,938,567 1,938,567
Machinery and equipment 2,150,242 2,150,242
Infrastructure 2,889,725 494,298 3,384,023
Total capital assets being depreciated 6,978,534 494,298 7,472,832 Less accumulated depreciation for:

Buildings and improvements (1,686,361) (30,775) 541,756 (1,175,380) Machinery and equipment (1,996,450) (44,033) (2,040,483) Infrastructure (293,401) (251,082) 778,504 234,021
Total accumulated depreciation (3,976,212) (325,890) 1,320,260 (2,981,842) Total capital assets, being depreciated, net 3,002,322 (325,890) 1,320,260 494,298 4,490,990 Governmental activities capital assets, net 5,397,416 $ 1,182,376 $ (56,149) $ - $ (1,060,735) $ 5,462,908 $ Balance at Prior Period Balance at
Business-type activities: June 30, 2023 Additions Deletions Transfers Adjustments June 30, 2024 Capital assets, not being depreciated:

Land 1,804,213 $ - $ - $ - $ - $ 1,804,213 $
Construction in progress 1,490,857 186,146 (1,568,139) 108,864 Total capital assets, not being depreciated 3,295,070 186,146 (1,568,139) 1,913,077 Capital assets, being depreciated:

Buildings and improvements 8,945,492 20,140 8,965,632
Machinery and equipment 10,471,132 29,693 10,500,825
Infrastructure 47,047,637 1,538,446 48,586,083
Total capital assets, being depreciated 66,464,261 20,140 1,568,139 68,052,540 Less accumulated depreciation (28,868,638) (1,901,072) (30,769,710) Total capital assets, being depreciated, net 37,595,623 (1,880,932) 1,568,139 37,282,830 Business-type activities capital assets, net 40,890,693 $ (1,694,786) $ - $ - $ - $ 39,195,907 $

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
43 NOTE 5 – CAPITAL ASSETS (CONTINUED)
Depreciation
Depreciation expense was charged to governmental functions as follows:

General Government $ 325,890
Total depreciation expense – governmental functions $ 325,890 Depreciation expense was charged to business-type functions as follows:

Sewer $ 977,563
Water 876,522
Airport 46,987
Total depreciation expense – business-type functions $ 1,901,072 NOTE 6 – NOTES RECEIVABLE
The City has established a number of housing assistance loan programs using HOME Investment Partnerships Program grant funds. These loans consist of several loans for first-time home buyers assistance and home rehabilitation assistance loans for qualified persons. The City also utilizes Community Development Block Grant (CDBG) to provide business assistance loans and home rehabilitation loans to qualified persons.

All housing loans are secured by deeds of trust. Loans carry interest rates ranging from 0% to 5% with repayment terms from 10 to 55 years or upon sale or transfer of property. Interest rates are set at below market rates and, in some cases, below the rate of inflation. Repayment of these loans is not assured until cash is received, and in some instances, the loans terms are extended.

NOTE 7 – LONG-TERM LIABILITIES
The following is a schedule of long-term liabilities for Governmental Activities and Business-type Activities for the fiscal year ended June 30, 2024:

Balance at Balance at Due Within
June 30, 2023 Additions Repayments June 30, 2024 One Year Governmental Activities:

Compensated absences 479,393 $ 427,711 $ (239,697) $ 667,407 $ 239,697 $ Total Governmental Activities $ 427,711 479,393 $ (239,697) $ 667,407 $ 239,697 $ Business-type Activities:

Compensated absences 141,646 $ 146,316 $ (73,478) $ 214,484 $ 73,478 $ Debt from direct borrowings and direct placements:

State Water Revolving Fund Loan 2,330,216 (105,919) 2,224,297 105,919 2015 Tax Compliance Certificates 2,224,134 (186,629) 2,037,505 193,796 2020 Wastewater Refunding Bonds 15,545,000 (205,000) 15,340,000 215,000 Premium on debt 538,656 (19,238) 519,418 19,238
Landfill Post-closure Costs 881,592 881,592
Total Business-type Activities 21, $ 146,31 661,244 $ (590,264) 6 $ 21,217,29 $ 607,431 6 $

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
44 NOTE 7 – LONG-TERM LIABILITIES (Continued)

1. Business-type Activities – Direct Borrowings and Placements of Debt – California State Water Resources Control Board Revolving Loan
In November of 2011, The City Council adopted a resolution approving funding in the amount of $5,779,623 for the Water Plant Improvements Project and pledged the City’s Water Fund as the specific revenue source for the repayment of the loan. The loan consists of loan principal of $3,366,510 and a grant in the amount of $3,000,000. The term of the loan is 30 years with 0% interest. The maximum loan amount $3,170,935. Principal and interest are payable semi-annually on January 1 and July 1. Annual principal payments are $105,919 and continue through the fiscal year ending 2045. In the event of a default, the full outstanding balance of the loan is due and payable.

Annual debt service requirements for the loan are shown below:

Fiscal Year
Ended June 30, Principal Interest Total
2025 105,919 $ - $ 105,919 $
2026 105,919 105,919
2027 105,919 105,919
2028 105,919 105,919
2029 105,919 105,919
2030-2034 529,595 529,595
2035-2039 529,595 529,595
2040-2044 529,595 529,595
2045 105,917 105,917
$ - 2,224,297 $ 2,224,297 $
State Water Revolving Fund Loan

4. Business-type Activities- Direct Borrowings and Placements of Debt – 2015 Tax Compliance Certificates
On December 1, 2015, the City issued $3,350,945 in debt to provide for refunding and redemption of the outstanding 1993 Sewer Revenue Bonds and pledged the City’s Sewer Fund as the specific revenue source for the repayment of the Bond. Interest on the bond is 3.84% and interest payments are due semi-annually on November 1 and May 1. Principal payments are due annually on November 1, ranging from $143,360 to $261,976 through the fiscal year 2033. In the event of a default, the full outstanding balance of the Loans are due and payable. Annual debt service requirements for the certificates are shown below:

Fiscal Year
Ended June 30, Principal Interest Total
2025 193,796 $ 74,519 $ 268,315 $
2026 201,237 66,934 268,171
2027 208,965 59,058 268,023
2028 216,989 50,880 267,869
2029 225,321 42,388 267,709
2030-2033 991,197 77,917 1,069,114
$ 371,696 2,037,505 $ 2,409,201 $
2015 Tax Compliance Certificates

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
45 NOTE 7 – LONG-TERM LIABILITIES (Continued)

5. Business-type Activities- Direct Borrowings and Placements of Debt – 2020 Wastewater Refunding Bond
On August 1, 2020 the City issued $16,055,000 in debt to provide for refunding and redemption of the outstanding 2007 Sewer Loans series A and B as well as the 2011 Wastewater Bond and pledged the City’s Sewer Fund as the specific revenue source for the repayment of the Bond. Interest on the bond is between 2.5% and 4% and interest payments are due semi-annually on November 1 and May

1. Principal payments are due annually on November 1, ranging from $130,000 to $885,000 through the fiscal year 2051. In the event of a default, the full outstanding balance of the Loans are due and payable. Annual debt service requirements for the certificates are shown below:

Fiscal Year
Ended June 30, Principal Interest Total
2025 215,000 $ 415,012 $ 630,012 $
2026 220,000 406,312 626,312
2027 230,000 397,313 627,313
2028 245,000 387,812 632,812
2029 250,000 377,912 627,912
2030-2034 1,700,000 1,720,760 3,420,760
2035-2039 3,180,000 1,307,390 4,487,390
2040-2044 3,550,000 922,104 4,472,104
2045-2049 4,005,000 471,498 4,476,498
2050-2051 1,745,000 43,938 1,788,938
$ 6,450,051 15,340,000 $ 21,790,051 $
2020 Wastewater Refunding Bond
Fiscal Year
Ended June 30, Principal Interest Total
2025 514,715 $ 489,531 $ 1,004,246 $
2026 527,156 473,246 1,000,402
2027 544,884 456,371 1,001,255
2028 567,908 438,692 1,006,600
2029 581,240 420,300 1,001,540
2030-2034 3,220,792 1,798,677 5,019,469
2035-2039 3,709,595 1,307,390 5,016,985
2040-2044 4,079,595 922,104 5,001,699
2045-2049 4,110,917 471,498 4,582,415
2050-2051 1,745,000 43,938 1,788,938
$ 6,821,747 19,601,802 $ 26,423,549 $
Total Business-type Activities

6. Landfill Post-closure Costs
The City’s solid waste landfill was closed during the 1997/98 fiscal year. State and federal laws and regulations require that the City place a final cover (closure) on its landfill when closed, and perform certain maintenance and monitoring functions (post-closure) at the landfill site for thirty years after closure. At June 30, 2000, the City had completed its landfill closure activities and, therefore, no closure liability is included in the accompanying financial statements. The City’s estimated liability for the continuing landfill post-closure care costs at June 30, 2024 was $881,592. However, the actual cost of post-closure care may change due to inflation, changes in technology, or changes in landfill laws and regulations.

