MEETING BEFORE THE CALIFORNIA AIR RESOURCES BOARD BOARD HEARING ROOM CALIFORNIA AIR RESOURCES BOARD 2020 L STREET SACRAMENTO, CALIFORNIA FRIDAY, JUNE 30, 1995 9:05 A.M. Nadine J. Parks Shorthand Reporter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii MEMBERS PRESENT John D. Dunlap, III, Chairman Eugene A. Boston, M.D. Joseph C. Calhoun Lynne T. Edgerton M. Patricia Hilligoss John S. Lagarias Jack C. Parnell Ron Roberts Doug Vagim Staff: Jim Boyd, Executive Officer Tom Cackette, Chief Deputy Executive Officer Mike Scheible, Deputy Executive Officer Mike Kenny, Chief Counsel Lynn Terry, Acting Chief, Office of Air Quality and Transportation Planning Anne Geraghty, Manager, Transportation Strategies Group Roberta Hughan, Staff, OAQTP Pam Burmich, Staff, OAQTP John Holmes, Ph.D, Chief, Research Division Bob Barham, Assistant Division Chief, RD Manjit Ahuja, Manager, Emissions Control Technology Research Section, RD Ralph Propper, Staff, Emissions Control Technology Research Section, RD Jim Ryden, Staff Counsel Patricia Hutchens, Board Secretary Wendy Grandchamp, Secretary Bill Valdez, Administrative Services Division iii I N D E X PAGE Proceedings 1 Call to Order and Roll Call 1 Opening Remarks by Chairman Dunlap AGENDA ITEMS: 95-7-1 Public Meeting to Consider Proposed Report to State Legislature on Motor Vehicle Registration Fee Program Introductory Remarks by Chairman Dunlap 1 Staff Report: Jim Boyd Executive Officer 3 Pam Burmich Staff OAQTP 5 Roberta Hughan Staff OAQTP 12 Questions/Comments 22 PUBLIC COMMENTS: Dick Baldwin Ventura County APCD 32 Bob Carr CAPCOA 44 Questions/Comments 50 Norm Covell Sacramento Metro AQMD 54 Questions/Comments 58 iv INDEX, continued. . . PAGE AGENDA ITEMS: 95-7-1 Ron Cagle, P.E. City of Los Angeles 60 Steve Huffman Cleaner Air Partnership 61 Judith LaMare, Ph.D. Cleaner Air Partnership 65 Steve Huffman Cleaner Air Partnership 69 Questions/Comments 70 George Erdman Northern Sonoma APCD 71 Cecile Martin California Electric Transportation Coalition 75 Coleen McDuffee City of Woodland 77 Bonnie Carrion Colusa County APCD 78 Edward Huestis City of Vacaville 80 Craig Harris Databases & Algorithms 84 Greg Vlasek California Natural Gas Vehicle Coalition 85 Rich Cole Local Government Commission 87 Questions/Comments 95 Written Comments Entered into Record by Ms. Hughan 98 v INDEX, continued. . . PAGE AGENDA ITEMS: 95-7-1 Questions/Comments 103 Motion by Vagim to Approve Resolution 95-32 120 Discussion 120 Roll Call Vote 128, 129 95-7-2 Public Meeting to Consider Proposals for the Air Resources Board's Innovative Clean Air Technologies Program Introductory Remarks by Chairman Dunlap 130 Staff Presentation: Jim Boyd Executive Officer 130 Manjit Ahuja Manager Emissions Control Technology Research Section, RD 132 Questions/Comments 139 Written Comments Entered into Record by Bob Barham 141 Questions/Comments 142 Motion by Lagarias to Approve Resolutions 95-33 through 36 147 Board Action 147 95-7-3 Public Meeting to Consider Planned Air Pollution Research - 1995 Update Introductory Remarks by Chairman Dunlap 148 vi INDEX, continued. . . PAGE AGENDA ITEMS: 95-7-3 Staff Presentation: Jim Boyd Executive Officer 148 Ralph Propper Staff Emissions Control Technology Research Section, RD 151 Tom Cackette Chief Deputy Executive Officer 159 Manjit Ahuja 160 Questions/Comments 167 Motion by Roberts to Approve Resolution 95-37 172 Discussion 173 Board Action 173 95-7-4 Research Proposals Motion by Vagim to Approve Resolutions 95-22 and 95-38 173 PUBLIC COMMENT: Joan Daisey Lawrence Berkeley Laboratory 174 Board Action 174 Adjournment 175 Certificate of Reporter 176 1 1 P R O C E E D I N G S 2 --o0o-- 3 CHAIRMAN DUNLAP: I'd like to reconvene the June 4 Board meeting of the Air Resources Board. I'd like to ask 5 the Board Secretary to please call the roll. 6 MS. HUTCHENS: Boston? 7 DR. BOSTON: Present. 8 MS. HUTCHENS: Calhoun? 9 MR. CALHOUN: Here. 10 MS. HUTCHENS: Edgerton? 11 MS. EDGERTON: Here. 12 MS. HUTCHENS: Hilligoss? 13 MAYOR HILLIGOSS: Here. 14 MS. HUTCHENS: Lagarias? 15 MR. LAGARIAS: Here. 16 MS. HUTCHENS: Parnell? 17 MR. PARNELL: Here. 18 MS. HUTCHENS: Riordan? 19 Roberts? 20 Silva? 21 Vagim? 22 Chairman Dunlap. 23 CHAIRMAN DUNLAP: Here. Thank you. 24 I'd like to remind those in the audience who wish 25 to speak on any of the items today to please present our 2 1 Board Secretary 20 copies, and sign up with her. That will 2 make sure you're included. 3 The first item on the agenda today is 95-7-1, a 4 public meeting to consider a proposed report to the State 5 Legislature on the motor vehicle registration fee program. 6 This item is the proposed report to the 7 Legislature on the use of motor vehicle registration fees by 8 the air districts and local agencies. 9 As some of you may recall, we're revisiting this 10 report as a followup to our February Board meeting. At that 11 meeting, the Board had questions about the effectiveness of 12 the program in the first three years, and how the program 13 might be improved in the future. 14 Staff was directed to look at the previously 15 funded projects in more detail and to develop criteria for 16 use of the funds in the future. 17 I know staff has done both, and that this new work 18 is reflected in the report that we are considering today. 19 The primary change to the report is the inclusion 20 of proposed criteria and guidelines for use of the funds. 21 These criteria were developed in a process that included 22 public workshops and consultation with air districts and 23 other recipient agencies. 24 I know again that staff has gone to considerable 25 effort in the allotted timeframe to expand the scope of the 3 1 report. I also firmly believe that this additional time was 2 well spent. It is essential that this program be carried 3 out in a way that maximizes the air control benefit and 4 ensures that the public's interests are best served, and 5 that we receive the greatest value possible. 6 At this point, I'd like to ask Mr. Boyd to 7 introduce the item and to begin the staff presentation and 8 overview. 9 Jim? 10 MR. BOYD: Thank you, Mr. Chairman. Good morning, 11 Board members, and good morning to our audience. 12 You gave us a tall order at the February Board 13 meeting, and you asked us some critical questions. And they 14 were tough questions as well. And while we could not look 15 at every project, the staff evaluated some typical projects 16 to determine the emissions reductions achieved. 17 And I personally won't go into the detail and 18 results of the evaluation, but staff will discuss this in 19 just a few moments. 20 What I would like to highlight is the importance 21 of the proposed criteria and guidelines for future use of 22 these funds. While we found that the funds were generally 23 well spent, it was also clear that the program could be made 24 even better. I think there's a general agreement around 25 that cost-effectiveness must be in the forefront as funding 4 1 decisions are made by recipient agencies. I think the 2 public expects and demands that in this day and age. 3 The funds should also be focused on implementing 4 strategies in districts' clean air plans, which in turn feed 5 into our State Implementation Plan, or SIP, that was so 6 critical, and approved and submitted by this Board last 7 year. 8 These two points, we think, are fundamental to the 9 criteria, therefore, that are proposed for your 10 consideration today. 11 Although today's product certainly took more time 12 and more resources to complete, we think the effort was 13 worthwhile. I believe the proposed criteria will strengthen 14 the program, result in greater air quality benefits, and 15 result in improving the partnership between us and the local 16 districts. 17 I also want to emphasize the need for ongoing 18 evaluation of the program. It's an ongoing pet peeve of 19 mine, or a project of mine. We recommend that the districts 20 report to us -- a report really to the Board -- annually on 21 the use of the funds and the emissions reductions or to be 22 achieved. 23 This will enable the staff to report back to the 24 Board on future program results. 25 With your approval and with the implementation of 5 1 the proposed criteria, I believe it will be particularly 2 important to revisit the program as we move down the road in 3 future years. 4 Staff of our Office of Air Quality and 5 Transportation Planning will be giving you a joint 6 presentation today. Ms. Pam Burmich will present the cost- 7 effectiveness and the projects that were reviewed in that 8 effort. And Ms. Roberta Hughan will present the proposed 9 criteria and guidance, and give you the staff's complete 10 recommendation on that point. 11 And with that, I'd ask Ms. Burmich to please begin 12 the staff presentation. 13 MS. BURMICH: Thank you, Mr. Boyd. Good morning. 14 Since there may be some in the audience who were 15 not with us last February, I will begin the presentation 16 with a brief background on the proposed report, including 17 the Board's direction to staff. 18 I will follow with a more detailed discussion of 19 staff's cost-effectiveness evaluation of sample projects. 20 Finally, Roberta Hughan will present staff's proposed 21 criteria and guidance along with our recommendations. 22 As background, I will briefly run through the 23 structure of the motor vehicle registration fee program. 24 State law authorizes air districts to levy these fees for 25 the purpose of reducing motor vehicle emissions and for 6 1 related California Clean Air Act planning and technical 2 work. 3 We will discuss the uses of the fees in more 4 detail later. 25 districts have fee programs. These fees 5 are allocated at the regional level to air pollution 6 projects and programs. 7 State law requires the Board to assess the program 8 and report to the Legislature. State law delineates the 9 distribution of these funds, and the recipients vary 10 depending on the region. 11 Air districts are sole recipients in areas other 12 than South Coast and Bay Area. In the South Coast, 30 13 percent of the funds go to the district for California clean 14 air implementation. 40 percent go to individual cities and 15 counties based on population. 16 The remaining 30 percent is allocated to projects 17 selected by the South Coast Mobile Source Air Pollution 18 Reduction Review Committee, called the MSRC, and approved by 19 the South Coast District governing board. 20 In the Bay Area, 60 percent of the funds are 21 allocated to the district to implement specific types of 22 emission reduction programs identified in State law. The 23 remaining 40 percent is allocated to county congestion 24 management agencies. 25 At the February Board hearing, we presented a 7 1 proposed report to the Legislature. We reported that the 2 vast majority of funds were spent in compliance with the 3 requirements and intent of State law. That assessment, 4 however, did not include cost-effectiveness analyses. 5 Based on the Board's direction, we've done 6 additional work to evaluate sample projects that have been 7 funded and to determine cost-effectiveness. As the Board 8 directed, we have also developed funding criteria and 9 guidance for air districts and other recipient agencies. 10 Roughly 1,000 diverse projects were funded with 11 motor vehicle fees over the first three years of the 12 program. In order to select a sampling of these projects, 13 we identified broad categories. We then selected sample 14 projects in each category. 15 We chose a range of projects that included both 16 well-designed and poorly designed projects. For each of 17 these projects we gathered detailed information on cost and 18 emission reductions, so that cost-effectiveness could be 19 calculated. The main factor that limited our choice of 20 projects was the availability of sufficient information to 21 calculate cost-effectiveness. 22 As we will discuss later, staff identified what we 23 consider an acceptable range of cost-effectiveness. In the 24 initial screening, we found that nearly all the projects fit 25 into one of eleven categories. The categories of electric 8 1 vehicles and alternative fuel vehicles include both the 2 purchase of new vehicles and conversion. 3 We also evaluated scrappage programs, traffic 4 signal timing, and shuttle services. 5 Other categories were telecommunications, employer 6 trip reductions, bicycles, and land use, smoking vehicle 7 abatement, and public education. 8 We calculated cost-effectiveness for the projects 9 in the first eight categories. I'll be discussing these in 10 more detail in a minute. 11 For the land-use category, there was insufficient 12 data for cost-effectiveness evaluation. Recent ARB funded 13 research indicates that there is potential for significant 14 air quality benefits from land-use development and design. 15 Future projects should include the monitoring needed to 16 better evaluate these projects. 17 For projects that fell in the categories of 18 smoking vehicle abatement and public education, it was not 19 possible to quantify emission reductions based on the 20 available information. 21 In the case of public education projects, we were 22 recently made aware of survey results for the Sacramento 23 Region that should help future assessment of this type of 24 project. 25 This slide shows the information we gathered in 9 1 order to determine cost-effectiveness of the projects. In 2 the process, ARB staff consulted air districts and other 3 recipient agencies and project proponents. 4 The two basic elements of the cost-effectiveness 5 analysis are emission reductions and costs. For some 6 projects it was necessary to convert reductions in trips and 7 vehicle miles traveled into emission reductions. 8 Calculations of cost include both capital and 9 operating costs. Finally, project life had to be determined 10 in order to quantify the total emission reductions from the 11 project. 12 We used standard ARB emission factors, but also 13 developed some customized emission factors where needed to 14 fit the conditions of the project. 15 We developed factors for up to 20 years into the 16 future so that benefits for each project could be calculated 17 separately and then totaled over the lifetime of the 18 project. 19 If a project reduced peak period trips in a 20 heavily congested area, we added a congestion factor to 21 reflect additional emission reductions. We also gathered 22 detailed cost information, such as cost of vehicle, fuels, 23 battery replacement, salaries, maintenance, adjustments to 24 traffic signal timing systems, and phone costs associated 25 with telecommunication projects. 10 1 Once the information was gathered, we calculated a 2 cost-effectiveness ratio for each project in our sample. 3 The cost-effectiveness ratio is the total capital and 4 operating costs incurred over the life of the project 5 divided by the total emission reductions. 6 Costs were expressed in terms of current dollars, 7 known as net present value. Emission reductions were 8 calculated for reactive organic gases, nitrogen oxide, fine 9 particulates, and carbon monoxide. 10 Cost-effectiveness ratios cited in the proposed 11 report are the combined emission reductions from ozone 12 precursors and fine particulates. 13 In the South Coast, where carbon monoxide is still 14 a problem, those additional benefits should also be 15 considered. 16 To calculate costs and emission reductions, we 17 used existing methodologies that are outlined in previous 18 ARB guidance documents. However, nearly every project had 19 unique characteristics that called for customized 20 evaluations. At times, we had to make assumptions to 21 complete our evaluations. 22 We based these assumptions on the best information 23 available. However, more complete evaluations should be 24 possible in the future with increased monitoring of project 25 costs and results. 11 1 Cost-effectiveness projects were found in every 2 category. Here are some examples of the projects that had 3 cost-effectiveness ratios of $10,000 or less per ton of 4 pollutants reduced. This equates to $5.00 per pound. 5 This is well within the range of general accepted 6 cost-effectiveness for air pollution control programs. 7 You'll hear more about cost-effectiveness when we move on 8 into the proposed criteria. 9 These projects include the Santa Barbara electric 10 bus project and the compressed natural gas commuter express, 11 the South Coast UPS delivery truck conversions to compressed 12 natural gas, the South Coast and San Joaquin Valley 13 scrappage projects, the Fremont signal timing project, San 14 Bernardino County telecommunications project and trip 15 reduction program, South Placer commuter ridesharing, and 16 the Monterey Aquarium bicycle loan program. 17 We also found projects that were not cost- 18 effective. Looking at the 20 projects evaluated, we 19 identified several factors that influence cost-effectiveness 20 -- few or short trips reduced, inefficient or relatively 21 high polluting vehicles, low ridership and high costs. For 22 example, we reviewed two shuttle projects. One was cost- 23 effective and one was not. 24 The cost-effective project operated at full 25 capacity over a 160 mile route in a low-emitting CNG bus. 12 1 The second project operated below capacity over a four-mile 2 route in an older, more polluting bus. 3 As a result, the project was not cost-effective. 4 Costs also play an important role. For example, we found a 5 large difference in cost-effectiveness for two projects 6 involving the purchase of new compressed natural gas buses. 7 The main reason for the difference was higher purchase costs 8 for one of the projects. 9 The results of our project evaluations are 10 highlighted here. First, we found cost-effectiveness varied 11 substantially from one project to another even within the 12 same category. 13 We found project design to be critical to the 14 cost-effectiveness. Many well-designed projects fell within 15 the acceptable range for cost-effectiveness, and poorly 16 designed projects did not. 17 Of the sample we evaluated, two-thirds of the 18 projects had favorable cost-effectiveness ratios. The 19 results convinced us that cost-effectiveness can be improved 20 in many cases. 21 This leads us to the next part of the 22 presentation, the proposed criteria and guidance. I'll now 23 turn the presentation over to Roberta Hughan. 24 MS. HUGHAN: The second direction to staff was to 25 develop criteria and guidance for the future use of the 13 1 funds. This is to ensure that the funds are used 2 effectively to reduce motor vehicle emissions. 3 In response to this direction, staff has developed 4 proposed criteria and guidance. These are included as 5 Appendix D of the proposed report. 6 Statutory requirements set the context for use of 7 the funds. The proposed criteria are consistent with the 8 intent of the law that requires that the revenues be used 9 solely to reduce emissions from motor vehicles and to carry 10 out related California Clean Air Act requirements, including 11 planning, monitoring, enforcement, and technical activities. 12 In developing the proposed criteria and 13 guidelines, the ARB staff held public workshops in Northern 14 and Southern California to solicit input related to the 15 Board's direction and also to learn from the experiences of 16 the various recipients of the funds. 17 Staff consulted with the affected agencies, 18 including districts, cities and counties, and grant 19 recipients. 20 Local differences in revenues and Clean Air Act 21 responsibilities were considered. Staff identified a 22 maximum cost-effectiveness ratio based on a generally 23 accepted cost per ton of pollutants reduced and also looked 24 for an oversight mechanism to ensure the future 25 effectiveness of the program. 14 1 As a result of this work, staff is proposing the 2 following four criteria: Use the funds should implement 3 clean air plans, emphasize cost-effectiveness, leverage 4 other funds, and advance new technology. 5 I will describe each of these criteria in greater 6 detail. 7 The first criterion is implementation if district 8 clean air plans. The use of the revenues by the districts 9 and others to implement clean air plans can be separated 10 into two categories: first, emission reduction programs 11 and, second, planning and technical activities to implement 12 the California Clean Air Act. Public education falls into 13 the second category. 14 Staff recommends that emission reduction programs 15 meet the following criteria: Implement plan measures. The 16 district clean air plans establish the strategies, 17 timeframe, and quantities of emission reductions needed to 18 attain and maintain air quality standards. That framework 19 should be the basis for expenditure of these funds. 20 Funding of these measures should be given 21 priority. 50 percent or more of the total revenues in a 22 region should be used for those projects identified in the 23 plans that directly reduce mobile source emissions. This 24 recommendation would apply to large and medium districts. 25 Smaller districts that receive less than $150,000 15 1 annually are limited in what they can do, and staff is not 2 recommending that this criteria apply to them. 3 South Coast cities and counties that have minimum 4 technical and planning requirements should spend 90 percent 5 or more on project implementation. In the Bay Area, State 6 law requires that all of these funds be spent on emission 7 reduction programs and projects. 8 Both short and long-term strategies in district 9 plans should be funded. For instance, in regions such as 10 the South Coast, long-term strategies are a crucial element 11 of attainment plans, given the persistent air quality 12 problem. 13 Long-term strategies should also be considered in 14 the context of anticipated growth in population and vehicle 15 travel. 16 Finally, it is important that projects be funded 17 in a timely manner. Where revenues are being accumulated to 18 fund future projects, those projects and implementation 19 dates should be identified and the funds programmed through 20 the budget process. 21 The second category includes planning and 22 technical activities. While the primary purpose of the 23 funds is to reduce emissions from the use of motor vehicles, 24 State law also recognizes the need to develop clean air 25 plans that identify the strategies for meeting air quality 16 1 standards for the related technical studies to implement the 2 California Clean Air Act and for public education efforts 3 aimed at reducing motor vehicle emissions. 4 Given the statutory requirements and in 5 consideration of the relative responsibilities of recipient 6 agencies, staff recommends the following criteria for air 7 quality planning and technical activities. 