Proposed amendments adjust fees equivalent to the change in the California
Consumer Price Index for 1997. Other amendments include cost-of-service adjustments, and include reducing some discounts; providing a time-and-materials fee for Title V permit issuance; voluntary fees for expedited permit application processing; establish an increased per-nozzle fee for gasoline dispensing facilities; reduction of certain protocol evaluation fees; return to higher processing fee for applications for a permit to operate without first obtaining a permit to construct; and other administrative corrections.
COMMITTEE:
Budget Advisory Committee, February 26, 1998, Finance, April 3, 1998; Administrative, Ethnic Community Advisory Group, April 8, 1998 and April 17, 1998, Reviewed
RECOMMENDED ACTION:
Amend Regulation III - Fees.
Barry R. Wallerstein, D.Env.
Acting Executive Officer
Background
California Health and Safety Code §§40500, et seq, established AQMD’sauthority toadopt rules and regulations, including fee schedules intended to cover AQMD’s actual costs in cleaning the air. The following nine rules, which set fees for the issuance of variances and permits to stationary sources, compliance monitoring and testing, review of emission control plans, and regulation of indirect and area sources, are proposed for amendment:
Rule 301 - Permit Fees Rule 303 - Hearing Board Fees Rule 304 - Equipment, Materials and Ambient Air Analysis Rule 304.1 - Analysis Fees Rule 306 - Plan Fees Rule 307 - Fees for Air Toxic Emissions Inventory Rule 308 - Transportation Plan Fees Rule 309 - Fees for Regulation XVI Plans Rule 311 - Air Quality Investment Program (AQIP) Fees
California Health & Safety Code §§40510, 40510.5, and 40523 authorize AQMD to increase fees consistent with annual increases in the California Consumer Price Index (CPI). [ Larger increases are allowed for individual fees only if the Board finds that the increase is necessary and will result in an equitable apportionment of fees, and if the increase is spread over two years.] The change in the California CPI applicable to the year 1997 is 2.2%. To maintain revenues required to support AQMD’s legally-mandated functions of achieving and maintaining health-based state and federal air quality standards, a broad-based fee increase for applicable Regulation III rules equal to the change in the California CPI is necessary. Because AQMD revenues are decreasing as significant progress towards air quality attainment is made, the aggregate effect of this proposed increase will not exceed the statutory fee cap on revenue generated.
Other proposed changes more equitably align fees with the levels of effort required to perform the tasks with which they are associated, consistent with requirements of Health & Safety Code §§40510 and 40510.5 as amended pursuant to 1995’s SB 962 (Russell).
Proposed Amendments
Proposed amendments include an across-the-board 2.2% fee increase for most rules, consistent with the California CPI applicable to the year 1997, proposed increases to more nearly recover AQMD costs, as well as general administrative language clarifications.
Rule 301 - Permit Fees
Rule 301 continues to tie permit processing fees, annual operating permit fees, and annual emission-based fees to the complexity of compliance review required and the emission potential of the equipment/process to be permitted. Proposed changes to Rule 301 will:
(1) Increase fees 2.2%, equivalent to the change in the California CPI for 1997.
(2) Replace the definition of "Similar Equipment" with that of "Identical Equipment", and reduce the discount for Identical Equipment from 75% to 50%. Only those permit applications for identical equipment which are submitted at the same time in the same submittal package are eligible for this discount. Based on previous submittals, an estimated 1,300 of 11,000 applications received annually (12%) would be eligible for the identical equipment discount, while some 700 similar equipment applications would receive no discount as a result of the change in definition. In practice, similar equipment proved not to result in lower processing costs than different equipment. Analysis has shown that a substantial portion of costs incurred in processing permits for similar equipment was not recovered. This proposal will enable AQMD to recover costs associated with concurrent and subsequent processing of identical permit units. Even though the workload for identical subsequent permits is reduced, it is still significant and a fee of 25% of the regular fee is too low to cover the level of effort required.
(3) Eliminate the use of multiple discounts. Some permit applicants claim both the 50% small business discount and the 75% discount for similar equipment. This means the second application fee is only one-eighth the regular fee schedule which is not enough to cover costs. This proposal would allow qualifying applicants to claim any one, but only one, discount per transaction. Although few permit applications were processed with multiple discounts last year, the resulting simplified process will improve application process flow as well as adjust fees to more nearly recover costs.
