BOARD MEETING DATE: October 5, 2007
AGENDA NO. 13

PROPOSAL:

Transfer Funds and Authorize Extension of Financial Incentives Program to Assist Dry Cleaners Converting from Perc to Non-Perc, Non-Ozone Forming Alternative Technologies

SYNOPSIS:

The existing financial incentives program to help dry cleaners convert to non-perc technologies is fully committed.  This action is to transfer $1 million from AQMD's Air Quality Assistance Fund to the Dry Cleaner Grant Fund to continue providing grants to dry cleaners for transitioning to non-perc, non-ozone forming technologies.

COMMITTEE:

Administrative, September 14, 2007, Recommended for Approval

RECOMMENDED ACTIONS:

1. Authorize a supplement to the existing financial incentive grant program assisting dry cleaners making early transitions to non-perc, non-ozone forming alternative cleaning technologies.
2. Transfer $1 million from the Air Quality Assistance Fund (AQAF) to the Dry Cleaner Grant Fund.
3. Authorize the Executive Officer to provide the following grant amounts, in accordance with existing protocol:
   1. $20,000 for CO₂ machines.
   2. $10,000 for professional wet cleaning systems.
   3. Up to $5,000 (instead of $10,000) for professional wet cleaning systems that:
      1. Have existing tensioning equipment that was installed before December 6, 2002, and require a new washer and dryer in order to complete the system; or
      2. Do not require tensioning equipment because of their specialty operation.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

On December 6, 2002, the Board approved $2 million for a financial incentive grant program to assist dry cleaners to transition to non-perc alternative dry cleaning technologies (Phase I dry cleaner grant program). On April 7, 2006, the Board approved an additional $1 million to supplement the previous grant program (Phase II dry cleaner grant program). On April 6, 2007, the Board approved $250,000 to supplement the previous grant programs for professional wet cleaning systems only (Phase III dry cleaner grant program). To date, all funding for both Phase I and II of the dry cleaner grant program has been committed and Phase III is almost fully committed.

Non-perc alternative technologies currently in operation include wet cleaning, hydrocarbon and silicon-based solvent cleaning and CO₂ cleaning. In previous phases of the grant program, funding levels were set at $20,000 for CO₂ machines, up to $10,000 for professional wet cleaning systems, $5,000 for hydrocarbon machines, and $5,000 for Green Earth™ machines. Funding for Green Earth™ machines was suspended as of April 4, 2003 due to potential toxicity concerns. Higher grant funding levels for CO₂ machines are primarily due to the much higher cost of the CO₂ machines compared to other non-perc alternative technologies.

There are 533 cleaners that have received funding or have funding committed through the original phases of the dry cleaner grant program. Initial applications for Phase I of the dry cleaner grant program consisted of approximately 15% professional wet cleaning systems and 3 CO₂ machines. However, applications for Phase II of the dry cleaner grant program only consisted of approximately 5% professional wet cleaning systems and no CO₂ machines. As directed by the Board, Phase III grants were awarded to professional wet cleaning systems only.

Based on information gathered from the original grant programs (Phase I and II), staff found that most cleaners preferred to convert to hydrocarbon machines due to operational similarity to perc machines. Therefore, in most cases, cleaners would convert to hydrocarbon machines without the financial incentive program. Staff recommends that any additional grant monies help dry cleaners switch to the most environmentally friendly alternatives. Environmental organizations support this approach. Therefore, staff is recommending that incentives be provided to only professional wet cleaning and CO₂ technologies at this time.

Proposal

The Air Quality Assistance Fund (AQAF) was created under state law in 1989 (H§S 40448.7) to provide funding and assistance to small business owners, with monies obtained from settlement and penalties collected from violations of air quality rules and regulations.  Loan guarantees were made from the AQAF to several small business operators, mostly dry cleaners.  The legislation requiring the AQAF was repealed by its own sunset clause on January 1, 1999.  Currently there is about $2.4 million remaining in the unused portion of the fund.

Staff is proposing that $1 million be transferred from the AQAF to the existing Dry Cleaner Grant Fund. The funds will be used to assist dry cleaners with the transition to non-perc, non-ozone forming alternatives. Sufficient funds are available in the AQAF for this purpose.

Similar to the existing grant program, the amount of each grant is not to exceed $20,000 for CO₂ machines and $10,000 for professional wet cleaning systems. Staff also recommends grants of $5,000 for purchasing a washer and a dryer to complete the system where a cleaner already purchased and installed the tensioning equipment before December 6, 2002.  For specialty facilities, such as stores exclusively cleaning draperies, where no tensioning equipment is required, staff recommends $5,000 be granted.  Staff will continue to evaluate specialty situations and may issue partial grants.

No additional funding is proposed for hydrocarbon machines since most dry cleaners would install these machines without the financial incentive program. Further, volatile organic compound emissions resulting from the use of the hydrocarbon machines contribute to the formation of ozone, for which there are state and national ambient air standards. Additional funding will help increase use of other, more environmentally beneficial alternatives.

Staff will work with the professional associations to inform cleaners of the program. Providing this financial incentive will benefit up to 100 dry cleaners installing complete professional wet cleaning systems. Increasing market penetration of various non-perc, non-ozone forming alternatives will improve industry's acceptance of the newer technologies and may lead to reduced costs for these technologies due to volume sales.

Resource Impacts

AQMD staff will administer the grant program with existing resources.

Proposed Action

It is recommended that the Board direct staff to supplement the existing financial incentive grant program to assist dry cleaners making early transitions to non-perc, non-ozone forming alternative cleaning technologies by transferring $1 million from the AQAF to the Dry Cleaner Grant Fund. Staff also recommends that the Board authorize the Executive Officer to provide grants to water-based and CO₂ technologies, using existing protocols described earlier.