Underground Storage Tank (UST) Program

Underground storage tank system illustration

Alternative Forms of UST Financial Responsibility for Local Governments

Local government entities include both general purpose local governments and special purpose governments. General purpose local governments include municipalities, counties and towns. Special purpose local governments include organizations that perform a single function or a limited range of functions, such as special districts and school districts.

Bond Rating Test

In order to pass this bond rating test of self-insurance, a local government UST owner/operator must meet requirements based on outstanding bond issues and ratings.1

Bond Financial Test

In order to pass this financial test of self-insurance, a local government UST owner/operator must demonstrate financial strength according to a set of pass-or-fail criteria. A worksheet based on year-end financial statements or the latest completed fiscal year must be completed and show an eligible score. Local governments that pass the financial test must be able to pay for their own cleanups and third party liability obligations.2

Guarantee

A local government owner/operator may obtain a guarantee from another local government or the state. The guarantor agrees to pay cleanup costs or third party compensation, or fund a standby trust accessible for direct payment if the local government or owner fails to provide financial assurance.3

Local Government Fund

This is an irrevocable fiduciary or trust account established to cover cleanup and third party compensation caused by UST releases (leaks) or general emergencies. A local government has three options for establishing a local government fund:4

  • Fully-funded dedicated fund
  • General emergencies contingency fund
  • Dedicated pay-in fund combined with unused bonding authority