July 24, 1997

MEMORANDUM

TO:         RCRA Dockets F-97-FLXF-FFFFF & F-97-FLXP-FFFFF

FROM:       Allen J. Geswein, Environmental Engineer

SUBJECT:    Financial Assurance Requirements for MSWLFs



     Under 40 CFR Parts 258.70 - 258.74, owners and operators
of all municipal solid waste landfill (MSWLF) units must
demonstrate financial assurance.  The purpose of financial
assurance is to ensure that owners or operators adequately
plan for the future costs of closure, postclosure care, and
corrective action of known releases and ensure that adequate
funds will be available to cover these costs.  Owners or
operators must show financial assurance through one or more of
a variety of available financial mechanisms.  This requirement
does not apply to owners or operators who are state or federal
government entities whose debts and liabilities are the debts
and liabilities of a state or the United States.  These
requirements were promulgated under the Solid Waste Disposal
Facility Criteria Final Rule on October 9, 1991, to protect
human health and the environment.

     To demonstrate financial assurance, owners and operators
may use a trust fund, surety bond guaranteeing payment or
performance, letter of credit, insurance, a state-approved
mechanism, state assumption of responsibility, or a
combination of any of these financial mechanisms.  EPA has
issued a local government financial test.  EPA will soon issue
a corporate financial test.

     Although state and federal governments are exempted from
these requirements, the Agency requires general purpose local
governments (e.g., municipalities, counties, cities,
townships, towns, and villages), as well as special purpose
local governments (e.g., public authorities, special
districts) to demonstrate financial assurance.  The Agency's
reasons behind requiring publicly-owned MSWLFs to comply with
financial assurance requirements are as follows:

            LIMITED RESOURCES.  Compared with federal and    
            state government entities, which are permanent and 
            stable institutions that have the requisite      
            financial strength and incentives to cover
            the costs of closure, postclosure care, and      
            corrective action, local governments generally   
            have more limited financial resources.  Local    
            governments also have less flexibility in their  
            annual budgets and may not be able to make       
            long-term advance commitments to future funds    
            (U.S. EPA, 1991).  Local governments may have a  
            difficult time reallocating a substantial amount 
            of funds for closure, postclosure care, or 
            corrective action in a given year.

            SLOWER REACTION TIME.  Local governments generally
            cannot access the traditional sources of municipal
            funding (i.e., intergovernmental transfers, bond 
            issues, and taxes) quickly enough to ensure      
            funding in a timely manner.  Local governments   
            vary substantially in terms of size, financial 
            capacity, and functions performed (U.S. EPA,     
            1991).  Some local governments, therefore, may not
            have the ability to meet their closure,          
            postclosure care, and corrective action          
            obligations in an appropriate amount of time (U.S.
            EPA, 1991).

            FINANCIAL PROBLEMS.  The Agency believes that    
            local government entities have been more prone to 
            fiscal emergencies than federal and state        
            government entities (U.S. EPA, 1991).  Local
            governments should therefore be subject to       
            financial assurance requirements to induce       
            planning for the future costs of closure,        
            postclosure care, and corrective action.  

            NEW FINANCIAL ASSURANCE FLEXIBILITY.  Local      
            governments that pass the local government       
            financial test are exempt from having to obtain a 
            third-party financial assurance mechanism.  For  
            the local government test, local governments must
            demonstrate financial health and strength in a   
            variety of methods, make community decision-makers
            aware of the commitment of future government funds
            via a public notice component of the rule, and   
            conform to certain recordkeeping and reporting   
            requirements (U.S. EPA, 1996).  Under the local
            government guarantee, a local government can     
            guarantee the costs of closure, postclosure care, 
            and corrective action by another local government 
            or a private business (U.S. EPA, 1996).

Resources Used:

U.S. EPA. 1988. 40 CFR Parts 257 and 258, Solid Waste Disposal
Facility Criteria; Proposed Rule. 53 Federal Register 33314.
Washington, DC. August 30.

U.S. EPA. 1991. 40 CFR Parts 257 and 258, Solid Waste Disposal
Facility Criteria; Final Rule. 56 Federal Register 50978.
Washington, DC. October 9.

U.S. EPA. 1993. 40 CFR Part 258, Financial Assurance
Mechanisms for Local Government Owners and Operators of
Municipal Solid Waste Landfill Facilities; Proposed Rule. 58
Federal Register 68353. Washington, DC. December 27.

U.S. EPA. 1994. Seminar publication: Design, operation, and
closure of municipal solid waste landfills. Washington, DC.
September.

U.S. EPA. 1996. 40 CFR Part 268, Financial Assurance
Mechanisms for Local Government Owners and Operators of
Municipal Solid Waste Landfill Facilities; Final Rule (DRAFT).
61 Federal Register 60344. Washington, DC. June 12.