BOARD MEETING DATE: February 2, 2007
AGENDA NO. 11

Approve Funding Allocations under AB 923 for CY 2007, Adopt Resolution Accepting Terms and Conditions for FY 2006-07 Carl Moyer Program Award, Issue Carl Moyer Program Announcement for FY 2006-07, and Modify a Carl Moyer Program Award

SYNOPSIS:

This action is to approve program allocations for Calendar Year 2007 funds under AB 923.  This action is also to adopt a resolution recognizing $34,549,672 in Carl Moyer Program grant awards from CARB under SB 1107 with its terms and conditions for FY 2006-07, and to approve the release of a Program Announcement to provide incentive funding for low-emission on- and off-road vehicles and equipment for the FY 2006-07 Carl Moyer Program.  Total amount of available funds for the program announcement will be approximately $25.5 million, comprised of approximately $6.5 million from the AB 923 Account, and approximately $19 million from the SB 1107 Account of the Carl Moyer Program Fund.  Furthermore, this action is to modify a Carl Moyer Program Award,

COMMITTEE:

Technology, January 26, 2007, Recommended for Approval

RECOMMENDED ACTIONS:

1. Approve the allocation of AB 923 Funds among the following programs for calendar year 2007:
   1. Up to $5.5 million for the Carl Moyer Program (heavy-duty vehicle/equipment) as the AQMD’s required local match.
   2. Up to $1.0 million for agricultural sources.
   3. $19 million or the remaining balance of the CY 2007 funds and any unused funds from CY 2006 for the Lower-Emission School Bus Program.
2. Approve the attached resolution to recognize up to $34,549,672 from CARB under SB 1107 for the Carl Moyer Program and place it in the Carl Moyer Fund and accept the terms and conditions of the FY 2006-07 Carl Moyer Grant award.
3. Approve issuance of Program Announcement #PA2007-08, in the amount of $25.5 million, to solicit projects for the FY 2006-07 Carl Moyer Memorial Air Quality Standards Attainment Program.
4. Modify an award originally granted to Clean Fuels LLC on October 6, 2006 for the purchase of 1 new LNG transport truck to an award to Prometheus Energy for the purchase of the same LNG truck in the unchanged amount of $51,635.00 from the Carl Moyer Program Fund SB 1107 Account due to change of ownership.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

AB 923 Funds

On September 23, 2004 the Governor signed AB 923 (Firebaugh), which allows air districts in designated non-attainment areas to adopt an additional two-dollar surcharge on motor vehicle registration fees for programs that achieve emission reductions from vehicular sources and off-road engines.  The Board at its December 3, 2004 meeting, adopted a resolution for the two-dollar vehicle registration fee increase, and at its July 8, 2005 meeting adopted its long-term program guideline for expenditure of funds.  For AB 923 funds collected from mid-CY 2005 till the end of CY 2006, the allocations and expenditures on eligible programs as approved by the Board are shown in Table 1.

Table 1: AB 923 Allocations for CYs 2005 & 2006

Revenues to be collected under AB 923 in CY 2007 and any rollover funds from CY 2006 are to be allocated to eligible programs by the Board.

Carl Moyer Program

The Carl Moyer Memorial Air Quality Standards Attainment Program (CMP) provides funds on an incentive basis for the incremental cost of purchasing cleaner than required engines and equipment.  Eligible projects include cleaner on- and off-road, marine, locomotive, and agricultural engines, as well as forklifts, airport ground support equipment, and auxiliary power units.

This is the ninth year of the CMP and the third year of the program with funding from SB 1107 and AB 923.  CARB has allocated $34,549,672 to the AQMD under SB 1107 for implementation of the FY 2006-07 CMP.  Of this amount, $1,727,484 is designated for administrative and outreach efforts, and $32,822,188 for projects funding.  In addition, $5.5 million is required from the AQMD as its local match funding.

Proposal

Allocation of AB 923 Funds

It is anticipated that approximately $22 million will be collected under AB 923 in CY 2007.  This amount, in addition to $3.5 million in rollover funds from CY2006 due to under-subscription of the Agricultural Assistance Program, will make approximately $25.5 million available for eligible programs under AB 923.