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
46 NOTE 7 – LONG-TERM LIABILITIES (Continued)

7. Compensated Absences
The City’s policy relating to compensated absences is described in Note (1). Compensated absences are liquidated primarily by the General and Enterprise Funds. The total amount outstanding at June 30, 2024, was $ 214,484 for business-type activities and $667,407 for governmental activities.

NOTE 8 – JOINT POWER AGREEMENTS
The City is a member of various joint powers authorities, which provide goods for services to the City and other authority members. Under the criteria established by GASB No. 14, the City does not have sufficient authority, influence or accountability over these entities to incorporate them in this annual report.

Additionally, the City has determined that it has no ongoing financial interest in or responsibility for any of these organizations as defined by GASB No. 14. The names and general functions of these joint powers are as follows:

Redwood Empire Municipal Insurance Fund (REMIF):

A group of Northern California cities participate in this agreement to provide themselves with various levels of liability, property and workers’ compensation insurance. REMIF is administered by a commission comprised of one member and one alternate appointed by each member city. The City provides for its general insurance needs through REMIF. During the fiscal year ended June 30, 2023, the City paid $202,708 to REMIF for insurance coverage. Beginning July 1, 2015 REMIF city members have become self-insured with their health benefits.

Mendocino Solid Waste Management Authority:

Mendocino Solid Waste Management Authority consists of three Mendocino County cities and the County of Mendocino. Mendocino Solid Waste Management Authority was created for the purpose of a) siting, licensing, developing, constructing, maintaining, and operating disposal sites and sanitary landfills and b) preparing and implementing a solid waste management plan. Mendocino Solid Waste management Authority is governed by a commission comprised of one member for each city and two members who are appointed by the Mendocino County Board of Supervisors.

Mendocino Emergency Services Authority:

Mendocino Emergency Services Authority (Authority) consists of four Mendocino County cities and the County of Mendocino. The authority was created for the purpose of coordinating disaster and other emergency preparedness planning and recovery programs, training of employees and volunteers, administration of disaster recovery assistance programs, and other related activities. The Authority is governed by a commission comprised of one member from each member agency.

Solid Waste Disposal Facility Operations Agreement:

The City and the County of Mendocino have entered into an agreement for the purpose of joint ownership, maintenance and operation of the solid waste landfill serving the City and certain unincorporated areas of the County of Mendocino. The City has been granted complete control of and authority over the administration, operation and maintenance of the landfill. The City and County will equally share the costs associated with the landfill including the purchase of equipment and closure/post-closure costs. Due to the City’s overall control of the landfill activity, the accompanying financial statements include 100% of the landfill activity, including the liability for closure/post-closure costs described in Note 7.

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
47 NOTE 9 – CONTRACTED SERVICES
The City has entered into an agreement to provide services to persons living outside the City limits. The general purpose and description of this contract agreement is as follows:

Brooktrails Community Services District
The City has entered into an agreement with the District to provide the District with sewage treatment.

Under the terms of the agreement, the District is to reimburse the City for costs allocated to the District based on the ratio of total flow entering the treatment plant. The cost allocation was carried over from previous years. During the fiscal year ended June 30, 2015, the City settled a lawsuit with the District. The new District allocation of $22,000 per month began July 1, 2015 as well as 36% of the bond payments.

NOTE 10 – CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time although the City expected such amounts, if any, to be immaterial.

The City violated the National Primary Drinking Water Regulations maximum contaminant level for total Trihalomethanes (TTHMs) which is one of the contaminant standards required by the Safe Drinking Water Act. The cost of the violation to the City cannot be currently determined.

There are other pending lawsuits in which the City is involved. Although the outcome of these lawsuits is not presently determinable, it is the opinion of the City Attorney that the resolutions of these matters will not have a material adverse effect on the financial condition of the City.

NOTE 11 – DEFERRED COMPENSATION PLAN
The City offers its employees deferred compensation plans created in accordance with IRS Code Section 457. The plans, available to all City employees, permit employees to defer a portion of their salary until future years. Participation in the plans is optional. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. As explained previously, the City has adopted the provisions of GASB No. 32 and, therefore, assets and liabilities of these plans have been excluded from the accompanying financial statements.

NOTE 12 – PENSION PLAN
For purposes of measuring the net pension liability and deferred outflows/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 CalPERS’ Financial Office. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

A. General Information about the Pension Plan
Plan Descriptions - All qualified employees are eligible to participate in the City’s separate Safety (police and fire) and Miscellaneous (all other) Plans, cost sharing defined benefit pension plans administered by the California Public Employees' Retirement System (CalPERS’), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plans are established by State statute and Local Government resolution.

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
48 NOTE 12 – PENSION PLAN (CONTINUED)
A. General Information about the Pension Plan (Continued) CalPERS’ issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS’ website.

Benefits Provided - CalPERS’ provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service.

The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees' Retirement Law.

The Plans’ provisions and benefits in effect at June 30, 2024, are summarized as follows:

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 the July l 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 fiscal year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

Prior to January 1, On or after January 1,
Hire date 2013 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 55-55 52-67
Monthly benefits, as a % of eligible compensation 2.0% to 2.5% 1.0% to 2.5% Required employee contribution rates 8% 6.75%
Required employer contribution rates 13.35% 7.59%
City Misc Plan
Prior to January 1, On or after January 1, On or after January 1, Hire date 2012 2012 2013
Benefit formula 3.0% @ 50 3.0% @ 55 2.7% @ 57
Benefit vesting schedule 5 Years Service 5 Years Service 5 Years Service Benefit payments Monthly for life Monthly for life Monthly for life Retirement age 50-55 50-55 50-57
Monthly benefits, as a % of eligible compensation 3.00% 2.4% to 3.0% 2.0% to 2.7% Required employee contribution rates 9% 13.00% 13.00%
Required employer contribution rates 22.48% 13.13% 13.13% City Safety Plan

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
49 NOTE 12 – PENSION PLAN (Continued)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions
As of June 30, 2024, the City reported net pension liabilities for its proportionate share of the net pension liability of the Plan as follows:

Misc. Plan Safety Plan
$ 4,125,218 7,077,643 $
Proportionate Share of Net Pension
Liability
The City’s net pension liability for the Plan is measured as the proportionate share of the net pension liability. The net pension liability of the Plan is measured as of June 30, 2023, and the total pension liability for the Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2022 rolled forward to June 30, 2023 using standard update procedures. The City’s proportion of the net pension liability was based on a projection of the City’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. The City’s proportionate share of the net pension liability for the Plan as of June 30, 2022 and 2023 was as follows:

City Miscellaneous City Safety
Plan Plan
Proportion - June 30, 2022 0.144850% 0.058700%
Proportion - June 30, 2023 0.141540% 0.055190%
Change - Increase (Decrease) -0.003310% -0.003510%
For the fiscal year ended June 30, 2024, the City recognized pension expense of $1,267,222. At June 30, 2024, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred
Outflows of Inflows of
Resources Resources
Pension contributions subsequent to measurement date 1,265,529 $ - $ Net differences between projected and actual earnings
on pension plan investments 1,710,469
Differences based on actual experience 582,415
Differences based on change of assumptions 668,062
Differences between actual vs proportionate contribution 4,471 (626,166) Adjustment due to differences in proportions 182,934 (78,883) Total 4,413,880 $ (705,049) $
$1,265,529 reported as deferred outflows of resources related to contributions subsequent to the measurement date and will be recognized as a reduction of the net pension liability in the fiscal year ended June 30, 2025. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions and will be recognized as pension expense as follows:

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
50 NOTE 12 – PENSION PLAN (Continued)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
Fiscal Year Ended
June 30, Amount
2025 625,964 $
2026 450,809
2027 1,317,891
2028 48,638
Total $ 2,443,302
The City’s net pension liability for each Plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of each of the Plans is measured as of June 30, 2023, using an annual actuarial valuation as of June 30, 2022 rolled forward to June 30, 2023 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

Actuarial Assumptions - The total pension liabilities in the June 30, 2022 actuarial valuations were determined using the following actuarial assumptions:
(1) Depending on age, service and type of employment
(2) Net of pension plan investment expenses, including inflation The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2017 valuation were based on the results of a January 2014 actuarial experience study for the period 1997 to 2011. Further details of the Experience Study can found on the CalPERS’ website.

