9VAC25-650-124. Corporate financial test.
A. An owner or operator may satisfy the requirements for financial assurance by demonstrating that he passes a financial test as specified in this section. To pass this test the owner or operator shall meet the following criteria:
1. Financial component.
a. The owner or operator shall satisfy one of the following three conditions:
(1) Supply documentation demonstrating that the owner or operator has a current rating for its senior unsubordinated debt of AAA, AA, A, or BBB as issued by Standard and Poor's or Aaa, Aa, A, or Baa as issued by Moody's;
(2) A ratio of less than 1.5 comparing total liabilities to net worth; or
(3) A ratio of greater than 0.10 comparing the sum of net income plus depreciation, depletion, and amortization, minus $10 million, to total liabilities.
b. The tangible net worth of the owner or operator shall be greater than the sum of the current closure plan cost estimates and any other environmental obligations covered by a financial test plus $10 million.
c. The owner or operator shall have assets located in the United States amounting to at least the sum of current closure plan cost estimates and any other environmental obligations covered by a financial test as described in subdivision 3 of this subsection.
2. Reporting requirements.
a. To demonstrate that the owner or operator meets the financial component, the owner or operator shall submit the following items to the director and place copies of the items in the facility's operating record:
(1) An original letter signed by the owner's or operator's chief financial officer or managing member and worded as specified in 9VAC25-650-124 B.
(2) A copy of the independent certified public accountant's unqualified opinion of the owner's or operator's financial statements for the latest completed fiscal year except as provided in subdivision (a) of this subdivision A 2 a (2):
(a) To be eligible to use the financial test, the owner's or operator's financial statements referenced in subdivision 2 a (2) of this subsection shall receive an unqualified opinion from the independent certified public accountant. An adverse opinion, disclaimer of opinion, or other qualified opinion will be cause for disallowance. The director may evaluate qualified opinions on a case-by-case basis and allow use of the financial test in cases where the director deems that the matters which form the basis for the qualification are insufficient to warrant disallowance of the test. If the director does not allow use of the test, the owner or operator shall provide alternate financial assurance as specified in this part.
(b) (Reserved.)
(3) A copy of the owner's or operator's audited financial statements for the latest completed fiscal year.
(4) If the chief financial officer's or managing member's letter providing evidence of financial assurance includes financial data that are different from data in the audited financial statements referred to in subdivision 2 a (2) of this subsection or any other audited financial statement or data filed with the Securities Exchange Commission (SEC), a special report from the owner's or operator's independent certified public accountant to the owner or operator is required stating that:
(a) He has compared the data in the chief financial officer's or managing member's letter derived from the independently audited, year-end financial statements for the latest fiscal year with the amounts in such financial statements; and
(b) 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 or managing member's letter should be adjusted.
(5) A certification from the corporation's chief financial officer or managing member stating the method for funding closure costs and the amount currently designated for closure costs in the corporation's financial statements worded as specified in 9VAC25-650-124 B.
b. If the owner or operator changes the financial assurance mechanism to corporate financial test from any other mechanism, the owner or operator shall submit the items specified in subdivision 2 a of this subsection at least 60 days before the date that the former assurance expires.
c. After the initial submission of items specified in subdivision 2 a of this subsection, the owner or operator shall update the information and submit updated information to the director within 90 days following the close of the owner's or operator's fiscal year. This information must consist of all five items specified in subdivision 2 a of this subsection.
d. The owner or operator is no longer required to submit the items specified in subdivision 2 a of this subsection when:
(1) The owner or operator substitutes alternate financial assurance as specified in this part; or
(2) The owner or operator is released from the requirements of this part by the director.
e. If the owner or operator no longer meets the requirements of subdivision 1 of this subsection, the owner or operator shall, within 120 days following the close of the owner's or operator's fiscal year, obtain alternative financial assurance that meets the requirements of this part, notify the director that the owner or operator no longer meets the criteria of the financial test and submit the alternate assurance documentation.
f. The director may require reports of financial condition at any time from the owner or operator in addition to those specified in subdivision 2 a of this subsection. If the director finds, on the basis of such reports or other information, that the owner or operator no longer meets the requirements of subdivision 1 of this subsection, the owner or operator shall provide alternate financial assurance as specified in this part within 30 days after notification of such a finding.
g. The director may disallow use of this test on the basis of qualifications in the opinion expressed by the independent certified public accountant in his report on examination of the owner's or operator's financial statements (see subdivision 2 a (2) (a) of this subsection). An adverse opinion or a disclaimer of opinion will be cause for disallowance. The director will evaluate other qualifications on an individual basis. The owner or operator shall provide alternate financial assurance as specified in this part within 30 days after notification of the disallowance.
3. Calculation of costs to be assured. When calculating the current cost estimates for closure, and any other environmental obligations assured by a financial test referred to in subdivision 1 of this subsection, the owner or operator must include cost estimates required for closure plans for privately owned sewerage systems under this part, as well as cost estimates required for the following environmental obligations, if it assures them through financial test obligations associated with underground injection control (UIC) facilities under 40 CFR 144.62; petroleum underground storage tank facilities under 9VAC25-590-10 et seq.; above ground storage tank facilities under 9VAC25-640-10 et seq.; polychlorinated biphenyls (PCB) storage facilities under 40 CFR Part 761; hazardous waste treatment, storage, and disposal facilities under 40 CFR Parts 264 and 265; and municipal solid waste management facilities under 9VAC20-70.