8 Identify use of the funds in district budgets. 9 This will assure that funding is allocated as part of a 10 public process and that the funds are clearly tied to 11 California Clean Air Act implementation. Less than 50 12 percent of the revenues should be budgeted and used for 13 these purposes. 14 Fund in proportion to motor vehicle emissions. 15 Planning and technical activities should not be funded 16 entirely by motor vehicle fees. At most, the funding should 17 be proportional to the relative contribution of mobile 18 source emissions. 19 Keep plans updated. Districts should ensure that 20 clean air plans are complete and updated as required. 21 Planning and technical activities necessary to meet 22 statutory deadlines should be considered as priorities are 23 set. 24 Involve planning partners. Local government 25 agencies should participate in the air quality planning 17 1 process, since they are involved in implementing measures in 2 the district's plans, particularly in the South Coast. 3 However, because cities and counties have limited 4 responsibility for the development of air quality plans, no 5 more than 10 percent of their revenues should be used for 6 these purposes. 7 The second criterion is cost-effectiveness. And 8 the following two criteria apply to funding of projects that 9 directly reduce emissions. Projects should be prioritized 10 and funded on the basis of cost-effectiveness. A range of 11 acceptable cost-effectiveness should be applied for 12 screening purposes and cost-effectiveness should be a 13 primary consideration in final funding decisions. 14 We recommend that recipient agencies apply the 15 cost-effectiveness criterion as follows: 16 Apply a $20,000 per ton cost-effectiveness cap. 17 As air pollution programs have been implemented, a generally 18 accepted range of cost-effectiveness has emerged. $20,000 19 per ton, which is $10 per pound, is at the upper end of this 20 range. 21 Projects should be screened using this upper 22 limit. Those not meeting this criterion should not be 23 considered further unless redesigned to result in acceptable 24 cost-effectiveness or identified as a high, new technology 25 project. 18 1 Exceptions could be made for research and 2 demonstration projects involving new technologies as they 3 may not be cost-effective in this area in the short term. 4 Prioritize projects based on cost-effectiveness. 5 Selection of projects with the highest cost-effectiveness 6 would result in the greatest air quality benefit from the 7 funds. 8 Ensure that grant programs reflect cost- 9 effectiveness criteria as projects are scored and selected. 10 Cost-effectiveness is being considered to some degree in 11 almost all major grant programs, but increased emphasis 12 would improve overall program effectiveness. 13 Other factors, such as technical feasibility, 14 total emission reduction potential, and rate of emission 15 reduction should also be considered as long as cost- 16 effectiveness is heavily weighted in the decision-making 17 process. 18 The third criterion is leveraging funds. Leverage 19 public and private funds. This criterion is designed to 20 recognize that vehicle registration fee revenues will go 21 further if co-funding is available. As well, if used as 22 matching funds, they can attract federal air quality funds 23 to an area. 24 Give priority to emission reduction projects that 25 have co-funding from other private or public sources. There 19 1 are two caveats here. The use of these funds must result in 2 a greater benefit in air quality, and these funds should not 3 just replace other possible funding. 4 Ensure credits are not sold. Projects that are 5 co-funded must be designed to ensure that emission reduction 6 credits are not generated for sale through use of motor 7 vehicle registration fees. In some cases, co-funders can 8 generate emission credits in proportion to their 9 contribution. However, this does reduce the cost- 10 effectiveness of the project and no true leveraging occurs. 11 Advancement of new technology is the fourth 12 criterion. Support of demonstration projects and 13 acceleration of new technologies should be considered as 14 projects or prioritized for funding. These projects may not 15 be cost-effective in the short term. 16 Balance short- and long-term needs. Funding 17 programs should balance the district's need to achieve 18 short-term emission reductions with the need for new 19 strategies in the future. This recognizes the need to find 20 new effective ways to reduce pollution as population and 21 vehicle continue to grow. 22 Evaluate and share results. It is important that 23 completed projects be evaluated so the benefits and 24 potential for expanding use of new technologies can be 25 assessed. The results should also be shared to avoid 20 1 duplication of research efforts or ineffective projects. 2 Staff is proposing an oversight mechanism to 3 ensure that the program provides the maximum air quality 4 benefits possible. Staff will work with the recipient 5 agencies to adopt their criteria if approved by the Board. 6 Agencies could adopt more detailed criteria if 7 consistent with the Board's criteria. 8 This will include both districts and local 9 jurisdictions. 10 Staff will also help identify measures in clean 11 air plans that could be funded in the future. Recipient 12 agencies should continue to report annually. This will 13 enable staff to ascertain if criteria have been adopted and 14 implemented. 15 The recommended biennial Board report will include 16 an assessment of compliance with the adopted criteria by 17 recipient agencies. Based on staff conclusions, 18 recommendations for legislative change could be made. 19 Staff has identified several actions for the 20 future. One is the continued participation on the 21 California Air Pollution Control Officers Association 22 Committee on Motor Vehicle Registration Fees. 23 Their bimonthly meetings provide a good 24 opportunity to exchange ideas and gather and disseminate 25 information. This group will also be used to help update 21 1 the criteria and guidance when necessary. 2 Staff will work with recipient agencies directly 3 to aid in adopting and implementing the proposed criteria 4 and guidelines. Staff is proposing to develop project- 5 specific guidance. This will be done in consultation with 6 affected parties, partly based on what was learned in 7 evaluating the sample projects. 8 In other words, what makes one project more 9 successful and thus more cost-effective than another? The 10 guidance would include a standardized cost-effectiveness 11 methodology, emission reduction calculation methodology, 12 recommended project components, and procedures for 13 evaluating projects. 14 And, of course, staff will monitoring results of 15 the program, both during the biennial review, and as an 16 ongoing process to participation in the grant programs and 17 in one-on-one discussions. 18 As the TCM Clearinghouse is expanded to include 19 projects and programs funded with motor vehicle registration 20 fee revenues, it will allow districts and others to access 21 information about successful programs and avoid duplication. 22 Staff has two final recommendations. First, that 23 the Board approve the report for submission to the State 24 Legislature, including the funding criteria with minor staff 25 modifications, and with any modifications provided by the 22 1 Board. 2 Staff does have some changes related to the 3 project cost-effectiveness data. These are in the summary 4 of selected projects, Table 17, page 26 of the report. 5 The fourth project, Santa Barbara Transit electric 6 bus vehicle purchase, has a cost-effectiveness ratio of 7 $3.00 per pound instead of the $1.00 per pound shown in the 8 selected project summary. The fourteenth project, the San 9 Bernardino County trip reduction program, has a cost- 10 effectiveness ratio of $4.00 per pound instead of the $60 11 per pound that is shown. 12 The second recommendation is to direct staff to 13 work with the recipient agencies to implement the funding 14 criteria. At your direction, staff will work with recipient 15 agencies to implement their criteria and guidance and keep 16 it current. 17 Thank you. We will be glad to answer any 18 questions you may have. 19 CHAIRMAN DUNLAP: Thank you, Ms. Hughan. At this 20 point, any of the Board members have any questions or 21 comments? 22 Ms. Edgerton. 23 MS. EDGERTON: I'd like to compliment the staff, 24 and I'd like to thank the Chairman for asking you all to 25 work on this excellent project. 23 1 Obviously, all of us know that the financial 2 difficulties of all of the cities and counties in the State 3 are enormous. And for us to keep making the progress that 4 we need to make in air quality, it's essential that all the 5 dollars be very carefully spent. 6 So, I am very impressed with how thorough this is 7 and how thoughtful. And I thank you for it. 8 CHAIRMAN DUNLAP: Thank you. Supervisor Roberts. 9 SUPERVISOR ROBERTS: Yeah, just a quick question. 10 On one of the slides, you had a line that said that two- 11 thirds of the programs were judged to be cost-effective. 12 Does that mean that one-third aren't cost-effective? 13 MS. TERRY: Yes. That's what it means. 14 SUPERVISOR ROBERTS: Was that the $10 per ton or 15 the $20 per ton (sic)? 16 MS. TERRY: That was at the $20. 17 SUPERVISOR ROBERTS: The $20 per ton, there was -- 18 MS. TERRY: Excuse me. $20 per pound. 19 SUPERVISOR ROBERTS: Excuse me, per pound. 20 MS. TERRY: The $20,000 per ton. $10 per pound. 21 SUPERVISOR ROBERTS: So, one-third of the projects 22 actually exceeded that level? 23 MS. TERRY: That's right. And these were 24 projects, just to note, that in the initial stages, in many 25 cases, a cost-effectiveness evaluation was not done ahead of 24 1 time when the funding decisions were made. And so, we're 2 not terribly surprised with those findings. And I think, 3 with the increased scrutiny, that we won't see that kind of 4 project funded in the future. 5 And again, as noted, many of the project 6 categories had cost-effective projects within the category. 7 And if there had been a little more thought put into the 8 design of the project, it's quite possible that one-third of 9 the projects could have been implemented in a cost-effective 10 manner. 11 SUPERVISOR ROBERTS: So, some of those were 12 similar to other projects that were cost-effective? 13 MS. TERRY: Right. And it really was a matter of, 14 I think, the program getting up and rolling and some 15 inexperience, and sort of getting the program on its feet. 16 And we've learned a lot in the first three years of the 17 program. 18 And I think that was one of the major findings of 19 our analysis, is that we need to get that information out 20 there and share it. And through the CAPCOA Committee and 21 through the South Coast workshop process that's been going 22 on in the last few months, they've been carrying out a 23 tremendous outreach program that our staff -- Roberta's been 24 participating in as well. 25 SUPERVISOR ROBERTS: Just one final follow-up 25 1 question. 2 Is there some way to characterize the kinds of 3 projects maybe that fell under that category? Is there any 4 significant part of them that were -- that you could 5 describe what kinds of things? 6 MS. TERRY: Oh, which of the projects were not 7 cost-effective? 8 SUPERVISOR ROBERTS: Not effective, yeah. 9 MS. TERRY: There was an example -- a trip 10 reduction program, I believe. Maybe, Pam, would you like to 11 comment on the specific projects? 12 MS. BURMICH: Well, the example that I mentioned 13 in the presentation is really one of the most obvious ones. 14 And that was a shuttle service. We had two that were very 15 similar in nature. But one was designed using a clean bus, 16 long distances, and it always traveled at capacity. The 17 other example was exactly the opposite. It was a very short 18 route. 19 So, those were the kinds of distinctions that we 20 saw in some of the programs that made one to be really cost- 21 effective and other not, which means that many of the trip 22 reduction programs could have been possibly improved by 23 using cleaner vehicles along with the trip reduction 24 strategy or, you know, things like that. 25 MS. GERAGHTY: On a similar example, in 26 1 telecommunication, there the differences were the cost of 2 the equipment and the utilization of equipment. In one 3 instance, they used relatively lower cost equipment, plus 4 they gave direction that this equipment had to be used. So, 5 the policies that were used by the agency said, "You will 6 use this." And so, it did cut down on trips. 7 The other was more, "We're getting the new 8 equipment, and you can use it," and that kind of thing. So, 9 it's utilization of what they've selected. 10 SUPERVISOR ROBERTS: Thank you. 11 CHAIRMAN DUNLAP: Mr. Parnell. 12 MR. PARNELL: With respect to the same question, 13 it's always fascinating to me when you look at cost- 14 effectiveness, there's usually a divergence of view as to 15 whose numbers are right. Is there a concurrence basically 16 as you talk to each of these projects that you deem to be 17 not cost-effective; is there a concurrence that generally 18 that is the case, or is this a function of analysis, and you 19 can come to any conclusion? 20 MR. BURMICH: Well, an example -- we did send our 21 analyses to each of the air districts where we did a 22 project. And we also sent it to the project proponents, 23 where we received their information. 24 In general, we got back one comment, and they were 25 right. We had made a mistake in the analysis, and that was 27 1 the one that we mentioned today that we changed. 2 But, basically, some of the ones that we found 3 were not cost-effective in the extreme were supported by the 4 air district's point of view and the project proponent once 5 they saw the numbers. In fact, one of the air districts 6 thanked us for doing that project, because they had been 7 trying to tell their constituency that this was not an air 8 pollution project, and they didn't believe it. 9 So, they felt supported by the results that we 10 came up with. 11 MR. PARNELL: So, the overall flavor of that 12 activity is one of concurrence; is that a fair 13 characterization? 14 MS. BURMICH: So far. And I would say that, in 15 fairness, this work probably needs some more review from the 16 public. We don't feel that we got quite as much review as 17 we would like to get. But I think that we could definitely 18 say that this is within a good scale of the kind of results 19 you can expect. 20 MR. PARNELL: Thank you. 21 CHAIRMAN DUNLAP: Okay. Very good. Anything 22 else? Dr. Boston, then Ms. Edgerton. 23 DR. BOSTON: Mr. Chairman, I'd like to ask legal 24 for some information. As I look at the summary of the Sher 25 bill, they state that we are supposed to assess how these 28 1 fees are used and to report back to the Legislature. I'm 2 wondering just how far our oversight authority goes. 3 Are we allowed to advise the various districts on 4 how these funds are to be used, or are we just to report to 5 the Legislature and let them make the decision? 6 MR. KENNY: I don't have a real good answer to 7 that. I think, basically, generally in response to your 8 question, the legislation is not specific. But the general 9 oversight authority that the Board has is fairly 10 comprehensive. 11 So, the Board can basically provide fairly direct 12 oversight with regard to how these funds are going to be 13 expended. That would generally involve, I think, as far as 14 the Board would like to go with regard to this. 15 On the other hand, because the legislation is not 16 clear, I can't say that with, you know, with certainty. 17 DR. BOSTON: So, if they chose not to follow our 18 advice, we would have to go to the Legislature. 19 MR. KENNY: I think that would be the clearest way 20 of doing this, yes. 21 MR. BOYD: Dr. Boston, building on Mr. Kenny's 22 comments and getting a little bit out of the realm of pure 23 legal interpretation, and looking at policy, I would think 24 in this day and age, the severe fiscal situation, the state 25 of the economy, and looking at other precedents in terms of 29 1 the demands the electorate and the legislative bodies put on 2 government programs and what have you, that the Board -- 3 your board -- has a lot of latitude in terms of its policy, 4 responsibility, and purview to reflect on those guidances 5 and decide what is, you know, in the best interest of the 6 air program and the best expenditure of funds and what have 7 you. And I think operating within that realm, the idea -- 8 and being an old budget analyst myself -- the idea of 9 putting constraints, or guidance, or criteria parameters on 10 the use of, quote, "public funds" is fairly standard 11 practice. 12 And so, I don't think the Board in the least bit 13 is going beyond the bounds of what in the past some people 14 would say would presume to be expected, or what I think in 15 the present people tend to demand is expected. 16 MS. EDGERTON: I found this summary of selected 17 projects fascinating. And I think some of us are -- of 18 course, we're concerned about those projects that, on 19 analysis, are not cost-effective. 20 But equally important, it seems to me, are the 21 results in terms of identifying the projects that are 22 particularly effective. 23 And it looked to me like one of the big winners, 24 or perhaps the biggest winner here was this electric vehicle 25 purchase for Santa Barbara Transit buses at $3.00 a pound 30 1 with an 18-year analysis. 2 Is my analysis of this -- this chart. I know 3 these aren't all the projects funded. I know you had to 4 sort of just take selected projects. But of this list in 5 Table 17, would you say that this Santa Barbara Transit bus 6 project was probably the most cost-effective or the best 7 project? 8 How would you define "best"? 9 MS. TERRY: Well, I would say it was a highly 10 cost-effective project. I would be careful to say it's the 11 best, because to be quite honest, when you're within this 12 range of under $5.00 per pound, for example, you know, the 13 preciseness of our analysis may not be that great. But, 14 clearly, it was a cost-effective project. 15 One of the aspects of that one is that there was a 16 research demonstration that went into it initially. And 17 now, at this point, further -- similar projects could be 18 done that would be very cost-effective as well. So, it's 19 out there. It's a good kind of project. From that 20 standpoint, it's, I think, an excellent example, along with 21 a few others. 22 But it's clearly up there and ranking very high. 23 MS. EDGERTON: Well, I appreciate that. And I 24 think that's -- I think one of the things the Legislature, 25 at least in my reading, if I were a legislator, what I would 31 1 want from the Air Board was feedback on what are the 2 projects that are working and making sure that those are 3 identified for people throughout the State. 4 It seems a real service that we can do. So, one 5 of things that I was hoping is that we'd have some kind of 6 special recognition program along the way for those projects 7 which are especially sound, so that other people -- other 8 counties who don't have the resources to do all the analysis 9 and may not want to read all of the pages, and may not want 10 to do an analysis of every table, could have a sense of what 11 is really working so they say, "Well, we only have this 12 amount of dollars. We see that this electric transit bus is 13 working in Santa Barbara. Let's do that." 14 So, I guess I was proposing that you might 15 consider looking at that. 16 CHAIRMAN DUNLAP: Sure. Okay. Why don't we hold 17 that, Mr. Boyd. We'll ask you to hang onto that, and when 18 we conclude, we'll see if we can work that into the mix. It 19 sounds like a reasonable request. 20 What I would like to do at this time, with the 21 indulgence of my colleagues on the Board, is to get to the 22 witnesses. I would everybody who has signed up to comment 23 to please come to the first couple rows so we can move 24 quickly. We have some 13 folks who wish to testify. 25 And we'll run through them fairly quickly. I 32 1 would ask your consideration in that and try not to be 2 redundant, and don't repeat what your colleagues have said, 3 please. 4 We'll start off with Mr. Carr from CAPCOA, 5 followed by Norm Covell from Sacramento Metro AQMD, and Ron 6 Cagle. That will be the order in which we'll start. 7 Good morning. 8 MR. CARR: Good morning. My name is Bob Carr. 9 I'm the Air Pollution Control Officer from San Luis Obispo 10 County and the current president of CAPCOA. And we had this 11 arranged for Mr. Baldwin to precede me in the testimony, 12 because he has all the history of this. But I will go 13 ahead, and then you can -- 14 CHAIRMAN DUNLAP: If you'd like, we can take him. 15 MR. CARR: I will pick up on the history 16 afterwards. 17 CHAIRMAN DUNLAP: That's okay. 18 MR. CARR: Want to do it first, Dick? It'll work 19 this way. 20 CHAIRMAN DUNLAP: Okay. I'm fine. I just 21 thought, being the CAPCOA President, you might want to go 22 first. That's all. 23 MR. CARR: Okay. I thought it might be good for 24 you to hear the history that he has in his testimony. 25 CHAIRMAN DUNLAP: Okay. Mr. Baldwin, please come 33 1 forward. 2 MR. BALDWIN: Thank you, Chairman Dunlap, Board 3 members. 4 My name is Dick Baldwin. I'm the Ventura County 5 Air Pollution Control Officer, and I appreciate the 6 opportunity to testify today about your draft report on 7 district use of DMV fees. 8 I'm here today because I'm concerned. I'm 9 concerned about the staff's recommendation for a one-size- 10 fits-all solution to expenditure of the DMV fees. 11 To illustrate just how concerned I am, this is 12 only the second time in my 13 years as Ventura County's Air 13 Pollution Control Officer that I've testified before your 14 Board. 15 The first time I testified about the reformulated 16 gasoline regulations. We were concerned that NOx emissions 17 might increase under certain proposals being made by 18 industry. And I'm pleased with the outcome of the RFG rule. 19 In fact, I'm so pleased that I've assigned two of my staff 20 to help your staff in your RFG public outreach program. I 21 hope I will also pleased with your Board's decision on the 22 expenditure formula for DMV fees today. 23 I believe there is some confusion on why the AB 24 2766 DMV fee was created. Recent discussions that ARB focus 25 on special projects such as scrap car programs as the reason 34 1 for the fee -- but that is not why the fee was created. It 2 was created to help districts implement the California Clean 3 Air Act. Let's begin with a brief history. 