Discount Rate - The discount rate used to measure the total pension liability was 6.90% for each Plan.

To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS’ stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 6.90 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 6.90 percent will be applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report that can be obtained from the CalPERS’ website.

Miscellaneous Safety
Valuation Date June 30, 2022 June 30, 2022
Measurement Date June 30, 2023 June 30, 2023
Actuarial Cost Method
Actuarial Assumptions:

Discount Rate 6.90% 6.90%
Inflation 2.30% 2.30%
Payroll Growth 3.00% 3.00%
Projected Salary Increase 3.30%-14.20% (1) 3.30%-14.20% (1) Investment Rate of Return 6.90% (2) 6.90% (2)
Mortality
Entry-Age Normal Cost Method
Derived using CalPERS’' Membership Data for all Funds

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
51 NOTE 12 – PENSION PLAN (Continued)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions (Continued)
CalPERS’ was scheduled to review all actuarial assumptions as part of its regular Asset Liability Management (ALM) review cycle that was scheduled to be completed in February 2018. Any changes to the discount rate will require Board action and proper stakeholder outreach. For these reasons, CalPERS’ expects to continue using a discount rate net of administrative expenses for GASB 67 and 68 calculations through at least the 2017-18 fiscal year. CalPERS’ will continue to check the materiality of the difference in calculation until such time as we have changed our methodology.

The long-term expected rate of return on pension plan investments was determined using a buildingblock method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, CalPERS’ took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds' asset classes, expected compound returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent.

The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses.

Assumed Asset Real Return Real Return
Asset Class Allocation Year 1-10(a) Year 11+(b)
Global Equity 50.00% 4.80% 5.98%
Fixed Income 28.00% 1.00% 2.62%
Inflation Assets 0.00% 0.77% 1.81%
Private Equity 8.00% 6.30% 7.23%
Real Assets 13.00% 3.75% 4.93%
Liquidity 1.00% 0.00% -0.92%
a) An expected inflation of 2% used for this period
b) An expected inflation of 2.92% used for this period
Sensitivity of the Net Pension Liability to Changes in the Discount Rate -The following presents the net pension liability of the Local Government for each Plan, calculated using the discount rate for each Plan, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate:

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
52 NOTE 12 – PENSION PLAN (Continued)
B. 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.

NOTE 13 - SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY
On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (“the Bill”) that provides for the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the City of Willits (City) that previously had reported a redevelopment agency within the reporting entity of the City as a blended component unit.

The Bill provides that upon dissolution of a redevelopment agency, either the city or other unit of local government will agree to serve as the “successor agency” to hold the assets units until they are distributed to other units of state and local government. On January 10, 2012, the City Council elected to become the Successor Agency for the former redevelopment agency in accordance with the Bill as part of the City resolution number 2012-04. After enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the State of California cannot enter into new projects, obligations or commitments. Subject to the control of a newly established oversight board, remaining assets can only be used to pay enforceable obligations in existence as of the date of the dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments). Successor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated.

Long-term debt of the Successor Agency as of June 30, 2024, consisted of the following:

Balance Balance Due within
June 30, 2023 Additions Deletions June 30, 2024 one year 2020 Tax Allocation Refunding Bonds $ 611,780 $ (316,530) - $ $ 295,250 $ 295,250 Totals $ 1,241,247 $ (316,530) - $ $ 295,250 $ 295,250
Miscellaneous Safety
1% Decrease 5.90% 5.90%
Net Pension Liability $10,184,875 $6,000,432
Current Discount Rate 6.90% 6.90%
Net Pension Liability $7,077,643 $4,125,218
1% Increase 7.90% 7.90%
Net Pension Liability $4,520,125 $ 2,592,097

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
53 NOTE 13 - SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT

AGENCY (CONTINUED)
Tax Allocation Refunding Bonds – Series 2020
The former redevelopment agency issued $1,541,112 of tax allocation refunding bonds on January 14, 2020 to refund the Tax Allocation Bonds – Series 2002. In the event of default, the outstanding balance is due immediately. Annual debt service requirements for the bond are shown below:

Fiscal Year
Ended June 30, Principal Interest Total
2025 295,250 $ 3,849 $ 299,099 $
$ 3,849 295,250 $ 299,099 $
2020 Tax Allocation Refunding Bonds
NOTE 14 – OTHER POST EMPLOYMENT BENEFITS
The City does not offer other post-employment benefits.

NOTE 15 – NON-COMMITMENT DEBT
The City has sponsored the issuance of $5,500,000 of Certificates of Participation for Frank R.

Howard Foundation, a nonprofit corporation. The Trust agreement is dated July 1, 2015. The funds will be used for construction; installation and furnishing of a single story 16,000 square foot medical office. The medical office will be located at 3 Marcela Drive in Willits, California. The City is not liable for repayment of the debt but was assisting the Frank R. Howard Foundation to obtain tax exempt financing.

NOTE 16 – RISK MANAGEMENT/JOINT VENTURE
A. Risk Management
The City of Willits is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omission; injuries to employees; and natural disasters. The City participates in a public entity risk pool for workers’ compensation, general liability and property insurance coverage. During fiscal year 2023-24, there were no significant reductions in insurance coverage. There has also been no significant variance in insurance coverages within the last 3 fiscal years.

B. Risk Pool Arrangements
The City is an associate member of the Redwood Empire Municipal Insurance Fund (REMIF), a public entity pool comprised of fifteen northern California charter and associate member cities.

REMIF is organized under a Joint Powers Agreement pursuant to the California Government Code.

The purpose of REMIF is to arrange and administer programs of insurance for the pooling of selfinsured losses and to purchase excess insurance coverage.

For each of its insurance programs, REMIF has a multilevel risk sharing arrangement. Initially each individual charter or associate member city participating in a program assumes its own losses up to a predetermined deductible level. Losses and claims in excess of the deductibles and within REMIF’s stated retention limits are paid out of a central pool maintained by REMIF. This central pool is funded by all of the cities participating in that program through premium assessments.

REMIF purchases excess loss insurance policies (reinsurance) to provide coverage for losses and claims in excess of REMIF’s stated retention limits up to specified amounts.

CITY OF WILLITS

NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2024
54 NOTE 16 – RISK MANAGEMENT/JOINT VENTURE (Continued)
B. Risk Pool Arrangements (Continued)
Losses and claims ceded to reinsurers would represent a contingent liability to REMIF if the reinsurers were unable to meet their existing obligations under the reinsurance agreements. Losses and claims which surpass the limits of the excess of loss insurance policies are the responsibility of the individual city in which the loss or claim originates.

The City of Willits participates in the following REMIF programs:

General Liability Insurance – Annual premiums are paid by the member cities and are adjusted retrospectively to cover costs. The City of Willits self-insures for the first $5,000 of each loss and pays 100% of all losses incurred under $5,000. The City does not share or pay for losses of other cities under a range of between $5,000 to $25,000, depending on the entity’s deductible amount.

Participating cities then share in the next $5,000 to $500,000 per loss occurrence. Specific coverage includes comprehensive and general liability, personal injury, contractual liability, professional liability, and certain other coverage. REMIF is a member of the California Joint Powers Risk Management Authority, which provides REMIF with an additional $39,500,000 liability insurance coverage over and above REMIF retention level of $500,000.

Worker’s Compensation – Periodic deposits are paid by member cities and are adjusted retrospectively to cover costs. The City of Willits is self-insured for the first $10,000 of each loss and pays 100% of all losses incurred under $10,000. The City does not share or pay for losses of other cities under $10,000. Excess worker’s compensation insurance coverage is maintained with a limit of $1,000,000 to protect against catastrophic losses.

Property Insurance –The City of Willits maintains the following property insurance coverages:

Automobile – Loss limit: Stated Value. Deductible: $10,000. Boiler/Machinery – Loss limit: $100 million. Deductible: $5,000. Cyber Coverage – Loss Limit: $2 million. Deductible: $100,000.

Pollution: - Loss Limit: $2 million. Deductible: $100,000. Property Loss: Loss Limit: $400 million.

Deductible: $10,000 (excludes flood, earthquake, and boiler/machinery. Earthquake and Flood – Loss Limit: $20 million. Deductible: $100,000.

The June 30, 2024 financial statements for REMIF are available online at www.remif.com.

NOTE 17 – COMMITMENTS AND CONTIGENCIES
There are various lawsuits and claims against the City. Although the outcomes of these lawsuits and claims is not presently determinable, management, after consultation with legal counsel is of the opinion will not have an material adverse effect on the financial condition of the City as of June 30, 2024.

