SWVP-0719 Workshop 3 Workshop 3 Cost Estimating and Cost Estimating and Financial Assurance Financial Assurance SWVP-028586
Reviews financial mechanism for Hal Hong Financial Administrator adequacy and completeness Communicates with Project Manager Groundwater Section financial/TSU/applicant Reviews/approves cost estimate Technical Support Unit Review detail and adequacy Groundwater Section OR Expedited Consultant A.R.S. § 49-243(N) requires a demonstration of financial capability or competence before the Department issues the permit. SWVP-028587
Rules & Regulations • Arizona Administrative Code (A.A.C.) Title 18, Chapter 9 http://www.azsos.gov/public_services/Title_18/18_table.htm • Arizona Revised Statutes (A.R.S.) Title 49, Chapter 2, Article 3 http://www.azleg.state.az.us/ArizonaRevisedStatutes.asp?Title=49 SWVP-028588
The Beginning… • Individual APPs require closure and post- closure cost estimates per A.A.C. R18-9- A201(B)(5). • The closure and post-closure plans (R18-9- A202[A][10])must be signed and sealed by an Arizona-registered P.E. per BTR (§ 32- 125 and R4-30-304). • The costs , based upon the plans, must be derived by an engineer, controller, or accountant per R18-9-A201(B)(5)(a). SWVP-028589
What to include in the plan Example: WWTPs • Capital costs (new plants only) • One year of O&M costs (new plants only) • Associated labor, equipment, materials • Documentation preparation • Sampling • Remediation, if required • Demolition and disposal • Filling and grading • Mobilization/demobilization of equipment • Report preparation Note that all calculations for volume, time, etc. should be included in the plan and sealed by an Arizona-registered professional. SWVP-028590
What to include in the plan Example: Impoundment • Design costs (for re-design after closure) • Sampling to determine horizontal and vertical extent of contamination, if present • Remediation costs • Confirmation sampling • Hauling and Disposal costs • Associated labor, equipment (mob/demob), materials • Backfilling and grading • Report preparation SWVP-028591
Assigning Costs Industry Standard Costing • Publications/Databases (RSMeans) • Actual vendor quotes (competitive bids) • Operating history for similar facilities • Up-to-date software • Other appropriate sources SWVP-028592
SWVP-028593 Example Capping
SWVP-028594 Example Capping
SWVP-028595 Example Excavation/Disposal
SWVP-028596 Example Excavation/Disposal
SWVP-028597 Example Excavation/Disposal
SWVP-028598 Example Excavation/Disposal
SWVP-028599 Example Excel Estimate
SWVP-028600 Example Excel Estimate
Financial Mechanisms R18-9-A203 Hal Hong reviews all mechanisms Demonstrate the financial capability to construct, operate, close, and ensure proper post-closure care of the facility in compliance with A.R.S. Title 49, Chapter 2, Article 3, conditions of the individual permit, and A.A.C. Articles 1 and 2 of Title 18, Chapter 9. SWVP-028601
What you must do… 1. Submit a letter signed by the CFO stating the applicant is financially capable of meeting the costs described in R18-9- A201(B)(5). Note: state or federal agency, county, city, town, or other local governmental entity, submit a statement specifying the details of the financial arrangements used to meet the costs. SWVP-028602
What you must do… 2. Submit information required for at least one of the financial assurance mechanisms under R18-9-A203(C). Include the following: • The selected mechanism or mechanisms; • The amount covered by each mechanism; • The institution or company that is responsible for each mechanism; and • Other details that demonstrate how the applicant is financially capable of meeting the costs described in R18-9-A201(B)(5). SWVP-028603
Available Mechanisms 1. Financial test for self-assurance No consolidation of financial statement with parent or sibling company and include one of the following: • A ratio of total liabilities to net worth less than 2.0 and a ratio of current assets to current liabilities greater than 1.5; • A ratio of total liabilities to net worth less than 2.0 and a ratio of the sum of the net annual income plus depreciation, depletion, and amortization to total liabilities greater than 0.1; or • A ratio of the sum of net annual income plus depreciation, depletion, and amortization to total liabilities greater than 0.1 and a ratio of current assets to current liabilities greater than 1.5. SWVP-028604
