BOARD MEETING DATE: September 3, 2004
AGENDA NO. 29
(Continued from the August 6, 2004 Board Meeting)

Approve Grants to Retrofit Diesel School Buses with Particulate Traps, Purchase Cleaning Equipment Systems and Install Insulation Blankets; Issue New Program Announcement and Application for Retrofit of School Buses with Particulate Traps and Insulation Blankets; and Consider Changes to Implementation Procedures of Chairman's Initiative on Lower-Emission School Bus Program to Allow Transfer of Funds from School Bus Replacement Component to School Bus Retrofit Component

SYNOPSIS:

On February 6, 2004, the Board released a Program Announcement to retrofit existing diesel school buses with particulate filter traps. The retrofit program was oversubscribed (beyond the $4.8 million budget). In addition, school bus operators indicated the desire for AQMD to fund PM trap cleaning equipment and insulation blankets. Staff recommends the following awards: 1) approve awards to four school districts to retrofit 48 buses with PM traps and insulation blankets not to exceed $348,000; 2) approve a purchase of up to 21 PM trap cleaning equipment systems not exceeding $168,000; and 3) approve the purchase/installation of 1,272 thermal blankets at $250 each for buses retrofitted with prior AQMD grants in an amount not to exceed $318,000. With remaining funds in the Chairman’s School Bus Initiative for PM traps, totaling $3,966,000, staff is presenting three options for Board’s consideration: 1) to fully fund 76.2% of all requests of PM traps with insulation blankets as applied for by five private operators; or 2) to re-issue the Program Announcement with additional conditions, including cost sharing which potentially can provide additional PM traps. In addition, at the August 27, 2004, Technology Committee meeting, a third option was suggested by a member of the public to allow transfer of $1,239,500 from the School Bus Replacement Program to the School Bus Retrofit Program of the Chairman’s Initiative such that all 718 PM traps requested by the private operators could be funded at full cost. This option requires the Board to make a policy change of the implementation procedures of the Chairman’s Initiative on the Lower-Emission School Bus Program (Review: Technology Committee, August 27, 2004)

COMMITTEE:

Technology, August 27, 2004,
Recommended for Board Consideration

RECOMMENDED ACTIONS:

1. Authorize the Chairman to approve grant awards to four public school districts to retrofit 48 buses with particulate traps and insulation blankets as set forth by the following dollar amounts: Chino Valley - $21,750; Norwalk-La Mirada - $14,500; Capistrano -- $246,500; William S. Hart - $62,250. Each award for PM trap and insulation blanket totals $7,250 per unit. The total grant award for these four public schools should not exceed $348,000.
    
2. Authorize the Executive Officer to approve the purchase of up to 21 PM trap cleaning equipment systems as set forth by the following dollar amounts: Capistrano - $8,000; Tumbleweed Transportation - $8,000; Cardinal - $8,000; Atlantic Express - $16,000; First Student - $32,000; Laidlaw - $16,000; Anaheim City School - $8,000; Coachella Valley - $8,000; Los Angeles Unified - $24,000; Norwalk-La Mirada - $8,000; Orange - $8,000; Placentia - $8,000; William S. Hart - $8,000; and Durham - $8,000. Each cleaning equipment system is costed out at $8,000 each.
    
3. Authorize the Executive Officer to amend existing grants to expand the purchase and installation of insulation blankets, at $250 each, on 1,272 school buses retrofitted with prior AQMD funding (granted on June 7, 2002 and December 6, 2002). The total award for these amended grants shall not exceed $318,000 from the Lower Emission School Bus Program Fund. Table 4 depicts the number of retrofitted buses and those public schools and private operators eligible for such amended grants for the purchase and installation of insulation blankets.
    
4. Election of one of the three options as set forth below:

Option 1, Allocation within Initial Funding
Authorize the Chairman to approve grant awards to private school bus operators to retrofit 547 buses with particulate traps and insulation blankets as set forth in Table 1 in an amount not to exceed $3,965,750 from the Lower Emission School Bus Program Fund. (staff recommendation)

    or

Option 2, Reissue Program Announcement with Cost Share
Authorize the Executive Officer to issue a new Program Announcement and Application (PA 2005-04) (Attachment 1) for Retrofit of Diesel School Buses with Particulate Traps and Insulation Blankets including cost-sharing consideration for funding awards using the $3,966,000 of unspent funds for retrofit of diesel buses with PM traps from the previous Program Announcement. (staff recommendation)

    or

Option 3, Fund Transfer from School Bus Replacement to School Bus Retrofit
Authorize the Chairman to approve grant awards to private school bus operators to retrofit 718 buses with particulate traps and insulation blankets as set forth in Table 1 in an amount not to exceed $5,205,500 from the Lower-Emission School Bus Program Fund, including the transfer of $1,239,750 from the school bus replacement component of the program to the school bus retrofit program. This would require a policy change to the Chairman’s School Bus Initiative Program by the Board. (public’s recommendation.)

