Section 811.716  Local Government Financial Test

A unit of local government owner or operator that satisfies the requirements of subsections (a) through (c) may demonstrate financial assurance up to the amount specified in subsection (d).

a)         Financial Component

1)         The unit of local government owner or operator must satisfy subsection (a)(1)(A) or (a)(1)(B), as applicable:

A)        If the owner or 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

B)        The owner or operator must satisfy each of the following financial ratios based on the owner or operator'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.

2)         The unit of local government owner or 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 the Comptroller of the State of Illinois pursuant to the Governmental Account Audit Act [50 ILCS 310].

3)         A unit of local government is not eligible to assure its obligations pursuant to this Section if any of the following is true:

A)        It is currently in default on any outstanding general obligation bonds;

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

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

D)        It receives an adverse opinion, disclaimer of opinion, or other qualified opinion from the independent certified public accountant or the Comptroller of the State of Illinois pursuant to the Governmental Account Audit Act [50 ILCS 310] auditing its financial statement as required pursuant to subsection (a)(2).  However, the Agency must evaluate qualified opinions on a case-by-case basis and allow use of the financial test in cases where the Agency deems the qualification insufficient to warrant disallowance of use of the test.

4)         Terms used in this Section are defined as follows:

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

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

"Deficit" equals total annual revenues minus total annual expenditures.

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

"Total expenditures" include all expenditures excluding capital outlays and debt repayment.

b)         Public Notice Component

1)         The unit of local government owner or operator must place a reference to the closure and post-closure care costs assured through the financial test into its next comprehensive annual financial report (CAFR), or prior to the initial receipt of waste at the facility, whichever is later.

2)         Disclosure must include the nature and source of closure and post-closure care requirements, the reported liability at the balance sheet date, the estimated total closure and post-closure care cost remaining to be recognized, the percentage of landfill capacity used to date, and the estimated landfill life in years.

3)         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 Sections 811.319(d) and 811.325.

4)         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.

5)         For closure and post-closure costs, conformance with Government Accounting Standards Board Statement 18, incorporated by reference in 35 Ill. Adm. Code 810.104, assures compliance with this public notice component.

c)         Recordkeeping and Reporting Requirements

1)         The unit of local government owner or operator must place the following items in the facility's operating record:

A)        A letter signed by the unit of local government's chief financial officer that provides the following information:

i)          It lists all the current cost estimates covered by a financial test, as described in subsection (d);

ii)         It provides evidence and certifies that the unit of local government meets the conditions of subsections (a)(1), (a)(2), and (a)(3); and

iii)        It certifies that the unit of local government meets the conditions of subsections (b) and (d).

B)        The unit of local government's independently audited year-end financial statements for the latest fiscal year (except for a unit of local government 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 (CPA) or the Comptroller of the State of Illinois pursuant to the Governmental Account Audit Act [50 ILCS 310].

C)        A report to the unit of local government from the unit of local government's independent CPA or the Comptroller of the State of Illinois pursuant to the Governmental Account Audit Act [50 ILCS 310] based on performing an agreed upon procedures engagement relative to the financial ratios required by subsection (a)(1)(B), if applicable, and the requirements of subsections (a)(2), (a)(3)(C), and (a)(3)(D).  The CPA or Comptroller's report should state the procedures performed and the CPA or Comptroller's findings.

D)        A copy of the comprehensive annual financial report (CAFR) used to comply with subsection (b) or certification that the requirements of Government Accounting Standards Board Statement 18, incorporated by reference in 35 Ill. Adm. Code 810.104, have been met.

2)         The items required in subsection (c)(1) must be placed in the facility operating record as follows:

A)        In the case of closure and post-closure care, prior to the initial receipt of waste at the facility; or

B)        In the case of corrective action, not later than 120 days after the corrective action remedy is selected in accordance with the requirements of Sections 811.319(d) and 811.325.

3)         After the initial placement of the items in the facility operating record, the unit of local government owner or operator must update the information and place the updated information in the operating record within 180 days following the close of the owner or operator's fiscal year.

4)         The unit of local government owner or operator is no longer required to meet the requirements of subsection (c) when either of the following occurs:

A)        The owner or operator substitutes alternative financial assurance as specified in this Section; or

B)        The owner or operator is released from the requirements of this Section in accordance with Section 811.326(g), 811.702(b), or 811.704(j) or (k)(6).

5)         A unit of local government must satisfy the requirements of the financial test at the close of each fiscal year.  If the unit of local government owner or operator no longer meets the requirements of the local government financial test it must, within 120 days following the close of the owner or operator's fiscal year, obtain alternative financial assurance that meets the requirements of this Subpart, place the required submissions for that assurance in the operating record, notify the Agency that the owner or operator no longer meets the criteria of the financial test and that alternative assurance has been obtained, and submit evidence of the alternative financial assurance to the Agency.

6)         The Agency, based on a reasonable belief that the unit of local government owner or operator may no longer meet the requirements of the local government financial test, may require additional reports of financial condition from the unit of local government at any time.  If the Agency determines, on the basis of these reports or other information, that the owner or operator no longer meets the requirements of the local government financial test, the unit of local government must provide alternative financial assurance in accordance with this Subpart.

d)         Calculation of Costs to Be Assured.  The portion of the closure, post-closure, and corrective action costs that an owner or operator may assure pursuant to this Section is determined as follows:

1)         If the unit of local government owner or 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 unit of local government's total annual revenue.

2)         If the unit of local government assures other environmental obligations through a financial test, including those associated with UIC facilities pursuant to 35 Ill. Adm. Code 704.213; petroleum underground storage tank facilities pursuant to 40 CFR 280; PCB storage facilities pursuant to 40 CFR 761; and hazardous waste treatment, storage, and disposal facilities pursuant to 35 Ill. Adm. Code 724 and 725, it must add those costs to the closure, post-closure, and corrective action costs it seeks to assure pursuant to this Section.  The total that may be assured must not exceed 43 percent of the unit of local government's total annual revenue.

3)         The owner or operator must obtain an alternative financial assurance instrument for those costs that exceed the limits set in subsections (d)(1) and (d)(2).

BOARD NOTE:  Derived from 40 CFR 258.74(f) (2017).

(Source:  Amended at 42 Ill. Reg. 21330, effective November 19, 2018)