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0 0 Agenda Item 15 - Permitting and Enforcement Committee g January 15, 1998 Alternative 1 or Alternative 2, the test must be based on financial statements prepared in conformity with generally accepted accounting principles (GAAP) for governments and audited by an independent certified public accountant. Alternative 1 requires a local government to pass a liquidity ratio and debt service ratio. Alternative 2 requires a local government with outstanding rated general obligation bonds to document a current investment grade bond rating by Standard and Poor's or Moody's. The LGG regulation defines a local government's eligibility to use the LGG to promise to pay specified debts or perform specified obligations for another public or private landfill. To use the LGG a guarantor must satisfy the requirements of the LGFT based on the guarantor's financial statements prepared in conformity with GAAP for governments and audited by an independent certified public accountant. Rulemaking Process: The proposed regulations were noticed on November 21, 1997 in the California Regulatory Notice Register. This initiated the 45 -day comment period, which concludes at 5:00 p.m. on January 5, 1998. All comments received during the 45 -day comment period will be addressed as part of the rulemaking record. Key Issues: The proposed regulations provide public operators with financial assurance alternatives for postclosure maintenance and corrective action costs, but not for closure costs. This limitation is consistent with existing CIWMB regulations specifying certain mechanisms can only be used for the operating costs of postclosure maintenance, but not for closure expenses. Staff determined the LGFT and LGG might not provide equivalent assurance for closure costs as the existing Enterprise Fund mechanism, which is utilized by most public operators for closure costs. There is greater potential for delay in conducting closure due to an inability to pay for closure activities in a timely manner when the assurance provided is by passing of a financial test, rather than by having monies set aside in a closure account within the local government's enterprise fund. Delay in conducting closure could jeopardize public health, safety, and the environment and increase response costs for corrective action at a site. The Enterprise Fund can be utilized for closure, postclosure maintenance or corrective action costs. The Pledge of Revenue, another existing mechanism, can be utilized for postclosure maintenance or corrective action costs. Like the LGFT and LGG, the Enterprise Fund and Pledge of Revenue mechanisms have no third party costs. Allowing the LGFT to be used for postclosure maintenance and corrective action costs but not for closure costs also maintains a level playing field between public and private operators. Existing regulations specify the Financial Means Test and Corporate Guarantee can only be used by private operators, and only for postclosure maintenance and operating liability coverage. Staff recommends this implementation approach for the LGFT to alleviate the potential problem of local governments not being able to pass the test consistently from year to year. If a local