Mo. Code Regs. tit. 10 § 26-3.113

Current through Register Vol. 49, No. 21, November 1, 2024.

Section 10 CSR 26-3.113 - Local Government Financial Test

PURPOSE: This rule describes the requirements for use of a local government financial test for demonstrating financial responsibility.

(1) A local government owner or operator may satisfy the requirements of 10 CSR 26-3.093 by passing the financial test specified in this rule. To be eligible to use the financial test, the local government owner or operator shall have the ability and authority to assess and levy taxes or to freely establish fees and charges.

(2) To pass the local government financial test, the owner or operator must meet the criteria of subsections (2)(B) and (C) of this rule based on year-end financial statements for the latest completed fiscal year-

(A) 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:

1. Total revenues. Consists of the sum of general fund operating and nonoperating 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, and the like), 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;

2. Total expenditures. Consists of the sum of general fund operating and nonoperating 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);

3. Local revenues. Consists of total revenues (as defined in paragraph (2)(A)1. of this rule) minus the sum of all transfers from other governmental entities, including all monies received from federal, state, or local government sources;

4. 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, inter-fund obligations, amounts owed in a trust or agency capacity, and advances and contingent loans from other governments;

5. 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 nonsecurity assets; and

6. Population consists of the number of people in the area served by the local government;

(B) 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; and

(C) The local government owner or operator shall have a letter signed by the chief financial officer worded as specified in section (3) of this rule.

(3) To demonstrate that it meets the financial test under section (2) of this rule, the chief financial officer of the local government owner or operator shall sign, within one hundred twenty (120) days of the close of each financial reporting year, as defined by the twelve (12)-month period for which financial statements used to support the financial test are prepared, a letter worded as specified in Form 13, included herein.

(4) 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 shall obtain alternative coverage within one hundred fifty (150) days of the end of the year for which financial statements have been prepared.

(5) The director may require reports of financial condition at any time from the local government owner or operator. If the director finds, on the basis of the reports or other information, that the local government owner or operator no longer meets the financial test requirements of 10 CSR 26-3.113(2) and (3), the owner or operator shall obtain alternate coverage within thirty (30) days after notification of the finding.

(6) If the local government owner or operator fails to obtain alternate assurance within one hundred fifty (150) days of finding that it no longer meets the requirements of the financial test based on the year-end financial statements or within thirty (30) days of notification by the director that it no longer meets the requirements of the financial test, the owner or operator shall notify the director of the failure within ten (10) days.

Form 13-Local Government Financial Test

The following text should be used to comply with the requirements of 10 CSR 26-3.113(3) 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 "non-sudden 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 10 CSR 26-2.022].

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 & 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 & Poor's rating of AAA, AA, A, or BBB.

WORKSHEET FOR MUNICIPAL FINANCIAL TEST

Part I: Basic Information

1. Total Revenues

a. Revenues (dollars)

Value of revenues excludes liquidation of investments and issuance of debt. Value includes all general fund operating and nonoperating 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)

2. Total Expenditures

a. Expenditures (dollars)

Value consists of the sum of general fund operating and nonoperating 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)

3. Local Revenues

a. Total Revenues (from 1c) (dollars)

b. Subtract total intergovernmental transfers (dollars)

c. Local Revenues (dollars)

4. Debt Service

a. Interest and fiscal charges (dollars)

b. Add debt retirement (dollars)

c. Total Debt Service (dollars)

5. Total Funds (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)

6. Population (persons)

Part II: Application of Test

7. Total Revenues to Population

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

8. Total Expenses to Population

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

9. Local Revenues to Total Revenues

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

10. Debt Services to Population

a. Debt Service (from 4d)

b. Population (from 6)

c. Divide 10a by 10b

d. Subtract 51

e. Divide by 1038

f. Multiply by -1.866

11. Debt Service to Total Revenues

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

12. Total Revenues to Total Expenses

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

13. Funds Balance to Total Revenues

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

14. Funds Balance to Total Expenses

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

15. Total Funds to Population

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

16. Add 7f + 8f + 9f + 10f + 1If + 12f + 13f + 14f + 15f + 4.937

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 10 CSR 26-3.113(3) as the regulations were constituted on the date shown immediately below.

[Signature]

[Name]

[Title]

[Date]

10 CSR 26-3.113

AUTHORITY: section 319.114, RSMo 2000.* This rule originally filed as 10 CSR 20-11.113. Original rule filed Aug. 3, 1993, effective 4/9/1994. Moved and amended: Filed April 15, 2011, effective 12/30/2011 .

*Original authority: 319.114, RSMo 1989.