4 This is appropriate, since only two of you -- two 5 of the members of the Board were on the Board when the 6 California Clean Air Act and AB 2766 were passed. 7 But I was there. I was there as a concerned air 8 pollution control officer of a severe nonattainment 9 district. I was there as Chairman of the CAPCOA Legislative 10 Committee when the debate began on the California Clean Air 11 Act. And I was there as president of CAPCOA when the Act 12 was signed and our association began the enormous task of 13 implementing this new law, a law which Governor Deukmejian 14 called the most comprehensive environmental law ever passed 15 by the Legislature. 16 Throughout the debate on the California Clean Air 17 Act, and long afterwards, the air districts repeated one 18 message -- to implement this new law, we need more 19 resources. We repeated that message to Assemblyman Sher and 20 his staff. 21 CAPCOA met often with them to discuss how 22 districts would get the funds necessary to implement the 23 Act. One idea, increase permit fees. But many districts 24 already had high fees and didn't want to further burden 25 industry with what we expected to be a very large increase 35 1 in expenses. 2 Then we talked about tax fixes and more funds from 3 the State. We even joked about bake sales. But one idea 4 screamed out to us all as the best and most equitable 5 solution; motor vehicle registration fees. 6 This source was the best answer because at least 7 half of our air quality problem is caused by motor vehicles; 8 yet, they were contributing almost nothing to the solution, 9 particularly in Ventura County. And I'm speaking of a 10 financial contribution. 11 Early on, an attempt was made to include a 12 registration fee in the California Clean Air Act. 13 Unfortunately, there was no consensus on how the funds 14 should be divided in some areas, so the proposal was removed 15 from the table. Assemblyman Sher assured us he would 16 address the resource need after the Act became law. And he 17 did. 18 But the solution was not quick. The California 19 Clean Air Act passed in 1988. In 1989, an effort was made 20 to pass DMV fee legislation. The cities in the South Coast 21 Air Basin had their own ideas on how the funds should be 22 spent in their area. 23 That debate brought the legislative effort to a 24 halt in 1989. Unfortunately, the mandates clock was still 25 ticking in the California Clean Air Act. 36 1 In response to the Legislature's failure to pass a 2 registration fee bill in 1989, my air pollution control 3 board pursued separate legislation to give us the resources 4 we needed in Ventura County. 5 My board was concerned about the impact fee 6 increases would have on businesses. They felt the right 7 solution was vehicle registration fees. 8 So, at our request, Senator Gary Hart introduced 9 SB 2228 on February 26, 1990. SB 2228 was supported by our 10 local businesses as a way to provide additional and 11 appropriate resources without increasing their fees and 12 putting some of the burden where it rightfully should be, on 13 motor vehicles. 14 This was a significant equity issue for our 15 businesses. Our bill was chaptered before AB 2766. 16 However, we wrote 2228 to be superseded by 2766 in the event 17 that it finally became law, which it did. 18 The point of all this is to emphasize to you the 19 concern our board had about implementing the California 20 Clean Air Act without the necessary resources to do the job. 21 The DMV fee gave us the resources. 22 I want to quote for you the legislative -- and 23 it's in your report -- the legislative intent in AB 2766. 24 The bill states in Paragraph (a) of 44220, ". . .any 25 district. . .may, upon adoption of a resolution by the 37 1 district governing board, exercise fee authority. . .to 2 ensure that districts. . .have the necessary funds to carry 3 out their responsibilities for implementing the California 4 Clean Air Act of 1988." 5 And paragraph (b) goes on to state: "The revenues 6 from the fees collected. . .shall be used solely to reduce 7 air pollution from motor vehicles and for related planning, 8 monitoring, enforcement, and technical studies. . ." and I 9 emphasize this -- "necessary for implementation of the 10 California Clean Air Act of 1988." 11 So, there are two requirements in 44220. The fees 12 are authorized to guarantee the districts have the necessary 13 funds to carry out their responsibilities to implement the 14 California Clean Air Act. And, in addition, the funds must 15 be related to efforts to reduce motor vehicle emissions, 16 such as planning, monitoring, et cetera. 17 There is an effort underway, in my mind, to 18 require these funds to be used for other things, such as 19 scrapping old cars and purchasing alternative fueled 20 vehicles. This concerns me, at least the scrap vehicle 21 part. 22 Cars will get scrapped anyway if we have the 23 patience to wait a few more years. So, I don't understand 24 the rationale in spending scarce public funds to do 25 something that will occur anyway without the use of these 38 1 funds. 2 And besides, these outside projects are not why SB 3 2228 and AB 2766 became law. As I said earlier, I was there 4 and I know. 5 While some of these projects are clearly 6 desirable, such as building clean fuels infrastructures, the 7 needs of the 34 districts must be met first. These needs 8 include planning, monitoring, public education, enforcement, 9 rules, and other mandated activities. 10 I'd like to now look at how we use the funds in my 11 district, Ventura County. 12 With the DMV funding, we were able to achieve our 13 new mandates without increasing fees. I fact, we have not 14 increased fees for new permits since 1986, and have not 15 increased permit renewal fees since 1990. Furthermore, we 16 have no plans to increase fees this year, unless someone 17 strips away our ability to use the DMV fees. 18 Let me give you some examples of where our 19 resource shortfall was. We cannot run half of an ozone 20 monitor, half of a hydrocarbon analyzer, or half of an 21 anemometer or a wind vane. Yet, we needed the information 22 from these and other instruments to determine the status and 23 progress of our air quality. We needed the information to 24 provide the public with alerts when high pollution levels 25 were reached. And we needed the information to help us 39 1 prepare our plans for the California Clean Air Act. 2 Before AB 2766, permit fees paid for most of our 3 air monitoring program. By using motor vehicle fees to pay 4 for our fair share of the monitoring program, we were able 5 to add resources by using the freed up fee revenue to comply 6 with many new stationary source mandates, such as annual 7 permit review and renewal, no net increase in emissions from 8 new and modified sources, new rules to reduce stationary 9 source emissions such as best available retrofit control 10 technology, and new inspectors to ensure that the new rules 11 and permits were being complied with. We did all this 12 without increasing permit fees. And, again, we succeeded 13 because motor vehicles began to pay their fair share of our 14 programs related to motor vehicle emissions. 15 DMV fees also helped us start up the Act's 16 mandated and essential public information and education 17 programs that bring the clean air message directly to 18 residents. Our district participated in the development of 19 the presidential award-winning "Think Earth K through 6 20 Education Program." 21 We have placed this program in every public school 22 in Ventura County. We are working with middle schools to 23 use the Air & Waste Management Association's resource guide 24 on air quality. To date, we have introduced this series of 25 air pollution experiments into 21 middle schools, and will 40 1 place it into more schools next fall. 2 Now, last month, we introduced a new curriculum 3 into our high schools. It is called "Sky High." We have 4 signed resolutions from nearly every school district board 5 in Ventura County stating they will use this new curriculum 6 in their high schools. 7 We've already presented a teacher training at 8 Oxnard Union, and have several other projects scheduled for 9 the fall. DMV fees paid for some of this project, including 10 all the necessary staff time. 11 We created a video -- "Our Future is Up in the 12 Air" -- to support the high school program and to be used 13 for our public outreach program. 14 Leonard Nimoy narrated it free of charge. A copy 15 of the video was sent to your public information office. 16 The high school curriculum, with the video, will be provided 17 free to every high school in Ventura County. 18 In addition, we have implemented a highly 19 successful smoking vehicle public outreach program. We 20 average 300 calls per month on the hotline. The hotline is 21 popular with the public, since it is something individuals 22 can directly do to help reduce motor vehicle emissions. 23 The California Clean Air Act also requires us to 24 incorporate transportation control measures into our 25 planning efforts. We now have transportation planning staff 41 1 to work with local cities to help find solutions to the air 2 quality impacts from the ever-increasing size of the vehicle 3 fleet in Ventura county. 4 We are also able to implement the mandated 5 indirect source review programs in the California Clean Air 6 Act through our environmental review programs. 7 The Act requires us to achieve an average vehicle 8 ridership of 1.5 for all peak commute trips by 1999. DMV 9 fees were used to develop and implement our trip reduction 10 rule to achieve this mandate. 11 Our trip reduction program, Rule 210, has 12 increased the average vehicle ridership at our larger 13 employers from a base of 1.12 passengers per commute vehicle 14 to 1.35. Our goal is to reach a 1.5 AVR by 1997, as 15 required by the federal Clean Air Act. 16 With the DMV fees, we're able to provide free 17 comprehensive training and free annual update training to 18 every employee transportation coordinator in Ventura County. 19 These training programs help employees comply with 20 the rule more efficiently and provide encouragement for them 21 to continue their efforts. 22 We're also using the funds to develop a low- 23 emissions fleet rule. And we are using the fund to 24 implement a public outreach program for your Phase 2 25 reformulated gasoline program. 42 1 We believe the success of Phase 2 RFG is critical 2 to our air quality improvement in Ventura county. 3 None of these efforts are cheap, but we're keeping 4 close tabs on all of our costs that are related to reducing 5 emissions from motor vehicles. The total motor vehicle 6 program costs in our budget, which includes funding for 7 outside projects, is over $2.2 million. Yet our revenue is 8 only $2.1 million. So, we continue to fund motor vehicle 9 related programs with other funds. Fortunately, the gap is 10 not as large as it used to be. 11 Notwithstanding this shortfall and shortfalls from 12 past years, we did fund several outside projects. These 13 included a California Highway Patrol officer to cite smoking 14 vehicles and the development of a transportation model -- 15 traffic model for our Transportation Commission that's 16 specific to Ventura County for transportation and congestion 17 management planning purposes. 18 We are paying our Transportation Commission 19 $50,000 a year to maintain and use the model. We also 20 provided seed money to start up a satellite work center. 21 And we're supporting a transit "Dial-A-Route" program, which 22 over 6,000 people per month are calling too get bus route 23 and schedule information. 24 And we are also providing staff support with the 25 help of DMV fees for a first-in-the-nation program. The 3M 43 1 Company donated $1.5 million from the sale of emission 2 offsets to create the Ventura County clean air fund. This 3 fund is helping to convert nearly all of our transit buses 4 to compressed natural gas. 5 The fund is supporting development of liquified 6 natural gas locomotives and trucks, and it purchased 7 equipment for our community college to prepare local 8 mechanics for repairs expected under the enhanced smog check 9 program, now being called Smog Check II. 10 When you deliberate on your staff's report, please 11 keep in mind our historical discussion here. Actions are 12 our own; the consequences are not. The needs of each 13 district are different. This is especially true when 14 compared the revenue they can receive from this program. 15 For example, if we had the number of cars that are 16 in the San Joaquin Valley, we would be receiving more than 17 our entire budget, butt we are not them and they are not us. 18 If we use your staff's proposed formula requiring 19 50 percent of our funds to be used for projects, we would 20 have three choices. We could reduce -- and I mean 21 significantly reduce -- our mandated program. We could seek 22 a change in the law to increase the fee to $8.00, or we 23 could bring 500,000 more cars into Ventura County. None of 24 these options make sense. 25 You cannot prescribe one distribution formula to 44 1 satisfy the requirements of all. It's just not that simple. 2 So, I urge you to not prescribe any distribution formula for 3 these funds. 4 I agree with the need for periodic assessments of 5 the program. The public has a right to know how this money 6 is being spent. However, I ask you to remember two points 7 when you determine the audit or report frequency. 8 First, districts are already responding to 9 numerous report mandates; and, second, this program is 10 moving at glacial speed. Spending patterns are not going to 11 change radically in a one or two-year period. Therefore, it 12 is my recommendation that the audit frequency be no more 13 than once every three years. 14 That concludes my remarks. Thanks for listening. 15 This issue is vital to my district. 16 I'll be glad to answer any questions you may have. 17 CHAIRMAN DUNLAP: Okay. Very good. Any 18 questions? All right. 19 Thank you, Mr. Baldwin. Appreciate it. 20 Mr. Carr. I apologize for the curve I threw you. 21 MR. CARR: No problem. You know, we get thrown 22 curves like that all the time in our business, and a lot 23 worse, too. 24 Mr. Chairman, members of the Board, it's a 25 pleasure to have the opportunity to appear here before you 45 1 this morning. 2 I can assure you on behalf of CAPCOA and the 3 districts that we share your interest in the appropriate use 4 of and accountability for the DMV fees. I believe the 5 proposed criteria and guidelines are an important and 6 positive step in that direction and can help provide 7 assurance that the fees re being used appropriately. 8 However, there are some aspects of this matter 9 that are troublesome, and I would like to put on the record. 10 My biggest concern is the apparent failure to 11 recognize that not all districts are the same and don't all 12 have the same needs. This holds true for programs and 13 projects that these fees go to fund as well. 14 The report and the proposed criteria and 15 guidelines address these differences to a certain extent, 16 but we all know how a prescription approved today may be 17 applied next year. 18 We also know that a project we fund this year may 19 be replaced by something entirely different -- new and 20 different next year. 21 To allow for change and for the differences in 22 district needs, and for those times when the most cost- 23 effective project is not necessarily the best place to spend 24 part of this money, for those times when the best 25 approaches-- approach does not match the prescription, we 46 1 would like to have the assurance that if we do something 2 with this money that works, we will not be penalized because 3 we fail to exactly match the prescription. 4 If this cannot come through a revision of the 5 prescription, we at least would like the record to reflect 6 that districts will be given adequate opportunity to defend 7 their case. I would also like to remind your Board that the 8 law doesn't specify that a prescription be applied to the 9 use of these fees. 10 Another troublesome aspect of the report is the 11 deemphasis of the law that establishes the use of these fees 12 to implement the California Clean Air Act. 13 Mr. Baldwin went into this in some detail. I'm 14 sure I don't need to remind you that for the past two 15 decades the number of vehicle trips and miles traveled in 16 California have increased at over twice the rate of 17 population growth. That, in itself, is a frightening 18 statistic. 19 Along with these trips, we are producing over a 20 half a billion (sic) tons of ROG and NOx, and the miles that 21 we drive will exceed 280 billion this year. 22 You are also aware that districts receiving these 23 funds have been able to hold the line and, in some cases, 24 even reduce the fees on stationary sources we regulate. 25 Perhaps the motor vehicle is starting to pay part of its 47 1 fair share for environmental programs in California. 2 But dealing with the problems we face will not 3 occur overnight. It will take time to change the direction 4 we have been following the past 50 years. And it will take 5 funding as well. 6 In a small way, these fees redirect dollars that 7 previously were being spent on driving and puts them to 8 other uses, uses that will pay long-term benefits to our 9 State. 10 And it will take more, not for air pollution 11 programs necessarily, but for transportation systems. 12 However, that is another issue to be dealt with at another 13 time. And hopefully, we'll be here next year talking to you 14 about that. 15 My point is, however, that we need a full arsenal 16 to overcome the situation that has been created, and we need 17 to recognize that the DMV fees the districts receive can and 18 should be put to use in a great variety of ways for 19 permanent, long-term air quality benefits. 20 I believe this was the intent of the California 21 Clean Air Act and the subsequent legislation that made these 22 funds possible. Not every program and project should be 23 judged solely or even predominantly on how many tons can be 24 reduced today and at what cost. 25 As a matter of fact, we need to be cautious that 48 1 we ado not go overboard with that approach. Is it the best 2 use of these funds to get immediate but short-term emission 3 reductions if those same emissions are destined to be 4 eliminated in two or three years anyway? 5 And then, how then do we address the needs for 6 emission reductions that still exist in three years, but 7 have been deferred? 8 CAPCOA is very concerned about this issue and the 9 related issues that surround the question of destroying cars 10 and trucks to try to satiate an immediate appetite. 11 This is a public policy issue of great importance, 12 and we feel there needs to be much more debate in California 13 and around the nation before we decide how many eggs to put 14 into the scrappage basket and whose eggs they should be. 15 In closing, I would just like to say that 16 throughout my tenure in CAPCOA -- both as president and in 17 other capacities -- I have endeavored to develop 18 partnerships between the air agencies and between regulated 19 industry and the agencies. I believe we should all strive 20 to work together cooperatively toward a common goal, and 21 keep our conflicts to a minimum. 22 There have been some rough times in the past 23 between all of the players, but we have done quite well in 24 working our way through most of them. 25 Right now, I feel that the partnership of the ARB 49 1 and the districts is somewhat strained, and can stand some 2 improvement. I don't believe the discomfort I sense comes 3 from the staff, but rather from some higher level. I would 4 encourage each of you to consider the type of relationship 5 that sister agencies should have and, if you agree that we 6 can improve, work with us to see that improvement occurs. 7 Listening to our concerns today may be a good 8 place to start. For our part, the CAPCOA Board and our DMV 9 fee committee that Roberta referred to earlier stand ready 10 to work with the ARB to make any refinements to the report 11 and proposed criteria and guidelines that your Board may 12 choose to direct staff to undertake. 13 And just one other note. I feel, kind of in 14 summary, that your Board needs to recognize that we do need 15 to have some of this latitude so that programs like Mr. 16 Baldwin's -- a very effective and respected program in 17 California -- doesn't get caught in a net and cause to have 18 more damage than good come out of it. 19 And I think that, to some extent, individual 20 projects need to be given that same kind of recognition if 21 they deserve it. 22 So, thank you again. 23 CHAIRMAN DUNLAP: Thank you, Mr. Carr. 24 Go ahead. Mr. Lagarias has a question for you, 25 Bob. 50 1 MR. LAGARIAS: Mr. Carr, do you have any trouble 2 with the cost-effectiveness assessment approach? 3 MR. CARR: I don't have any trouble with the cost- 4 effectiveness. I feel that the cost-effectiveness approach 5 is critical to us making sure that these funds are well 6 expended. 7 I think what my problem is, that if we have a 8 project -- if we go through and rate all of our projects and 9 we have a project that is rated number nine of out ten, but 10 the consensus of the community -- a committee who was 11 approving these projects -- is that this is a better project 12 to fund than number eight, that we might be in some trouble 13 with the criteria that is proposed. 14 And I think that your -- as I say, I think that 15 there needs to be some of that latitude allowed in this. 16 MR. LAGARIAS: Well, I agree with you. I think 17 that a cost-effectiveness assessment merely tell us what 18 you're going to get on that particular project. But a 19 justification for any project can certainly overwhelm mere 20 dollars per ton. 21 Thank you. 22 MR. CARR: Right. Thank you. 23 CHAIRMAN DUNLAP: Ms. Edgerton. 24 MS. EDGERTON: One of the things that strikes me 25 is that we have now moved five years past when the 2766 was 51 1 first enacted, and there are plans. There's been a great 2 success in terms of the planning has developed substantially 3 to the point where we do have a State Implementation Plan, 4 which this Board adopted last November, and the districts 5 have plans as well. 6 So, it had been my understanding that a lot of -- 7 of course, we're continuing to do a lot of planning, and we 8 have a lot way to go. But a lot of the upfront planning 9 needs have been advanced. There have been a lot of 10 achievements there. 