BOARD MEETING DATE: January 8, 1999 AGENDA NO. 25
PROPOSAL:
Air Quality Assistance Fund: Progress Report and Recommendations
SYNOPSIS:
This report summarizes the results of the enhancements made to the Air Quality Assistance Fund (AQAF) since April 1998 and provides recommendations for its future use.
COMMITTEE:
Stationary Source, December 18, 1998, Recommended for Approval
RECOMMENDED ACTION:
- Approve attached RFP.
- Direct staff to report back to the Board as soon as possible with a formal proposal for redesign of the AQAF.
Barry R. Wallerstein, D.Env.
Executive Officer
Background
At the April 10, 1998 meeting, the Governing Board authorized staff to seek alternatives to the current management of the Air Quality Assistance Fund (AQAF). Since that time, staff has discussed a variety of administrative options with interested parties in the banking, small business and economic development communities. This letter provides a brief status report.
Implementation of the Recommendations
Based on information gathered in these discussions, staff has arrived at the following conclusions: (1) AQMD should consider liquidating its current loan guaranty portfolio to make maximum use of the funds remaining in the AQAF; (2) AQMD should explore a public/private partnership with lending institutions and other entities such as utility companies, universities and foundations to provide financial assistance for air pollution control equipment purchases; and (3) AQMD should identify a number of incentives in addition to loan guaranties to increase small business access to credit for financing pollution controls.
Members of the AQAF Focus Group, which was formed in September of this year, agreed that AQMD does not have the resources to build the marketing and financial expertise necessary to increase business awareness of, and access to, financial assistance. Because mechanisms are already in place in the private sector which can more efficiently market the AQAF and handle loan transactions with small businesses, they recommended that the AQMD look for partnerships which can: (1) eliminate the financial risks previously incurred with AQMD loan guaranties and (2) increase business awareness of and access to financial assistance at a significantly reduced cost per loan transaction.
A number of options for partnerships were discussed, including one with lending institutions. For example, a lender could be paid an established fee for completing loans to small businesses for air quality compliance. Lenders have the broad base of business clients necessary to make prompt use of these funds. Lenders also have experienced marketing staff and more efficient, standardized loan processing and approval procedures for prompt decision-making. A preferred list of qualified "Clean Air Lenders" could be developed and those lenders could market assistance directly to AQMD permitees.
Staff decided to seek a consultant with financial expertise to prepare a detailed proposal for Board consideration, including the design of a new assistance program. The attached RFP solicits financial consultants capable of re-designing and implementing a new comprehensive financial assistance program for small businesses that are subject to air pollution control requirements.
Among other tasks, the selected consultant will be asked to: (1) identify the necessary steps for liquidating the AQMD's current loan guarantee portfolio to increase the amount of dollars available for financial assistance; (2) develop and implement one or more partnerships such as one with lenders where they would provide financial management services for a unique business client niche that combines air pollution compliance and financial need and (3) identify the proper role for AQMD to play in any future partnerships. The consultant will also be asked to identify meaningful incentives such as points that the AQMD could, through the AQAF, pay each lender for approving loans to businesses for the purchase of air pollution controls.
Should the AQMD enter into such partnerships, the current AQAF Standard Operating Procedure will be discontinued. Financial consulting, which has been provided to small businesses by an AQMD consultant up to now, would become part of the total financial services package offered by lenders. Qualified lenders would have their own internal evaluation procedures, will take referrals from the AQMD and deal directly with business clients applying for loans.
Legislative Authority and Funding
Health and Safety Code Section 40448.7, which established the AQAF and its purpose, had a sunset date of January 1, 1999. However, the preceding Section 40448.6 still requires AQMD to increase availability of financial assistance programs for small businesses. Thus, the Board has broad latitude in how to use the AQAF or to develop an alternative means for financial assistance to businesses.
The AQAF was set up so that the expenses of the program are paid from interest earned on the AQAF. The actions contained herein will not impact the AQMD general fund.
Attachment
Air Quality Assistance Fund RFP (to be provided under separate cover)
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