An owner or operator may satisfy the requirements of financial assurance for closure, post closure, or corrective action by establishing a local government financial test or a local government financial test and local government guarantee, which conforms to the requirements of this section, in addition to the requirements specified in Subchapters A and B of this chapter (relating to General Financial Assurance Requirements; and Financial Assurance Requirements for Closure, Post Closure, and Corrective Action). An owner or operator who satisfies the requirements of paragraphs (1) - (3) of this section may demonstrate financial assurance up to the amount specified in paragraph (4) of this section. (1) In order to satisfy the financial component of the test, the owner or operator must meet the criteria of either subparagraph (A) or (B) of this paragraph and in addition must meet certain general conditions outlined in subparagraph (C) of this paragraph. (A) The owner or operator must satisfy each of the following financial ratios based on its most recent audited annual financial statement: (i) a ratio of cash plus marketable securities to total expenditures greater than or equal to 0.05; and (ii) a ratio of annual debt service to total expenditures less than or equal to 0.20. (B) If the owner or operator: (i) of a facility other than a municipal solid waste landfill has outstanding, rated, general obligation bonds that are not secured by insurance, a letter of credit, or other collateral or guarantee, those bonds must have a current rating of Aaa, Aa, A, or Baa, as issued by Moody's, or AAA, AA, A, or BBB, as issued by Standard and Poor's on all such general obligation bonds; or (ii) of a municipal solid waste landfill subject to Chapter 330 of this title (relating to Municipal Solid Waste) has bonds as defined in Subchapter R of this chapter (relating to Financial Assurance for Municipal Solid Waste Facilities) and those bonds are not secured by insurance, a letter of credit, or other collateral or guarantee, those bonds must have a current rating of Aaa, Aa, A, or Baa, as issued by Moody's, or AAA, AA, A, or BBB, as issued by Standard and Poor's on all such financial obligations. (C) In addition to meeting the criteria listed under subparagraph (A) or (B) of this paragraph, the following general conditions must be met. (i) The owner or operator shall prepare its financial statements in conformity with Generally Accepted Accounting Principles for governments and have its financial statements audited by an independent certified public accountant (or appropriate state agency). (ii) The owner or operator must not have operated at a deficit equal to 5.0% or more of total annual revenue in each of the past two fiscal years. (iii) The owner or operator must not currently be in default on any outstanding general obligation bonds. (iv) The owner or operator must not have any outstanding general obligation bonds rated lower than Baa as issued by Moody's or BBB as issued by Standard and Poor's. (v) The owner or operator must not have received an adverse opinion, disclaimer of opinion, or other qualified opinion from the independent certified public accountant (or appropriate state agency) auditing its financial statements as required under clause (i) of this subparagraph. However, the executive director may evaluate qualified opinions on a case-by-case basis and allow use of the financial test in cases where the executive director deems the qualification insufficient to warrant disallowance of use of the test. (D) The following terms used in this section are defined as follows. (i) Deficit equals total annual revenues minus total annual expenditures. (ii) Total revenues is the sum of the following seven items: (I) "Total Revenues" of the General Fund; (II) "Total Revenues" of Special Revenue Funds; (III) "Total Revenues" of the Debt Service Fund; (IV) "Total Revenues" of Capital Project Funds; (V) "Total Operating Revenues" of Enterprise Funds; (VI) if positive, "Total Non-Operating Revenues (Net)" of Enterprise Funds; and (VII) if positive, "Total Non-Operating Revenues (Net)" of Internal Service Funds. (iii) Total expenditures is the sum of the following six items: (I) "Total Expenditures" of the General Fund; (II) "Total Expenditures" of Special Revenue Funds; (III) "Total Expenditures" of the Debt Service Fund; (IV) "Total Operating Expenses Before Depreciation" of Enterprise Funds; (V) if negative, "Total Non-Operating Revenues (Net)" of Enterprise Funds; and (VI) if negative, "Total Non-Operating Revenues (Net)" of Internal Service Funds; except if the local government is not using accrual accounting and is not including depreciation in its expenditures, include routine capital outlays and debt repayment as a substitute for depreciation. (iv) Cash and current investments is the sum of "Cash," "Cash Equivalents" (e.g., bank deposits, very short-term debt securities, money market funds), and "Current Investments" (e.g., interest or dividend bearing securities that are expected to be held for less than one year), in the General Fund, Special Revenue Funds, Debt Service Fund, Enterprise Funds, and Internal Service Funds, as reported on the Comprehensive Annual Financial Report's (CAFR) Combined Balance Sheet. Note that cash, cash equivalents, and current investments are included in this term even if they are: pooled; with a fiscal agent; or restricted, provided that the assets belong to the General Fund, Special Revenue Funds, Debt Service Fund, Enterprise Funds, and Internal Service Funds. Specifically excluded from this definition are accounts receivable, retirement assets, real property, fixed assets, and other non-current assets, as well as any assets (including cash) in Capital Project Funds. (v) Debt service is the sum of all amounts in any Debt Service category (including bond principal, other debt principal, interest on bonds, interest on other debt) in the General Fund, Special Revenue Funds, Debt Service Fund, and Capital Projects Funds as reported on the CAFR's Combined Statement of Revenues, Expenditures and Changes in Fund Balances/Equity; plus all principal and interest expense in Enterprise Funds and Internal Service Funds, as reported on the CAFR's Combined Statement of Revenues, Expenses and Changes in Retained Earnings/Fund Balances. (2) In order to satisfy the public notice component of the test, the local government owner or operator must place a reference to the closure, post closure, or corrective action costs assured through the financial test into its next CAFR after the effective date of this section or prior to the initial receipt of waste at the facility, whichever is later. Disclosure must include the nature and source of closure, post closure, or corrective action requirements; the reported liability at the balance sheet date; the estimated total closure or post closure cost remaining to be recognized; the percentage of landfill capacity used to date; and the estimated landfill life in years. A reference to corrective action costs must be placed in the CAFR not later than 120 days after the corrective action remedy has been selected in accordance with the requirements of §330.415 of this title (relating to Implementation of the Corrective Action Program). For the first year the financial test is used to assure costs at a particular facility, the reference may instead be placed in the operating record until issuance of the next available CAFR if timing does not permit the reference to be incorporated into the most recently issued CAFR or budget. For closure and post closure costs, conformance with Government Accounting Standards Board Statement 18 assures compliance with the public notice component. (3) In order to satisfy the recordkeeping and reporting component of the test, the local government owner or operator must submit the following four items to the executive director: (A) a letter signed by the local government's chief financial officer worded as specified in §37.371 of this title (relating to Local Government Financial Test) that: (i) lists all the current cost estimates covered by a financial test as described in paragraph (4) of this section; (ii) provides evidence and certifies that the local government meets the conditions of either paragraph (1)(A) or (B), and (1)(C) of this section; and (iii) certifies that the local government meets the conditions of paragraphs (2) and (4) of this section; (B) the local government's independently audited year-end financial statements for the latest fiscal year, including the unqualified opinion of the auditor. The auditor must be an independent certified public accountant (CPA) or an appropriate state agency that conducts equivalent comprehensive audits; (C) a report to the local government from the local government's independent CPA or the appropriate state agency which: Cont'd... |