11 And so, at some point, if the program is to 12 continue, you get to implementing the plan, not always 13 planning. 14 Can you comment on the balance between planning -- 15 what balance you think makes sense in terms of planning and 16 implementation? 17 MR. CARR: I think it varies from district to 18 district and in different areas of the State. 19 Our district, for instance, until the California 20 Clean Air Act came along, we weren't required to do that 21 type of intensive planning and we didn't, in effect. I 22 mean, we did some planning. 23 So, this was all new to us. It took a lot of 24 these resources for us to get up and going with the 25 planning. And we're still, even after all this time, it's 52 1 still taking a lot of our resources to do it. Now we're 2 looking at PM10 and trying to incorporate that into our 3 plan. 4 I think the balance is certainly going to shift 5 over time, that we're going to see less and less of this 6 money put to planning and more put to implementation of 7 various sorts. 8 And I think we should count on that and plan for 9 it. But I can't tell you at this point in time if 50 10 percent is fine for the entire State. I don't think that it 11 is. 12 I think that for some districts it's not; for 13 others it probably is maybe a lot more than 50 percent could 14 go to implementation. 15 I've been talking to Mr. Schoning and the ARB 16 about long-range planning, and I think that it will behoove 17 us to try to start looking forward five years and ten years 18 on a statewide basis as to how we can start making those 19 kinds of moves and planning for those kinds of changes. 20 CHAIRMAN DUNLAP: Mr. Carr, I had a question. I'm 21 a little bit perplexed about a comment you made at the close 22 of your prepared remarks about sensing a strained 23 relationship between the Board and CAPCOA or San Luis 24 Obispo. I don't know. Can you illuminate on that a bit? 25 MR. CARR: I wasn't sure if I should make that 53 1 comment. Even this morning I thought about taking that last 2 page out and not including it. But I went ahead and did it, 3 because I feel like it was important to do. 4 I've been president of CAPCOA for half a year now. 5 I haven't addressed your Board before, and I don't know if I 6 will again during my term this year. I feel like there's a 7 feeling amongst the air districts -- and I don't know how 8 pervasive it is -- that there's' some invisible thing in 9 Sacramento going on that's calling the shots. And we're 10 kind of in our bunkers out there waiting to see where the 11 shot lands, and whether we'll be able to defend ourselves if 12 it lands too close. 13 And I don't think that that's necessary or 14 appropriate. And if I have those feelings, I trust my 15 feelings, and I think there's something there. And I would 16 like to see us be able to develop a better relationship to 17 make sure that we are understanding each other, what's 18 happening and why it's happening as we proceed down this 19 path. 20 CHAIRMAN DUNLAP: Okay. Thank you. Mr. Covell, 21 followed by Ron Cagle, City of Los Angeles; and then Steve 22 Huffman, Cleaner Air Partnership. 23 Good morning, Norm. 24 MR. COVELL: Good morning, Chairman Dunlap, 25 members of the Board. My name's Norm Covell. I'm the Air 54 1 Pollution Control Director for the Sacramento Metropolitan 2 Air Quality Management District. 3 I'd like to begin by complimenting Jim, Lynn 4 Terry, and the staff in pulling this report together. I 5 know it was very difficult to get a rope around the many and 6 varied manifestations of this program that exist around the 7 State. 8 With all due respect to my colleague, Dick 9 Baldwin, I would like to remind this Board that the 10 Sacramento District and a concerned Sacramento community 11 preceded any other legislation statewide by two years in 12 securing this mechanism for applying revenues to deal with 13 problems that the district was facing. 14 This preceded the California Clean Air Act as 15 well. 16 CHAIRMAN DUNLAP: Now, you were first, right? 17 MR. COVELL: That's right. 18 CHAIRMAN DUNLAP: All right. We want to make that 19 clear. 20 (Laughter.) 21 MR. COVELL: And we did it for the express purpose 22 of trying to deal with what we saw as the majority of the 23 problem that existed out there and the inability of the 24 district, both in terms of its mandates and its available 25 resources, to do anything about it. 55 1 For years, we'd been running around beating up dry 2 cleaners, and the gas stations, and Aerojets, and 3 McClellans, and so on, recognizing that we had a growing 4 problem regarding vehicle use. And that doesn't take a 5 thing away from the excellent program that this Board and 6 Jim and his staff have put in place over the years regarding 7 tailpipe cleanup and the new standards on new vehicles. 8 But we all recognize that nothing much was 9 happening in terms of how these vehicles are used once they 10 get out on the road, and trying to face decisions as to how 11 we're going to move people from place to place as we move 12 into the 21st Century. 13 So, we went after a source of funding and some 14 expanded mandates that would allow to get into that arena, 15 which that legislation did for us. 16 I bring that up to point out -- and at the sake of 17 repetition -- I'm going to do it, because I think it needs 18 to be emphasized, and that is the variety of need based on 19 the variety of problem that exists around the State, and the 20 variety of existing resources that the districts have to 21 deal with their problems. 22 Well, Dick quoted a 50 percent figure regarding 23 mobile sources in his area. The Sacramento District 24 experiences a problem where motor vehicles are 70 percent of 25 our problem; it has the highest ratio of VOC emissions to 56 1 stationary sources -- from mobile sources than stationary 2 sources anywhere in the nation. 3 And we had to come to grips with that problem. 4 So, we set about to do it through this legislation. 5 Two points that I want to bring out. Number one, 6 the increased reporting requirements, you need to be aware 7 of the fact that these laws limit us to a five percent 8 administrative cap on the use of this money. We're into 9 many and varied projects with the use of our money right 10 now, which necessitate contracts. And these contracts have 11 to be administered. That comes under the five percent cap. 12 To increase reporting requirements beyond what's 13 really necessary's going to impact that as well. Your Board 14 staff has had to put an inordinate amount of time focused on 15 pulling this report together, and I know you don't have new 16 found sources of revenues to direct that effort. And you 17 need to be mindful of that in the future as to what we're 18 creating here in terms of your staff's needs to ride herd on 19 this. 20 I certainly agree that we do need to be 21 responsible, but I think we need to leaven that a bit with 22 the understanding that we do have limited resources to focus 23 on the administrative oversight of this effort statewide. 24 It's an $84 million program statewide right now, and 25 certainly needs -- and I think Dick pointed this out -- that 57 1 we have the responsibility to report to the public how we 2 are, in fact, spending their money, and we're making good 3 government decisions in the use of that funding. 4 Secondly, perhaps as an alternative to some 5 specifics in terms of 50 percent of the funding having to go 6 to projects and X-number of dollars having to go to other 7 types of activities, that we might look more at ranges. 8 I certainly want to reemphasize a point that you 9 raised, Ms. Edgerton, that the planning activities ebb and 10 flow. The California Clean Air Act required a plan to be 11 pulled together, which I think the districts have completed 12 now. There's a triennial update required with that. 13 So, the planning activities related to that are 14 going to move up and down. And I would submit that perhaps 15 on the years that a plan update is required, that the 16 guidelines in terms of the use of this money are going to 17 recognize that resources will flow more towards planning; 18 and on the subsequent reporting, will reflect that during 19 those times there would be an increased use of planning 20 resources to meet the State's needs. 21 We utilize the same resources to do our federal 22 planning to meet the requirements of the 1990 Act. So, 23 those are the main things. 24 I think the criteria that you've established in 25 terms of cost-effectiveness is good. And we recognize that, 58 1 in many areas, though, some of this funding is used for 2 projects that are more difficult to evaluate. And I think 3 you're going to hear this morning from members of our 4 community Clean Air Partnership -- and our project manager's 5 here -- have done some innovative things in terms of 6 attempting to evaluate projects like public education to try 7 to get a feel for how effective that is when implemented. 8 I think they need to be listened to and perhaps 9 incorporate some of those ideas into our findings. 10 We look forward to working through CAPCOA with the 11 ARB staff in implementing the findings of this Board. 12 But just in summary, two things. Be mindful of 13 our administrative cap and keep the costs down to administer 14 this program, and let's get most of the money out there 15 where it's doing some good in cleaning up the air. And 16 think about flexibility as we set these guidelines. 17 Thank you. 18 CHAIRMAN DUNLAP: Thank you, Mr. Covell. Sure. 19 Norm, don't run away yet. Ms. Edgerton. 20 MS. EDGERTON: Thank you for your comments. You 21 were clearly there when the Act was passed, because you had 22 had a similar provision two years in advance. How do you 23 read the legislation's direction for the funds to be spent 24 for motor vehicles and for planning? Do you see that as 25 indicating a legislative intent that motor vehicles' 59 1 emission reductions is prioritized. 2 MR. COVELL: Well, understand that the Sacramento 3 District operates under a separate piece of legislation. I 4 think it was AB 3344, or something like that, that passed 5 two years ahead of time that has significantly different 6 requirements for us. 7 It required an air quality improvement strategy. 8 Again, this preceded the California Clean Air Act plan 9 requirement. It required us to develop a public education 10 plan and implement it. It required us to start working with 11 fleet operators to bring about the requirements that would 12 change fuels and change vehicle types and so on. 13 It's somewhat more specific and somewhat 14 different, I think, than the 2766 stuff is concerned. But 15 when you look at districts and what we have to do, I'd 16 certainly agree with Dick that there has to be a blending of 17 the money that we derive from our stationary sources and our 18 mobile sources if we're going to achieve all the other 19 charges that districts face -- to become involved in air 20 quality monitoring, to develop plans, to develop rules and 21 regulations that will be utilized as strategies to implement 22 what's identified in our plan. 23 So, I certainly feel that, logically, there has to 24 be a mix in the use of funding. But I would certainly say 25 that on those off years, we would be negligent to show that 60 1 a vast majority of these funds continue to be used year 2 after year in the planning activities of a district. I 3 think it has to be -- they have to have the flexibility to 4 move it where it's needed as our programs change. 5 MS. EDGERTON: Thank you. 6 CHAIRMAN DUNLAP: Thank you. Mr. Cagle, Mr. 7 Huffman, and then Dr. LeMare. 8 MR. CAGLE: Mr. Chairman and members, Ron Cagle on 9 behalf of the City of Los Angeles. I have given your staff 10 a letter signed -- co-signed actually by Los Angeles City 11 Council President John Ferraro and Mayor Dick Riordan, and 12 that letter comments on three areas of the proposed report, 13 two of which have been covered and covered quite well by Mr. 14 Baldwin -- the planning and technical activities cap, which 15 we don't think is appropriate, and the program cost- 16 effectiveness criteria. 17 One other comment that I would like to make at 18 this time, and it is regarding the unexpended funds report 19 in the portion of the report. 20 We would urge that the report stress the progress 21 that has been made in increasing the percentage of 22 appropriated funds. I think, since my principal job is 23 lobbying the State Legislature on behalf of the City of Los 24 Angeles, I can cite one particular example regarding an 25 abandoned vehicle abatement program from a number of years 61 1 ago, which was fully funded with about 3 million bucks. 2 And in one prior tight budget year, the 3 Legislature discovered that and reappropriated those monies, 4 and we've been fighting ever since to get abandoned vehicle 5 abatement programs back for cities and counties. 6 So, when the Legislature sees these pools of 7 apparently unappropriated monies, they can reappropriate 8 them quite readily. So, those are my principal comments. 9 An I'll make other copies of the comments available for the 10 Board. 11 CHAIRMAN DUNLAP: Thank you very much. I 12 appreciate the high level interest in the City of Los 13 Angeles as well. 14 Mr. Huffman. 15 MR. HUFFMAN: Good morning, Mr. Chairman and 16 members of the Board. I'm Steve Huffman, Vice-President- 17 Corporate Consultant for Blue Diamond Growers, the world's 18 largest processor and marketer of almonds. 19 We employ about a thousand people here in 20 Sacramento. For several years, I have been a member of the 21 steering committee of the Cleaner Air Partnership, and I 22 chaired it for three years. 23 What is the Cleaner Air Partnership? It is a 24 joint project of the American Lung Association of 25 Sacramento, Emigrant Trails Chapter, and the Sacramento 62 1 Metropolitan Chamber of Commerce. It was formed in 1986 to 2 help organize our community to face the challenge of poor 3 quality air in our region. 4 It includes business people, environmentalists, 5 elected officials, and government staff. The report you re 6 considering endorsing today says much about the cost- 7 effectiveness of measures to improve air quality. Our 8 partnership likewise believes that cost needs to be 9 considered in formulating policy. 10 We are distributing -- or I guess we have 11 distributed to you this blue Cleaner Air Partnership public 12 education plan on air quality and transportation. It 13 describes what we have done here in Sacramento to make the 14 public more aware of the problem and what individuals can do 15 to be a part of the solution. 16 Dr. Judith LaMare, our project manager, will give 17 you further details later about the program and its results. 18 Businesses also can play a part. The second handout is our 19 clean air catalog designed to educate businesses about what 20 other businesses are already doing. I think you will be 21 impressed by the variety and creativity of the actions that 22 businesses have taken. 23 One of the issues here I know is leverage. You'll 24 see a number of corporate logos here, so we're talking about 25 private money, private sector money coming into the effort. 63 1 Mr. Covell's already talked about the fact that 2 our problem here in this region is primarily mobile source, 3 and so I won't go over that again. 4 CHAIRMAN DUNLAP: Hold on just a moment to allow 5 our hard-working court reporter to take a moment. 6 (Thereupon, there was a pause in the 7 proceedings to allow the court reporter 8 to replenish her stenograph paper.) 9 CHAIRMAN DUNLAP: Please continue. 10 MR. HUFFMAN: And Mr. Covell also talked about how 11 we got our legislation, so I won't cover that again. 12 So, how have we used this money? We've used it to 13 promote the use of clean fuels in part, notably M85 and 14 compressed natural gas. Our partnership set up the clean 15 fuels forum, a public-private group of fleet managers, 16 suppliers, and others, to take a look at emerging 17 technologies and to share information. It is now run by the 18 district. 19 By working with oil companies and vehicle 20 manufacturers, we've been able to increase both the number 21 of M85 vehicles and fueling stations. Regional Transit, our 22 local public transportation utility, has bought many CNG 23 buses. Because of this sustained effort over several years, 24 our region now has more clean fuel vehicles per capita than 25 anywhere. 64 1 I would also like to discuss medium and heavy-duty 2 vehicles in particular, because, as new automobiles become 3 cleaner and the fleet turns over, we need to shift our 4 attention to both on-road and off-road medium and heavy-duty 5 vehicles. 6 Our district adopted the first ever fleet rule 7 last July. It requires operators of fleets of 15 or more 8 vehicles, such as Blue Diamond Growers, to report their 9 inventories on an annual basis. A related rule requires 10 that, as old vehicles are retired, they be replaced with 11 low-emission vehicles. And the same concept applies to 12 repowering of existing vehicles with lower emission engines. 13 DMV surcharge fees, leveraged by other sources, 14 have been used for all the work I have described. 15 Let me now turn to the issue of public education 16 to encourage voluntary reductions in driving. Because we 17 have an ozone problem in Sacramento, we have an annual 18 smoggy season campaign to be conducted over the warm months. 19 It includes television, radio, print ads, posters, 20 media relations, and employer outreach. An innovative 21 approach we've used is the "Smog Squad," a grassroots 22 organization designed to go door to door with the message 23 that individuals can make a difference in air quality 24 through changes in their habits. Extensive use is made of 25 volunteers and existing neighborhood and community groups. 65 1 The message is passed from the volunteers to 2 friends and neighbors who serve as an information source. 3 So that is what we have done. Has it made a 4 difference? From the very beginning, we decided we had to 5 measure public opinion annually to look for trends. In 6 fact, the public education program has been effective, and I 7 now introduce Jude LaMare, who will give you more details. 8 I will return briefly to give my view on staff 9 recommendations as to future ARB oversight. 10 CHAIRMAN DUNLAP: Thank you. Good morning, Jude. 11 DR. LA MARE: Good morning, Mr. Chairman and 12 members. 13 I'm Judge LaMare, Project Manager for the Cleaner 14 Air Partnership. here to talk about our annual public 15 opinion survey and how it's been used to document emission 16 reductions from what staff has characterized as public 17 education programs. 18 I'm here to ask you to look at that line between 19 emission reduction programs and planning, technical, 20 monitoring programs, and recognize that some projects may be 21 on the line. And, in particular, if we can agree that 22 survey research is a legitimate way to measure voluntary 23 participation by drivers and trip reduction resulting in 24 emission reductions, then we begin to move those public 25 education activities that document that voluntary 66 1 participation out of this planning category and into 2 emission reduction programs. 3 One of the reasons that this is very important to 4 the Cleaner Air Partnership is that we have defined cost- 5 effectiveness as being somewhat related to seasonal programs 6 in our partnership. 7 Early in the process of developing this business 8 environmental coalition, and looking at what's going to 9 clean up our air in Sacramento -- recognizing that mobile 10 sources is the major, major factor -- was the recognition 11 that we have a season that the meteorology very much affects 12 when we're going to have ozone violations. 13 If you were here last weekend, you saw that 14 happen. You saw that we have a "Spare the Air" campaign; 15 that the media is actively involved in recruiting people to 16 not drive during days when we have meteorology that leads to 17 ozone violations, and that these occurrences are going to 18 become fewer and fewer as we get closer and closer to 19 attainment. 20 So that it becomes very cost-effective to try to 21 work on those particular periods of time when we really are 22 at risk of ozone violations. And that by spending money on 23 those times and getting the kinds of action we need, we 24 actually get more cost-effective reductions than some other 25 programs which would have to be applied year-round and would 67 1 produce lots of emission reductions at times when we don't 2 really need them. 3 So, by excluding voluntary driver participation 4 programs from the category of emission reduction programs 5 and considering them only to be public education -- some 6 kind of vague program that we need, but really can't be 7 documented as reducing emissions -- if we do that, we also 8 exclude the potential of developing the cost-effectiveness 9 of this approach. 10 In fact, our data show that 138,000 drivers in the 11 summer of 1994 participated by reducing trips on days when 12 they knew that the air district had asked them not to drive, 13 and that that resulted in real emission reductions in very-- 14 at the level of at least 2.8 tons on each of those days. 15 So, we think that's really significant, and that 16 if there are questions about survey research as an adequate 17 methodology for measuring and monitoring, that kind of 18 participation, there needs to be a real technical effort 19 addressed to that question, and not simply dismiss it. 20 We also have, because we have done this survey 21 every year -- excuse me. 22 CHAIRMAN DUNLAP: On that point, do you think it's 23 been dismissed? 24 DR. LA MARE: It's been dismissed in this report 25 at present, I think primarily because my letter to Anne 68 1 didn't get to her till May 8th, in which I tried to lay out 2 these factors. And so, we really didn't have that prolonged 3 dialogue. 4 CHAIRMAN DUNLAP: Okay. Just to maybe -- 5 MS. GERAGHTY: I'd like to -- 6 CHAIRMAN DUNLAP: Well, all I would do is log 7 that. Let's cover that at some point. Okay. Continue, I'm 8 sorry. 9 DR. LA MARE: Because we've been monitoring driver 10 participation since 1989, we've also noticed that there is 11 an annual reduction in trips, voluntary/discretionary by 12 drivers, at the level of 56,000 drivers who have -- who are 13 using alternatives once or twice a week instead of driving 14 purely as a choice matter, not because they have to, not 15 because their car's down, not because they want -- their 16 family wants to use the car, so they're going to use the bus 17 to go to work, but as a specific use of an alternative. 