NOTE 18 – PRIOR PERIOD ADJUSTMENTS
A prior period adjustment of $717,052 (General Fund), $189,570 (Water), $78,308 (Sewer), $(24,881) (Airport), $27,647 (Transportation Sales Tax), $130,242 (Capital Outlay), $8,026 (Gas Tax) were posted due to misstatements of accounts payable balances related to a system error in the ERP transition.

A prior period adjustment of $(241,217) was made in the General Fund related to an overstatement of accounts receivable in the prior fiscal year.

A prior period adjustment of $(1,060,735) was made on the government-wide statement related to the overstatement of construction in progress.

Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
Revenues
Property Taxes 501,600 $ 501,600 $ 529,242 $ 27,642 $
Sales and Use Taxes 1,941,500 1,941,500 1,375,976 (565,524) Business License Taxes 146,500 146,500 130,799 (15,701) Franchise Fees 320,200 320,200 402,221 82,021
Transient Occupancy Taxes 453,200 453,200 283,515 (169,685) Other Taxes 530,400 530,400 355,282 (175,118)
Licenses and Permits 192,496 192,496 79,461 (113,035)
Interest 30,000 30,000 112,968 82,968
Charges for Services 75,300 75,300 1,087,088 1,011,788
Intergovernmental 699,551 699,551 831,044 131,493
Other 599,332 599,332 99,915 (499,417)
Total Revenues 5,490,079 5,490,079 5,287,511 (202,568)
Expenditures
Current:

General Government 2,537,797 2,537,797 2,949,570 (411,773) Planning 333,026 333,026 333,026
Public Safety 2,887,980 2,887,980 2,624,710 263,270
Public Works 296,314 296,314 342,724 (46,410)
Parks and Recreation 379,863 379,863 305,010 74,853
Community Development 600,100 600,100 799,059 (198,959) Capital Outlay: 78,870
Total Expenditures 7,035,080 7,035,080 7,099,943 14,007 Excess (Deficiency) of Revenues Over
(Under) Expenditures (1,545,001) (1,545,001) (1,812,432) (267,431) Other Financing Sources (Uses):

Transfers In 224,846 224,846
Transfers Out (151,000) (151,000) (720,130) (569,130)
Total Other Financing Sources (Uses) (151,000) (151,000) (495,284) (344,284) Net Change in Fund Balance (1,696,001) (1,696,001) (2,307,716) (611,715) Fund Balance - July 1, 2023 2,316,824 2,316,824 2,316,824 Prior Period Adjustments 475,835 475,835
Fund Balance - July 1, 2023, Restated 2,316,824 2,316,824 2,792,659 475,835 Fund Balance - June 30, 2024 $ 620,823 $ 620,823 $ 484,943 $ (135,880) Budgeted Amounts

CITY OF WILLITS

GENERAL FUND
FOR THE FISCAL YEAR ENDED JUNE 30, 2024

SCHEDULE OF REVENUES, EXPENDITURES,

BUDGET AND ACTUAL

AND CHANGES IN FUND BALANCES
55 Variance with
Final Budget
Original Final Actual Positive (Negative)
Revenues
Sales and Use Taxes 1,062,033 $ 1,062,033 $ 892,892 $ (169,141) $ Interest 61,499 61,499
Intergovernmental 200,000 200,000 (200,000)
Total Revenues 1,262,033 1,262,033 954,391 (307,642)
Expenditures
Current:

Public Works 4,594,104 4,594,104 505,404 4,088,700
Capital Outlay 120,590 (120,590)
Total Expenditures 4,594,104 4,594,104 625,994 3,968,110 Excess (Deficiency) of Revenues Over
(Under) Expenditures (3,332,071) (3,332,071) 328,397 3,660,468 Other Financing Sources (Uses):

Transfers Out (1,995,000) (1,995,000) (533,941) 1,461,059 Total Other Financing Sources (Uses) (1,995,000) (1,995,000) (533,941) 1,461,059 Net Change in Fund Balance (5,327,071) (5,327,071) (205,544) 5,121,527 Fund Balance - July 1, 2023 2,437,650 2,437,650 2,437,650 Prior Period Adjustment 27,647 27,647
Fund Balance - July 1, 2023, Restated 2,437,650 2,437,650 2,465,297 27,647 Fund Balance - June 30, 2023 $ (2,889,421) $ (2,889,421) $ 2,259,753 $ 5,149,174

CITY OF WILLITS

SCHEDULE OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL

TRANSPORTATION SALES TAX SPECIAL REVENUE FUND
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
Budgeted Amounts
56 Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
Revenues
Sales and Use Taxes 1,545,000 $ 1,545,000 $ 1,368,302 $ (176,698) $ Total Revenues 1,545,000 1,545,000 1,368,302 (176,698)
Net Change in Fund Balance 1,545,000 1,545,000 1,368,302 (176,698) Fund Balance - July 1, 2023 3,287,519 3,287,519 3,287,519 Fund Balance - June 30, 2024 $ 4,832,519 4,832,519 $ 4,655,821 $ (176,698) $ Budgeted Amounts

CITY OF WILLITS

SCHEDULE OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL

MEASURE K SALES TAX SPECIAL REVENUE FUND
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
57 CITY OF WILLITS

REQUIRED SUPPLEMENTAL INFORMATION
JUNE 30, 2024
58 Cost Sharing Defined Benefit Pension Plans
Schedule of the City’s Proportionate Share of the Net Pension Liability – Last 10 Years Misc Plan Safety Plan Misc Plan Safety Plan Misc Plan Safety Plan Misc Plan Safety Plan Misc Plan Safety Plan Proportion of the net pension liability 0.141540% 0.055190% 0.144850% 0.058700% 0.209960% 0.066670% 0.144290% 0.056630% 0.144400% 0.059340% Proportionate share of the net pension liability 7,077,643 $ 4,125,218 $ 6,777,718 $ 4,033,289 $ 3,986,796 $ 2,339,777$ $ 6,086,133 $ 3,772,924 $ 5,782,463 3,545,788$ Covered-employee payroll 1,988,424$ $ 550,124 $ 1,941,809 $ 812,511 $ 1,960,626 725,122$ $ 1,995,011 838,234$ 1,844,079$ 665,707$ Proportionate Share of the net pension liability
as a percentage of covered-employee payro 355.94% 749.87% 349.04% 496.40% 203.34% 322.67% 305.07% 450.10% 313.57% 532.63% Plan's fiduciary net position 15,897,066 $ 9,544,297 $ 15,719,519 $ 9,012,511 $ 17,999,030 $ 9,441,255 $ 14,255,123 $ 9,945,145$ $ 9,057,376 13,500,184 $ Plan's total pension liability $ 13,669,515 22,974,709 $ 21,287,905 $ 14,255,133 $ $ 20,244,424 $ 20,341,256 13,522,533 $ 13,718,069$ $ 12,644,758 19,282,647 $ Plan fiduciary net position as a percentage of
total pension liability 69.19% 69.82% 73.84% 63.22% 88.91% 69.82% 70.08% 72.50% 70.01% 71.63% June 30, 2024 June 30, 2023 June 30, 2022 June 30, 2021 June 30, 2020 Misc Plan Safety Plan Misc Plan Safety Plan Misc Plan Safety Plan Misc Plan Safety Plan Misc Plan Safety Plan Proportion of the net pension liability 0.144900% 0.059010% 0.142270% 0.059340% 0.143320% 0.093130% 0.152275% 0.067911% 0.151177% 0.067559% Proportionate share of the net pension liability 5,461,003 $ 3,462,358$ 5,608,277$ 3,545,788$ 4,978,929$ $ 4,177,620 3,235,381 $ $ 3,736,327 2,798,221 $ $ 2,534,118 Covered-employee payroll 1,798,882$ 537,809$ 1,678,686$ 587,395$ 1,743,044$ 747,527$ 1,612,018$ 773,076$ 1,577,211$ 785,122$ Proportionate Share of the net pension liability
as a percentage of covered-employee payroll 303.58% 643.79% 334.09% 603.65% 285.65% 432.81% 259.15% 361.96% 236.89% 322.77% Plan's fiduciary net position $ 9,551,447 19,014,416 $ $ 9,001,638 17,178,465 $ $ 6,687,054 11,065,481 $ 11,402,375 $ 6,825,730 $ 11,269,690 $ 6,833,187 $ Plan's total pension liability $ 13,565,469 27,035,996 $ 22,786,742 $ 12,547,426 $ 16,044,411 $ 9,922,435 $ 15,579,995 $ 9,623,951 $ 15,006,017 $ 9,367,305 $ Plan fiduciary net position as a percentage of
total pension liability 70.33% 70.41% 75.39% 71.74% 68.97% 67.39% 73.19% 70.92% 75.10% 72.95% June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 Notes to Schedule
Change in Benefit Terms: The figures above do not include any liability impact that may have resulted from plan changes which occurred after June 30, 2013 as they have minimal cost impact. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a Golden Handshakes).

