20.9.10.19

LOCAL GOVERNMENT FINANCIAL TEST. A local government that satisfies the requirements of Subsections A through E of this section may demonstrate financial assurance pursuant to Subsection A of 20.9.10.13 NMAC up to the amount specified in Subsection F of this section for closure, post-closure care, phase I and phase II assessments, and corrective action.

1. A. Financial component. The local government shall satisfy one of the following:

   (1) if the local government has outstanding general obligations bonds, 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 outstanding general obligation bonds; or,

   (2) if the local government does not have outstanding general obligation bonds, it must satisfy each of the following financial ratios based on the local government’s most recent audited annual financial statement: a ratio of cash plus marketable securities to total expenditures greater than or equal to 0.05; and a ratio of annual debt service to total expenditures less than or equal to 0.20.

2. B. The local government 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.
3. C. A local government is not eligible to assure its obligations using the local government financial test if it is currently in default on any outstanding general obligation bonds; has any outstanding general obligation bonds rated lower than Baa as issued by Moody's or BBB as issued by Standard and Poor's; operated at a deficit equal to five percent or more of total annual revenue in either of the past two fiscal years; or 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. However, the secretary may evaluate qualified opinions on a case-by-case basis and allow use of the financial test in cases where the secretary deems the qualification insufficient to warrant disallowance of the test.
4. D. Public notice component. The local government shall place a reference to all closure, post-closure care, phase I and phase II assessments, and corrective action costs assured through the financial test into its comprehensive annual financial reports (CAFR) and budgets. Upon initial receipt of waste at the facility, the reference must be included in the next CAFR. In the case of existing facilities, for closure, post closure care, and the phase I and phase II assessment, the reference must be included prior to the effective date of 20.9.10.19 NMAC. In the case of corrective action, the reference must be included not later than 120 days after the corrective action remedy has been selected in accordance with the requirements of 20.9.9 NMAC, the permit issuance, or the secretary’s decision. For the first year the financial test is used to assure costs at a particular facility, the reference may instead be placed in the operation record until insurance of the next available CAFR if timing does not permit the reference to be incorporated into the most recently issued CAFR or budget. The reference shall include the amount of each cost estimate and the year in which the local government expects these costs to be incurred. References in the budget must occur as budgeted line items if the activities are to occur in the period covered by the budget, but may appear in a supplemental data section if the activities will not occur until after the period covered by the budget.

5. E. Record keeping and reporting requirements.

   (1) The local government shall submit the following items to the department:

   (a) a letter signed by the local government's chief financial officer that lists all the current cost estimates covered by a financial test, as described in Subsection F of 20.9.10.19 NMAC, provides evidence and certifies that the local government meets the conditions of Subsections A, B and C of 20.9.10.19 NMAC, and certifies that the local government meets the conditions of Subsections D and F of 20.9.10.19 NMAC;

   (b) 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 and 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; and

   (c) a report to the local government from the local government's independent certified public accountant or the appropriate state agency stating that the certified public accountant or state agency has compared the data in the chief financial officer's letter with the owner's or operator's most recent independently audited, year-end financial statements, and in connection with that examination, no matters came to his attention which caused him to believe that the data in the chief financial officer's letter should be adjusted; a copy of the supporting documentation shall also be placed in the facility operating record.

   (2) The items required in Subsection E of 20.9.10.19 NMAC must be placed in the facility operating record as follows: in the case of closure, post-closure care, and the phase I and phase II assessment, prior to the initial receipt of waste at the facility, or for existing facilities, prior to the effective date of this part; or in the case of corrective action, not later than 120 days after the corrective action remedy is selected in accordance with the requirements of 20.9.9 NMAC, the permit issuance, or the secretary's decision.

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

   (4) The local government owner or operator is no longer required to meet the requirements of Subsection E of 20.9.10.19 NMAC when the owner or operator substitutes alternate financial assurance as specified in 20.9.10.13 NMAC, or the owner or operator is released from the requirements of 20.9.10.13 - 20.9.10.23 NMAC in accordance with Subsection B of 20.9.10.9 NMAC, Subsection B of 20.9.10.10 NMAC, Subsection B of 20.9.10.11 NMAC, or Subsection B of 20.9.10.12 NMAC.

   (5) A local government shall satisfy the requirements of the financial test at the close of each fiscal year. If the local government owner or operator no longer meets the requirements of the local government financial test it shall, within 210 days following the close of the owner or operator's fiscal year, obtain alternative or supplemental financial assurance, and place the required submissions for that assurance in the operating record.

   (6) The secretary, based on a reasonable belief that the 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 local government at any time. If the secretary finds that the local government no longer meets the requirements of the local government financial test, the local government shall provide alternate financial assurance that meets the requirements of 20.9.10 NMAC.

6. F. Calculation of costs to be assured. The portion of the closure, post-closure care, phase I and phase II assessments, and corrective action costs which a local government can assure under 20.9.10.19 NMAC is determined as follows:

   (1) if the local government does not assure other environmental obligations through a financial test, it may assure closure, post-closure care, phase I and phase II assessments, and corrective action costs in an amount not to exceed 43 percent of the local government's total annual revenue;

   (2) 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 care, the phase I and phase II assessments, and corrective action costs it seeks to assure under this paragraph; the total shall not exceed 43 percent of the local government's total annual revenue;

   (3) the local government shall obtain an alternate financial assurance instrument for those costs that exceed the limits set in Paragraphs (1) and (2) of Subsection F of 20.9.10.19 NMAC.

[20.9.10.19 NMAC - Rp, 20 NMAC 9.1.IX.906, 8/2/2007]