18 So, we think there are real opportunities out 19 there to work -- as we have with the business community -- 20 on voluntary efforts to find cost-effective ways to reduce 21 emissions, to reach our ozone health -- safe and healthy 22 ozone levels. 23 There are also opportunities of working with 24 drivers on a voluntary basis -- families -- through the 25 "Smog Squad," but we want credit for that. We think it 69 1 deserves to be in the plan. 2 Thank you. 3 CHAIRMAN DUNLAP: Thank you. 4 MR. HUFFMAN: I'll wind up very briefly here. 5 I refer to Section VII of your report, which has 6 to do with recommendations. Earlier in the report, it is 7 clear that with only very minor exceptions, DMV surcharge 8 funds are being used in the spirit of the State legislation 9 that authorized them. 10 I understand the mandate to make a biennial report 11 to the Legislature, but I question whether all the 12 recommendations are needed to comply with the legislation, 13 which I understand to be AB 2766 and AB 4334. 14 I think one of the appealing aspects of the DMV 15 surcharges is that they are expended district by district 16 based on the peculiarities of each area of the State. I do 17 not believe that comprehensive State monitoring is required 18 for districts to expend the funds in a cost-effective 19 manner. 20 My experience tells me that when the public and 21 private sectors talk to one another, that happens. There is 22 recognition on the part of the business community in 23 Sacramento, and I am sure elsewhere in our State, that air 24 is a quality of life issue that influences other businesses 25 locating here. 70 1 We all agree that air needs to be improved, and we 2 all have a stake in the cost of how we improve it. Another 3 monitoring system at the State level, it seems to me -- in 4 my written remarks I say "unnecessary." I think some 5 monitoring clearly is, but I think -- I'm just asking you to 6 look at all those recommendations and consider, too, that 7 local districts already have enough people to answer to on 8 many subjects. 9 If all the recommendations are adopted, for 10 example, will there need to be an increase in staff? The 11 cost-effectiveness of this program to monitor cost- 12 effectiveness of the air districts is also an issue. So, 13 please take a close look at it. 14 And thank you for listening to our testimony. 15 CHAIRMAN DUNLAP: Mr. Lagarias has a question. 16 MR. LAGARIAS: I have a comment for Dr. LaMare. 17 The concept of a voluntary public information 18 program to reduce air pollutants from motor vehicles during 19 the high ozone season is indeed acceptable. I know in the 20 Bay Area, the "Spare the Air" program has been very 21 effective. 22 Under the Clean Air Act, the requirements we have 23 just to meet the federal requirements require that all 24 programs be not only viable but enforceable. And in the 25 case of voluntary programs, the federal government, as a 71 1 rule, has not deemed these to be part of the enforceable 2 act. 3 But under this legislation, it may indeed -- 4 through public presentations and voluntary programs, we can 5 get the voluntary citizen involvement into this fight to 6 keep our air clean. 7 So, I think that's a very solid and laudatory 8 program on your part. 9 DR. LA MARE: Thank you. 10 MR. HUFFMAN: Thank you. 11 CHAIRMAN DUNLAP: Thank you. 12 George Erdman from Northern Sonoma APCD, and 13 Cecile Martin from the California Electric Transportation 14 Coalition, followed by Coleen McDuffee. 15 MR. BOYD: Mr. Dunlap, did you want Ms. Geraghty 16 to respond to that issue that came up? 17 CHAIRMAN DUNLAP: I think we can hold it till we 18 hear from the witnesses. Just keep a log there and we'll 19 cover it. I'm sure that the witnesses won't leave, so we 20 might have a chance to talk to them directly. 21 Good morning. 22 MR. ERDMAN: Good morning, Mr. Chairman, members 23 of the Board. My name is George Erdman. I'm a Senior 24 Specialist for the Northern Sonoma Air Pollution Control 25 District. 72 1 I had not originally intended on speaking, and 2 then my supervisor called and provided me with a written 3 statement, which I was not able to provide to you earlier, 4 and I will submit that to your clerk. 5 The Northern Sonoma County Air Pollution District 6 is testifying today in response to the proposed report to 7 the Legislature on local air district use of monies 8 generated through the motor vehicle registration surcharges. 9 We believe it is imperative that implementation 10 remain with the local districts and that the districts 11 continue to determine appropriate and reasonable uses of 12 these monies for motor vehicle pollution mitigation. 13 The report to the Legislature carries some 14 specific limitations on uses of motor vehicle fee money that 15 go beyond the limits set forth in the Health & Safety Code. 16 While we understand and agree that general guidelines are 17 appropriate, we feel very strongly that the guidelines must 18 recognize the substantial differences in local air programs 19 throughout the State. 20 Not all districts can reasonably follow some of 21 the criteria set forth in the report. The districts' 22 existing funding base, program scope, and pollution depend 23 on whether the district is urban or rural, as well as the 24 industrial activity and traffic patterns in the area. 25 Blanket percentages or rate limits for funding of 73 1 vehicle pollution mitigation activities cannot be 2 universally applied. 3 This district implements a vehicle pollution 4 mitigation program as mandated under the California Health & 5 Safety Code Section 4420. We provided the State with a 6 report on our program last fall, and received comments from 7 staff that our implementation was completely in accord with 8 intent and the mandate. 9 Some of our activities were specifically 10 recognized in the ARB report you are considering today. In 11 particular, Northern Sonoma is concerned about the minimum 12 funding requirement for grant projects and the limits on air 13 monitoring under this program. Each year, we have released 14 request for proposals for funding grants and have ranked the 15 projects and awarded grants. 16 Unfortunately, we do not receive a significant 17 number of fundable project proposals. This is probably due 18 to the substantial rural nature of our district. Each year, 19 we work to improve the public awareness of our program, but 20 the progress is slow. 21 The profile of our community is changing rapidly. 22 The northern portions of Sonoma County are seeing tremendous 23 residential development, but there is no corresponding 24 increase in industrial activity. We've seen disturbing 25 trends towards increasing ozone levels, but do not fully 74 1 understand the causes, nor do we have enough information to 2 prepare appropriate plans to address the problem. 3 You'll have to excuse me. I'm a bit nervous. 4 Under the vehicle pollution mitigation program, 5 we've designed and begun implementing a vehicle pollution 6 monitoring program designed to correlate traffic patterns 7 and pollution levels in our district. 8 This may well be the most cost-effective and 9 important step we can take towards addressing motor vehicle 10 emissions and improving the air quality in the district. We 11 feel very strongly that any guidelines provided by the State 12 on implementation of this program need to recognize and 13 allow for different air quality and approaches, depending on 14 the needs of the region. 15 ARB staff have indicated that they concur with 16 this concept, but the report fails to expressly recognize 17 that. We urge the Board to provide written recognition of 18 the different needs of the districts and to allow for 19 variation from the guidelines if the need can be documented. 20 Thank you. Whoo! I'm a lot better ad-libbing. 21 (Laughter.) 22 CHAIRMAN DUNLAP: Thank you. You did a fine -- 23 MR. ERDMAN: Do you have any questions? 24 CHAIRMAN DUNLAP: -- did a fine job. Thank you. 25 MR. ERDMAN: Thank you very much. 75 1 CHAIRMAN DUNLAP: Appreciate it. Ms. Martin, 2 please come forward. Coleen McDuffee following Ms. Martin, 3 and then Bonnie Carrion from Colusa County. 4 Good morning. 5 MS. MARTIN: Good morning, Chairman Dunlap and 6 Board. I thank you for allowing us to make comments today. 7 My name is Cecile Martin. I'm Deputy Director of 8 the California Electric Transportation Coalition, and I 9 wanted to address my comments actually to a very small part 10 of this report, not to the bigger issues that have been 11 brought up this morning. 12 And that is, we've participated in some of the 13 workshops, because we believe from our experience that these 14 public/private partnerships that have been part of the 15 projects that you've seen and that have been reviewed here 16 have been very, very important in demonstrating new 17 technologies and preparing for the early market. We feel 18 that they're critical, and I would emphasize, too, that we 19 believe that we have seen in these projects -- and I've been 20 involved with them both in my current position and previous 21 to this for almost four years at the California Energy 22 Commission. What we've seen is a learning curve, and I 23 think we've seen with a lot of these projects that people 24 have gotten a lot smarter over time, and the cost- 25 effectiveness of these projects has increased over time. 76 1 So, when I heard that two-thirds of them met the 2 cost-effectiveness criterion that has sort of been developed 3 after the fact, I thought that was pretty good. 4 We were concerned in particular, when we heard 5 that cost-effectiveness criteria was going to be developed, 6 that there were some considerations for the long-term 7 benefits of developing new technologies; so that when 8 projects were looked at, that might give emissions 9 reductions right away but have no long-term effects; that 10 there was some sort of balancing so we wouldn't lose our 11 long-term benefits for the sake of short-term benefits. 12 And I'd like to say that we feel pretty satisfied 13 that staff, in developing the cost-effectiveness criteria 14 for projects, has handled that issue. We think the report 15 reflects that consideration and that new -- that the new 16 technology projects hold up well under the scrutiny of the 17 stated cost-effectiveness formula that's been suggested. 18 So, I wanted to thank staff for putting that into 19 the report. And then, just as I was listening today, there 20 was another comment that I thought I might make, is that the 21 cap -- I don't disagree with having a cap. And at this 22 moment in time, I don't disagree with the $20,000 per ton or 23 $10 per pound criteria (sic). 24 But, I think, as it gets more and more difficult 25 to reduce emissions, the price could go up, you know, the 77 1 price in the market could go up. But that's kind of a 2 moving target, and that some accommodation should be made 3 for looking at that number on a yearly, biennial basis, that 4 kind of thing, the way they're now doing in the South Coast 5 under RECLAIM. 6 CHAIRMAN DUNLAP: Very good. Thank you. Ms. 7 McDuffee, City of Woodland. 8 MS. MC DUFFEE: Good morning, Chairman Dunlap and 9 members of the Board. My name is Coleen McDuffee, and I'm a 10 planner with the City of Woodland. If you're not familiar 11 with Woodland, we're a town of about 42,000 people located 12 in Yolo County, and we wanted to come and speak to you today 13 just to let you know that we've been very pleased and 14 satisfied with the way the motor vehicle funds have been 15 distributed in the Yolo-Solano Air District. 16 We wanted to just give you an idea of how the 17 funds have been used in Woodland really briefly. We have 18 used them to install bike racks in our downtown area. We 19 have converted some of the city vehicles to compressed 20 natural gas, and we've also done a signal interconnect 21 project along a heavily traveled road. 22 We've also -- a lot of the private companies of 23 Woodland have also participated in the funding cycle. One 24 of the projects is called "Club Ride," and the 20 largest 25 employers in our city joined together and filed an 78 1 application, for which they were successful. And what it is 2 is a catalog. A merchant discount catalog was developed, 3 whereby people who carpool to work are eligible to receive 4 discounts at businesses in town. 5 A compressed natural gas facility was also built 6 in Woodland with partial funding by the air district, and 7 one of our larger employers also received money to assist 8 them to install showers for bicycle commuters. 9 I think the two features of the current process 10 that we are most pleased with is the wide variety of air 11 quality projects that have been approved in our district. 12 And the second feature is the fact that it is a funding 13 process that is open both to public and private entities. 14 So, in summary, we just wanted to express to you 15 that we feel the current system is working, and that we 16 would urge you to retain the current process. 17 Thank you. 18 CHAIRMAN DUNLAP: Thank you. Bonnie Carrion from 19 Colusa County APCD, followed by Edward Huestis, City of 20 Vacaville. 21 Good morning. 22 MS. CARRION: Good morning, Chairman Dunlap, 23 members of the Board. Like George, I wasn't prepared to 24 speak this morning till my boss called me at nine o'clock. 25 So, I apologize in advance. 79 1 I'm with Colusa County Air Pollution Control 2 District. And maybe some of you don't know where that is. 3 That's located about -- Colusa's located about 70 miles 4 north of Sacramento, a very small rural district. 5 I'm speaking on behalf of basically the rural 6 districts in the Northern Sacramento Valley. 7 Our district, as well as other small districts, 8 are concerned with the criteria being developed or proposed 9 for the use of the vehicle funds and their effect on the 10 rural districts. 11 Two main concerns are the elimination of the 12 spending flexibility and the reporting requirements 13 proposed. 14 As you are aware, there's a vast difference 15 between urban and rural spending levels regarding planning, 16 air monitoring, public education, et cetera. Our district, 17 as well as the other districts, small districts, have very 18 limited revenue and really rely on these funds, these 19 vehicle funds, to implement provisions of the Clean Air Act, 20 which we believe was the initial intent of vehicle fees 21 being initiated. 22 Small districts need this flexibility that we 23 currently have in using these funds. And although we're 24 very pleased to see that we have been acknowledged in the 25 criteria by allowing our districts to allocate the funds 80 1 based on program needs air quality benefits, rather than on 2 a strict formula, we still feel that urban districts also 3 need the flexibility, not a strict formula. 4 Basically, I'm kind of reiterating what everyone 5 else -- Dick Baldwin, Bob Carr, George Erdman, Norm Covell, 6 they've already mentioned everything that I'm kind of 7 informed or saying (sic). 8 Another concern that small districts have -- and 9 Norm talked about this earlier -- is that the reporting 10 requirements -- we have very limited staff and a limited 11 budget, and we're just concerned that it will be just too 12 complex, too cumbersome. 13 So, that's basically pretty much what I have to 14 say. 15 CHAIRMAN DUNLAP: Okay. Thank you. 16 Any questions for our able witness? Okay. Very 17 good. Thanks. 18 City of Vacaville. Craig Harris would be next up, 19 and Greg Vlasek following, and then Mr. Cole. 20 Good morning. 21 MR. HUESTIS: Chairman Dunlap, members of the 22 Board, Ed Huestis, Transportation Systems Manager, City of 23 Vacaville. 24 And for those who aren't familiar with Vacaville, 25 it's about 80,000, just a little over 80,000. And I just 81 1 want to touch upon just briefly some of the projects that 2 the funding has provided for us. 3 First of all, also, I'm very pleased with the way 4 that it's been distributed. We're under the jurisdiction of 5 the Yolo-Solano Air Quality Management District. It's been 6 outstanding. And one project -- similar to Woodland's-- 7 we've had the Elmira Road traffic signal interconnect 8 project, which we've heard a lot of favorable already at the 9 completion of that project, because of how it tends to 10 speedup the process of, you know, going through the light. 11 So, that's been very helpful. 12 One of the new technologies, if you want to refer 13 to it as that, is the Neighborhood Telecenter program. We 14 have two outstanding, successful neighborhood telecenters as 15 part of the Caltrans funded effort, the residential area 16 based office program. And this has helped us -- in addition 17 to their funding, has helped us (sic) get this up to speed 18 to a successful level, to where we have 20 regular users, 19 using both of these centers. 20 We have one at each community center there in 21 Vacaville. And beings that we have about 70 percent of our 22 working adult citizens leaving Vacaville -- either going 23 towards the Sacramento area or to the San Francisco Bay 24 Area, it's an ideal location for the two telecenters, 25 because our residents can walk to, bike to, or take transit 82 1 to, and in some cases drive across town to one of these 2 telecenters, link up with their employer, and using the 3 computer -- the 486 computers that we have there, laser 4 printer, copier, the amenities that they would have at the 5 office -- one or two days a week. 6 And this completely eliminates a trip in most 7 cases, you know, of considerable distance towards the Bay 8 Area or San Francisco -- I mean or Sacramento. 9 And we have also, as part of our general plan, a 10 30 percent trip reduction, which we are striving to meet by 11 1999 as well, besides the California Clean Air Act 12 requirements. 13 And so, this is really -- has been received very 14 well within the community, and we've also been able to 15 revise our brochures to show the support by the Yolo-Solano 16 Air Quality Management District and are sending those out. 17 A couple things -- a couple other things we have. 18 It is a neighborhood based office where it's in a 19 residential area, but it's also being used, as we found -- 20 since this is a demonstration program, we wanted to find out 21 where people are going to be coming from. It's also being 22 used as a regional telecenter. 23 We actually have a couple -- a married couple. 24 One works for the Integrated Waste Management Board up here, 25 and one works for Toxics Division. I believe it's in EPA. 83 1 On Mondays -- they leave in Fairfield -- they go to 2 Vacaville, stop right there, link up with their employer one 3 day a week, every Monday. Their supervisors are very 4 impressed with the productivity increase on that day than if 5 they were to go all the way into work. And here again, we 6 eliminate a trip, a good portion of that trip, to 7 Sacramento. 8 Family Friendly Workplace Initiative, that has 9 come out -- you may be aware of from the Administration. It 10 affects GSA. GSA is actively promoting telecommuting for 11 their workers. We have an MOU with GSA for the GSA workers 12 in San Francisco that are going to tie up three of our work 13 stations on a regular basis. 14 Kaiser is another active participant. What this 15 has turned out to be is that when we contact the employee 16 transportation coordinators in both Sacramento and in the 17 Bay Area, they are very excited already, because they are 18 looking for ways to provide to their employees on ways to 19 decrease traffic congestion and air pollution at the same 20 time. 21 And so, they take the information and they run 22 with it, and have done a lot of the legwork for us in 23 promoting the telecenters there. 24 And so, again, with your dollars, it has really 25 made a big difference for us in being able to get the word 84 1 out promoting the program and bringing on users. 2 And I please recommend retaining the current 3 process. It's been very beneficial to us. Any questions? 4 CHAIRMAN DUNLAP: No. Thank you very much. 5 Mr. Harris from Databases and Algorithms. 6 Good morning. 7 MR. HARRIS: Good morning. I'm the owner of a 8 small company in Davis, and I recently opened a telecenter 9 or a telecommuting center with ten stations. Some of the 10 funding came from my company and also from Yolo-Solano AQMD. 11 Since about February, it's running about 10 12 percent occupancy and, of that ten percent, there's been 13 about 8,000 vehicle miles traveled avoided. With some more 14 marketing support through this year and for next, we 15 anticipate growing utilization to maybe 50 or 60 percent of 16 approximately a 50-miles per day vehicle mile traveled 17 avoided. 18 I also am in the internet business of trying to -- 19 or looking at expanding internet with response time so that 20 people can start to begin to telecommute to State agencies 21 and to the Bay Area using internet. So, those are two of 22 the areas that my company is looking at. Your funding has 23 helped last year, and we're going after some more funds for 24 next year. 25 CHAIRMAN DUNLAP: Okay. Thank you. 85 1 Mr. Vlasek. Good to see you. I'm glad you 2 dressed up for us today. 3 (Laughter.) 4 MR. VLASEK: I was compelled to dress for a later 5 appointment. 6 CHAIRMAN DUNLAP: I see. I see. 7 MR. VLASEK: Good morning, Chairman and members of 8 the Board. My name is Greg Vlasek. I'm the Executive 9 Director of the California Natural Gas Vehicle Coalition. 10 Our coalition represents public and private 11 organizations supporting natural gas vehicles throughout the 12 State of California. 13 I came today to compliment the staff for the work 14 that's been done on this report and to urge you to support 15 their recommendations regarding ARB oversight criteria and 16 reporting. 17 I believe very strongly that this can be a process 18 that will improve communications and relationships between 19 the districts and between the ARB, and provide a higher 20 level of understanding for the State Legislature of the 21 importance of these various air quality control measures and 22 technologies, and help them in formulating their policies 23 for the future. 24 I would caution the Board and the staff as well 25 against overdirection or overstandardization of the cost- 86 1 effectiveness evaluation, and this really goes to point 2 that's been raised by many of the districts quite 3 eloquently. 4 These cost-effectiveness evaluations are very 5 complex. In many cases, I think they are probably better 6 performed or better devised at the local level because of 7 that complexity. They involve many factors, including 8 project-specific costs, rapidly evolving clean-air 9 technologies, and changing pricing for those technologies. 