Change in Assumptions: Discount rate has changed to 7.15% in fiscal year 2017.

Discount rate has changed to 6.90% in fiscal year 2023.

Inflation rate has changed to 2.3% in the fiscal year 2023

CITY OF WILLITS

REQUIRED SUPPLEMENTAL INFORMATION
JUNE 30, 2024
59 Cost Sharing Defined Benefit Pension Plans
Schedule of Contributions – Last 10 Years
Misc Safety Misc Safety Misc Safety Misc Safety Misc Safety Plan Plan Plan Plan Plan Plan Plan Plan Plan Plan
Contractual required contribution (actuarially
determined) $ 925,304 $ 340,225 $ 895,361 $ 371,861 $ 607,211 $ 590,683 $ 541,588 $ 544,157 $ 598,503 $ 414,634 Contributions in relation to the actuarially
determined contributions (925,304) (340,225) (895,361) (371,861) (607,211) (590,683) (541,588) (544,157) (598,503) (414,634) Contribution deficiency (excess) $ - $ - $ - $ - $ - $ - -$ -$ -$ -$ Covered employee payroll $ 2,152,483 585,124$ $ 1,988,424 $ 550,124 $ 2,185,744 500,004$ $ 2,089,451 $ 615,479 $ 2,103,326 $ 729,919 Contributions as a percentage of covered
employee payroll 42.99% 58.15% 45.03% 67.60% 27.78% 118.14% 25.92% 88.41% 28.46% 56.81% June 30, 2024 June 30, 2023 June 30, 2022 June 30, 2021 June 30, 2020 Misc Safety Misc Safety Misc Safety Misc Safety Misc Safety Plan Plan Plan Plan Plan Plan Plan Plan Plan Plan
Contractual required contribution (actuarially
determined) $ 513,332 321,412$ $ 470,671 338,047$ $ 448,765 $ 370,313 $ 331,977 $ 236,700 $ 332,087 $ 285,632 Contributions in relation to the actuarially
determined contributions (513,332) (321,412) (470,671) (338,047) (448,765) (370,313) (331,977) (236,700) (332,087) (285,632) Contribution deficiency (excess) $ - -$ -$ -$ -$ -$ -$ -$ -$ -$ Covered employee payroll $ 1,844,079 665,707$ $ 1,798,882 537,809$ $ 1,678,686 587,395$ $ 1,743,044 747,527$ 1,612,018$ $ 773,076 Contributions as a percentage of covered
employee payroll 27.84% 48.28% 26.16% 62.86% 26.73% 63.04% 19.05% 31.66% 20.60% 36.95% June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 Notes to Schedule
(1)The mortality table was developed based on CalPERS’ specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the 2014 experience study report.

Valuation Date: June 30, 2022
Methods and assumptions used to determine contributions rates:

Actuarial Cost Method Entry Age Normal Cost Method
Amortization Method Level Percent of Payroll
Asset Valuation Method Market Value
Inflation 2.30%
Salary Increase 3.30% to 14.2 %
Investment Rate of Return 6.90%
Mortality Rate Table(1) Derived using CalPERS’ Data
Variance with
Final Budget
Budget Actual Positive (Negative)
Revenues
Intergovernmental - $ $ 164,057 $ 164,057
Other 76,785 76,785
Total Revenues 240,842 240,842
Expenditures
Current:

Public Works 139,923 (139,923)
Capital Outlay 600,000 1,928,881 (1,328,881)
Total Expenditures 600,000 2,068,804 (1,468,804)
Excess (Deficiency) of Revenues Over
(Under) Expenditures (600,000) (1,827,962) (1,227,962)
Other Financing Sources (uses):

Transfers In 1,393,797 1,393,797
Total Other Financing Sources (Uses) 1,393,797 1,393,797 Net Change in Fund Balance (600,000) (434,165) 165,835
Fund Balance - July 1, 2023 178,920 178,920
Prior Period Adjustments 130,242 130,242
Fund Balance - July 1, 2023, Restated 178,920 309,162 130,242 Fund Balance - June 30, 2023 $ (421,080) $ (125,003) $ 296,077 FOR THE FISCAL YEAR ENDED JUNE 30, 2024
Final

CITY OF WILLITS

SCHEDULE OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL

CAPITAL OUTLAY CAPITAL PROJECTS FUND
61 63

NONMAJOR GOVERNMENTAL FUNDS

SPECIAL REVENUE FUNDS
______________________________
Special revenue funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes.
______________________________
Haehl Creek Fund was established to account for the development of improvements at the intersections of Baechtel Road with South Main Street or along the Haehl Creek Drive, East Hill Road, or Baechtel Road corridors.

LEAA Fund was established to account for revenue and expenditures associated with the Law Enforcement Assistance Administration Program.

Narcotics Forfeiture Fund was established to account for funds distributed to the Willits Police Department in accordance with law as a result of a local or state narcotics forfeiture and/or seizure. As required by law these funds will be utilized exclusively to support the law enforcement and prosecutor efforts of the Willits Police Department.

Business Rehab Fund was established to account for funds set aside for the business rehabilitation program loans and to account for revenues and expenditures associated with repayment and disbursement of loans.

Vehicle Abatement Fund was established to account for funds received as part of the CHP abandoned vehicle abatement program.

HSG Rehab Fund was established to account the CDBG Housing Rehabilitation program loans.

DNA Cost Reimb Fund was established to account for funds distributed to the Willits Police Department in accordance with California State laws for funds from the State Department of Justice.

H&S Restitution Fund was established to account for funds distributed to the Willits Police Department by offenders whose actions have caused resources to be expended to remediate their operations/locations, according to the District Attorney’s 11470.2 H&S Restitution Fund.

Business Loan Fund was established to account for local small business loans and to account for revenues and expenditures associated with repayment and disbursement of loans.

Lateral Repair Loan Fund was established to account for loans given by the City for residents to make necessary repairs to sewer lateral improvement and repairs.

Gas Tax Fund was established to account for revenue and expenses associated with gasoline tax.

LEAA Narcotics Business Vehicle
Haehl Creek Program Forfeiture Rehab Abatement HSG Rehab Assets
Cash and Investments 132,309 $ 2,185 $ 61,132 $ 4,154 $ - $ 73,759 $ Accounts Receivable
Loans Receivable 225,481
Total Assets $ 132,309 $ 2,185 $ 61,132 $ 4,154 $ 299,240 - $ Liabilities
Accounts Payable -$ $ - $ 514 -$ $ - $ 2,475
Deposits Payable 4,066
Due to other Funds 5,256
Total Liabilities 4,580 5,256 2,475
Fund Balances
Restricted 132,309 2,185 56,552 4,154 296,765
Unassigned (5,256)
Total Fund Balances 132,309 2,185 56,552 4,154 (5,256) 296,765 Total Liabilities and Fund Balances 132,309 $ $ 2,185 $ 61,132 $ 4,154 $ 299,240 - $ Special Revenue Funds

CITY OF WILLITS

COMBINING BALANCE SHEET

NONMAJOR GOVERNMENTAL FUNDS
June 30, 2024
64 Total
Nonmajor
DNA Cost H&S Housing Lateral Governmental
Reimb Restitution Loan Repair Loan Gas Tax Funds
$ 50,562 $ 37,308 $ 42,271 $ 35,037 $ 438,717
34,380 34,380
225,481
$ 50,562 $ 37,308 $ 42,271 $ 35,037 $ 34,380 $ 698,578
-$ $ - $ - $ - $ 15,991 $ 18,980
4,066
431,785 437,041
447,776 460,087
50,562 37,308 42,271 35,037 657,143
(413,396) (418,652)
50,562 37,308 42,271 35,037 (413,396) 238,491
$ 50,562 $ 37,308 $ 42,271 $ 35,037 $ 34,380 $ 698,578

CITY OF WILLITS

COMBINING BALANCE SHEET

NONMAJOR GOVERNMENTAL FUNDS
June 30, 2024
Special Revenue Funds
65 LEAA Narcotics Business Vehicle
Haehl Creek Program Forfeiture Rehab Abatement HSG Rehab Revenues:

Sales and Use Taxes $ - $ - $ - $ - $ - $ -
Interest 3,726 61 1,722 117
Charges for Services
Intergovernmental 9,601 92,309
Total Revenues 3,726 61 11,323 117 92,309
Expenditures:

Current:

Community Development 18,386
Public Safety 17,095 10,244
Public Works 1,507
Total Expenditures 1,507 17,095 10,244 18,386
Excess (Deficiency) of Revenues
over (Under) Expenditures 2,219 (17,034) 1,079 117 73,923 Net Change in Fund Balances 2,219 (17,034) 1,079 117 73,923 Fund Balances - June 30, 2023 130,090 19,219 55,473 4,037 (5,256) 222,842 Prior Period Adjustments
Fund Balances - July 1, 2023, Restated 130,090 19,219 55,473 4,037 (5,256) 222,842 Fund Balances - June 30, 2024 $ 132,309 $ 2,185 $ 56,552 4,154$ (5,256)$ 296,765$ Special Revenue Funds

CITY OF WILLITS

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

NONMAJOR GOVERNMENTAL FUNDS
For the Fiscal Year Ended June 30, 2024
66 Total
Nonmajor
DNA Cost H&S Housing Lateral Governmental
Reimb Restitution Loan Repair Loan Gas Tax Funds
$ - $ - $ - $ - $ - $ -
1,424 1,051 1,191 9,292
3,885 55,284 59,169
41,080 268,627 411,617
5,309 1,051 42,271 323,911 480,078
18,386
27,339
497,148 498,655
497,148 544,380
5,309 1,051 42,271 (173,237) (64,302)
5,309 1,051 42,271 (173,237) (64,302)
45,253 36,257 35,037 (232,133) 310,819
(8,026) (8,026)
45,253 36,257 35,037 302,793 (240,159)
$ 50,562 $ 37,308 $ 42,271 $ 35,037 $ (413,396) $ 238,491

CITY OF WILLITS

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

NONMAJOR GOVERNMENTAL FUNDS
For the Fiscal Year Ended June 30, 2024
Special Revenue Funds
67 Variance with
Final Budget
Budget Actual Positive (Negative)
Revenues
Charges of services - $ $ 55,284 $ 55,284
Intergovernmental 243,189 268,627 25,438
Total Revenues 243,189 323,911 80,722
Expenditures
Current:

Public Works 314,692 497,148 (182,456)
Total Expenditures 314,692 497,148 (182,456)
Excess (Deficiency) of Revenues Over
(Under) Expenditures (71,503) (173,237) (101,734)
Net Change in Fund Balance (71,503) (173,237) (101,734) Fund Balance - July 1, 2023 (232,133) (232,133)
Prior Period Adjustments (8,026) (8,026)
Fund Balance - July 1, 2023, Restated (232,133) (240,159) (8,026) Fund Balance - June 30, 2024 $ (303,636) $ (413,396) $ (109,760)

CITY OF WILLITS

SCHEDULE OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL

GAS TAX SPECIAL REVENUE FUND
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
Final
68 Variance with
Final Budget
Budget Actual Positive (Negative)
Revenues
Interest - $ $ 61 $ 61
Total Revenues 61 61
Expenditures
Current:

Public Safety 5,604 17,095 (11,491)
Total Expenditures 5,604 17,095 (11,491)
Excess (Deficiency) of Revenues Over
(Under) Expenditures (5,604) (17,034) (11,430)
Net Change in Fund Balance (17,034) (17,034)
Fund Balance - July 1, 2023 19,219 19,219
Fund Balance - June 30, 2024 $ 19,219 $ 2,185 $ (17,034)

CITY OF WILLITS

SCHEDULE OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL

LEAA PROGRAM SPECIAL REVENUE FUND
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
Final
69 Variance with
Final Budget
Budget Actual Positive (Negative)
Revenues
Interest 500 $ 1,722 $ 1,222 $
Intergovernmental 35,000 9,601 (25,399)
Total Revenues 35,500 11,323 (24,177)
Expenditures
Current:

Public Safety 35,000 10,244 24,756
Total Expenditures 35,000 10,244 24,756
Excess (Deficiency) of Revenues Over
(Under) Expenditures 1,079 500 579
Net Change in Fund Balance 500 1,079 579
Fund Balance - July 1, 2023 55,473 55,473
Fund Balance - June 30, 2024 55,973 $ 56,552 $ 579 $

SCHEDULE OF REVENUES, EXPENDITURES,

CITY OF WILLITS

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL

NARCOTICS FORFEITURE SPECIAL REVENUE FUND
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
Final
70 Variance with
Final Budget
Budget Actual Positive (Negative)
Revenues
Interest 500 $ $ 1,051 $ 551
Total Revenues 500 1,051 551
Expenditures
Current:

Public Safety 10,000 - 10,000
Total Expenditures 10,000 10,000
Excess (Deficiency) of Revenues Over
(Under) Expenditures (9,500) 1,051 10,551
Net Change in Fund Balance (9,500) 1,051 10,551
Fund Balance - July 1, 2022 36,257 36,257
Fund Balance - June 30, 2023 $ 26,757 $ 37,308 $ 10,551 Final

CITY OF WILLITS

SCHEDULE OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL

H&S RESTITUTION SPECIAL REVENUE FUND
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
71 72

NONMAJOR PROPRIETARY FUNDS

PROPRIETARY FUNDS
______________________________
Proprietary funds are used to account for operations that are financed and operated in a manner similar to private business enterprises - for these funds, it is the intent of the City Council that the costs of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges.
______________________________
Solid Waste - This fund is used to account for revenues and expenses associated with solid waste services.

Airport - This fund is used to account for revenues and expenses associated with the Airport.

Total
Nonmajor
Solid Waste Airport
Fund Fund
Assets
Current Assets:

Cash and Investments $ - $ - $ -
Accounts Receivable 78,926 78,926
Inventory 193,194 193,194
Total Current Assets 272,120 272,120
Noncurrent Assets:

Capital Assets:

Land 11,692 11,692
Buildings and Improvements 1,777,853 1,777,853
Machinery and Equipment 54,867 54,867
Less:

Accumulated Depreciation (722,185) (722,185)
Total Noncurrent Assets 1,122,227 1,122,227
Total Assets 1,394,347 1,394,347
Liabilities
Current Liabilities:

Accounts Payable 6,072 14,498 20,570
Due to Other Funds 872,496 498,598 1,371,094
Deposits Payable 8,769 8,769
Total Current Liabilities 878,568 521,865 1,400,433
Noncurrent Liabilities:

Landfill Post-closure Costs 881,592 881,592
Total Noncurrent Liabilities 881,592 881,592
Total Liabilities 1,760,160 521,865 2,282,025
Net Position
Net Investment in Capital Assets 1,122,227 1,122,227
Unrestricted (1,760,160) (249,745) (2,009,905)
Total Net Position $ (1,760,160) $ 872,482 $ (887,678)

CITY OF WILLITS

NONMAJOR PROPRIETARY FUNDS

COMBINING STATEMENT OF NET POSITION
June 30, 2024
Enterprise Funds
Enterprise
Funds
73 Total
Nonmajor
Solid Waste Airport
Fund Fund
Operating Revenues
Charges for Services $ 128,264 - $ $ 128,264
Other 39,000 39,000
Total Operating Revenues 167,264 167,264
Operating Expenses
Operations 201,947 201,947
Administrative 6,413 6,413
Maintenance 179,231 27,088 206,319
Depreciation 46,987 46,987
Total Operating Expenses 179,231 282,435 461,666
Operating Income (Loss) (179,231) (115,171) (294,402)
Non-Operating Revenue (Expenses)
Interest Revenue
Total Non-Operating Revenue (Expenses)
Net Income (Loss) (179,231) (115,171) (294,402)
Transfers
Transfers Out (1,927) (1,927)
Changes in Net Position (179,231) (117,098) (296,329)
Net Position - Beginning of Fiscal Year (1,580,929) 1,014,461 (566,468) Prior Period Adjustment (24,881) (24,881)
Net Position - Beginning of Fiscal Year, restated (1,580,929) 1,014,461 (591,349) Net Position - End of Fiscal Year $ (1,760,160) $ 897,363 $ (887,678) Enterprise

NONMAJOR PROPRIETARY FUNDS

COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION FOR THE FISCAL YEAR ENDED JUNE 30, 2024
Funds
Enterprise Funds

CITY OF WILLITS
74 Total
Nonmajor
Solid Waste Airport
Fund Fund
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash Received from Users - $ $ 90,201 $ 90,201
Cash Payments to Suppliers and Contractors (184,204) (290,394) (474,598) Net Cash Provided (Used) By Operating Activities (184,204) (200,193) (384,397) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Interfund Borrowing 184,204 413,307 597,511
Net Cash Provided (Used) By Noncapital Financing Activities 184,204 411,380 595,584 CASH FLOWS FROM INVESTING ACTIVITIES:

Interest Received -
Net Cash Provided (Used) in Investing Activities

CASH FLOWS FROM CAPITAL AND RELATED FINANCING
ACTIVITIES:

Acquisition of property, plant, and equipment (211,187) (211,187) Net Cash Provided (Used) In Capital and Related
Financing Activities (211,187) (211,187)

NET INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF FISCAL YEAR
CASH AND CASH EQUIVALENTS, END OF FISCAL YEAR $ - $ - $ - Reconciliation to Statement of Net Position:

Cash and Cash Equivalents $ - $ - $ -
CASH FLOWS FROM OPERATING ACTIVITIES:

Operating Income (Loss) $ (179,231) $ (115,171) $ (294,402) Adjustment to Reconcile Operating Income
(Loss) to Net Cash Provided (Used) by Operating
Activities:

Depreciation Expense 46,987 46,987
Changes in Assets and Liabilities:

Increase (Decrease) in Accounts Payable (4,973) 3,404 (1,569) (Increase) Decrease in Inventory (58,350) (58,350)
Total Adjustments (4,973) (85,022) (89,995)
Net Cash Provided (Used) By Operating Activities $ (184,204) $ (200,193) $ (384,397)

CITY OF WILLITS
FOR THE FISCAL YEAR ENDED JUNE 30, 2024
Funds

NONMAJOR PROPRIETARY FUNDS

COMBINING STATEMENT OF CASH FLOWS
Enterprise Funds
Enterprise
75 Resolution No. 2026-__ Page 1 of 1 February 25, 2026 RESOLUTION NO. 2026-__

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WILLITS TO ACCEPT THE AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDING JUNE 30, 2024.

WHEREAS, the City of Willits retained the services of Moss, Levy & Hartzheim LLP to review and test processes and audit the financial statements of the governmental activities and business-type activities of each major fund, and the aggregate remaining funds and information for the Fiscal Year ending June 30, 2024; and
WHEREAS, the auditor has the responsibility to express opinions on the financial statements where Moss, Levy & Hartzheim LLP conducted the audit in accordance with Government Auditing Standards, issued by the Comptroller General of the United States; and WHEREAS, the auditor offered a modified opinion and stated that the financial statements are presented fairly and in all material respects regarding the financial position of the governmental activities and business-type activities for each major fund, and the aggregate remaining funds.

NOW, THEREFORE, BE IT RESOLVED that the Willits City Council Does hereby accept the City of Willits Annual Financial Report for the Fiscal Year ending June 30, 2024.

PASSED, APPROVED AND ADOPTED, this 25th day of February, 2026.

THE CITY OF WILLITS
______________________________
Tom Allman, Mayor
ATTEST:

I, Delores Pedersen, City Clerk of the City of Willits, do hereby certify that the foregoing Resolution was duly and regularly passed, approved and adopted by the City Council of the City of Willits, California, at its regular meeting held on the 14th day of January 2026, by the following vote:

AYES:

NOES:

ABSENT:

RECUSED:
______________________________
Delores Pedersen, City Clerk
1 Monthly Achievements & Activities
●Grant applications for funding to conduct an Aeronautical Survey to determine obstructions and trees that penetrate the Transitional Slope on property to the North and South of Runway 16/34 is being submitted. This study will be a useful tool in identifying and prioritizing tree removal to improve the safety of flight operations. An additional grant to fund a Wildlife Hazard Assessment for the Airport is also being submitted. The Wildlife Assessment will serve as a basis to apply for federal funding to construct fencing as a mitigation measure to address the animals that frequently congregate on the runway and could pose a potential hazard to operations. ●The Rules, Regulations, & Minimum Standards were adopted by Resolution. The final version and supporting documents were submitted to the FAA for review. The FAA granted itself another extension in the plaintiff’s appeal of a portion of the Director’s Determination, this time until March 14.
●NO TRESSPASSING signs were posted at the South end of the runway where existing trails converge and there has been unauthorized access in the form of motorcycle activity. ●Attempts to contact tenants, some several months behind on payments for hangar rentals were made. Some were unsuccessful and unfortunately will have to be notified via certified letter and provided a pay or quit notice. Working with Legal Council to handle potential evictions.

Project Updates
• Any potential out of pocket improvement projects that are not critical to the safety of flight operations and compliance are on hold due to budget constraints and the Cities current financial state.

Staffing Items
• Staff members continue to visit the Airport weekly for maintenance, security evaluation, and fuel quality assurance. Thomas Gallups has separated from employment with the City of Willits. His duties at the Airport have been distributed amongst the Maintenance department.

AIRPORT – O28
JANUARY 2026 | Report
2 Budget Status
●No Change, 3 empty hangars.

Focus for Next Month
● Continue work with legal to continue resolving the PART 16 Complaint and satisfy the FAA determination. Meet the expectations declared by the Director in order to continue receiving the funding needed to sustain the facility, as previously mentioned in this report – This is ongoing. ● Begin planning for tree removal and repair of the Segmented Circle as determined necessary to improve the safety of flight operations by the State DOT (Caltrans Division of Aeronautics) in the recent annual inspection. These potential projects would be funded though State entitlements that have accrued over the last three fiscal years in the amount of approximately 30k eligible solely for the purpose of maintenance of the Airport.
●Post additional NO TRESSPASSING signs and continue to monitor trail heads and access points. 1 Monthly Achievements & Activities
• Issued 9 Building Permits..................................................12 in December. • Opened 3 Code Enforcement Cases .............................2 in December. • Closed 3 Code Enforcement Cases................................8 in December. • Total of 48 Active Code Enforcement Cases..............48 in December.

The Department required an average of 1.5 calendar days to issue January Building Permits.  Over the counter Permits (reroofs/minor electrical) are typically issued on the day of submission and are not included in the average processing timeline.  Timeline includes time for Fire Department to complete required review for certain permits.

Project Updates
• Willits Housing Rehabilitation Loan Program
o The City developed an Owner-Occupied Housing Rehabilitation Program funded by the Permanent Local Housing Allocation (PLHA) Program. The initiative is part of the $553,857 allocated to the City for 2019-2023 under the California Department of Housing and Community Development guidelines. These funds aim to assist in the rehabilitation of owner-occupied affordable housing.
o The City is currently accepting applications from Willits homeowners interested in receiving no-interest rehabilitation loans ranging from $25,000 to $50,000 to improve aging homes. The application intake period closes on February 28, 2026. Applications are available through the Community Development Department, and for more information, property owners may contact Phil Davidson at [email protected] or 707-459-7153.
• Community Development Block Grant (CDBG) 2025 NOFA
o City Council authorized City staff to develop applications for the 2025 CDBG Notice of Funding Availability (NOFA).
o Applications will include:
• $1.5 million for City Business Loan Assistance Program • $1.0 million for the Willits Grange, including new roof and ADA improvements • $300,000 to support design of new MCHC medical campus at the old Howard Hospital site
o Staff is working with all parties and consultants to finalize application materials with goal of submitting CDBG applications in March 2026.
• Entertainment Zone Ordinance
o At Council direction, staff is developing a draft ordinance to establish a regulatory framework, allowing the City to designate Entertainment Zones by resolution during City approved special events.

Community Development January 2026 | Report
2 • Free Dump Days (Clean California Grant)
o Staff is providing free dump vouchers for City residents to dispose of household waste at the Willits Transfer Station between dates of February 24-28. o Vouchers are currently available at City Hall.

Staffing Items
• No items to report.

Budget Status
• No items to report.

Focus for Next Month
• Clean California Grant
o Finalize Bud Snider Park Improvement Designs
o Coordinate with School District woodshop class to build community kiosks. o Release RFP for Main Street improvements including decorative streetlights and banner system
• Entertainment Zone Ordinance
o Update draft Ordinance to present to Council.
o Coordinate with Willits Police Department
o Seek community input including downtown business owners. • LAFCO Municipal Service Review
o Work with LAFCO staff to develop public draft MSR
• Develop CDBG applications for submission
Achievements & Activities
• FY 2023-24 Audit Completed.
• Worked on Bank Reconciliations for current Fiscal Year in preparation of Monthly Treasurer Reports.
• Finalizing preparation for FY 2024-25 Audit. Developed schedules and reports for year-end entries.
• Continued to Assist consultant on reporting and navigation within the Springbrook Software system.
• Completed W-2 process and disseminated the W-2 Forms
• Completed Year End reporting 1099 for Accounts Payable Project Updates
• Springbrook Implementation:
o Project Management Module on hold. (Task system still in operation) Staffing Items
• None
Focus for Next Month
• Springbrook reflection on payroll and process review. • Preparation of Monthly Treasurer Reports to be presented on a regular basis to Council • Beginning the process of Dissolution of the Successor Agency by using information acquired from Department of Finance.