Formula Version of Self-assurance 1. A ratio of total liabilities to net worth less than 2.0 and a ratio of current assets to current liabilities greater than 1.5; Total Liabilities < 2.0 Net Worth Current Assets > 1.5 Current Liabilities SWVP-028605
Formula Version of Self-assurance 2. A ratio of total liabilities to net worth less than 2.0 and a ratio of the sum of the net annual income plus depreciation, depletion, and amortization to total liabilities greater than 0.1; or Total Liabilities < 2.0 Net Worth Net Annual Income + Depreciation + Depletion+ Amortization > 0.1 Total Liabilities SWVP-028606
Formula Version of Self-assurance 3. A ratio of the sum of net annual income plus depreciation, depletion, and amortization to total liabilities greater than 0.1 and a ratio of current assets to current liabilities greater than 1.5. Net Annual Income + Depreciation + Depletion+ Amortization > 0.1 Total Liabilities Current Assets > 1.5 Current Liabilities SWVP-028607
Self-assurance (continued) The net working capital and tangible net worth of the applicant each are at least six times the closure cost estimate; and The applicant has assets in the US of at least 90 percent of total assets or six times the cost estimate. SWVP-028608
Self-assurance (continued) The applicant may demonstrate: – The applicant’s senior unsecured debt has a current investment-grade rating as issued by Moody’s Investor Service, Inc.; Standard and Poor’s Corporation; or Fitch Ratings; – The tangible net worth of the applicant is at least six times the cost estimate; and – The applicant has assets in the US of at least 90 percent of total assets or six times the cost estimate. SWVP-028609
Self-assurance (continued) Lastly, the applicant shall submit: – A letter from the CFO indicating which criterion specified previously is used to satisfy the requirements of the rule, how the applicant meets the criterion, and certification of the letter’s accuracy; and – A statement from an independent certified public accountant verifying that the demonstration submitted is accurate based on a review of the applicant’s financial statements for the latest completed fiscal year or more recent financial data and no adjustment to the financial statement is necessary. SWVP-028610
Available Mechanisms 2. Performance Surety Bond a. Company on bond must be listed as acceptable surety on federal bonds in Circular 570 of the US Dept. of Treasury; b. Bond covers entire cost estimate by the surety, or by payment into a standby trust fund of an amount equal to the penal amount f the permittee fails to perform the required activities; c. The penal amount of the bond is at least equal to the cost estimate, if the bond is the only method used to satisfy the requirements of rule or a pro-rata amount if used with another financial assurance mechanism; SWVP-028611
Available Mechanisms d. Surety bond names ADEQ as beneficiary; e. Original surety bond is submitted to the Director; f. Under the terms of the bond, the surety is liable on the bond obligation when the permittee fails to perform as guaranteed by the bond; and g. Surety payments under the terms of the bond are deposited directly into the Standby Trust Fund. SWVP-028612
Available Mechanisms 3. Certificate of Deposit (COD) a. Applicant submits one or more CODs made payable to or assigned to ADEQ to cover the cost estimate or a pro-rata amount, if used with another mechanism; b. COD is insured by the Federal Deposit Insurance Corporation and is automatically renewable; c. The bank assigns the COD to ADEQ; d. Only ADEQ has access to the COD; and e. Interest accrues to the permittee during the period the applicant gives the COD as financial assurance, unless the interest is required to satisfy the cost estimate. SWVP-028613
Available Mechanisms 4. Trust Fund a. ADEQ must be named beneficiary; b. The trust fund must be initially funded in an amount at least equal to: • Cost estimate under R18-9-A201(B)(5); • The amount specified in a compliance schedule approved in the permit; or • A pro-rata amount if used with another mechanism. SWVP-028614
Recommend
More recommend
