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§280.105 Local government financial test.
(a) A local government owner or operator may satisfy the requirements of §280.93 by passing the financial test specified in this section. To be eligible to use the financial test, the local government owner or operator must have the ability and authority to assess and levy taxes or to freely establish fees and charges. To pass the local government financial test, the owner or operator must meet the criteria of paragraphs (b)(2) and (b)(3) of this section based on year-end financial statements for the latest completed fiscal year.
(b)(1) The local government owner or operator must have the following information available, as shown in the year-end financial statements for the latest completed fiscal year:
(i) Total revenues: Consists of the sum of general fund operating and non-operating revenues including net local taxes, licenses and permits, fines and forfeitures, revenues from use of money and property, charges for services, investment earnings, sales (property, publications, etc.), intergovernmental revenues (restricted and unrestricted), and total revenues from all other governmental funds including enterprise, debt service, capital projects, and special revenues, but excluding revenues to funds held in a trust or agency capacity. For purposes of this test, the calculation of total revenues shall exclude all transfers between funds under the direct control of the local government using the financial test (interfund transfers), liquidation of investments, and issuance of debt.
(ii) Total expenditures: Consists of the sum of general fund operating and non-operating expenditures including public safety, public utilities, transportation, public works, environmental protection, cultural and recreational, community development, revenue sharing, employee benefits and compensation, office management, planning and zoning, capital projects, interest payments on debt, payments for retirement of debt principal, and total expenditures from all other governmental funds including enterprise, debt service, capital projects, and special revenues. For purposes of this test, the calculation of total expenditures shall exclude all transfers between funds under the direct control of the local government using the financial test (interfund transfers).
(iii) Local revenues: Consists of total revenues (as defined in paragraph (b)(1)(i) of this section) minus the sum of all transfers from other governmental entities, including all monies received from Federal, state, or local government sources.
(iv) Debt service: Consists of the sum of all interest and principal payments on all long-term credit obligations and all interest-bearing short-term credit obligations. Includes interest and principal payments on general obligation bonds, revenue bonds, notes, mortgages, judgments, and interest bearing warrants. Excludes payments on non-interest-bearing short-term obligations, interfund obligations, amounts owed in a trust or agency capacity, and advances and contingent loans from other governments.
(v) Total funds: Consists of the sum of cash and investment securities from all funds, including general, enterprise, debt service, capital projects, and special revenue funds, but excluding employee retirement funds, at the end of the local government's financial reporting year. Includes Federal securities, Federal agency securities, state and local government securities, and other securities such as bonds, notes and mortgages. For purposes of this test, the calculation of total funds shall exclude agency funds, private trust funds, accounts receivable, value of real property, and other non-security assets.
(vi) Population consists of the number of people in the area served by the local government.
(2) The local government's year-end financial statements, if independently audited, cannot include an adverse auditor's opinion or a disclaimer of opinion. The local government cannot have outstanding issues of general obligation or revenue bonds that are rated as less than investment grade.
(3) The local government owner or operator must have a letter signed by the chief financial officer worded as specified in paragraph (c) of this section.
(c) To demonstrate that it meets the financial test under paragraph (b) of
this section, the chief financial officer of the local government owner or
operator, must sign, within 120 days of the close of each financial reporting
year, as defined by the twelve-month period for which financial statements used
to support the financial test are prepared, a letter worded exactly as follows,
except that the instructions in brackets are to be replaced by the relevant
information and the brackets deleted:
LETTER FROM CHIEF FINANCIAL OFFICER
I am the chief financial officer of [insert: name and address of the owner or operator]. This letter is in support of the use of the local government financial test to demonstrate financial responsibility for [insert: "taking corrective action" and/or "compensating third parties for bodily injury and property damage"] caused by [insert: "sudden accidental releases" and/or "nonsudden accidental releases"] in the amount of at least [insert: dollar amount] per occurrence and [insert: dollar amount] annual aggregate arising from operating [an] underground storage tank[s].
Underground storage tanks at the following facilities are assured by this financial test [List for each facility: the name and address of the facility where tanks assured by this financial test are located. If separate mechanisms or combinations of mechanisms are being used to assure any of the tanks at this facility, list each tank assured by this financial test by the tank identification number provided in the notification submitted pursuant to 40 CFR Part 280.22 or the corresponding state requirements.]