Finance January 2026 | Report

POLICE DEPARTMENT REPORT
January 2026
Monthly Achievements & Activities
January 2025 January 2026
• 911 Calls Received 45 64
• Calls for service (CFS) 561 490
• Cases 49 42
• Arrests 25 23
• Citations 21 18
• Traffic Stops 64 63
Project Updates
• As staffing allows - continued traffic safety education and enforcement, emphasizing school zones, pedestrians in crosswalks, speeding, and passing to the right violations. • Continued deployment of the speed awareness radar trailer. • Providing extra patrols in city parks as time allows.

Staffing Items
• One lateral Police Officer remains in the background process. • Former Community Service Officer Kolby Johnson continues to progress through the Dispatch Training Program.
• Community Services Officer Christopher Dendy began the Santa Rosa Junior College Basic Police Academy.
• Police Officer Steven Duran continues to progress through the Field Training Program. • The Department continues to focus on an ongoing recruitment effort to fill vacancies for Police Officers, Dispatchers, and Community Service Officers.
1 Monthly Achievements & Activities
• The Parks crew removed benches adjacent to the playground at Snider Park from service due to damage and placed a set of picnic tables at the location until work begins to reconfigure the site. The Monkey Bars on the large play structure failed due to wear and age and had to be removed for safety. The feature is no longer available or in production, so other options are being evaluated.
• The Sand Truck/Plow was serviced and made ready for the potential storm impact to the roadways and public safety.
• The Flooded Advisory signs and Road Closed Barricades to support Public Safety were deployed during the severe winter storms at multiple locations.
• Extra street sweeping and debris collection was conducted during and after the storms subsided, with regular daily storm drain maintenance to keep the drain inlets clear and minimize flooding on the roadways.
• Several overgrown ditches, intersections, and sections of Public Right-of-Way were cleared to improve drainage and line of sight. Heavy vegetation removal was conducted along the south side of E. Valley from S. Lenore to City Limits East. The basin for a large drainage culvert and the ditch line that feeds it were cleared. Other areas include but are not limited Brothers Lane x Baechtel Rd. , Casteel Ln., and along Railroad Ave x E. Oaks St. • Roadway shoulder repair and minor grading was performed along the eastern portion of Railroad Ave. The area experiences heavy traffic and use during the bi-weekly operations at the Willits Food Bank, who’s volunteers and customers they serve park in that location and cross the street to receive services. Parking congestion has reduced. Most of the repairs were made utilizing asphalt grindings produced from past road surface repairs. • City staff spent several hours marking underground utilities along the South Main St. / Hwy 20 corridor for asset damage prevention during the next phase of the underground fiber optic data line installation project.

Services & Facilities
JANUARY 2026 | Report
2 Project Updates
• The heating unit at the City Pool may need to be replaced. It began to fail due to calcification but is currently operating at limited capacity. Options are being discussed between the District and the City to determine the best course of action moving forward. • Pothole patching was conducted at various locations; approximately 5 Cubic yards of asphalt cold mix was distributed as needed. Several areas brought forward by the public were addressed. The material bin was re-stocked to support additional street maintenance during the winter season and to restore pavement disturbed during utility repairs. Additional base rock was also ordered to replace inventory.
• Two damaged toilets at Snider Park were replaced, the Stage at Recreation Grove had to be power washed several times for graffiti and food debris from transient activity, and Graffiti on several STOP signs through out the City was addressed.
• The chip beds, planters, and landscaping along Main St. , E. Commercial St. , Wood St. Parking lot, and at the Sports Complex were serviced. Brick work was repaired and weeds were removed as needed. The holes from digging animals were filled at the Dog Park, and the Haehl Creek walking trail was mowed, serviced, and hanging branches were pruned for clearance. Some of the Par-Course exercise equipment at that site had minor repairs identified during site evaluation.
• Fence repair was conducted at 223 Bonnie Ln. A tree on City owned property had pushed over a section of privately owned fence at that address, and the panel was replaced. • A sign provided by the donor who funded the Pin-Wheel Sculptures at Hwy 20 Park was installed.
●Drinking fountain repair parts were ordered to repair drinking fountains at various locations.

Staffing Items
●No Change, the Maintenance Department is currently staffing six full-time employees: two assigned to Parks and Facilities and three assigned to Streets and Utility Repairs, with one supervisor overseeing operations.
3 Budget Status
• No Report, spending has been reduced, and several projects are on hold.

Focus for Next Month*
*NOTE: SEVERAL ITEMS WERE ROLLED OVER FROM LAST MONTH OR ARE PART OF ONGOING SEASONAL OPERATION.
• The “Snack Shack” at the Sports complex needs a new roof, and materials are being sourced to make the needed repairs. The shingles are failing as well as the plywood beneath. This will be done in house. Preparation of the Sports Complex for the upcoming Baseball season will also be a high priority this coming month.
• Pothole patching and minor road repairs at various locations, this is ongoing throughout the wet weather months as the heavy rains create potholes in areas prone to pavement failure. • Pour and finish concrete on a small section of sidewalk on East Hill Rd. Bridge left over from the PG&E Yard Project. This is now an in-house project.
• Continued drainage ditch evaluation and clearing in preparation for the storm season, this will be ongoing as weather permits.
• Storm drain inspection and clearing of debris as needed. ● Service and weatherize seasonal parks maintenance equipment. 1 Monthly Achievements & Activities
• Weatherized water distribution pump stations.
• Completed and submitted NPDES application for renewal in January 2027. • Completed and submitted annual water rights reporting for 2025. • Submitted early installation variance for the seasonal Centennial Splashboards through Division of Dam Safety.
• Replaced failed electrical breaker at the Elias Well control box. • Cleaned and greased solids up-flow clarifier at SWTP. • Drained and refilled solids contact clarifier due underdosing of main coagulant from a clogged chemical feed line at SWTP.
• Replaced approximately two hundred failed meter registers and Orion radio read modules throughout water distribution system.
• Replaced chemical feed line on the Ferric Chloride pump (main coagulant) at SWTP. • Operators worked with AT&T technicians to repair failed communication phone lines. • Pumped and cleaned out raw water pump station vault at SWTP. • Operators assisted JM Integration with numerous failed alarms including updating the SCADA system to Windows 11.
• Operators met with multiple customers due to brown water calls after the Fire Department completed a fire hydrant flow test for the new Mendocino College campus addition on E.

Commercial St.
• Replaced ferric chloride injection quill and pass through valve at SWTP. • Wastewater operators assisted Syserco with vac truck dewatering the solar project pier holes in the ballfield parking lot.
• Sewer lateral inspections completed for two home sales. • Garman construction placed rip rap in slip out on watershed road at the effluent of a culvert. • Cleaned 4,980 feet of sewer mainline throughout the city’s collection system. • WWTP operators assisted with Vac Truck on two water leaks in the distribution system.

Project Updates
• Ongoing: Fats, Oils and Grease (F.O.G.) program throughout the sewer collection system. • Ongoing: Sewer lateral inspection program.
• Ongoing: Water meter replacement program.
• Ongoing: Grounds maintenance at Water/Wastewater facilities.

Utilities January 2026 | Report
2 • Reservoir Capacity: Morris 665-acre feet and Centennial 582-acre feet equate to 96-percent of full capacity (February 20th). Centennial splashboards installed early 2/10/26 (Permit is March 1st) per Division of Dam Safety variance request approval. • Jan. 2026 Water Usage: SWTP: 13,153,809 MG. Jan. 2025: 11,150,221 MG.

GWTP: 2,500,000MG. Jan. 2025: 1,200,000 MG.

Totals: 15,653,809 MG. Jan. 2025: 12,350,221 MG
• Jan. Non-Potable Water Usage [Truck Fill Station]: 38,650 Gals. • January 2026 Wastewater Treatment Plant Flows: 69,919,590 MG.

Staffing Items
• Caleb Allen passed the Grade I state wastewater treatment exam. • Adam Simental completed the Sacramento State water operations course (6-month course) to be eligible to take the Grade II state water treatment exam.

Budget Status
• In Progress.

Focus for Next Month
• Schedule Veolia for the replacement of the Ultraviolet (UV) Disinfection control panel at WWTP. • Schedule Trident filter inspection with WesTech for middle of March. • Schedule 307 Blosser Lane failing sewer lateral replacement at the intersection of HWY 20 at Blosser Lane with Wipf Construction.