BOARD MEETING DATE: May 19, 2000 AGENDA NO. 42
Amend Rules 301 – Permitting and Associated Fees; 303 – Hearing Board Fees; 304 – Equipment, Materials, and Ambient Air Analyses; 304.1 – Analyses Fees; 306 – Plan Fees; 307 – Fees for Air Toxics Emissions Inventory; 307.1 – Alternative Fees for Air Toxics Emissions Inventory; 308 – On-Road Motor Vehicle Mitigation Options Fees; 309 – Fees for Regulation XVI; 311 – Air Quality Investment Program (AQIP) Fees.
SYNOPSIS:
Proposed Amended Regulation III includes a 2.9% across-the-board California Consumer Price Index increase in fees, in addition to an 8.1% increase for annual operating permit emission fees; implements the second-tier fee increases for gasoline dispensers and Title V permits; adjusts the Hearing Board fees to reflect some of the District’s cost. A $50 per person fee is proposed for employee transportation coordinator training pursuant to Rule 2202. Other changes necessary for clarification are proposed.
COMMITTEE:
Administrative, March 10 and April 14; Stationary Source, March 24 and April 28; Reviewed.
RECOMMENDED ACTION:
Adopt the attached resolution:
Barry R. Wallerstein, D. Env.
Executive Officer
Background
The AQMD Governing Board is scheduled to adopt the FY 2000-2001 Budget at its May 19, 2000 meeting. Historically, both the budget and the fee rules have been adopted at the May Board meeting each year.
California Health and Safety Code Section 40500, et seq, established AQMD’s authority to adopt rules and regulations, including fee schedules intended to cover AQMD’s actual costs of cleaning the air. There are ten rules within Regulation III, Fees that set fees in three major categories:
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(1) |
permitting including permit processing and annual renewals of permits to stationary |
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(2) |
annual emission fees for the 1700 facilities who emit toxic air contaminants or emit |
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(3) |
other District services including variances from the Hearing Board, compliance |
As described in more detail in Attachment B, the FY 2000-2001 Budget is projected to experience a $3 million shortfall, absent fee increases, in spite of a steady decline in AQMD expenditures and a significant reduction in staff. This is primarily due to the substantial decline in emission fee revenues as well as AQMD’s efforts to minimize fee increases in the past. In order to partially fund the budget shortfall, staff recommends that fees be increased to a level that is sufficient to stabilize revenues. This stabilization can be achieved with an 11% increase in annual emission fees and an increase of 2.9% for most other fees. To implement these increases, eight fee rules are proposed for amendment. In addition, Rules 307 and 307.1, Fees for Air Toxics Emissions Inventory, have two amendments for clarification purposes but do not contain fee increases.
The draft FY 2000-2001 Budget request represents a $400 thousand reduction in expenditures from the previous fiscal year even though it includes a projected increase of $920,978 for service station enforcement. AQMD’s budget has dropped from a high of $113 million in 1992 to just $86.8 million for the coming year.
Policy Issues
The staff proposal for amending Regulation III contains 3 major elements. First, staff is proposing an 11 % increase in the rate charged per ton of annual emissions. By changing the language in the rule to apply the increased emission fee adopted this year to payments due for FY 2000-2001 emissions, the fee rate is actually 13% higher than the rate that businesses used to calculate their emission fees last year. This is because for the past few years the rule has allowed emission fee payers to use the previous year’s rates. This year’s proposal returns to the earlier system whereby fee payers pay on this year’s rates. However, total revenues from emission fees will be the same as last year. This is because emissions from these fee payers are expected to drop significantly during the year.
Second, staff proposes an across-the-board increase of 2.9% for most other fees found in Regulation III. This increase is consistent with the change in the California Consumer Price Index (CPI) of 2.9%. This smaller increase applies to fees such as permit processing and annual permit renewals, in addition to laboratory analysis and air monitoring fees.
Third, staff recommends a restructuring and an increase in Hearing Board fees as a cost-recovery measure for a majority of the services provided by this Board. A proposed 11% increase per ton would apply to excess emission fees for companies operating under variance from AQMD rules.
Although AQMD has taken a number of effective steps to streamline its operations, particularly its permitting and administrative programs, more work needs to be done. Additional recommendations from the Permit Streamlining Task Force and the 1999 Fee Structure Study will be considered in next year’s Regulation III amendments. The fee structure study demonstrated that permit processing fees are substantially less than the cost to process permits. However, additional time is needed to collect permit processing data and to receive public input on a major restructuring of permitting operations and the fee system.
Future Efforts
To assure that these recommendations are well-developed and that they will be effective in addressing permit timelines and in making the fee system simpler and more equitable, working groups will be formed in early June 2000 to immediately begin a fee restructuring process. These groups will merge the findings of the permit streamlining studies with revenue projections and develop solid recommendations for simplifying the rules and for improving fee clarity and predictability while maintaining and enhancing equity for all fee payers. The restructuring will include developing an area source emission fee proposal, a "fee for all" approach. Area Sources are those widely distributed sources that individually emit relatively small amounts of pollutants but collectively constitute significant emissions.
