SECTION 252:515-27-82. Local government financial test

(a)   Local government test authorized. A local government owner/operator that satisfies the requirements of this Section may demonstrate financial assurance up to the amount specified in this Section.

(b)   Local government not eligible for assurance. A local government is not eligible to assure its obligations under this Section if it:

(1)   is currently in default on any outstanding general obligation bonds;

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

(3)   operated at a deficit equal to five percent or more of total annual revenue in each of the past two fiscal years; or

(4)   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 as required by (e) of this Section.

(c)   Definitions. The following words or terms, when used in this Section, shall have the following meaning unless the context clearly indicates otherwise:

(1)   "Deficit" means total annual revenues minus total annual expenditures;

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

(3)   "Total expenditures" means all expenditures excluding capital outlays and debt repayment;

(4)   "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; and

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

(d)   Financial component. The owner/operator must submit a demonstration to the DEQ for approval, that it satisfies one of the following, and place a copy of the approved demonstration in the operating record.

(1)   General obligation bond rating. If the owner/operator has outstanding, rated, general obligation bonds that are not secured by insurance, a letter of credit, or other collateral or 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 all such general obligation bonds; or

(2)   Financial ratio. The owner/operator must satisfy each of the following financial ratios based on the owner/operator's most recent audited annual financial statement:

(A)   A ratio of cash plus marketable securities to total expenditures greater than or equal to 0.05; and

(B)   A ratio of annual debt service to total expenditures less than or equal to 0.20.

(e)   Preparation of financial statements. The owner/operator 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 (or appropriate State agency).

(f)   Public notice component.

(1)   CAFR. Except as provided in (2) of this Subsection, the owner/operator must place a reference to the closure, post-closure care, and/or corrective action costs assured through the financial test into its next comprehensive annual financial report (CAFR). Disclosure must include:

(A)   the nature and source of closure and post-closure care, and/or corrective action requirements;

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

(C)   the estimated total closure and post-closure care cost remaining to be recognized;

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

(E)   the estimated remaining facility life in years. The estimated remaining life shall be the actual life as calculated in accordance with OAC 252:515-27-8, not the maximum economic life.

(2)   First year. For the first year the financial test is used to assure costs at a particular facility, the reference may be placed in the operating record until issuance of the next available CAFR or annual audited financial statement if timing does not permit the reference to be incorporated into the most recently issued CAFR or budget.

(g)   Assurance of compliance. For closure and post-closure costs, conformance with Government Accounting Standards Board Statement 18 assures compliance with the public notice requirements of (f) of this Section.

(h)   Recordkeeping and reporting. The local government owner/operator must submit the following to the DEQ for approval, and place a copy of the approved documents in the facility's operating record.

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

(A)   lists all the current cost estimates covered by a financial test, as described in (k) of this Section;

(B)   provides evidence and certifies that the local government meets the conditions of (b), (d), and (e) of this Section; and

(C)   certifies that the local government meets the conditions of (f) and (k) of this Section.

(2)   the local government's independently audited year-end financial statements for the latest fiscal year (except for local governments where audits are required every two years where unaudited statements may be used in years when audits are not required), including the unqualified opinion of the auditor who must be an independent, certified public accountant or an appropriate State agency that conducts equivalent comprehensive audits;

(3)   a report to the local government from the local government's independent certified public accountant (CPA) or the appropriate State agency based on performing an agreed upon procedures engagement relative to the financial ratios required by (d)(2) of this Section, if applicable, and the requirements of (b)(3), (b)(4), and (e) of this Section. The CPA or State agency's report should state the procedures performed and the CPA or State agency's findings; and

(4)   either a copy of the comprehensive annual financial report (CAFR) or annual audited financial statements used to comply with (f) of this Section, or certification that the requirements of General Accounting Standards Board Statement 18 have been met.

(i)   New financial assurance required. A local government must satisfy the requirements of the financial test at the close of each of its fiscal years. If the local government owner/operator no longer meets the requirements of the local government financial test it must obtain a DEQ approved alternative financial assurance that meets the requirements of this Part within 210 days following the close of its fiscal year.

(j)   DEQ may request financial information. The DEQ, based on a reasonable belief that the local government owner/operator 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 DEQ finds, on the basis of such reports or other information, that the owner/operator no longer meets the requirements of the local government financial test, the local government must comply with (i) of this Section.

(k)   Calculation of costs to be assured. The portion of the closure, post-closure, and corrective action costs for which an owner/operator can assure under this Section is determined as follows.

(1)   No other environmental obligations. If the local government owner/operator 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 percent of the local government's total annual revenue.

(2)   Other environmental obligations. If the local government assures other environmental obligations through a financial test, including those associated with UIC facilities under 40 CFR 144.62, petroleum underground storage tank facilities under 40 CFR Part 280, PCB storage facilities under 40 CFR Part 761, and hazardous waste treatment, storage, and disposal facilities under 40 CFR Parts 264 and 265, it must add those costs to the closure, post-closure, and corrective action costs it seeks to assure under this paragraph. The total that may be assured must not exceed 43 percent of the local government's total annual revenue.

(3)   Alternative financial assurance required. The owner/operator must obtain an alternate financial assurance mechanism for those costs that exceed the limits specified in (1) and (2) of this Subsection.

[Source: Added at 20 Ok Reg 1151, eff 6-1-03]