BOARD MEETING DATE: May 3, 2002
AGENDA NO. 33

Amend Regulation III - Fees

SYNOPSIS: 

Proposed amendments to Regulation III adjust the fees by the cost of living index. An across-the-board 2.5% increase in fees corresponding to the change in the California Consumer Price Index (CPI) for 2001, adjustment of selected special processing fees to better reflect actual costs and other minor language clarifications are being proposed.

COMMITTEE: 

Stationary Source, March 22 and April 26, 2002; Administrative, April 10, 2002, Reviewed

RECOMMENDED ACTION:

Adopt the attached resolution:

1. Certifying the Notice of Exemption for Proposed Amended 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, and 311 – Air Quality Investment Program (AQIP) Fees; and
   
    
2. Amending 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; and 311 – Air Quality Investment Program (AQIP) Fees.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

The AQMD Board is scheduled to adopt the FY 2002-03 Budget at its May 3, 2002 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:
 

Regulation III – Fees, fund approximately two-thirds of the AQMD programs. As described in more detail in Attachment B, the FY 2002-03 Budget is projected to be balanced. In previous years, budget deficits were funded from reserves. This staff proposal for amending Regulation III consists of an overall adjustment and several minor amendments to better align the costs and fees. First, fees have been adjusted by the cost of living index. An across-the-board 2.5% increase in fees corresponding to the change in the California Consumer Price Index (CPI) for 2001 is being proposed. Also, an adjustment of selected special processing fees is being proposed to better reflect actual costs. Finally, minor language clarifications are being proposed. To implement these increases, ten fee rules are proposed for amendment.

The draft FY 2002-03 Budget expenditures represent a $3.8 million decrease from the current fiscal year amended budget. AQMD’s budget has dropped from a high of $113 million in 1992 to just $99.2 million for the coming year.

Policy Issues

Over the past several years, the AQMD has made significant strides in improving performance and efficiency in several of its programs and reducing expenditures. While further program streamlining continues to be the goal, the cost of several AQMD programs continues to be significantly under-recovered. The purpose of the proposed amendments to Regulation III is to partially address the cost of under-recovery, more equitably distribute program costs among impacted sources, and arrive at a balanced budget for the next fiscal year and several years beyond.

The staff proposal for amending Regulation III contains three major elements. First, staff is proposing an across-the-board increase in fees to reflect the change in the California Consumer Price Index. This 2.5% adjustment will be made to all fee rates in Regulation III.

Second, staff is recommending adjustments to the selected special processing fees such as Air Quality Analysis fee and Health Risk Assessment fee consistent with the results of the time tracking study.

Finally, other minor amendments are being proposed to clarify the Regulation and make other adjustments.

Taken collectively, the proposed amendments to Regulation III more closely align program costs with program revenues and provide for a proposed balanced budget.

PROPOSED AMENDMENTS TO REGULATION III – FEES

Staff is recommending a 2.5% across-the-board increase at a rate equal to the change in the California Consumer Price Index (CPI). Additional changes proposed are:

Proposed Amended Rule 301 – Permitting and Associated Fees

1. Fee Adjustments: The fee for Air Quality Analysis and Health Risk Assessment is being adjusted based on the time tracking study conducted by the Permit Streamlining Taskforce. Also, based on the comments received during the Public Comments period, the fee for equipment listed in Schedules A through C is being decreased while a Time and Materials (T&M) costs is proposed for equipment listed in Schedules D through H to recover cost for detailed projects, Sections (i)(2) and (i)(3). The circumstances for accruing T&M charges are specified and required Executive Officer approval. As the fee adjustments for Schedules D through H are beyond the CPI, they are being phased in over a two-year period. Also, the fee for Public Notice Preparation and Publication on Significant Projects, as defined in Rule 212 is being adjusted to accurately reflect the actual costs involved. However, the owner/operator may choose to arrange publication of the above notice independent of the District option. Where publication is performed by the owner/operator or an independent consultant, the owner/operator of the source shall provide to the Executive Officer a copy of the proof of publication, (i)(4).
   
    
2. Language and Technical Clarifications: Sections (a)(2), (c)(4), (e)(2),(e)(6), (e)(7), (e)(9), (o)(5), (o)(7), (x)(1), Tables II(A), II(B), III, and IV.
   
    
3. Prevention of Significant Deterioration (PSD) Fee Review: A fee of $750 in FY 2002 – 03 and $1,500 thereafter be assessed for a project requiring modeling review triggered by the requirements of Regulation XVII – Prevention of Significant Deterioration (PSD), Table II (A).

Proposed Amended Rule 303 – Hearing Board Fees

Table III has been revised based on feedback received from petitioners filing documents with the Hearing Board and to more accurately reflects different scenarios.

Proposed Amended Rule 306 – Plan Fees

Language has been added to provide for annual renewal of various location plans pursuant to amended Rule 1166.

Proposed Amended Rule 307 – Fees for Air Toxics Emissions Inventory

The authority to collect fees pursuant to Rule 307 has been extended for FY 2002 – 03.

Proposed Amended Rule 307.1 – Alternative Fees for Air Toxics Emissions Inventory

The authority to collect fees pursuant to Rule 307 has been extended for FY 2002 – 03.

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. The proposed amendments were available for public review and comments since February. The Public Workshop for Proposed Amended Regulation III was held on March 8, 2002 and a Public Consultation Meeting on March 28, 2002. The Budget Advisory Committee and the Administrative Committee meetings were held on April 10 and April 12, 2002, respectively. The Budget Public Workshop and the Governing Board Public Workshop on the proposed FY 2002-03 Budget and associated fees occurred on April 17 and April 19, 2002, respectively. Also, a presentation was made to the Local Government and Small Business Assistance Advisory Group on April 19, 2002.

REGULATION III MEETINGS
 

AQMD and Legal Mandates

The fee rules are not part of the AQMP. California Health and Safety Code Section 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 2001 is 2.5%. To provide for a balanced budget and to maintain revenues required to support AQMD’s legally mandated functions of achieving and maintaining health-based state and federal air quality standards, staff is proposing amendments to Regulation III to more closely align program costs with program revenues and provide for a proposed balanced budget.

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 because the proposed project involves the modification and structuring of changes by public agencies for the purpose of meeting operating expenses and financial reserve requirements, it is statutorily exempt from CEQA, pursuant to state CEQA Guidelines Section 15273 – Rates, Tolls, Fares, and Charges. A Notice of Exemption will be filed with the county clerks immediately following adoption of the proposed project.

The proposed amendments to Regulation III - Fees will increase fee revenue by about $1.6 million for the fiscal year 2002-03. Regulation III – Fees in total will generate $66.9 million for the fiscal year 2002-03, which has an estimated budget of $99.2 million.

A Socioeconomic Assessment of the proposed amendments to Regulation III, Fees is included as Attachment J to this letter.

Attachments

1. Summary of Proposed Amendments
2. Abstract of Fiscal Year 2002-2003 Draft Budget and Draft Work Program
3. Key Issues
4. Rule Development Process
5. Summary of Key Contacts
6. Resolution
7. Notice of Exemption
8. Proposed Rule Language
9. Staff Report
10. Socioeconomic Assessment

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