10 And I would like to cite an example from the 11 report, and that's the example of the heavy-duty natural gas 12 transit buses. In the report, as it stands now, that is 13 cited as one of the technologies that is not cost-effective 14 under the criteria. And that is based on some emission 15 factors or emission studies -- which I'm not here to 16 question the validity of -- but I would point out that there 17 are credible studies that have been done in the South Coast 18 AQMD and published in SAE papers that indicate that the 19 emissions benefits from those buses are underestimated by as 20 much as sixfold in these analyses as presented here. 21 And if you plug that data into the calculation, 22 you'll find that the transit buses, the natural gas transit 23 buses, may in fact be as cost-effective as the two to three 24 dollar a pound scrappage measures that are cited. 25 That's the example. I'm not here asking you to 87 1 revisit or revise that particular element of the report, 2 because I don't think it really changes the overall message 3 to the Legislature, frankly. I'm more concerned that you 4 understand and take to heart the concern raised about -- the 5 concerns raised about making those evaluations kind of on a 6 district-by-district basis in the future. 7 And that really concludes my comments. 8 Thank you for your time. 9 CHAIRMAN DUNLAP: Thank you. I appreciate it. 10 Any questions for Mr. Vlasek? 11 Very good. Mr. Cole, Local Government Commission. 12 MR. COLE: Good morning, Chairman Dunlap and 13 members of the Board. Much of the discussion that we've 14 heard this morning deals with the issue of cost- 15 effectiveness and accountability. 16 My own background is 12 years on the Pasadena City 17 Council, including serving two years as the Mayor. And I 18 recently resumed volunteer community service by being 19 appointed to the Community Development Committee in my home 20 city. 21 And I want to talk about the cost-effectiveness at 22 the local government of transportation/land-use strategies 23 and public education. And I want to focus, if you would, on 24 page 75 of the Technical Support Document, which is a 25 project evaluation of a project done by the Local Government 88 1 Commission. 2 We're talking here about $83.5 million a year in 3 annual expenditures. This is $35,000 out of that $83.5 4 million, a very small piece. But I think it sheds some 5 important light on what is our definition of cost- 6 effectiveness. 7 CHAIRMAN DUNLAP: Would you point out that page 8 number again? 9 MR. COLE: Page 75 of the Technical Support 10 Document. It's the second of the two documents. Yours are 11 stapled together, I think, in your report. 12 CHAIRMAN DUNLAP: Okay. Do we have that document 13 up here? Could you send one or two up? We'll pass it 14 around. 15 MR. COLE: It was sent to me. 16 CHAIRMAN DUNLAP: We have a lot of material up 17 here. 18 MR. COLE: Well, in fact, I will make that point 19 further on. 20 CHAIRMAN DUNLAP: Okay. 21 MR. COLE: I mentioned local government and public 22 education, and transportation and land-use strategies. We 23 at the local government level are often frustrated by what 24 we call unfunded mandates, whether at the State or federal 25 level. 89 1 What this process of working through these fees 2 and making them available with these kind of programs does, 3 is move from an unfunded mandate approach to making progress 4 on air quality, to a funded resource approach to cleaning 5 our air. 6 We can often work harder, but sometimes the most 7 important thing that we can do, in terms of a breakthrough, 8 is to work smarter. I want to show you just a handful of 9 slides from the workshops that were done with 654 10 individuals throughout the SCAG region. 81 of them were 11 elected mayors, city council members, or county supervisors, 12 the rest were key staff and planning commissioners. 13 How do I make those slides work? 14 This is what most of Southern California lives 15 with on a day-to-day basis. 16 Next slide. 17 And this is, of course, what all of you are 18 focused on, whether it's vehicle emissions directly or 19 indirectly, it is the tremendous growth in vehicle miles 20 traveled that we estimate will happen throughout California 21 and, of course, specifically in Southern California. 22 Again? 23 This is part of the problem. We can encourage 24 people not to drive. We can encourage people to take public 25 transportation. But if you can't get there from here, if 90 1 the land-uses are situated in such a way that the only way 2 you can get to shopping or job opportunities is by car, you 3 have a fundamental problem that other strategies you can 4 work very hard on, but not necessarily smart. 5 Next slide. 6 The same with isolated office development. 7 Next slide. 8 And the other important, as older areas are 9 bypassed for newer development, they leave in their wake 10 tremendous economic problems that are also related to air 11 quality. The people that can't afford to get to work 12 without buying an old junker are the ones who are putting 13 those junkers on the road. 14 Next slide. 15 And when we encourage people to use transit, 16 sometimes we find that transit itself is not integrated at 17 all with where people need to go. You can get to this bus 18 stop, but then where do you go? 19 Next slide. 20 There are, however, alternatives throughout our 21 State that cities and counties are turning to. This is the 22 downtown San Jose Arena, which has helped spark the 23 revitalization of San Jose, and has dramatically reduced the 24 amount of people arriving by automobile to a sports stadium. 25 Next slide. 91 1 This is Horton Plaza in San Diego. Again, 40 2 percent of the shoppers get here other than by automobile. 3 Next slide. 4 This is also in San Diego. This is a 5 redevelopment of an old Sears' site. This Ralph's is the 6 highest grossing Ralph's in San Diego County, and yet over 7 half of the shoppers get there on foot or by public transit. 8 Next slide. 9 This is downtown Santa Monica, a key, highly 10 visible, mixed-use project that has gotten a lot of 11 attention, a commercial, retail, and residential on the top. 12 And, of course, it's brought tremendous vitality back to 13 downtown Santa Monica. 14 Next slide. 15 And, of course, the way we get to the kind of 16 different changes is through widespread public 17 participation. 18 Next slide. 19 And by integrating transit, so there's actually a 20 place to get there when you arrive by public transit, we 21 encourage both rail and bus transit as well as bicycle and 22 pedestrian orientation. 23 Next slide. 24 The same thing applies throughout Southern 25 California. This also is in Oldtown Pasadena. 92 1 Next slide. 2 And this is ultimately where we want to get, is 3 the kind of clean air results that we're all looking for. 4 I think that's it -- oh, that's backwards 5 (speaking of slide). That is from our general plan, and 6 I'll touch on that orally. But that targets growth. We, in 7 Pasadena, have targeted all of our substantial commercial, 8 residential, and retail development along transit and bus 9 corridors. 10 So, let me turn from those slides to just give you 11 a sense of what the folks who attended these workshops were 12 exposed to. But they were exposed to this all day. And 13 what comes out of that is a level of leverage and 14 partnership that really isn't valuable by a rigid criteria, 15 but which -- with the document that I've asked to be handed 16 out to you called, "Survey of Activities Resulting from ARB 17 and AB 2766 Assistance," there's 52 cities in which zoning 18 codes area being changed, general plans are being changed. 19 Design guidelines are being changed. 20 Specific projects are being undertaken. And these 21 are being done in partnership with the private sector, with 22 developers, with bankers who are doing financing, in which 23 the landscape of Southern California is being transformed to 24 one where transit and pedestrian orientation allow people 25 choices. 93 1 Our general plan has seven basic principles. One 2 of those principles that guides all of our land use and 3 transportation planning in our city is Pasadena will be a 4 city where people can circulate without cars. Those who are 5 poor, those who are disabled, those who are too young, those 6 who are too old, or those who don't always wish to always 7 drive are going to have those opportunities. And every 8 decision we make, from signal timing to the location of 9 residential development, is shaped by that key principle. 10 Now, the profound implications of that long term 11 are ones that for $35,000 to reach key people all over 12 Southern California, so that people from Ventura down to 13 Coachella, are getting this information is critical. And 14 you mentioned, Chairman Dunlap, the amount of material you 15 get. 16 Well, we all do in local government. This kind of 17 public education allows people to cut through the giant 18 reports that are collected, and collated, and mailed out, 19 and to engage people in an education process where they 20 learn how to make these kind of changes in their own 21 community. And they are doing it. 22 I will conclude with just one example from my own 23 community. We're very proud that we planned a mixed-use, 24 transit-oriented, pedestrian-oriented development in the 25 middle of our city. 94 1 It's called the Holly Street Village Apartments. 2 It's 374 units of housing, 14,000 square feet of commercial. 3 20 percent of those housing units are for very low income 4 families. The rest are at market rate. 5 It's immediately accessible by walking to Old 6 Pasadena and to the Civic Center. It is a project that 7 could not have been done without significant public 8 investment. Every one of the votes was four to three, not 9 because the City Council wasn't committed to these ideas, 10 but because they knew that it was a very long stretch in our 11 economy to make that kind of investment. 12 We held onto that four-three vote. That project 13 is open. It is fully leased, because of the political will 14 and the vision. Now, for $35,000 to reach people and to 15 give them the hope, and the resources, and the tools to 16 begin changing the way we build our cities is I think a 17 definition of cost-effectiveness. It's a partnership and 18 it's a leverage, and it's persuading people to do the right 19 thing by giving them the opportunity to do the right thing, 20 rather than forcing them to do the right thing through 21 mandates, and regulations, and rules. 22 Thank you very much. 23 CHAIRMAN DUNLAP: Thank you. Ms. Edgerton has a 24 question for you, Mr. Cole. 25 MS. EDGERTON: Thank you for your excellent 95 1 presentation. I'm sure everyone on the Board would agree 2 that your contributions are significant. 3 I'm trying to understand how this excellent 4 presentation relates to this particular report in your mind. 5 What are you saying about the report? 6 MR. COLE: A fair question to have me hone in on 7 to what's in the report. Two things: First of all, in the 8 original -- and I've got the wrong document in front of me, 9 so I'll do this from memory. In the original regulation, 10 one of the key priorities -- there was a first priority, 11 second, and third priorities to deal with transportation 12 policies, and one was the interrelationship between land use 13 and transportation, which is one that I think is fundamental 14 and central that needs to be emphasized not only in this 15 report, but in this program. 16 But, second, I agree with those who have said 17 people at the different air quality districts are going to 18 know better about the range of programs that will work and 19 have to have some level of flexibility to make an investment 20 of $35,000 on something that will have millions of dollars 21 of payoff in terms of private and public investment down the 22 road, but which may not translate day after tomorrow into a 23 reduction in vehicle miles traveled and, therefore, the NOx 24 emissions reduction that you can quantify. 25 So, I'm arguing both for public education and land 96 1 use and transportation strategies as an extremely cost- 2 effective partnership between ARB, the State of California, 3 and local governments. 4 MS. EDGERTON: And I would agree that those 5 projects can be very cost-effective as well. 6 I don't see anything in our criteria and 7 guidelines which would preclude the funding of this. 8 MR. COLE: I'm not arguing that. 9 MS. EDGERTON: I'm just trying to understand what 10 you're saying. 11 MR. COLE: I understand. 12 MS. EDGERTON: I'm just trying to be sure I'm 13 grasping this most -- 14 MR. COLE: (Interjecting) But I think the program 15 is a success. I think this little tiny slice of $35,000 16 shows that people thinking innovatively can figure what, 17 well, what's the best way to reach 185 cities in six 18 counties, hold one-day workshops, give elected officials, 19 and key planning staff, and commissioners a chance to 20 interact, get to know this stuff, understand what other 21 cities are doing, and leave, and then put it into effect. 22 That's an extraordinary cost-effective way to 23 leverage your dollars. And I wouldn't want to see things 24 get to the point where that was -- didn't fit in with some 25 rigid formula. I do not see that that rigid formula is part 97 1 of your documents. But I wanted to emphasize that, because 2 I agree with others who said it's important to give the 3 local air boards some flexibility to be able to do things 4 like this. 5 MS. EDGERTON: Well, I appreciate that, because 6 one of the things I'm not -- I'm trying to listen very 7 carefully to everyone. 8 But it seems to me that guidelines and criteria, 9 they're not -- they are what they are. They're guidelines, 10 and there is language in here that reflects an understanding 11 of different district needs. 12 MR. COLE: And flexibility. 13 MS. EDGERTON: And flexibility. The point of all 14 this is for all of us to learn together and to have an 15 effort to look at what we have learned, and to bring that to 16 everyone's attention. 17 MR. COLE: Well, if you failed to detect a 18 complaint in my presentation, it's because I'm not 19 complaining. 20 (Laughter.) 21 MS. EDGERTON: Wonderful. Thank you very much, 22 Mr. Cole. 23 CHAIRMAN DUNLAP: All right. Thank you. Very 24 good. Appreciate your time. 25 Okay. We seem to have exhausted our witness list. 98 1 I'll ask the Board Secretary, is there anyone else that we 2 may have missed in the audience? 3 MS. HUTCHENS: No. 4 CHAIRMAN DUNLAP: Okay. Very good. I'll ask Mr. 5 Boyd and staff to summarize, please, the written comments 6 we've received. 7 MS. HUGHAN: Mr. Chairman, we received a letter 8 from Allen Stiles, Board Chair of Monterey Bay Unified APCD. 9 And he urged the ARB to support continuation of the vehicle 10 registration program and to provide a balanced assessment of 11 the program to the State Legislature. 12 It also recommended maintenance of a flexible 13 program, and it's staff's view that we have complied in 14 general with the Chairman's request. 15 The letter that was referenced from Richard 16 Riordan, Mayor, and John Ferraro, the Council President of 17 the City of Los Angeles, that letter expressed concern in 18 several areas. 19 It recommends that the 10 percent cap on local 20 government expenditures for planning be eliminated, and that 21 local governments maintain full authority to allocate funds 22 according to their needs and mandates. And it is noted in 23 the report that the California Clean Air Act defines the 24 roles of the partners improving air quality, and that 25 statute directs cities and counties to spend their funds to 99 1 reduce motor vehicle pollution, to implement the Act, or the 2 district's clean air plan. 3 After investigation, staff came to the conclusion 4 that 10 percent is adequate for funding of any required air 5 quality planning by local government. 6 Another comment was that the letter recommends 7 that language be added to the cost-effectiveness criteria 8 that recognizes that other factors may be considered in 9 determining what projects to fund. 10 And the answer to that is that the recommendation 11 that all recipient agencies adopt criteria consistent with 12 that adopted by this Board does not exclude adoption of 13 supplementary criteria. In fact, staff sees no objection to 14 the supplementary criteria proposed. 15 However, we do suggest that the ARB criteria be 16 given the greatest weight. 17 Another comment, the letter requests reference to 18 the $17 million in unexpended funds be revised to underscore 19 the fact that unappropriated revenues basinwide have 20 decreased sufficiently each year; it suggests the report 21 place more emphasis in general on the overall effectiveness 22 of use of the funds. 23 On Table 20, page -- in response to that, on page 24 30, Table 20, it shows that each year the percentage of 25 expenditure improves, and if all goes as the city expects, 100 1 the next report to the Board should show an even greater 2 rate of expenditure. 3 Another letter came from James Hartel, Department 4 of Regional Planning, County of Los Angeles. And this 5 raises three issues. The first was the letter comments on 6 the difficulty of including the level of detail in the 7 county budget document that the report seems to require and 8 an alternate measure is suggested. 9 And our reply is that the ARB staff will be 10 working with the South Coast AQMD Intergovernmental Affairs 11 staff to develop a revised questionnaire and a format can be 12 developed that will recognize the county's limitations, 13 while still getting the needed information. 14 The letter agrees that cost-effectiveness is an 15 important consideration, but expresses concern that new 16 technologies that are costly in their early stages will not 17 get funded. It adds that land-use strategies, where 18 emission reductions are long term and not easy to quantify, 19 may also not get funded. 20 ARB staff recognized in the discussion of cost- 21 effectiveness that new technologies and techniques may not 22 be cost-effective in the near term, but are necessary to 23 develop long-term solutions. 24 The letter also states that capping air quality 25 planning activities seems counter to the goal of maintaining 101 1 local flexibility. It suggests a definition of what 2 constitutes air quality planning as opposed to planning- 3 related program implementation. 4 ARB staff believes that 10 percent is adequate for 5 local government involvement in air quality planning. In 6 preparing their projects specific guidance recommended in 7 the report, ARB staff can identify relevant project 8 development activities. 9 The last letter was from South Coast Air Quality 10 Management District, John Mikels, who's the Chairman of the 11 South Coast AQMD Interagency Air Quality Management Plan 12 Implementation Committee, also known as the IAIC, and in the 13 letter, the IAIC requests the report include mention that 14 small cities may not receive sufficient vehicle registration 15 fee revenues during any one fiscal year to fund projects. 16 And they have been retaining the funds with the intent of 17 accumulating funds for future projects. 18 The report does state that the AQMD reported that 19 funds are being accumulated for large projects. A sentence 20 saying small cities have particular difficulty can be added. 21 In the South Coast, there are plans to solicit 22 details next year about obligated funds. 23 The letter objects to the statement in the report 24 that the percentage of unspent funds indicates a lack of 25 knowledge about appropriate projects to fund. ARB staff 102 1 made this assumption based on the minimal criteria available 2 to local jurisdictions in the early years, but we can remove 3 that statement from the report. 4 The letter also requests that the report state 5 that there was minimal criteria and guidance initially 6 provided, and also state that now there is a trend towards 7 obligating a larger portion of the funds. 8 The report does note the absence of initial 9 criteria, and the trend towards obligating a larger portion 10 of the funds is documented. 11 The last comment, the letter states that local 12 governments are supportive of having additional guidance and 13 assistance with the program, but wish to retain flexibility, 14 and singles out the criteria for the ten percent cap on 15 planning is limiting flexibility. 16 The report recognizes the need for local decision- 17 making; however, staff feels that adoption of the proposed 18 criteria or consistent criteria will lead to a more 19 accountable program. 20 The letter also seems to include individual 21 project development in the 10 percent cap. And the cap does 22 refer to air quality planning. 23 CHAIRMAN DUNLAP: Okay. Does that do it? 24 MS. TERRY: There's one additional letter from 25 Yolo-Solano Air Quality Management District with a couple of 103 1 brief comments. 2 CHAIRMAN DUNLAP: Which I think may have been 3 covered in part by an early witness. Yes. 4 MS. TERRY: And Jude LaMare's comments covered her 5 letter I believe. 6 CHAIRMAN DUNLAP: Okay. Very good. Any other 7 staff comments? Mr. Boyd, does your team have anything else 8 to say on this item? 9 MR. BOYD: No further comments that I'm aware of, 10 Mr. Chair. 11 CHAIRMAN DUNLAP: Ms. Geraghty, could you take a 12 very short time and cover that one item we asked you to hang 13 onto for us earlier, which I can't recall at the moment. 14 MS. GERAGHTY: You asked how we would respond to 15 Jude LaMare's comments on her letter, in which she gave us 16 her -- looking at the cost-effectiveness and the 17 quantitative way of public education -- 18 CHAIRMAN DUNLAP: Surveys, I believe, right. 19 MS. GERAGHTY: -- and specifically surveys. And I 20 think that she's raised some good issues. With the amount 21 of time that we had to look at these projects, we weren't 22 able to delve into this area because it's a new area for us, 23 but we will -- 24 CHAIRMAN DUNLAP: I don't mean to put words in Dr. 25 LaMare's mouth, but it seemed to me that her concern was 104 1 primarily based with some discounting that we might do on 2 survey research; that it wasn't worth as much as some other 3 projects that wouldn't require survey on participation, et 4 cetera. 5 Do you feel that this report in any way discounts 6 that type of project or -- 7 MS. GERAGHTY: Well, I don't feel that it 8 discounts it. But what it didn't do in our supplementary 9 report was put publication -- looking at it in a 10 quantitative way. And what I think that we can do, as we 11 finalize that report and in our future work, is to look at 12 it in a quantitative way and the way that Judge LaMare 13 suggests. 