R315-309-8. Local Government Financial Test

  (1) The terms used in Section R315-309-8 are defined as follows.

  (a) "Total revenues" means the revenues from all taxes and fees but does not include the proceeds from borrowing or asset sales, excluding revenue form funds managed by local government on behalf of a specific third party.

  (b) "Total expenditures" means all expenditures excluding capital outlays and debt repayments.

  (c) "Cash plus marketable securities" means all the cash plus marketable securities held by the local government on the last day of a fiscal year, excluding cash and marketable securities designated to satisfy past obligations such as pensions.

  (d) "Debt service" means the amount of principal and interest due on a loan in a given time period, typically the current year.

  (2) A local government owner or operator of a solid waste facility may demonstrate financial assurance up to the current cost estimate as required by Subsection R315-309-2(3) for closure and post-closure care and the cost estimate as required by Subsection R315-309-2(5) for corrective action, if required, or up to the amount specified in Subsection R315-309-8(6), which ever is less, by meeting the following requirements.

  (a) If the local government has outstanding, rated general obligation bonds that are not secured by insurance, a letter of credit, or other collateral or other guarantee, it 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 such general obligation bonds.

  (b) If the local government has no outstanding general obligation bonds, the local government shall satisfy each of the following financial ratios based on the local government's 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.

  (c) The local government must 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.

  (d) The local government must place a reference to the closure and post-closure care costs assured through the financial test into the next comprehensive annual financial report and in every subsequent comprehensive annual financial report during the time in which closure and post-closure care costs are assured through the financial test. A reference to corrective action costs must be placed in the comprehensive annual financial report not later than 120 days after the corrective action remedy has been selected. The reference to the closure and post-closure care costs shall contain:

  (i) the nature and source of the closure and post-closure care requirements;

  (ii) the reported liability at the balance sheet date;

  (iii) the estimated total closure and post-closure care costs remaining to be recognized;

  (iv) the percentage of landfill capacity used to date; and

  (v) the estimated landfill life in years.

  (3) A local government is not eligible to assure closure, post-closure care, or corrective action costs at its solid waste disposal facility through the financial test if it:

  (a) is currently in default on any outstanding general obligation bonds, or

  (b) has any outstanding general obligation bonds rated lower than Baa as issued by Moody's or BBB as issued by Standard and Poor's; or

  (c) has operated at a deficit equal to 5%, or more, of the total annual revenue in each of the past two fiscal years; or

  (d) receives an adverse opinion, disclaimer of opinion, or other qualified opinion from the independent certified public accountant, or appropriate state agency auditing its financial statement. The Director may evaluate qualified opinions on a case-by-case basis and allow use of the financial test in cases where the Director deems the qualification insufficient to warrant disallowance of use of the test.

  (4) The local government owner or operator must submit the following items to the Director for approval and place a copy of these items in the operating record of the facility:

  (a) a letter signed by the local government's chief financial officer that:

  (i) lists all current cost estimates covered by a financial test; and

  (ii) provides evidence and certifies that the local government meets the requirements of Subsections R315-309-8(2) and R315-309-8(6);

  (b) the local government's independently audited year-end financial statements for the latest fiscal year including the unqualified opinion of the auditor, who must be an independent certified public accountant;

  (c) a report to the local government from the local government's independent certified public accountant stating the procedures performed and the findings relative to:

  (i) the requirements of Subsections R315-309-8(2)(c) and R315-309-8(3)(c) and (d); and

  (ii) the financial ratios required by Subsection R315-309-8(2)(b), if applicable; and

  (d) a copy of the comprehensive annual financial report used to comply with Subsection R315-309-8(2)(d).

  (e) The items required by Subsection R315-309-8(4) are to be submitted to the Director and copies placed in the facility's operating record as follows:

  (i) in the case of closure and post-closure care, for a new facility or a lateral expansion of an existing facility, before the initial receipt of waste;

  (ii) in the case of closure and post-closure care, for an existing facility, in accordance with the effective dates specified in Subsection R315-309-1(3)(a); and

  (iii) in the case of corrective action, in accordance with the schedule specified in Subsection R315-309-1(3)(b).

  (5) A local government must satisfy the requirements of the financial test at the close of each fiscal year.

  (a) The items required in Subsection R315-309-8(4) shall be submitted as part of the facility's annual report required by Subsection R315-302-2(4).

  (b) If the local government no longer meets the requirements of the local government financial test it shall, within 210 days following the close of the local government's fiscal year:

  (i) obtain alternative financial assurance that meets the requirements of R315-309-1(1); and

  (ii) submit documentation of the alternative financial assurance to the Director and place copies of the documentation in the facility's operating record.

  (c) The Director, based on a reasonable belief that the local government may no longer meet the requirements of the local government financial test, may require additional reports of financial condition from the local government at any time. If the Director finds that the local government no longer meets the requirements of the local government financial test, the local government shall be required to provide alternative financial assurance on a schedule established by the Director.

  (6) The portion of the closure, post-closure, and corrective action costs for which a local government owner or operator may assume under the local government financial test is determined as follows:

  (a) If the local government does not assure other environmental obligations through a financial test, it may assure closure, post-closure, and corrective action costs that equal up to 43% of the local government's total annual revenue.

  (b) If the local government assures any other environmental obligation through a financial test, it must add those costs to the closure, post-closure, and corrective action costs it seeks to assure by local government financial test. The total that may be assured must not exceed 43% of the local government's total annual revenue.

  (c) The local government shall obtain an alternate financial assurance mechanism for those costs that exceed 43% of the local government's total annual revenue.

  (7) Local Government Guarantee.

  (a) An owner or operator of a solid waste facility may demonstrate financial assurance for closure, post-closure, and corrective action by obtaining a written guarantee provided by a local government. The local government providing the guarantee shall meet the requirements of the local government financial test in Section R315-309-8 and shall comply with the terms of the written guarantee as specified in Subsections R315-309-8(7)(b) and (c).

  (b) The guarantee must be effective for closure and post-closure care:

  (i) for a new facility or a lateral expansion of an existing facility, before the initial receipt of waste;

  (ii) for an existing facility, in accordance with the effective dates specified in Subsection R315-309-1(3)(a); and

  (iii) for corrective action, in accordance with the schedule specified in Subsection R315-309-1(3)(b).

  (c) The guarantee shall provide that if the owner or operator fails to perform closure, post-closure care, or corrective action of a facility covered by the guarantee, the guarantor will:

  (i) perform, or pay a third party to perform, closure, post-closure, or corrective action as required; or

  (ii) establish a fully funded trust fund as specified in Section R315-309-4 in the name of the owner or operator.

  (d) The guarantee will remain in force unless the guarantor sends notice of cancellation by certified mail to the owner or operator and to the Director. Cancellation may not occur until 120 days after the date the notice is received by the Director.

  (e) If the guarantee is canceled, the owner or operator shall, within 90 days following the receipt of the cancellation notice:

  (i) obtain alternate financial assurance that meets the requirements of Subsection R315-309-1(1);

  (ii) submit documentation of the alternate financial assurance to the Director; and

  (iii) place copies of the documentation of the alternate financial assurance in the facility's operating record.

  (iv) If the owner or operator fails to provide alternate financial assurance within the 90 day period, the guarantor must provide the alternate financial assurance within 120 days following the guarantor's notice of cancellation, submit documentation of the alternate financial assurance to the Director for review and approval, and place copies of the documentation in the facility's operating record.