The Board may choose to fund any combination of the Carl Moyer, the Lower-Emission School Bus, agricultural sources, or light-duty vehicle remote sensing, repair and scrapping programs.  Based on the revenue explained above, staff is proposing the following allocations for CY 2007, AB 923 funds:

1. Up to $5.5 million for the CMP as AQMD’s required match (heavy-duty vehicle/equipment);
2. Up to $1 million for the agricultural engines projects; and
3. $19 million or any remaining balance of unused funds for the Lower-Emission School Bus Program:

The above allocation amounts for each program include any applicable administrative fees allowed under AB 923.

AB 923 funds allocated above for the Carl Moyer Program will serve as AQMD’s required local match for its portion of the SB 1107 funds allocated by CARB.  The proposed funding amount for agricultural sources will assist in the implementation of sources covered by SB 700.  Funding for the Lower-Emission School Bus Program will help fulfill the Board’s goal of continued replacement of older school buses with new buses.

Carl Moyer Program Announcement

Staff recommends that the Board recognize and approve the terms and conditions for receiving $34,549,672 from CARB as AQMD’s FY 2006-07 Carl Moyer Program allocation under SB 1107.  For year nine of the CMP, staff is requesting approval to release Program Announcement #PA2007-08, for approximately $25.5, million with $19,022,188 in funding from SB 1107, and $6.5 million in funding from AB 923.  The remaining balance from SB 1107 allocated by CARB will be recommended to the Board for approval separately for truck modernization projects and heavy-duty LNG truck projects at the ports.  The details of the funding allocations are outlined in Table 2:

Table 2: Details of Available Funding

If more funds become available by the time of awards approval, more projects will be awarded up to the total amount of funds available. The CMP guidelines require that the emission reductions be a minimum of 15 percent for repower or retrofit projects and 30 percent for new engines.  Staff proposes more stringent criteria for cost-effectiveness in some sectors based on experiences derived from past solicitations.  Table 3 outlines the proposed minimum funding allocations and the maximum allowed cost-effectiveness requirements for each category and subcategory:

Table 3

Proposed Funding and Cost-Effectiveness Limits

*The above indicated amounts are the minimum amounts but not necessarily the maximum amounts of funding available to be awarded to each vehicle/equipment category in case of over-subscription in its category.

**Small fleets (20 or fewer vehicles, with GVW 8,501 lbs. and above), and public sector, APUs.

***Funding for Fleet Modernization and LNG Truck Projects will be available separately in the near future.

****The amount indicated above will be set aside for the installation and operation of electronic monitoring units required by the Carl Moyer Program as a program cost.

The sum of a project’s NOx, PM10 and VOC emission reductions will be used to calculate cost-effectiveness.  This will allow projects that reduce one, two, or all of the covered pollutants to receive funding.  VOC and NOx reductions will be given equal weight; however, emission reductions of combustion PM are a priority and will carry greater weight in the calculation.  The formula for cost-effectiveness calculation is shown below:

Cost-Effectiveness ($/ton) =           Annualized Cost ($/year)                 
                                              (NOx + VOC + 20 x PM_C) tons/year

                  Where       NOx    =          NOx Emission reductions

                                    VOC    =          VOC emission Reductions

                                    PM_C     =          Combustion-related PM10 reductions

The proposed program announcement will solicit projects for on- and off-road vehicles and equipment, including refuse haulers, on-road trucks, transit buses, locomotives, agricultural engines, marine and port applications, and other vehicles and equipment.  New engines, repowers and retrofits are allowed within the program.  As in previous years, AQMD will fund diesel to diesel applications only when alternative fuel engines/vehicles are not commercially available or certified by CARB.  At least 40 percent of funding will be awarded to projects related to goods movement.  Projects to retrofit on-road heavy-duty diesel vehicles with CARB verified traps will be allowed to compete for funding, as particulate matter is now one of the criteria pollutants qualifying for funding.  The projects would need to meet the cost-effectiveness and all the other requirements of the program.

Proposals for all categories will be due by 1:00 pm on Friday, May 4, 2006.  Staff expects to finalize the review and evaluation of the proposals and recommend awards for Board approval on or before the September 2007 Governing Board meeting, contingent upon receiving the required funds from CARB.  The Carl Moyer Program Announcement is included as Attachment 2.