B. The wording of the letter from the chief financial officer or managing member shall be as follows, except that instructions in parentheses shall be replaced with the relevant information and the parentheses deleted.
| Director |
| Department of Environmental Quality |
| P.O. Box 1105 |
| Richmond, Virginia 23218 |
Dear (Sir, Madam):
I am the chief financial officer or managing member of (name and address of firm). This letter is in support of this firm's use of the financial test to demonstrate financial assurance, as specified in 9VAC25-650-124 of the Closure Plans and Demonstration of Financial Capability Regulation (9VAC25-650) ("Regulation").
(Fill out the following four paragraphs regarding privately owned sewerage systems (9VAC25-650), solid waste, regulated medical waste, yard waste composting, hazardous waste, underground injection (regulated under the federal program in 40 CFR Part 144, or its equivalent in other states), petroleum underground storage (9VAC25-590), above ground storage facilities (9VAC25-640) and PCB storage (regulated under 40 CFR Part 761) facilities and associated cost estimates. If your firm has no facilities that belong in a particular paragraph, write "None" in the space indicated. For each facility, include its name, address, permit number, if any, and current closure, post-closure care, corrective action or any other environmental obligation cost estimates. Identify each cost estimate as to whether it is for closure, post-closure care, corrective action or other environmental obligation.)
1. This firm is the owner or operator of the following facilities for which financial assurance is demonstrated through the corporate test specified in 9VAC25-650-124 or its equivalent in other applicable regulations. The current closure plan cost estimates covered by the test are shown for each facility:
2. This firm guarantees, through the corporate guarantee specified in 9VAC25-650-124, the financial assurance for the following facilities owned or operated by subsidiaries of this firm. The current closure plan cost estimates so guaranteed are shown for each facility:
3. This firm, as owner or operator or guarantor, is demonstrating financial assurance for the following facilities through the use of a financial test. The current closure plan cost estimates covered by such a test are shown for each facility:
4. This firm is the owner or operator of the following privately owned sewerage systems for which financial assurance is not demonstrated through the financial test or any other financial assurance mechanism. The current closure plan cost estimates for the facilities which are not covered by such financial assurance are shown for each facility:
This firm (insert "is required" or "is not required") to file a Form 10K with the Securities and Exchange Commission (SEC) for the latest fiscal year.
The fiscal year of this firm ends on (month, day). The figures for the following items marked with an asterisk are derived from this firm's independently audited, year-end financial statements for the latest completed fiscal year, ended (date).
| 1) Sum of current closure, post-closure care, corrective action, or other environmental obligations cost estimates (total of all cost estimates shown in the four paragraphs above.) | $_______________ | ||
| 2) Tangible net worth* | $_______________ | ||
| 3) Total assets located in the United States* | $_______________ | ||
| YES | NO | ||
| Line 2 exceeds line 1 by at least $10 million? | ____ | ____ | |
| Line 3 exceeds line 1 by at least $10 million? | ____ | ____ |
|
(Fill in Alternative I if the criteria of 9VAC25-650-124 A 1 a (1) are used. Fill in Alternative II if the criteria of 9VAC25-650-124 A 1 a (2) are used. Fill in Alternative III if the criteria of 9VAC25-650-124 A 1 a (3) are used.)
ALTERNATIVE I
| Current bond rating of this firm's senior unsubordinated debt and name of rating service | |
| Date of issuance of bond | |
| Date of maturity of bond |
ALTERNATIVE II
| 4) Total liabilities* (if any portion of the closure, post-closure care, corrective action, or other environmental obligations cost estimates is included in total liabilities, you may deduct the amount of that portion from this line and add that amount to line 5.) | $_______________ | ||
| 5) Net worth* | $_______________ | ||
| YES | NO | ||
| Is line 4 divided by line 5 less than 1.5? | ____ | ____ | |
ALTERNATIVE III
| 6) Total liabilities* | $_______________ | ||
| 7) The sum of net income plus depreciation, depletion, and amortization minus $10 million* | $_______________ | ||
| YES | NO | ||
| Is line 7 divided by line 6 less than 0.1? | ____ | ____ | |
I hereby certify that the wording of this letter is identical to the wording in 9VAC25-650-124 B of the Closure Plans and Demonstration of Financial Capability Regulation as such regulation is constituted on the date shown immediately below.
| (Signature) |
| (Name) |
| (Title) |
| (Date) |
C. Certification of funding.
CERTIFICATION OF FUNDING
I certify the following information details the current plan for funding closure at the privately owned sewerage systems listed below.
| Facility permit # |
|
| Source for funding closure |
|
| Name of locality or corporation |
|
| Signature |
|
| Printed name |
|
| Title |
|
| Date |
|
Statutory Authority
§§ 62.1-44.15 and 62.1-44.18:3 of the Code of Virginia.
Historical Notes
Derived from Virginia Register Volume 31, Issue 21, eff. July 30, 2015.