In addition to cutting equipment and contracting costs, AQMD has pursued a number of alternatives to fee increases in order to remedy this budget shortfall. Last year, AQMD and other air pollution control districts, working through the California Air Pollution Control Officers Association (CAPCOA), lost an opportunity for increasing its on-going share of subvention funding by $3 million, when the Governor vetoed the proposed statewide increase. In doing so, the Governor encouraged local districts to fully exercise their fee collection authority to fund their programs. CAPCOA is once again seeking a subvention increase this year.
Should the AQMD’s share of this year’s request for an increase in subvention funding from the state be denied, emission fees may have to be increased yet again in FY2001-02, unless other possibilities are adopted for cutting expenditures or increasing revenue. As noted above, AQMD proposes to explore other options for stabilizing revenues.
Proposed Amendments to Regulation III - Fees
In order to partially fund the budget shortfall, staff recommends that fees be increased to a level that is sufficient to stabilize revenues. This stabilization can be achieved with an 11% increase in annual emission fees and an increase of 2.9% for most other fees. To implement these increases, eight fee rules are proposed for amendment. In addition, Rules 307 and 307.1, Fees for Air Toxics Emissions Inventory, have two amendments for clarification purposes but do not contain fee increases.
The proposed amendments will generate additional revenue of $3.5 million, resulting in a total of $85.3 million for the coming fiscal year. This represents an average increase in revenue of close to 5.8%.
The proposed amendments include an across-the-board 2.9% fee increase for most rules, consistent with the CPI applicable to the year 1999, and an 11% increase in annual emission fees.
- Increase annual emission fees by 11%.
This includes the 2.9% CPI. Change the language in the rule to ensure that the increased emission fee is applicable to payments due for FY 1999-2000 emissions. To assure that the increase will fund the current shortfall, the increased fee is proposed to be applicable for payments due for FY 1999-2000 emissions and this reflects the 2.0% CPI increase approved in the May, 1999 Rule 301 amendment. Thus, this proposal reflects a fee rate per ton that is actually 13% higher than the fee rate per ton that businesses used to calculate their emission fees last year.
On average, emission sources subject to this fee will pay approximately the same amount in fees as they did last year because emissions are expected to decrease at this rate. However, how the fee rate increase will affect the facility’s total fees compared to last year will depend on the level of their emissions and the extent to which their emissions will change during FY 1999-2000. If the total facility emissions remain the same as last year, their overall fees will be 13% higher.
- Increase most fees including permit processing and annual permit renewal fees by 2.9%, equivalent to the change in the California CPI for 1999.
This across-the-board increase affects most fees found in Regulation III and includes fees for permit processing, annual permit renewals, ambient air and laboratory analysis, as well as plan reviews and certain registration fees.
- Restructure Hearing Board fees so that the fees charged reflect the relative level of effort of the Board’s services. Moderately increase fees for these services to recover a somewhat greater portion of the costs.
In proposed amended Rule 303, the first daily appearance fee would no longer be a separate fee, but would be added to the basic filing fee. A new proposed filing fee schedule presents six service groupings and a new charge for additional hearing days. Using a sliding scale, current fees are adjusted based on the amount of staff and Board member time required to process the petitions or other matters under consideration by the Board. The 80% small business discount is to be retained. Incentive discounts have been added from group variances with two or more petitioners, but the excess emission fee assessments remain the responsibility of the individual petitioner. Other minor changes are proposed for Rule 303.
- Reaffirm the scheduled second step increase in the compliance fee for gasoline fuel dispensing from $12.20 to $25.11.
At its May 8, 1998 meeting, the Governing Board approved and adopted a new compliance fee to be assessed to gasoline dispensing facilities. The fee was to be phased in over two years. Basin-wide this would provide $1,032,000 the first year and, if additional resources are needed, $2,064,000 each year thereafter. The Board determined that this revenue was necessary to cover costs associated with increased inspection frequencies. At the time, recent audits of service stations showed a high level of non-compliance and it became clear that a significant increase in resources devoted to service station enforcement was needed.
At its May 12, 1999 meeting, the Governing Board approved a delay in the implementation of the second stage of this fee so that staff could study compliance results. This study has been completed and staff has found that compliance rates are still unacceptably low. The FY 2000-2001 Draft Budget and Work Program provides for 10 new inspection and inspection support staff to be funded through this proposed fee increase.
- For Title V permit applications, reaffirm the scheduled second step increase in hourly rates to $84.28 for review time spent in excess of the standard designated hours.
At its May 8, 1998 meeting, the Governing Board created a tiered Title V initial fee structure and a final "time and materials" fee for additional time spent on non-standard Title V permit applications. Fee increases were to be implemented in two stages, beginning in 1998. However, at the May, 1999 Board meeting, the second stage increase was delayed for further study this year. In this proposal, staff recommends continuing to delay the second stage of the increase in the initial Title V fee until next May. This is because it is expected with recent changes in internal Title V permit processing, it is expected that most permits can be processed within existing rates. This will be further evaluated during the coming year. However, staff recommends immediately implementing the hourly "time and materials" final fee. This represents increasing the hourly rate from the existing one-half the actual value of an hour’s work to the full value. These are only changes for permits exceeding specified assumed hours to process Title V permits. Staff expects few permits to need this hourly charge but it is important to recover full costs on those unusual cases where they are needed.