(4) Assess full fees for each device installed and operated in series. Two equipment devices are sometimes installed and operated in series to avoid installing a more costly single device. Some operators may install air pollution control devices in series to improve collection efficiency. For example, many soil vapor extraction installations use a thermal or catalytic oxidizer followed in series by the installation of a carbon adsorption unit. Other carbon absorbers may have a second adsorber in line to protect against breakthrough. For several years, there has been a discount allowed for such multiple devices. However, this has not resulted in full cost recovery. Multiple control devices operating in a system are more complex than those same devices operating separately. Permit application processing time and supervisory review and approval procedures are also more complex. There is no labor savings in evaluating these permit application types, since the emission reduction contributions of each device must be evaluated separately.
(5) Restore the higher processing fee from 15% to 50% for failing to obtain a Permit to Construct prior to installing and operating permittable equipment. Sources that construct and begin operation without an AQMD permit receive an unfair tactical benefit. Not only do they avoid the initial payment of permit application processing fees, but they are excluded from subsequent assessment and payment of annual renewal fees because they are not represented in AQMD’s permitting database. Processing of an application for a Permit to Operate for a source operating without a Permit to Construct can be much more involved if the equipment has not been optimally designed to achieve regulatory compliance; thus, a higher fee is necessary. This fee was assessed at 50% until 1993 when it was reduced to 15%. A 15% higher fee for failing to obtain a permit does not begin to offset the benefits that sources gain by purposely failing to apply for a permit "up front". Restoring the fee assessed to 50% will provide a needed incentive for compliance, and recover costs for this more difficult type of permit processing.
(6) Assess a per-nozzle compliance fee for gasoline dispensing facilities. It is proposed that the 4100 retail and 3000 commercial gasoline dispensing facilities in the basin who operate with a total of 86,000 gasoline dispensing nozzles will pay an additional compliance fee of $24 per nozzle per year. The fee would be phased in over two years, and thus the first year assessment would be $12. Basin-wide, 86,000 nozzles at $12 would provide $1,032,000 the first year, and $2,064,000 per year thereafter at $24 per nozzle.
Recent audits have shown unacceptable non-compliance rates in the service station industry. While the District has reallocated some resources to stationary source enforcement, the improvement then has been disappointing. Thus, a significant increase in resources devoted to service station enforcement is needed.
Projected revenue will cover costs associated with increased inspection frequencies and other activities mandated by the results of recent District Rule 461 compliance audit findings. A per-nozzle compliance fee is proposed to recover increased costs for more frequent compliance inspections; to perform and review leak decay, air-liquid ratio, and back pressure tests; and to train and support the personnel and equipment required to conduct them.
To accomplish these objectives would require in the first year the equivalent of a Supervising Air Quality Inspector, an AQ Inspector III, 7 AQ Inspector II, and an Office Assistant. In the second year, unless a dramatic improvement in compliance is seen to reach satisfactory compliance levels, the number of inspectors would increase by about 10 to allow for more frequent inspection of continuing noncompliant facilities, and for further training of service station personnel. Using top-step rates and standard burden costs, the program costs would total $1,018,629 per year in the first year and approximately $2 million in the second and subsequent years. If satisfactory compliance is achieved, efforts in this area could be scaled back in the future.
(7) Change the Title V permit fee from a fixed $786.50 to a "time and materials" fee based on actual time spent. The fee is divided into a tiered initial fee, or deposit, based upon the number of devices covered by the permit, and a final Title V fee, based upon "time and materials" charges for actual time spent in excess of the hours covered by the initial fee.
Existing Title V fees do not recover the costs of processing Title V permits. Even the smaller (one to five devices) Title V permits based on Group A Title V permit applications processed to date have cost AQMD on average $1,400 more per permit than the current $786.50 application fee. The deficit is significantly more for larger facilities. The Federal Clean Air Act 502 (b)(3)(A) requires full recovery of Title V costs from permit fees. This program addresses this issue. This modified fee structure will enable AQMD to recover the substantial and actual costs incurred during the processing of Title V permits. Fee increases will be phased in over a two-year period, and will not affect work done before July 1, 1998.
