BOARD MEETING DATE: March 14, 1997 AGENDA NO. 18
Proposal:
Program Cost Estimate for Implementing the Air Toxics "Hot Spots" Information and Assessment Act (AB 2588) During FY 1997-98.
Synopsis:
The Air Toxics "Hot Spots" Information and Assessment Act requires air districts to annually transmit to CARB an AQMD Board-approved cost estimate for local program implementation. This proposed estimate must be approved and transmitted to CARB before April 1, 1997 to be included in the state’s new approved fee rule. This action is to approve this cost estimate and transmit it to CARB.
Committee:
Administrative and Stationary Source, February 21, 1997, Recommend for Approval
Recommended Action:
1. Approve inclusion of the AQMD in the statewide AB 2588 fee regulation for FY 1997-98.2. Approve the attached AQMD program cost findings and estimate to implement AB 2588 for FY 1996-97 and FY 1997-98 and its transmittal to CARB in accordance with the attached Board Resolution.
James M. Lents, Ph.D.
Executive Officer
Background
The AB 2588 Fee Regulation, which recovers state and local program costs, requires the AQMD to transmit an annual program cost estimate to CARB by April 1 for the following fiscal year. Alternatively, the AQMD must establish its own annual fee schedule by rule to collect the AQMD and state costs for implementation of the program. The fees assessed through this regulation are used to:
The AQMD’s cost estimate and estimates from other districts, CARB, and the state Office of Environmental Health Hazard Assessment (OEHHA) are used by CARB to calculate the fees each district charges to facilities in its jurisdiction. The Fee Regulation is amended by CARB each year to incorporate these program cost estimates and other changes. The fees are specifically designated for the purpose of administering and implementing the mandated requirements of the Act. The AQMD collects the fees assessed by the CARB regulation and transmits the state portion of the collected fees to CARB.
A number of issues affect this year’s fiscal estimate:
FY 1997-98 Cost Estimate
The program cost estimate for FY 1997-98 is based on both the Three-Year Budget Forecast and costs incurred during FY 1996-97. Table 1 (attached) contains a summary and breakdown of the AQMD’s estimated AB 2588 core program cost for FY 1997-98 which totals $1,526,326. Additional program costs are summarized in Tables 2, 3, and 4. The total projected costs for FY 1997-98 are $1,611,866.
In FY 1997-98, total projected AQMD costs will be down by $428,366 (21%) compared to the current year (FY 1996-97). This will be achieved by the reduction of outside contracts and support staff. However, dedicated program staffing levels will remain constant to administer and complete the critical program requirements.
Major Changes in the Fee Regulation
The FY 1996-97 fee regulation was modified significantly as a result of AB 564 (Cannella). These changes created three levels of requirements and a corresponding fee schedule directly related to a facility’s health risk estimate. A substantial amount of work must be done to complete reviews of health risks for a small group of facilities with higher fees. Staff expects the bulk of this work to continue until the year 2000 and is recommending to offset these higher costs as discussed below. Additionally, as more facilities are updated and risk numbers are finalized, low risk facilities will either be exempt from fees or be reclassified in a lower fee schedule per the new regulation. The statewide process for exempting de minimis sources is ongoing and this will cut revenues further, leaving fewer sources to bear the program costs.
Fee Offsets
The need to offset fees is the result of significant fee increases for 20% of the facilities, because of changes in the FY 1996-97 regulation. The changes caused 600 low risk facilities to be exempt from fees, a number of moderate risk facilities to revert to lower fees, and facilities with high risk values to pay significantly more. Staff anticipates an additional 100 facilities will qualify for exemptions in FY 1997-98. Overall, collections are dropping faster than ongoing program costs.
To offset fee increases in FY 1997-98, staff will use up to $700,000 from the Special Air Toxic Fund for the AB 2588 program. The exact amount will depend on the number of sources which remain in the fee billing categories in FY 1997-98 and the available funds from previous collections. Final estimates of these numbers will not be available until early April 1997.
District Tracking Fee
FY 1996-97
The FY 1996-97 regulation exempts a category of intermediate risk facilities from state fees. The category is defined as facilities with prioritization scores less than or equal to 10 and greater than one. Local districts are required to track and process update reports on a quadrennial cycle (every four years). These facilities’ reporting schedules are spread over the four-year cycle. The regulation established a $125 fee limit for each facility during their reporting year.
The update process includes the following annual activities and documents:
State law allows local districts to exceed the $125 fee only through a finding approved by their district board. Staff has determined that AQMD costs exceed the $125 limit as shown in the attached Table 2 for FY 1996-97. The fee to recover AQMD costs is $460 per facility. This new requirement took effect after the normal program cost date of April 1, 1996. The state fee regulation provides an approval deadline for the FY 1996-97 fee of April 1, 1997.
FY 1997-98
The current projection of facility counts shows that facilities will continue to move into this lower risk category. Staff has determined that AQMD costs will exceed the $125 limit as shown in attached Table 3 for FY 1997-98. The fee to recover these projected AQMD costs is $517 per facility. This cost is up slightly from FY 1996-97. While the number of sources is dropping, several program activities remain (i.e., inventories, administrative functions). The cost of these activities are therefore spread over a fewer number of sources.
Industrywide Source Fee
AQMD has not collected industrywide fees every year because of the high administrative cost of collecting a small fee (about $25 per year) from thousands of facilities. The only previous billing occurred in 1994 and facilities were charged $100 for past and projected expenses. The AQMD has paid state costs of $15 for each facility annually since FY 1993-94 using this original collection. Based on staff’s review of program activities, costs and expenses to date, and projected activities, a $111 fee will be required in FY 1997-98. Attached Table 4 gives the basis for this fee.
Conclusion
By approving these recommendations, the Board is:
Resolution
Table 1 - Air Toxics "Hot Spots" Program Cost Estimate for FY 1997-98
Table 2- Air Toxics "District Tracking Fee Estimate" for FY 1996-97
Table 3- Air Toxics "District Tracking Fee Estimate" for FY 1997-98
Table 4 -Air Toxics "Hot Spots" Industrywide Cost Estimate for FY 1997-98