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Exhaust emissions from high emitting diesel-fueled school buses present a risk to children and are a source of public exposure to toxic diesel particulate matter and smog-forming pollutants. There are thousands of older school buses on the road that have remained in service simply because school districts lack funds to replace them. To reduce emissions from these vehicles, AQMD has used state funds and its own funds to retrofit particulate traps on school buses. Over 50 percent of these funds have gone to school buses operating in communities meeting legislated criteria for disproportionate impacts, as set in Health and Safety Code Section 43023.5 (AB1390, Firebaugh).

AQMD Chairman’s School Bus Initiative
At its February 6, 2004 meeting, the Board approved the issuance of Program Announcement & Applications #2004-07, for the Chairman’s School Bus Initiative in the amount of $12 million. The school bus initiative was designed to provide funding for the replacement of pre-1987 school buses with new alternative fuel buses as well as the purchase and installation of particulate traps on diesel-powered school buses. Specifically, the initiative provided for:

a)

Total of $7.2 million, with up to $60,000 for Type D, CNG transit bus, $50,000 for mid-size, and $25,000 for a Type A bus. Public school districts and private operators were eligible for the funding with public school districts receiving first priority. Public schools would also have received an additional $12,000 per bus for CNG infrastructure. To be eligible, applicant had to scrap/crush a pre-1987 bus.

b)

Total of $4.8 million for installation of CARB verified particulate traps on 1994 and newer diesel school buses, capable of reducing diesel exhaust particulate matter by at least 85 percent. Both public and private fleets were eligible.

By the closing date of June 11, 2004, four public schools applied for seven new CNG buses, another four public school districts applied for 48 PM traps, and five private operators applied for 1,126 PM traps.

Proposal

Several actions are proposed as part of this request to the Board and are discussed in the following sections.

Proposed Awards

1. Four public school districts submitted applications for 48 particulate traps and five private school bus operators submitted applications for 1,126 particulate traps totaling 1,174 units. Among the applications submitted by private operators there were 408 applications for model year 2003 and newer buses, for which there are no CARB verified units. Staff therefore recommends awarding the 48 particulate traps requested by the four public school districts in an amount not to exceed $348,000 from the Lower Emission School Bus Program Fund. Because the number of eligible public school buses to be retrofitted is limited in number due to past awards and the Program Announcement gave public school districts higher priority over private operators, staff is recommending the full funding award of particulate traps to public school districts at this time.
    
2. Staff recommends that public school districts and private operators that have received 30 or more traps in the past and current rounds of funding, be awarded at least one PM trap cleaning equipment systems at $8,000 per equipment. School districts with multiple depots would be awarded multiple PM trap cleaning systems. It is therefore recommended to award 11 PM trap cleaning equipment systems to the current recipients of PM trap awards as set forth in Table 3, and ten PM trap cleaning equipment systems to the past recipients of PM trap awards granted on June 7, 2002 and December 6, 2002, as set forth in Table 4, in an amount not to exceed $168,000 from the Lower-Emission School Bus Program Fund.
    
3. Staff recommends approval of grants to public school districts and private operators to purchase and install insulation blankets on 1,272 school buses already retrofitted with AQMD funding granted on June 7, 2002 and December 6, 2002, in an amount not to exceed $318,000 from the Lower Emission School Bus Program Fund. The amount of funding for the optional purchase and installation of the blankets shall not exceed $250 per bus. Public school districts and private operators shall provide a list of already retrofitted buses to the AQMD on which installation blankets would be installed. Upon completion of the installations the AQMD will reimburse schools and private operators directly.
    

Table 1: Recommended PM Retrofit Trap Awards
 

Table 2: Rcommended PM Trap Cleaning Equipment Award
(Current Applicants)
 

Table 3: Recommended PM Trap Cleaning Equipment Award
(Past Recipients of PM Traps)
 

Relative to the request from private operators, staff is proposing two options for the Board’s consideration.

Option 1
Under this option, the remaining balance of $3,965,750, from the total $4,800,000 allocated in Chairman’s Initiative (PA 2004-07), be awarded to private operators in the amount set forth in Table 1. Each of the five private operators will be provided funds to fully offset the costs to retrofit 76.2% of the eligible buses applied under this option.

Option 2
Program Announcement with Funding Opportunities
Under this option, staff proposes that the Board approve the issuance of Program Announcement & Applications #PA 2005-04 (Attachment 1) with new funding opportunities for retrofit of diesel school buses with PM traps and insulation blankets. The conditions of the Program Announcement are provided below.

Total funds available for this program are $3,966,000. For the proposed program announcement, staff recommends to distribute at least one-half of the total funding in compliance with Health and Safety Code Section 43023.5 (AB1390, Firebaugh), to directly benefit low-income communities and communities of color that are disproportionately impacted by air pollution.