(8) Change Digester Gas-Fired Boilers from Schedule D to Schedule B. The existing Schedule D fee for digester-gas fired boilers overcharges the source for the required permitting work. The change to Schedule B is more in line with the permit processing time required.
(9) Establish a fee category (Schedule A) for open-air resin operations. Although Rule 301 currently allows the processing of equipment types not listed in the fee scheduled to be charged at Schedule C, staff has determined Schedule A to be the appropriate fee level for this type of operation.
(10) Create a new category of equipmentthat will be assessed registration and annual renewal fees in lieu of permit fees. This new equipment category initially is proposed to include negative air machines and charbroilers and their associated air pollution control equipment at commercial eating establishments, but may potentially include other equipment exempt from permits under Rule 219. Registration and annual renewal fees assessed for equipment within this proposed new category will be lower than permit fees which would otherwise be assessed.
(11) Assess Schedule A fees for permit applications submitted for previously exempt equipment under Rule 219 (clean-up only).
(12) Provide voluntary express application processing for permit applicants who elect to pay AQMD overtime rates for expedited service. The work will be done by staff during overtime hours.
Rule 303 - Hearing Board Fees
Proposed amendments will:
(1) Increase fees 2.2%, equivalent to the change in the California CPI for 1997.
(2) Remove references to FY 97-98 and FY 98-99 designations in Table I since the second year of required two-year phase-in has occurred.
Rule 304 - Equipment, Materials, and Ambient Air Analyses
Proposed amendments will:
(1) Increase fees 2.2%, equivalent to the change in the California CPI for 1997.
(2) Remove references to FY 97-98 and FY 98-99 designations in Table I since the second year of required two-year phase-in has occurred.
Rule 304.1 - Analysis Fees
Proposed amendments will:
(1) Increase fees 2.2%, equivalent to the change in the California CPI for 1997.
(2) Remove references to FY 97-98 and FY 98-99 designations in Table I since the second year of required two-year phase-in has occurred.
Rule 306 - Plan Fees
Proposed amendments will:
(1) Increase fees 2.2%, equivalent to the change in the California CPI for 1997.
(2) Remove references to FY 97-98 and FY 98-99 designations in Table I since the second year of required two-year phase-in has occurred.
(3) More equitably capture fees for source test protocols and report evaluations as a function of their relative complexity.
Rule 307 - Fees for Air Toxics Emissions Inventory
Proposed amendments will add a new paragraph to the rule to establish a fee for the AB 2588 Health Risk Assessment performed by AQMD contractors as part of a voluntary pilot program. These fees will not be increased by the CPI. This fee was formerly found in Rule 307.1.
Rule 308 - On-Road Motor Vehicles Mitigation Options Fees
Proposed amendments will increase fees 2.2%, equivalent to the change in the California CPI for 1997.
Regulation 309 - Fees for Regulation XVI Plans
Proposed amendments will:
(1) Increase fees 2.2%, equivalent to the change in the California CPI for 1997.
(2) Include fees for amendments to plans and applications.
Regulation 311 – Air Quality Investment Program (AQIP) Fees
Proposed amendments will increase fees 2.2%, equivalent to the change in the California CPI for 1997.
CEQA & Socioeconomic Analysis
Proposed rule amendments seek to increase AQMD fees for various services by 2.2%, consistent with the California CPI applicable for the year 1997. These amendments are categorically exempt pursuant to State CEQA Guidelines. For this reason, proposed rule amendments have been determined to be exempt from CEQA requirements.
A socioeconomic assessment of the impact of the proposed amended rules on industry has been performed and is included in the Final Staff Report.
AQMD staff has reviewed the proposed amendments to Rules 301, 303, 304, 304.1, 306, 307, 308, 309 and 311 pursuant to state CEQA Guidelines Section 15002(k)(l) and 15061(b)(2). Since the proposed project involves the modification and structuring of charges imposed by a public agency for the purpose of meeting operation expenses and financial reserve requirements, it is statutorily exempt from CEQA (state CEQA Guidelines Section 15273 – Rates, Tolls, Fares, and Charges). A Notice of Exemption, for the proposed project and will be filed with the four county clerks within the jurisdiction of the AQMD immediately following the project’s adoption by the Board.