Program Guidelines

At its July 8, 2005 meeting, the Board approved a long-term Program Guideline for the implementation of the Carl Moyer Program in the South Coast Basin with continuous funding from SB 1107 and AB 923 until 2015.  The proposed funding distribution for different equipment categories is made in this Board letter according to the criteria outlined in that Guideline with emphasis on the following priorities in order to achieve the highest emission reductions:

• Goods Movement (40 percent allocation)

• Environmental Justice (50 percent allocation)

• Cost Effectiveness

• Low Emission Engine / Vehicle Preference

• Early Commercialization of Advanced Technologies/Fuels

• Fleet Rules

• School Buses

Funding Distribution

As required by AB 1390, the CMP guidelines include the requirement that at least 50% of the program funds must be spent in disproportionately impacted areas.  At least half the funding allocated under SB 1107 and collected under AB 923 will be awarded to projects located in disproportionately impacted areas.  It has been the policy of the AQMD to allocate at least 50% of all funding available in the CMP, including roll-over funding from previous years and turnback funds to disproportionately impacted areas. 

Disproportionately Impacted Areas Point Ranking

The requirements of the CMP will be implemented according to the following criteria.

1. All projects must qualify for the Carl Moyer program by meeting the cost effectiveness limits established in the RFP.
2. All projects will be evaluated according to the following criteria to qualify for funding as a disproportionately impacted area:
   1. Poverty Level: All projects in areas where at least 10 percent of the population falls below the Federal poverty level based on the year 2000 census data, are eligible to be included in this category, and
   2. PM Exposure: All projects in areas with the highest 15 percent of PM concentration will be eligible to be ranked in this category.  The highest 15 percent of PM concentration is 46 micrograms per cubic meter and above, on an annual average, or
   3. Air Toxics Exposure: All projects in areas with a cancer risk of 1,000 in a million and above (based on MATES II estimates) will be eligible to be ranked in this category.

The maximum score will be comprised of 40 percent for poverty level, and 30 percent each for PM and toxic exposures.  Special circumstances exist in some areas, such as the Ports of Long Beach and Los Angeles.  Since there are no residents within the ports, poverty ranking could not be established.  In this case, the poverty ranking from the adjacent on-shore areas were extended to the port since these populated areas are directly impacted by port activities. 

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 Los Angeles Times, the Orange County Register, the San Bernardino Sun, and Riverside County Press Enterprise newspapers to leverage the most cost-effective method of outreach to the entire South Coast Basin.

Additionally, potential bidders may be notified utilizing 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, the State of California Contracts Register website, 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 AQMD has supported a number of activities directed to advancement of new technologies and commercialization of low-emission alternative fuel technologies.  The successful implementation of the CMP is a direct result of these Technology Advancement activities.  The vehicles and equipment funded under this RFP will operate many years, providing long-term emissions reductions.

Resource Impacts

Total amount of available funds for the CMP under Program Announcement #PA2007-08is approximately $25.5 million, comprised of approximately $19.0 million from funds under SB 1107 and $6.5 million from funds under AB 923.

Attachments (EXE 4.5mb)

1. Resolution of the Board Recognizing and Accepting Terms and Conditions of the FY 2006-07 Carl Moyer Grant Award
2. Program Announcement #PA2007-08

RESOLUTION NO. 07-

A Resolution of the South Coast Air Quality Management District Board Recognizing and Accepting the Terms and Conditions of the

FY 2006-07 Carl Moyer Grant Award

                        WHEREAS, under Health & Safety Code §40400 et seq. the South Coast Air Quality Management District (AQMD) is the local agency with the primary responsibility for the development, implementation, monitoring and enforcement of air pollution control strategies, clean fuels programs and motor vehicle use reduction measures; and

                        WHEREAS, the AQMD is authorized by Health & Safety Code §§40402, 40440, and 40448.5 to implement programs to reduce transportation emissions, including programs to encourage the use of alternative fuels and low-emission vehicles; to develop and implement other strategies and measures to reduce air contaminants and achieve the state and federal air quality standards; and

                        WHEREAS, the Board has adopted several programs to reduce emissions from on-road and off-road vehicles, as well as emissions from other equipment, including the School Bus Incentive Program and the Carl Moyer Program; and

                        WHEREAS, the South Coast Air Quality Management District is designated as a severe-17 non-attainment area for ozone and as such is required to utilize all feasible means to meet national ambient air quality standards.

                        THEREFORE, BE IT RESOLVED that the Board of the South Coast Air Quality Management District, State of California, in regular session assembled on February 2, 2007, does hereby accept the terms and conditions of the 2006-07 (year 9) Carl Moyer Program grant award and recognizes up to $34,549,672 in SB 1107 funds.

                        BE IT FURTHER RESOLVED that the Executive Officer is authorized and directed to take all steps necessary to carry out this Resolution.

________________________                              __________________________
Date                                                                           Clerk of the Board