Thus, 50 percent of the funds will be allocated to grant recipients that qualify under this AB 1390 category. All applications will be evaluated for poverty level, PM exposure, and toxic exposure according to the following criteria:

A)	Poverty Level: All school districts in areas where at least 10% of the population falls below the Federal poverty level based on the Year 2000 Census, will be eligible to be ranked in this category.
B)	PM Exposure: All school districts in areas with the highest 15% of PM concentration will be eligible to be ranked in this category. Based on an annual average, the highest 15% of PM concentration is 46 micrograms per cubic meter and above.
C)	Toxic Exposure: Based on AQMD’s MATES II estimates, all projects in areas with the highest 15% of toxic exposure, will be eligible to be ranked in this category. The highest 15% represents a cancer risk of 1,139 in a million and above (MATES II study).

Any applicant qualifying based on both the poverty level and either PM or toxic exposure categories will qualify for disproportionate impact funding.

Applicants unable to qualify under AB 1390 can qualify for the remaining 50 percent of the funding.

Under this Program Announcement, public school districts will granted first priority and they will receive the full cost of the retrofits. After public school districts have been awarded, the remainder of the funds, if any, will be distributed among private school bus operators based upon the funding criteria set forth in the Program Announcement. Criteria as cited in the Program Announcement (PA) will include a cost share component for private operators where the most cost effective application will be given highest consideration. The highest cost-sharing proposal would be funded first. The PA will also give added consideration to those private operators whose eligible fleet for retrofit totals less than 50 school buses in operation in the South Coast. No cost share is required. This provision is recommended as small private operators have expressed difficulties in competing against large private operators in negotiating volume discounts for diesel particulate traps. Maximum award per school bus will not exceed $7,250 [$6,500 (trap) + $500 (low sulfur fuel) + $250 (insulation blanket)] per school bus and eligible buses would only include 1994-2002 model year school buses. Funding will be less per bus if the large private operators offer cost-sharing in their bids. Any unused funds under this PA will be applied to PA 2005-01 (Lower-Emission School Bus Funding Program).

Staff analysis of the two options concludes that Option 2 has the potential to provide additional PM traps through a cost share approach among private operators. As more public school districts prescribe the use of either alternative fueled school buses or newer diesel school buses equipped with particulate traps, private operators have realized the benefits of incentive programs to offset the cost of the particulate traps. Staff recognizes the additional time (approximately two months) it will take to bid the particulate traps and make the awards, however, staff believes that the potential benefits in achieving additional emission reductions warrants this consideration.

Public Comments and Staff Responses
At the Technology Committee Meeting on August 27, 2004, the Committee requested that the following public comment be added to the list of potential options for the Governing Board consideration and that the staff conduct a comparative analysis of the options being presented to the Governing Board. A copy of the public comment is also attached (Attachment 2).

Public Comment #1:
Allocate $1,396,000 in additional funds to award all 766 PM traps following the guidelines advertised in the original Program Announcement. This money could come from other AQMD sources or from the $9,475,000 in funds available in the Chairman’s Initiative Program. This use of the unspent funds is justified given the exhaust emission reductions the 766 traps will achieve, and there will still be $8,079,500 available for bus replacement (a reduction of approximately 10 bus replacements).

Staff’s Response to Comment #1:
This option would require the Governing Board to make a policy change to the Chairman’s Initiative Program. Development of the program, carried out by an Ad Hoc committee comprised of AQMD Board Members, established funding allocation for the school bus replacement component and the school bus retrofit component. The Board adopted the Ad Hoc committee’s recommendations on February 6, 2004. This option suggests amendments to those allocations by transferring funds from the school bus replacement program to the school bus retrofit program for purposes of fully funding the cost of 718 PM traps requested by private operators. This action would result in a reduction of funding for the school bus replacement program in the amount of $1,239,500, which corresponds to approximately 9 fewer new CNG buses.

The majority of buses owned by public school districts have already been retrofitted with PM traps, and the available funding for additional traps is most likely to be used by private operators. On the other hand, the school bus fleet owned by public school districts is relatively old and funding for new CNG buses is most likely to be used by public school districts.

Public Comment #2:
Reduce award to 567 PM traps (a loss of only 199 traps) following the guidelines advertised in the original Program Announcement. By definition, some cost sharing would still be needed, because PM traps today exceeds the $7,000 originally advertised. Nevertheless, the award is significant enough to entice transportation companies and school districts to complete the installation of the PM traps awarded.

Staff’s Response to Comment #2:
This option is identical in concept to staff’s Option 1 proposal in this letter, with the noted exception that staff is proposing an additional $250 funding per unit for insulation blankets for a total cost of $7,250 per unit.