This owner or operator has not received an adverse opinion, or a disclaimer of opinion from an independent auditor on its financial statements for the latest completed fiscal year. Any outstanding issues of general obligation or revenue bonds, if rated, have a Moody's rating of Aaa, Aa, A, or Baa or a Standard and Poor's rating of AAA, AA, A, or BBB; if rated by both firms, the bonds have a Moody's rating of Aaa, Aa, A, or Baa and a Standard and Poor's rating of AAA, AA, A, or BBB.
a. Revenues (dollars) ______
Value of revenues
excludes liquidation of investments and issuance of debt. Value includes all
general fund operating and non-operating revenues, as well as all revenues from
all other governmental funds including enterprise, debt service, capital
projects, and special revenues, but excluding revenues to funds held in a trust
or agency capacity.
b. Subtract interfund transfers (dollars)______
c. Total Revenues (dollars)______
a. Expenditures (dollars) ______
Value consists
of the sum of general fund operating and non-operating expenditures including
interest payments on debt, payments for retirement of debt principal, and total
expenditures from all other governmental funds including enterprise, debt
service, capital projects, and special revenues.
b. Subtract interfund transfers (dollars)______
c. Total Expenditures (dollars)______
a. Total Revenues (from 1c) (dollars) ______
b. Subtract total intergovernmental transfers (dollars)______
c. Local Revenues (dollars)______
a. Interest and fiscal charges (dollars)______
b. Add debt retirement (dollars)______
c. Total Debt Service (dollars)______
(Sum of amounts held as cash and investment securities from all funds,
excluding amounts held for employee retirement funds, agency funds, and trust
funds)
a. Total Revenues (from 1c)______
b. Population (from 6)______
c. Divide 7a by 7b ______
d. Subtract 417______
e. Divide by 5,212______
f. Multiply by 4.095______
a. Total Expenses (from 2c)______
b. Population (from 6)______
c. Divide 8a by 8b ______
d. Subtract 524 ______
e. Divide by 5,401______
f. Multiply by 4.095______
a. Local Revenues (from 3c)______
b. Total Revenues (from 1c)______
c. Divide 9a by 9b ______
d. Subtract .695______
e. Divide by .205______
f. Multiply by 2.840 ______
a. Debt Service (from 4d) ______
b. Population (from 6)______
c. Divide 10a by 10b ______
d. Subtract 51 ______
e. Divide by 1,038______
f. Multiply by −1.866______
a. Debt Service (from 4d)______
b. Total Revenues (from 1c)______
c. Divide 11a by 11b ______
d. Subtract .068 ______
e. Divide by .259 ______
f. Multiply by −3.533 ______
a. Total Revenues (from 1c)______
b. Total Expenses (from 2c)______
c. Divide 12a by 12b______
d. Subtract .910 ______
e. Divide by .899 ______
f. Multiply by 3.458 ______
a. Total Funds (from 5) ______
b. Total Revenues (from 1c)______
c. Divide 13a by 13b ______
d. Subtract .891 ______
e. Divide by 9.156______
f. Multiply by 3.270 ______
a. Total Funds (from 5)______
b. Total Expenses (from 2c)______
c. Divide 14a by 14b______
d. Subtract .866 ______
e. Divide by 6.409 ______
f. Multiply by 3.270 ______
a. Total Funds (from 5) ______
b. Population (from 6)______
c. Divide 15a by 15b ______
d. Subtract 270 ______
e. Divide by 4,548 ______
f. Multiply by 1.866 ______
I hereby certify that the financial index shown on line 16 of the worksheet
is greater than zero and that the wording of this letter is identical to the
wording specified in 40 CFR part 280.105(c) as such regulations were constituted
on the date shown immediately below. [Date]
[Signature]
[Name]
[Title] (d) If a local government owner or operator using the test to provide
financial assurance finds that it no longer meets the requirements of the
financial test based on the year-end financial statements, the owner or operator
must obtain alternative coverage within 150 days of the end of the year for
which financial statements have been prepared.
(e) The Director of the implementing agency may require reports of financial
condition at any time from the local government owner or operator. If the
Director finds, on the basis of such reports or other information, that the
local government owner or operator no longer meets the financial test
requirements of §280.105 (b) and (c), the owner or operator must obtain
alternate coverage within 30 days after notification of such a finding.
(f) If the local government owner or operator fails to obtain alternate
assurance within 150 days of finding that it no longer meets the requirements of
the financial test based on the year-end financial statements or within 30 days
of notification by the Director of the implementing agency that it no longer
meets the requirements of the financial test, the owner or operator must notify
the Director of such failure within 10 days.
[58 FR 9054, Feb. 18, 1993]