14 CHAIRMAN DUNLAP: Okay. So, we don't -- 15 MS. GERAGHTY: So, I don't think it discounts it, 16 but it doesn't recognize -- it did not recognize it; that is 17 true. 18 CHAIRMAN DUNLAP: It would probably be hurtful if 19 it precluded -- if projects were precluded in some way, 20 because they required additional verification through 21 surveys. So, let's make sure that we don't have a bias, 22 okay, along those lines? 23 MS. GERAGHTY: Uh-huh. 24 CHAIRMAN DUNLAP: Okay. Mr. Parnell. 25 MR. PARNELL: We have heard a lot of good 105 1 testimony, and my compliments to the staff, first of all, 2 for having put together a good analysis of what you've seen. 3 And I think that we will be edified as a result of having 4 the opportunity to review. 5 But I have to say that I'm sensitive to the 6 testimony that we've heard that basically suggests that 7 local control is something that we covet and that we want to 8 hold on to. I think that all politics are local, and I 9 think that most solutions to complicated problems are local. 10 And having said that, a however, I think that 11 those of us that stay fairly close to this Legislature and 12 to this Administration have heard repeatedly that in this 13 time of austere budgets, that we run a significant risk -- 14 and I don't mean to overstate it -- but I think we run 15 always a significant risk of losing these kinds of funding 16 mechanisms if there isn't some kind of proper oversight and 17 proper reporting. 18 And that's not to say that we're not concerned 19 with the cost that Steve Huffman alluded to. We create an 20 agency to watch an agency to watch and agency, and 21 government has been good at that in the past. 22 I don't think that's what is anticipated here, and 23 certainly not in my mind could I tolerate that as a Board 24 member. 25 Another thing that disturbs me is Bob Carr's 106 1 comment, and I think this is probably not the venue for 2 exploring that. But the discomfort that he feels or the 3 competition between ourselves -- I think he dismissed the 4 staff, so that points to higher up. That means me, this 5 Board, or the Chairman. And I would really like to get to 6 the bottom of that, because I believe that this truly is a 7 partnership. 8 This Board can't do anything without people in the 9 local areas carrying out and implementing programs that are 10 meaningful programs. 11 And I think through this exchange and through this 12 dialogue, we're going to learn a lot. I like the workshop 13 idea. I think we do far too few of them in terms of really 14 coordinating what's in the realm of doable that will lead to 15 positive results in terms of clean air. 16 My hope is that we finally come to a conclusion on 17 this issue; that we recognize that these funds may be 18 vulnerable if we don't do something to demonstrate that 19 we're trying to be responsible and coordinate without 20 driving costs up. And so, I would hope we could be less 21 specific in some of the demands and be more generic and 22 allow more flexibility somehow as we come to a conclusion 23 here. 24 And, quite frankly, as you hear all this 25 testimony, it takes sometimes more than a handful of minutes 107 1 to fully digest what you've heard. 2 But I'm concerned. I think the testimony -- the 3 whole idea pervades all of the testimony that we don't want 4 to lose control. However, those of you from local 5 jurisdictions have to understand that we think this may not 6 even be an issue if funding dries up. That's the bigger 7 issue here. 8 So, somehow let's work together to find a 9 mechanism whereby we can do the responsible thing, be able 10 to report effectively in order to protect this very 11 important set of funding. Does that -- I hope that makes 12 some sense. 13 We need to be very careful that we're not overly 14 prescriptive. Local governments do know best in my view. 15 CHAIRMAN DUNLAP: Thank you. Well put. 16 Supervisor Vagim. 17 SUPERVISOR VAGIM: Mr. Parnell, I totally agree. 18 There's always that area of gray between how to overregulate 19 and how to do it right, and how to be too prescriptive. 20 But, at the same time, sitting on an air district 21 in the Valley that gets a significant amount of money sent 22 directly to it and then passes it through to a citizens' 23 committee, at least 50 percent or thereabouts, and watch 24 that process, I can see that they struggle, too, with the 25 process of trying to find some methods to follow. 108 1 And I think this a good document and good 2 suggestions to begin the process, to find some common 3 denominator, to quantify exactly what the use of these 4 public funds should be. 5 And if we don't have some quantifiable methods, 6 they sometimes can be all over the map. And we shouldn't 7 forget that the major reason for the fund, to reduce mobile 8 source emissions and implement the California Clean Air Act. 9 The latter is broad, very broad. But the criteria 10 that the staff has come up with are -- it's a good start for 11 me. As I mentioned to the staff when I was talking to them 12 on a one-on-one basis on this issue, that we need to perhaps 13 even go further. And I would like to have that, you know, 14 discussed amongst staff as we come up for the next report. 15 And I support the biennial review by the way. 16 For example, in my district allocation, there was 17 a finishing out a project in the City of Stockton, which is 18 a wonderful project, but it happened to be for signal 19 synchronization. And the primary purpose is for reduction 20 of carbon monoxide, and yet they've been in attainment now 21 for the past couple of years, or at least a year. 22 And the Cities of Fresno and Bakersfield received 23 no money for signal synchronization, and they're out of 24 attainment for carbon monoxide. 25 So, this doesn't insist that they follow those 109 1 types of regimens; that if you have something out of 2 compliance of one of your criteria pollutants, maybe you 3 ought to aim at that first before you go give the same kind 4 of money to somebody that's in compliance. 5 Those are local issues, and they probably should 6 remain local issues. But that's just one example of many 7 that could be out there, where some projects maybe just 8 shouldn't be applied when, in fact, that area doesn't have 9 that particular problem, where another area in their 10 district is even more demanding for that solution. 11 But that runs the risk of getting too 12 prescriptive. And so, what I would like staff to at least, 13 Mr. Chairman, walk through that analysis of what that means. 14 But this begins the process. And I've always said so much 15 needed process for some kind of just a basic skeleton model 16 for the districts to follow when they go through their 17 decisions on how they're going to allocate this money. And 18 I think we've needed this for a long time. 19 So, Mr. Chairman, I'm prepared to support this. 20 CHAIRMAN DUNLAP: Okay. Thank you. If I might 21 ask Mr. Boyd, take a moment and talk about briefly the 22 origin of this report came from a bill. We're going to 23 forward it, ultimately forward it -- it's late, several 24 months late -- to the Legislature. 25 Talk a bit about that process, if you would, 110 1 because Ms. Edgerton made a point earlier about this is, you 2 know, a series of recommendations. We're not dictating. 3 There's some flexibility there. Why don't you cover that if 4 can. 5 MR. BOYD: Well, I'll begin, and I'll ask Ms. 6 Terry and her staff to augment some. I mean, this was 7 intended to be a one-time report to the Legislature to, in 8 its broadest terms, to report on the program. That turned 9 out to be a difficult charge, and it took us a long time to 10 come to grips with the issue, as you know, and so the 11 report, I believe, was due January of this year. And we 12 brought it to you, as you know, in February, because we were 13 wrestling with the difficulty. And I must confess its 14 priority suffered while we tried to SIP the FIP, and all 15 hands on deck to deal with that battle. 16 So, it was set aside, let's say, or we had to cut 17 the staff down to a minimum a while. 18 Nonetheless, in the development of the idea -- or 19 the report and trying to meet the Legislature's original 20 intent and meld that with the realities of today, which the 21 past several years have been austere budgets and fiscal 22 crises year after year, after year in California, and a lot 23 of competition for funding sources -- and it's been 24 referenced several times that when somebody, perhaps lacking 25 the historical view of some program and its funding source, 111 1 sees that perhaps there are some weaknesses in the program, 2 that funding source is open season to go fund something 3 else. 4 I mean, I'm trying to stay away from any 5 references to pork-barreling dollars around, but -- 6 CHAIRMAN DUNLAP: You're close. 7 MR. BOYD: But it's open season on some of these. 8 So, we were quite concerned, and that's why even in the 9 original draft we talked about, in these times, we ought to 10 have a little more regular reporting on this. It would be a 11 good idea to develop some criteria in the future. And our 12 original recommendation was we and CAPCOA work together in 13 the future to develop criteria and what have you. 14 Then it was presented to your Board. Now, that 15 was done in a process that involved working with the local 16 agencies, and bringing that first report forward, 17 interrupted, of course, by the SIP. 18 The rest is a little more knowledgeable history -- 19 or you have a little more knowledge on that. At the 20 February Board meeting, the increased concerns on the part 21 of all about today's difficult times, and let's not prepare 22 criteria in the future, let's get some criteria developed 23 right now, and we really need to have a better handle on 24 this idea of cost-effectiveness, and can you go take a look 25 at some of today's current projects to give us a view, 112 1 because cost-effectiveness, cost/benefit has become the 2 watchword of folks in difficult financial times. 3 And that's kind of brought us to where we are 4 today. Now, the latter recommendations have been done in a 5 shorter period of time with involvement to a lesser degree, 6 but some involvement, of the affected districts. 7 CHAIRMAN DUNLAP: Sure. 8 MR. BOYD: We've done it in as open a fashion as 9 possible given the time constraints. 10 CHAIRMAN DUNLAP: I guess what I'd like to do is 11 find a way to move this item, of course. We need to move it 12 and move on with our agenda. 13 But at the same time, we want to make sure that we 14 stick to the very important elements of this report to the 15 Legislature, which is this framework, this accountability, 16 this defense, if you will, for charges that this money is 17 spent willy-nilly, but also not overdoing it as far as 18 overview of the locals and providing flexibility. 19 What I would propose then -- what I would be 20 willing to support, certainly from my vantage point, would 21 be some information being added perhaps to the report or in 22 the form of a transmittal letter to the proper parties in 23 the Legislature that talked about this report being a 24 framework, having some very real elements to it that people 25 can hang their hats on and see where the priorities are for 113 1 clean air, but at the same time acknowledging that there may 2 be cases whereby -- special cases, and I think Mr. Baldwin 3 pointed out a very comprehensive outreach and educational 4 program that I'm sure reaps -- and I'm a bit familiar with 5 it -- I know it reaps a significant amount of public 6 education value. But there may be cases whereby locals may 7 have special needs where they wouldn't be able to follow 8 these recommendations to a tee, or that there may be cases 9 where they'd be justified in doing some things a little 10 differently. 11 I think that would perhaps send a message, 12 hopefully a clear message that, while a framework is 13 necessary, there may be some unusual circumstances where 14 they can get especially good value by doing some 15 nontraditional things. 16 Is it possible, Mr. Boyd, do you think, to --- 17 MR. BOYD: Yes, I think it's possible. I'll wait 18 for a total sense of the Board, but just to respond to your 19 specific request, I think it would be possible in a 20 transmittal letter to begin to convey some of that. I mean, 21 I frankly thoroughly enjoyed today's discussion, because I 22 thought it was an excellent one; so did the staff, an 23 excellent overview of the history. And I appreciated the 24 fact it's taken a lot of time, but I think it was valuable 25 because those of us who've been here a long time value the 114 1 history that goes into some of these issues. And unless you 2 have a complete sense of the history, it's very difficult to 3 reach decisions. 4 And it is true, the derivation of these funds and 5 their original intent and everything else -- everything that 6 was stated today is indeed on point. 7 A couple of other points I'd like to make, just 8 for the record, there are a couple of allusions to the fact 9 that maybe motor vehicles don't pay their fair share. And 10 being a stickler for fiscal correctness, one must remember, 11 and Mr. Covell pointed out -- with ARB, we're basically all 12 motor vehicle fee funded, and we've been slugging at this 13 for a long, long time. 14 And several years ago, when -- during another 15 constant siege of frugal times, the Legislature -- in fact, 16 the Administration -- went after the subvention program. 17 The ARB subvenes money every year to local air districts. 18 And that's as old as the program is in California. 19 It was general fund funded, and the general fund, 20 of course, was open season. And yours truly, and the 21 Chairperson at that time, championed the cause all the way 22 to the Director of Finance and Governor and got that program 23 funded 100 percent out of the motor vehicle account to save 24 it -- to answer the very issues that the local districts 25 point out; that motor vehicles are a big part of the 115 1 program, and they should get more motor vehicle related 2 funds. 3 So, I think in all, there's a pretty good balance. 4 But that's, again, just a little -- another piece of the 5 historical perspective. 6 Lastly, Supervisor Vagim's comments reminded me of 7 personal experiences that I and probably other staff members 8 have of getting calls from people who sit on these 9 public/private partnership local groups who have to hold 10 court and make decisions over these funds. 11 I've had some desperate calls over the years from 12 people asking, "Couldn't you be able to give us a little bit 13 of criteria," because it's very uncomfortable down here at 14 the local level when have a favorite pet project of the 15 folks in the city that in your heart you feel doesn't really 16 have that much air quality benefit, but it's really hard to 17 deal with, you know, a real favorite thing to do within the 18 community. 19 So, there is a happy medium here that we have to 20 strive for. And that's what we're all wrestling to do with 21 today. So, we will do the best we can to reflect the 22 sentiment of the Board after we hear the total sentiment of 23 the Board. 24 But I agree with the idea of trying to find a 25 happy medium, and not close the door on the little $35,000 116 1 investment -- 2 CHAIRMAN DUNLAP: Sure. 3 MR. BOYD: -- that yields perhaps a giant 4 dividend. 5 CHAIRMAN DUNLAP: I guess one final comment I 6 would make to pick up on, I think, the spirit in which my 7 colleague, Mr. Parnell, made the point about, you know, 8 people looking at budgets and looking for weak links in 9 programs that need to be funded. 10 Mr. Boyd and I had the opportunity this budget 11 cycle to go over to the Legislature and to listen to the 12 legislators talk about being responsible trustees of the 13 public's dollars. And it is this same Legislature that is 14 looking to us to generate this report, to do this. So, we 15 are held accountable. 16 I take exception with some of the locals that may 17 think that somehow we are trying to dictate to them, but we 18 are being held accountable for their actions to a large 19 extent. So, this is a partnership, a government/government 20 partnership as well. 21 Mr. Lagarias. 22 MR. LAGARIAS: Well, I'd like to comment on the 23 report. I think the difference between this report and the 24 February report is exceptional; that you've identified where 25 the monies are going, and identified it in areas that are 117 1 very helpful and understanding of what has gone on to date. 2 I have some difficulty with the proposed criteria 3 and guidelines. I don't know that we're at the point where 4 the criteria are necessary or should be standardized. I 5 think each district has its own needs. And I believe they 6 should have the flexibility of distributing the funds as 7 their requirements are. And if we want to suggest 8 guidelines on how to distribute their money for development 9 and the clean air plans or on the other areas, such as 10 leveraging funds and demonstration of new technology, I 11 think that's appropriate. 12 I do find the concept of standardization as an 13 onus. We can live with what the districts give us as long 14 as we give them guidelines on that. 15 And I think that on cost-effectiveness, again, 16 this is a guideline with the flexibility that if a district 17 has something that doesn't meet the guidelines, it can still 18 propose it with a justification for why it wants to go in 19 this direction. That's the only way we can keep the door 20 open for innovation and new approaches. 21 But the basic rules have been set for us. It's 22 got to meet the California Clean Air Act and the fee related 23 to motor vehicle emission reductions. 24 So, those are pretty straightforward. But the 25 more we try to give a standardized sheet to each district 118 1 the more we're creating paper work. And I don't think 2 that's appropriate just to repeat on monies. 3 CHAIRMAN DUNLAP: Good point. We have a draft 4 resolution before us. There's been a number of opinions and 5 perspectives shared. I would suggest that we take a moment 6 to look at the resolution and see if we can make this work. 7 While we're reviewing it, I have a question, Mr. 8 Boyd, about the resolution. 9 On the third page, first bullet under "Now, 10 therefore, be it resolved," it says that the Board should 11 publish a report on the use of the funds biennially. And 12 then the third bullet says that the Sacramento Metropolitan 13 AQMD should continue to report to us annually. That's 14 basically a data accumulation exercise? Is that what that 15 is, for us to be able to -- 16 MR. BOYD: Bullets 2 and 3 both call for annual 17 reporting to the Board, with the Board providing a biennial 18 report to the Legislature. 19 CHAIRMAN DUNLAP: I see. So, we'll just be 20 accumulating -- 21 MR. BOYD: The Sacramento District is called out 22 separately, because they have a separate statutory 23 authority. 24 CHAIRMAN DUNLAP: Does their separate statutory 25 authority include a reporting mechanism already anywhere? 119 1 MS. TERRY: No. This was a one time report to the 2 Legislature. 3 CHAIRMAN DUNLAP: Okay. Maybe I'm confused, then, 4 Are we treating them any differently here? 5 MS. TERRY: No. The attempt was to treat them 6 like everyone else. They would report annually to ARB, and 7 the staff of the Board -- 8 CHAIRMAN DUNLAP: Would compile the information. 9 MS. TERRY: -- would compile the information. 10 CHAIRMAN DUNLAP: And every two years, put forward 11 the report. Okay. 12 MS. TERRY: Just to clarify, we had not 13 necessarily intended a report to the Legislature every two 14 years, but a report to this Board at the Board's discretion. 15 CHAIRMAN DUNLAP: Sure. And to the locals. Okay. 16 SUPERVISOR VAGIM: Mr. Chairman? 17 CHAIRMAN DUNLAP: Supervisor Vagim? 18 SUPERVISOR VAGIM: I'm ready to move for adoption 19 of Resolution 95-32. 20 MS. EDGERTON: Second. 21 CHAIRMAN DUNLAP: Okay. We have a motion and a 22 second to adopt the resolution as written. 23 We need to have some discussion. Are there any 24 amendments that anyone's willing to put forward for Mr. 25 Vagim to consider in light of his motion? 120 1 MR. LAGARIAS: Well, I would like to propose an 2 amendment, that rather than talk about a comprehensive 3 standardized report, that the districts have to report 4 yearly, that they report using guidelines to be developed, 5 so that we get away from the concept of an ironclad, 6 standardized report. 7 SUPERVISOR VAGIM: Mr. Lagarias, the only thing I 8 understand why that was in there is that the staff had a 9 difficult time trying to get an apples for apples type of a 10 thing. And it was good to have some kind of a baseline that 11 districts would follow. 12 MR. LAGARIAS: Yeah, but the districts are not all 13 making apples. Some of them are producing oranges and 14 grapefruit. 15 SUPERVISOR VAGIM: But I think the reporting 16 process allows that liberty. It allows those -- you don't 17 have to have a strict adherence to. Maybe staff could 18 embellish. 19 CHAIRMAN DUNLAP: I think what staff is talking 20 about, if I'm up to speed, is a form, right? 21 MS. TERRY: Actually, we had discussed with the 22 CAPCOA Board of Directors, working through a committee to 23 jointly develop this process. 24 CHAIRMAN DUNLAP: Okay. 25 MS. TERRY: So, we didn't have a form in mind yet. 121 1 MR. LAGARIAS: Fine. Because I was going to 2 suggest working with CAPCOA. That's okay with me. 3 CHAIRMAN DUNLAP: Okay. Supervisor Roberts. 4 SUPERVISOR ROBERTS: Well, that echoes my own 5 concern. I guess, as someone who serves both on this Board 6 and an air pollution control district board, I was surprised 7 to find out today that there's tension between these groups. 8 But I'd like to see, to the extent possible, we can involve 9 them. 10 The concern that I heard was not so much about 11 filing a report, it's getting into what might be a very 12 complex process that's going to absorb a lot of time. I 13 think we've seen previously where we've had information and 14 we couldn't compare one to another; that it's pretty useless 15 to have that -- we might as well not even do it if we're 16 going to have that kind of information. 17 So, I think some standardization in the reporting 18 is a requirement. But I think the thing that we need and 19 we've got to keep sight on is to simplify this thing and to 20 make it as easy as possible. An I think that's what I'm 21 hearing from the districts. They don't want to be spending 22 a lot of money on, again, on just pushing paper around. 23 So, I think involving them in the process is the 24 solution. 25 CHAIRMAN DUNLAP: Okay. Good point. 122 1 Yes, Mayor? 2 MAYOR HILLIGOSS: I was just wondering if the caps 3 are still in there. In this report, it says that there's 4 going to be a cap on -- 5 CHAIRMAN DUNLAP: I think caps is a misnomer. 