BOARD MEETING DATE: July 7, 2006
AGENDA NO. 6

Transfer Funds from Clean Fuels Fund to FY 2006-07 Budget of Science & Technology Advancement and Authorize Withhold Payment on Completed Contract with Closed Account

SYNOPSIS:

Since FY 1999-00, revenues from the state-mandated Clean Fuels Program have been directed to the Clean Fuels Fund. Periodically, funds are transferred from the Clean Fuels Fund to the General Fund to support AQMD activities directly related to the Clean Fuels Program. This action is to transfer $500,000 from the Clean Fuels Fund to the FY 2006-07 Budget of Science & Technology Advancement, Services and Supplies Major Object, Professional and Special Services Account to support Clean Fuels Program activities. In addition, an expired Clean Fuels Program contract with an unpaid balance was administratively closed in the Finance and Accounting System. The AQMD has a contractual obligation to pay the unpaid balance, which requires Board approval.

COMMITTEE:

Technology, June 23, 2006, Recommended for Approval

RECOMMENDED ACTION:

1. Authorize the transfer of $500,000 from the Clean Fuels Fund to the FY 2006-07  Budget of Science & Technology Advancement, Services and Supplies Major Object, Professional and Special Services Account to provide technical assistance, expert consultations, public outreach and technical conference sponsorship, and advanced technology vehicle leases.
2. Authorize the Executive Officer to approve payment of the unpaid balance in the amount of $128,496.60 to Detroit Diesel Corporation under completed Contract No. 01225 from the Clean Fuels Fund.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Achieving federal and state clean air standards in Southern California will require emission reductions from mobile and stationary sources beyond those available from current technologies. To meet the needs of the AQMP for cleaner fuels and engine control technologies, the AQMD adopted a Clean Fuels Program in 1988 and established the Technology Advancement Office to administer the program. Concurrently, the State Legislature authorized funds for the AQMD’s Clean Fuels Program and subsequently renewed this funding authorization in 1993. On June 8, 1999, SB 98 (Alarcón) extended the Clean Fuels Program funding mechanism for an additional five years, added administrative requirements, and specified the creation of and goals for the Clean Fuels Advisory Group. The Clean Fuels Program was reauthorized in 2003 via SB 288 (Sher) extending the program to January 1, 2010.

The objective defined for the Clean Fuels Program in the enabling legislation is as follows  (California Health & Safety Code Section 40448.5):

"(a) The south coast district shall establish an Office of Technology Advancement to administer the clean-burning fuels program established pursuant to this section. The program shall encourage projects that increase the utilization of clean-burning fuels that reduce public health hazards from air pollution."

"(d) In developing its program, the south coast district shall consider promoting projects in the transportation and stationary source sectors utilizing methanol fuel, fuel cells, liquid petroleum gas, natural gas, including compressed natural gas, combination fuels, synthetic fuels, electricity, including electric vehicles, and other clean-burning fuels."

The AQMD Clean Fuels Program is implemented as a public-private partnership in conjunction with private industry, technology developers, academic institutions, research institutions, and government agencies. This public-private partnership has enabled the AQMD to leverage its public funds with outside investment in a ratio, on average, of more than $4 of outside funding to every dollar of AQMD funding.

The AQMD’s Clean Fuels Program sponsors the development and demonstration of clean-fuel vehicles and technologies through a contract process.   At any given time, Technology Advancement has about 85 active contracts.   Over a period of 18 years, Technology Advancement has administered over 800 technology contracts.

Proposal

Beginning in FY 1999-00, revenues from the state-mandated Clean Fuels Program have been directed to the Clean Fuels Fund rather than to an account within the AQMD’s General Fund budget. This was done to clearly delineate the Clean Fuels Program revenues, which have statutory constraints imposed on their use, from the AQMD’s other revenues and its general budget. Periodically, funds are transferred from the Clean Fuels Fund to the General Fund to support AQMD activities directly related to the Clean Fuels Program.

The proposed action is to transfer $500,000 from the Clean Fuels Fund to the FY 2006-07 General Fund Budget of Science & Technology Advancement, Services and Supplies Major Object, Professional and Special Services Account upon the Board’s approval of the AQMD overall FY 2006-07 Budget. The proposed use of those funds is to facilitate support for various activities related to achieving the objectives of the Clean Fuels Program. These activities are expected to include:

Technical Assistance

Technical assistance is needed to provide source testing services and testing and analyses of emissions with and without add-on controls to include, but not limited to, particulate matter, air toxics, and other pollutants from new and existing liquid fuels, natural gas, and fuel blends used in alternative fuel motor vehicles.

Expert Consultation

Consultants provide expertise on new and emerging technologies, development of emission control technologies, and analyses of demonstration projects for alternative fuels, fuel cells, hydrogen infrastructure, microturbine technology, hybrid electric vehicles, renewable energy, and particulate control technology. Assignments for these consultants are expected to be short-term and time sensitive.

Public Outreach & Conference Sponsorship

AQMD is often asked to provide support for technical conferences and other outreach activities related to the Clean Fuels Program and the Technology Advancement Office. These conferences provide opportunities for the AQMD to inform the public, communicate its programs to broad audiences, and receive input from public and private organizations. Public outreach is important for commercialization of new technologies.

Advanced Technology Vehicle Leases

In order to showcase and demonstrate advanced, low-emission technologies, the AQMD often leases such clean vehicles to educate public and private organizations on the benefits of advanced technologies, as well as provide valuable in-use test data to the manufacturers.

Administrative Costs

Funding is also required to support the operation of the Clean Fuels Program; these costs include postage and public notice advertisements for RFPs, Program Announcements, and other project-related mailings.

Additionally, expired contracts are closed in the Finance and Accounting System as part of an ongoing effort by the Finance staff to reduce the number of contracts that need to be carried over at the end of each fiscal year. At times, the final reports and/or invoices are delayed for various reasons.  On rare occasions, these contracts expire and the unpaid contract balances are administratively closed in the Finance and Accounting System. One such contract was administratively closed leaving an unpaid balance. The work has been satisfactorily performed and the AQMD has a contractual obligation to pay the final payments including any withhold. AQMD received $800,000 from co-funding partners which required a 10% withhold on the project costs. This withhold requirement is atypical of Technology Advancement Office contracts. Although partial payment, retaining 10% of total billed costs, had been made on invoices for this contract, per Finance policy a separate invoice for the outstanding withhold must be provided in order to release payment. The Chief Financial Officer has determined that Board approval is required because there is no longer any contract against which payment can be made.

Staff recommends that payment of outstanding withhold be made from the Clean Fuels Fund for the following contract:

Resource Impacts

The proposed action is to transfer $500,000 from the Clean Fuels Fund to the FY 2006-07 Budget of Science & Technology Advancement, Services and Supplies Major Object, Professional and Special Services Account to support Clean Fuels Program activities, as well as  authorize the Executive Officer to make payment of the unpaid balance in the amount of $128,496.60 to Detroit Diesel Corporation under completed Contract NO. 01225 from the Clean Fuels Fund. Sufficient funds are available from the Clean Fuels Fund, established as a special revenue fund resulting from the state-mandated Clean Fuels Program. The Clean Fuels Program, under Health and Safety Code Sections 40448.5 and 40512 and Vehicle Code Section 9250.11, establishes mechanisms to collect revenues from mobile sources to support projects to increase the utilization of clean fuels, including the development of the necessary advanced enabling technologies. Funds collected from motor vehicles are restricted, by statute, to be used for projects and program activities related to mobile sources that support the objectives of the Clean Fuels Program.