- Add new fee for processing requests for exclusion from the Title V program and calculate the fee in accordance with Rule 306 – Plan Fees.
Staff is proposing that a standard plan review fee of $84.28 per hour be charged for processing exclusions under the Title V program. A facility can be excluded from Title V if, for example, there are errors in the annual emissions reported to the district or if a facility’s emissions have declined below the Title V threshold. During Phase I, 1200 exclusions were processed and issued by Title V engineers. Review times for exclusions take on the average of 3 hours, but can run much higher if site visits are necessary to audit emissions. The District has not recovered its costs of processing exclusion requests and expects to continue to receive requests for exclusions during Phase II of the program.
- Add 50% discount for plan and permit processing fees for approval of alternate record keeping systems.
At the January 21, 2000 Board meeting, the Board approved recommendations to streamline VOC record keeping. A 50% discount will apply for review of plans and changes of permit conditions for facilities that seek approval for alternate record keeping systems. The fee for plan review would be one-half of standard hourly fee of $84.28 which is $42.14. The fee for change of permit condition is determined by Rule 301, Summary Permit Fee Rates and varies by type of equipment under review.
- Other amendments are proposed for Regulation III, Fees.
A number of minor amendments are proposed in the draft rules and are listed in Attachment A, Summary of Proposed Amendments. For example, fee categories for food manufacturing and pharmaceuticals are proposed for clarification in Table IB of the rule. The proposal also increases the threshold horsepower rating for IC Engines used for cogeneration from 50 HP to 51 HP to be consistent with the exemption found in Rule 219 – Equipment Not Requiring a Written Permit. Finally, a small new fee ($50.00) is proposed to recover the cost of District-sponsored training for certification of Employee Transportation Coordinators (ETC). This was approved in concept when the Board decided to internalize the ETC training function.
Public and Board Review of Budget/Fee Options
The budget and fee options were available for public review and comment during the latter part of March and early April. In addition to one meeting of the Budget Advisory Committee in March of this year, four public consultation meetings were held to discuss the proposal. The Public Workshop for Proposed Amended Regulation III was held on March 24, 2000. The Budget Public Workshop and the Governing Board Public Workshop on the proposed FY 2000-2001 Budget and associated fees occurred on April 18 and 28, 2000, respectively.
REGULATION III MEETINGS
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DATE HELD |
TYPE OF MEETING |
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March |
1, 2000 |
Budget Advisory Committee Meeting |
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March |
24, 2000 |
Staff Public Workshop |
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April |
5, 2000 |
Public Consultation (2 meetings held) |
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April |
6, 2000 |
Public Consultation |
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April |
18, 2000 |
Budget Workshop |
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April |
25, 2000 |
Public Consultation |
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April |
28, 2000 |
Budget Workshop |
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May |
15, 2000 |
Budget Advisory Committee Meeting |
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May |
19, 2000 |
Public Hearing |
AQMP and Legal Mandates
The fee rules are not part of the AQMP. California Health and Safety Code §§ 40500 et seq. established the authority to "adopt fee schedules for the issuance of variances and permits to cover the reasonable cost of permitting, planning, enforcement, and monitoring related thereto," and to assess fees for the approval of plans for the control of air contaminants and for regulatory programs affecting indirect and area sources (H&S §§ 40522 and 40522.5).
California Health and Safety Code Sections 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 1999 is 2.9%. 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 most Regulation III rules equal to the change in the CPI is necessary. Because AQMD revenues are decreasing as significant progress towards air quality attainment is made, an 11% increase in annual emission fees, found in Rule 301, is also necessary.
Further discussion on legal authority is found in Attachment I, Staff Report on Proposed Amended Regulation III, Fees.
CEQA & Socioeconomic Analysis
The AQMD has reviewed the proposed amendments to Rules 301, 303, 304, 304.1, 306, 307, 307.1, 308, 309, and 311 and found they are exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to § 15273 – Rates, Tolls, Fares, and Charges. A Notice of Exemption will be filed immediately following adoption of the proposed project.
The proposed amended rules will generate additional revenue of $3.5 million resulting in a total revenue of $85.3 million for the fiscal year 2000-2001, a net increase of $0.55 million as compared to the fiscal year 1999-2000.
A Socioeconomic Assessment of the proposed amendments to Regulation III, Fees is included as Attachment J to this letter.
A. Summary of Proposed Amendments
B. Abstract of Fiscal Year 2000-2001 Draft Budget and Draft Work Program
C. Key Issues
D. Rule Development Process
E. Summary of Key Contacts
F. Resolution
G. Notice of Exemption
H. Proposed Rule Language
I. Staff Report
J. Socioeconomic Assessment
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