Public Comment #3:
Proceed with the award proposed on August 6, 2004 modified so that transportation companies with operations exclusively in the SCAQMD region and fewer than 200 buses are awarded the same funding as school districts (i.e. no cost sharing).

Staff’s Response to Comment #3:
It must be noted that because neither the consideration for small operator exemption (less than 50 buses eligible for retrofits) nor a cost sharing approach was included in the original Program Announcement a new Program Announcement must be re-issued. The program announcement proposed under Option 2 includes both these elements.

Summary of Three Recommended Options
Option 1: Retrofit 547 buses with particulate traps and insulation blankets as set forth in Table 1 in an amount not to exceed $3,965,750 from the Lower Emission School Bus Program Fund.

Option 2: Issue a new Program Announcement and Application (PA 2005-04) for Retrofit of Diesel School Buses with Particulate Traps and Insulation Blankets including cost-sharing consideration for funding awards using the $3,966,000 of unspent funds for retrofit of diesel buses with PM traps from the previous Program Announcement.

Option 3: Retrofit 718 buses with particulate traps and insulation blankets as set forth in Table 1 in an amount not to exceed $5,205,500 from the Lower-Emission School Bus Program Fund, including the transfer of $1,239,750 from the school bus replacement component of the program to the school bus retrofit program.

Comparison of Emissions Benefits Among the Three Options
Comparison of the emissions benefits among the three recommended options are listed in the following tables:

Comparison of Option 1 vs. Option 2
 

Option 3 Resulting in 9 Fewer CNG Buses vs. 171 More Traps
 

Comparison of All Three Options
 

*$3,906 lbs/yr increase in NOx emissions.

Outreach

In accordance with AQMD’s Procurement Policy and Procedure, a public notice advertising the RFP/RFQ and inviting bids will be published in the following publications:
 

1.	Antelope Valley Press	11.	La Opinion	21.	Rafu Shimpo
2.	Black Voice News	12.	La Prensa Hispana	22.	San Bernardino Sun
3.	Chinese Daily News	13.	La Voz Publications	23.	State of California Contracts
4.	Desert Sun	14.	Los Angeles Daily News		Register
5.	Eastern Group Publications	15.	Los Angeles Sentinel	24.	The Daily Breeze
6.	El Chicano	16.	Los Angeles Times	25.	The Excelsior
7.	El Informador	17.	Orange County Register	26.	The Signal
8.	Inland Empire Hispanic News	18.	Philippine News	27.	Wave Community Newspapers
9.	Inland Valley Daily Bulletin	19.	Precinct Reporter
10.	Korea Central Daily	20	Press Enterprise

Additionally, potential bidders will be notified utilizing the Los Angeles County MTA Directory of Certified Firms, the Inland Area Opportunity Pages Ethnic/Women Business & Professional Directory; and AQMD’s own electronic listing of certified minority vendors. Notice of the RFP/RFQ will be mailed to the Black and Latino Legislative Caucuses and various minority chambers of commerce and business associations, and placed on the Internet at AQMD’s Web site (http://www.aqmd.gov where it can be viewed by making menu selections "Inside AQMD"/"Employment and Business Opportunities"/"Business Opportunities" or by going directly to http://www.aqmd.gov/rfp/index.html). Information is also available on AQMD’s bidder’s 24-hour telephone message line (909) 396-2724.

Benefits to AQMD

The successful implementation of the Lower-Emission School Bus Replacement program will provide less polluting and safer school transportation for school children, and will reduce public exposure to toxic diesel particulate matter emissions.

The selection methodology, using AB 1390 criteria, for the school bus replacement awards will maximize the potential emission benefits in low income, high-diesel and high-PM10 exposure areas, and will enhance the objectives of the Environmental Justice and Children’s Health Initiatives adopted by the Board.

Resource Impacts

The proposed funding for diesel school bus retrofits were allocated by the Board.

a)	Total funding for purchase of 48 PM traps, cleaning equipment, and for purchase and installation of insulation blankets for public school buses shall not exceed $348,000 as set forth in Table 1.
b)	Total funding for the purchase of up to 21 PM trap cleaning equipment systems set forth in Tables 2 & 3 shall not exceed $168,000.
c)	Total funding for the purchase and installation of insulation blankets on all 1,272 school buses already retrofitted with prior AQMD funding shall not exceed $318,000.
d)	Full award funding for 76.2% of the total number of particulate traps requested for private operators, not to exceed $3,965,750. (Option 1)
e)	Re-issuance of a new Program Announcement and Application for Retrofit of Diesel School Buses with Particulate Traps and Insulation Blankets, incorporating a cost share element, not to exceed $3,966,000 (Option 2).
Sufficient funds are available in the Lower Emission School Bus Program Fund.

Attachment

Attachment 1: Program Announcement & Application #PA 2005-04
Attachment 2: Public Comments

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