6 Lynn, if you'd speak to that. 7 MS. TERRY: Yes. I agree that caps is a misnomer. 8 One of the fundamental criteria beyond cost-effectiveness is 9 the clean air plans. And those, in and of themselves, 10 provide considerable, and they do reflect local needs. So, 11 we see this as a starting point for working with the 12 districts on the best kinds of projects that will help 13 implement their plans. And there's inherent flexibility in 14 that process in our minds. 15 MAYOR HILLIGOSS: Does that include the $20,000 16 per ton or, or what was it? 17 MS. TERRY: We saw that as a screening process. 18 But clearly, for new technology projects, there are many 19 cases where that -- a cap definitely would not apply, and we 20 tried to articulate that in the criteria and point it out. 21 We also wanted to point out that there are other 22 considerations beyond cost-effectiveness. How many 23 reductions will you et? When will they be achieved? Long- 24 term strategies, all of those also need to be considered in 25 the context of both the plan and the cost-effectiveness 123 1 criteria. 2 MAYOR HILLIGOSS: In other words, these are really 3 just guidelines that they don't have to follow? 4 MS. TERRY: Yes. We see over the next two years 5 working closely with the districts on this program, and hope 6 to bring back a very glowing report in two years to really 7 show that these dollars have been well spent. 8 MR. LAGARIAS: There is one other point. 9 CHAIRMAN DUNLAP: Yes, Mr. Lagarias. 10 MR. LAGARIAS: As I recall, when the monies first 11 became available, the districts were scrambling all over 12 trying to make sure they could spend the money allocated for 13 them, and they would go out and try to get somebody to come 14 in with a project so they could allocate the money to them. 15 And, as a result, some projects came in that were clearly 16 solicited but of limited value. 17 And I hope that we prevent that from occurring to 18 the extent it has happened in the past. 19 CHAIRMAN DUNLAP: Okay. Thank you. Any other 20 comments? 21 Yes, Mr. Parnell. 22 MR. PARNELL: I'm still bothered by some of the 23 language of the resolution. And maybe it's because I 24 misunderstand. I'm one of the few who don't represent a 25 local air district, so I'm anxious to see what happens to 124 1 those of you who do when you go back having passed this 2 thing as it currently exists. 3 But it seems to me that it's a significant point, 4 the last point in the resolution. 5 "In analyzing district expenditures of vehicle 6 registration fee revenues, the ARB may find that a district 7 has used contrary to the purpose of the law." 8 That's possible. I agree that that's possible. 9 But it's arguable. I suspect that some local districts 10 would like to come in and argue the point as to whether it 11 was appropriate or inappropriate. 12 And it just seems to me -- and I'm not against 13 reporting. In fact, I think it's a good thing to protect 14 the funding source. But I still inherently believe that 15 local control is a very important issue here. To the extent 16 that there are violations or abuses, we need a mechanism, 17 and I agree, to find those and to deal with those in our 18 partnership, in our partnership. 19 But government has historically done the same 20 thing that I think this does today, and that is build 21 another level of bureaucracy for oversight which will cost 22 money, whether we recognize that or not. And so, that 23 bothers me. 24 And if someone can convince me otherwise -- 25 SUPERVISOR VAGIM: Can you, Mr. Parnell -- Mr. 125 1 Chairman? 2 CHAIRMAN DUNLAP: Sure, Supervisor Vagim. 3 SUPERVISOR VAGIM: Mr. Parnell, I don't see it 4 being that prescriptive. I see it as a guideline. I see it 5 ass a very needed guideline. Staff worked hard to try to 6 come up with something that they felt, in their analysis, 7 would be some thresholds that would be a comfort range for 8 projects that were doing the things that the legislative 9 requirements intended. 10 I can tell you -- and I think the Valley District 11 has got probably one of the most complicated -- in the sense 12 of a geopolitical makeup, because we don't have a very 13 prescriptive law that the South Coast does and the Bay Area 14 does. It's carte blanche. 15 But unlike a county district, where you have five 16 members who coalesce on various issues and kind of know how 17 to rabbit punch each other and that kind of stuff, we've got 18 11 member boards with three city members and eight 19 supervisors for a 250-mile range. I'm telling you, there's 20 not much coalescing on how you work this whole thing out. 21 And so, pet projects can come up real fast, and turf battles 22 can begin real fast. 23 MR. PARNELL: I understand that. 24 SUPERVISOR VAGIM: And so, baselines here are very 25 important, particularly to the Valley District, at least 126 1 from my perspective. 2 CHAIRMAN DUNLAP: Let's hear from one of the 3 rabbit punchers. 4 (Laughter.) 5 SUPERVISOR ROBERTS: His description of the 6 process really isn't much different from what we experience 7 even when there's five supervisors sitting as a board. You 8 will see somebody surface a project and try to politically 9 move it, and it may have the most obscure connection with 10 cleaning up the air. And I think that -- I read this, and 11 when I first went through this, I underlined that a couple 12 times, and I think I feel comfortable that it's in there as 13 kind of a last resort. And I don't find it particularly 14 threatening. 15 But I think that there is an obligation on the 16 part of this Board to make sure that this thing does say 17 generally on track. And I believe completely in the local 18 districts having the say in how these monies are going to be 19 spent. But I think somebody's got to -- somebody has got to 20 be there to remind them occasionally, I think, to keep the 21 programs going in the right direction. 22 So, I don't that threatening, Mr. Parnell. 23 MR. PARNELL: I agree that someone has to be 24 there. We go from someone -- when I read these words, some 25 of it seems very prescriptive to me. Someone needs to 127 1 convince me that it is not. 2 And the common threat of every piece of testimony 3 that we heard today was that we need to do some things in 4 our local areas that are unique to our local areas, and we 5 want to continue to be able to do that. And you're telling 6 me that they can; they're concerned that they can't. 7 That creates a problem for me. And I don't want 8 to prolong -- 9 SUPERVISOR ROBERTS: I told you I was surprised to 10 hear the comment. So, you know, that has not been our 11 experience, at least in San Diego. 12 CHAIRMAN DUNLAP: Okay. Very good. 13 Ms. Edgerton. 14 MS. EDGERTON: Speaking for my own part, I am 15 constantly recalling the Governor's instruction that we 16 will, California will comply with the Clean Air Act and we 17 will meet the requirements in our State Implementation Plan 18 so that our State will not be subject to sanctions. 19 And having gone through what I saw was a very, 20 very difficult process for the whole State all last year, 21 developing plans, looking at measures to see what emissions 22 reductions were to be achieved by each plan, and having -- 23 you know, sitting here for 25 hour meetings with tremendous 24 concern from all sectors of the society -- of our California 25 society, I just wanted to say that -- so that there's not a 128 1 misunderstanding, I felt very strongly that we do need to be 2 sure that we make every effort to work together to focus on 3 those measures which can actually deliver the cleaner air 4 that both the law and the people are asking for. 5 So, that's the source of my interest in trying to 6 have this dialogue and these guidelines move forward. 7 Having said that and taken up more of your time 8 just to try to be sure that some of the agencies understand 9 at least where this Board member is coming from in part, 10 I'll call the question. 11 CHAIRMAN DUNLAP: Sure. That'd be fine. 12 I'd like to close discussion. I think it's' been 13 healthy. I think we've heard from some witnesses that have 14 been well prepared, made their points. 15 I'd ask the Board Secretary to call the roll. We 16 have a motion and a second on the table, and it's for 17 Resolution 95-32. 18 MS. HUTCHENS: Boston? 19 DR. BOSTON: Yes. 20 MS. HUTCHENS: Calhoun? 21 MR. CALHOUN: Aye. 22 MS. HUTCHENS: Edgerton? 23 MS. EDGERTON: Yes. 24 MS. HUTCHENS: Hilligoss? 25 MAYOR HILLIGOSS: Aye, with my -- if these are 129 1 just guidelines. 2 MS. HUTCHENS: Lagarias? 3 MR. LAGARIAS: Aye. 4 MS. HUTCHENS: Parnell? 5 MR. PARNELL: A very reluctant yes. 6 MS. HUTCHENS: Roberts? 7 SUPERVISOR ROBERTS: Aye. 8 MS. HUTCHENS: Vagim? 9 SUPERVISOR VAGIM: Aye. 10 MS. HUTCHENS: Chairman Dunlap. 11 CHAIRMAN DUNLAP: Aye. 12 MS. HUTCHENS: Passes 9-0. 13 CHAIRMAN DUNLAP: Thank you. 14 MAYOR HILLIGOSS: With the letter, right? 15 CHAIRMAN DUNLAP: Yes, with the letter. Right. 16 And I'd be happy to have some input from Supervisor Vagim 17 and Mr. Parnell on that letter. 18 Okay. What I'd like to do is to continue to work 19 the agenda. We have some time pressure on some of my 20 colleagues on the Board. But we're going to work through. 21 Why don't we take a recess for five minutes. 22 We'll come back about 10 after 12:00. 23 (Thereupon, a recess was taken.) 24 CHAIRMAN DUNLAP: Because of the limits of time, 25 we'll reconvene. I'll make my comments brief. I've spoken 130 1 to staff. They're going to give a complete, but very 2 succinct presentation so we'll be able to conclude the 3 Board's business hopefully within the next hour. 4 The second item on the agenda today is 95-7-2, a 5 public meeting to consider proposals for the Air Resources 6 Board's innovative clean air technologies program, otherwise 7 known as ICAT. This item is a consideration of the 8 proposals for the Air Resources Board's ICAT program. The 9 purpose of this program -- and we heard about this a month 10 or two ago -- is to support technologies that no only have 11 high potential for improving air quality in our State, but 12 also offer great promise for stimulating the State's economy 13 through significant commercialization opportunities. 14 At the April meeting, the staff gave us the 15 overview of the program and informed us that they would be 16 coming back this month with specific proposals for the 17 Board's consideration. 18 Today, we have before us four proposals that are 19 being recommended for the Board's consideration. 20 At this point, I'd like to ask Mr. Boyd to 21 introduce the item, and we'll move forward. Jim? 22 MR. BOYD: Thank you, Mr. Chair, as you just 23 mentioned it was specifically the April Board meeting that 24 we gave you a detailed overview of this new program. 25 This program will provide seed money for projects 131 1 to move from research and development to the 2 commercialization phase. 3 Let me point out to you that in order to be 4 eligible for consideration under this program, proponents 5 must commit significant resources of their own and they also 6 have to show resource commitments from other outside 7 sources. 8 We've received a number of excellent proposals for 9 funding commercial development under this program, evaluated 10 these proposals, determined which ones can support the 11 Board's goals of cleaning up our air and fulfilling the 12 requirements of the SIP in the future, while simultaneously 13 helping this State's economy. 14 Of the 14 proposals that were evaluated, staff 15 recommends that the Board consider four to be approved for 16 funding. Myself and my deputies believe the objectives of 17 these four proposals are indeed consistent with the 18 aforementioned Board policy statements. 19 Also, these proposals meet the technical and 20 business requirements of the program that were established 21 well in advance of the proposals being submitted. 22 With that, I'll quickly turn it over to Mr. Manjit 23 Ahuja of the Research Division who will take you through the 24 program. 25 MR. AHUJA: Thank you, Mr. Boyd. 132 1 Good afternoon, Chairman Dunlap and members of the 2 Board. 3 As Mr. Boyd mentioned, we provided you with a 4 brief background in the April Board meeting, and I'll be 5 happy to go over the details if the Board has any questions; 6 otherwise, I'll quickly go to today's presentation. 7 The next slide shows the steps to 8 commercialization and capital availability that new 9 technologies must overcome before they can make money in the 10 general economy. 11 The next slide shows general criteria for rating 12 the ICAT proposals. 13 The next three slides are pie charts showing the 14 matching funds requirements. Basically, 20 percent has to 15 come from the applicant, 30 percent from other sources, and 16 only 50 percent will be provided by the Air Resources Board. 17 The next slide shows the results of our 18 solicitation efforts. As you can see, we received 56 19 preproposals, and we invited 22 of those to come back with 20 full-blown proposals. And three were disqualified because 21 of administrative reasons, and we were left with 14 22 proposals, which we have reviewed. 23 The next slide shows the selection criteria that 24 was used by the proposal reviewers. 25 The next slide shows the internal and external 133 1 reviewers that were involved. Staff from ARB's Research, 2 Stationary Source, and Mobile Source Divisions used these 3 criteria to evaluate the proposals. In addition, we 4 contracted with six outside reviewers to participate in 5 these evaluations. 6 Staff chose these external reviewers from the 7 State University System, because the Governor's recent 8 Executive Order limiting the use of sole-source contracts 9 precluded the possibility of contracting outside the State 10 system within the timeframe required for the review. 11 The external reviewers have extensive technical 12 and business backgrounds and provided staff with very 13 valuable comments and extensive review. If it would 14 interest the Board, I would be happy to provide their 15 backgrounds in detail. 16 The next slide identifies the three reviewers 17 chosen by the staff for their technical expertise: 18 Professor Daniel Chang from U.C. Davis, Professor Scott 19 Samuelsen from U.C. Irvine, Professor Forman Williams from 20 U.C. San Diego. 21 The next slide identifies the three reviewers 22 chosen for their business expertise: Professor Samuel 23 Doctors from CSU Hayward, Professor Jane Hall from CSU 24 Fullerton, and Cornelia Peshman from U.C. Irvine. 25 As shown on the next slide, we are recommending 134 1 that you approve four proposals for funding under the ICAT 2 program. We selected these proposals because they address 3 important issues -- important program needs at the Air 4 Resources Board, are technically sound, have the potential 5 to improve air quality, have good market potential, and 6 could be commercialized within a few years. 7 The cumulative cost of these four projects 8 approaches $5 million, of which close to million dollars of 9 State funding is being requested. We did not select the 10 remaining ten proposals for a combination of different 11 reasons. Some of the proposals included technologies that 12 were too early in their development stage, while some other 13 proposals provided insufficient detail to assess their 14 technical and economic feasibility and viability. 15 The guidelines in the ICAT RFP specified that the 16 overhead was not to exceed 100 percent, fringe benefits were 17 not to exceed 35 percent, and general and administrative 18 expenses were not to exceed 15 percent. In other words, we 19 put a cap on the amount of these indirect costs they could 20 charge to the ICAT project. 21 Also, we insisted that the contractors could not 22 charge any fee or profit on any of these four proposals. 23 The next four slides will show in turn each of the 24 proposals that we are recommending. 25 The first proposal is entitled "Cement Kiln NOx 135 1 Control: Reburn and Enhance Gas Reburn." This was 2 submitted by Acurex Environmental Corporation, located in 3 the Bay Area. 4 Development of this technology will preserve the 5 economic viability of the California cement industry. 6 Acurex would develop enhanced gas reburn 7 technology for use in the dusty environment of a coal-fired 8 cement kiln. Although the number of cement kilns is not 9 large, they are among the highest NOx emitters and have few 10 NOx control options. The technology is capable of 40 11 percent reduction with simple gas reburn and 70 percent 12 reduction with enhanced gas reburn. 13 The Acurex project cost is about $760,000, 14 including $567,000 in matching funds and $193,000 from ICAT. 15 The original proposal requested $227,000, but we negotiated 16 down by $34,000 based on Acurex having exceeded the ICAT 17 guidelines for overhead and other costs. Matching funds for 18 this project will be provided by the Gas Research Institute, 19 GRI, Riverside Cement Company, and Coen, with Coen supplying 20 the reburn hardware. We expect the commercialization would 21 occur within two to five years. 22 The second proposal is entitled, "Clean Air Two- 23 Stroke for Utility Engine Applications." 24 This was submitted by BKM, Inc., located in San 25 Diego. 136 1 This technology could achieve substantial 2 emissions reductions from small utility engines, which are 3 one of the highest emitting classes of engines. 4 BKM would continue development efforts on a low- 5 emitting two-stroke utility engine. They would perform 6 bench testing and specification development of major 7 components, design, and manufacture prototype engines, and 8 test them for emissions and durability. 9 The BKM design features an electronically 10 controlled fuel injection system, which BKM intends to 11 develop at a commercially viable rate. 12 Emission testing results on an early prototype 13 chainsaw engine has shown that hydrocarbons and carbon 14 monoxide were about half of the 1999 emissions standards for 15 t his class of engine, while NOx was about one-quarter of 16 the 1999 standards. Those have been approved by the Board. 17 The BKM project is for $1,199,000, including $1 18 million in matching funds, and $199,000 from ICAT. The 19 original proposal requested $250,000 from ICAT, but we 20 negotiated this down by $51,000 because of the same reason 21 that I mentioned in the other proposal. 22 Matching funds are being provided by Environmental 23 Engines Corporation, which is the commercialization arm of 24 BKM, and the New York State Energy Research and Development 25 Authority, NYSERDA for short. NYSERDA has already 137 1 contributed $540,000 to BKM for this project. We expect 2 commercialization would occur within the next two to four 3 years. 4 The next project is "Ultra Low-NOx Gas-Fired 5 Burner with Air Preheat." This was submitted by Coen 6 Company, located in the Bay Area. 7 This project addresses the large market sector of 8 industrial preheat burners. The proposal defines a 9 technically sound plan to produce a new generation of 10 natural gas fired low-NOx burners. The commercial 11 availability of this device would allow new and existing 12 boilers and furnaces that use preheat to obtain approval 13 from districts under stringent California regulations 14 without the use of costly selective catalytic reduction 15 technology, SCR technology. 16 Coen would develop and commercialize an ultra low- 17 NOx gas-fired burner to address the large market sector. 18 The Coen project cost is $1,9992,000, including $1,797,000 19 in matching funds and $195,000 from ICAT. 20 The original proposal was for $238,000 from ICAT, 21 but we negotiated it down by $43,000 for the reasons 22 mentioned earlier. 23 Matching funds for the project would be provided 24 by Coen, the Gas Research Institute, Southern California 25 Gas, and Southern California Edison, and Acurex. We expect 138 1 commercialization would occur within two to four years. 2 And finally, the last proposal that is being 3 recommended for funding is entitled, "High-Efficiency 4 Catalytic Converter Prototype Demonstration." This was 5 submitted by Ultramet, located in Los Angeles County. 6 Ultramet would continue to develop its catalyst 7 technology that uses a silicon carbide foam as the catalyst 8 support. Smaller, more durable, and lower cost catalytic 9 converters can be built using this technology. 10 The Ultramet project cost is $487,000, including 11 over $244,000 in matching funds to be provided by Ultramet, 12 and almost $243,000 from ICAT. The original proposal was 13 $246,000 from ICAT, but we negotiated this down for the 14 reasons mentioned earlier. 15 There are ten proposals that the staff is not 16 recommending for funding. In the interest of time, I will 17 not go through the details of these projects, but would be 18 happy to provide the staff's reasons for not recommending 19 those proposals for funding. 20 This completes my presentation. I'll be happy to 21 answer any questions that the Board may have. 22 CHAIRMAN DUNLAP: Thank you. Any of my colleagues 23 on the Board have questions for staff? 24 Mr. Calhoun. 25 MR. CALHOUN: I don't have any question, Mr. 139 1 Chairman, but I do have a comment that -- and it's a concern 2 that I have, and it's one that I mentioned when we first 3 were exposed to these particular project. And that is that 4 all the reviewers of these projects are from the 5 universities. And I have difficulty with that. 6 It seemed to me that somewhere we ought to be able 7 to find someone in business or private industry that could 8 participate in the review of some of these projects. 9 And I understand the legal reasons for it, but 10 there sure are our counsel, along with the Attorney 11 General's Office, ought to be able to draft us some kind of 12 legal document to protect the State, such that the concern 13 that they have expressed -- that is, the State being 14 properly protected, we ought to be able to overcome that. 15 And I'd still like to see a major effort put forth 16 towards trying to get someone other than the university 17 professors doing all this review work. 18 CHAIRMAN DUNLAP: Good point. I've had -- Mr. 19 Boyd and I have engaged in some discussions about advisory 20 committees, and screening committees, and I'm pleased with 21 the attitude that staff's expressed to me about expanding 22 our horizons in this area. 23 I will continue to work with Mr. Boyd, and we'll 24 expand some of these screening committees and make sure 25 they're reflective of I think the expertise that the private 140 1 sector has to offer us and would be willing. And I would be 2 happy for those Board members that want to be briefed will 3 get a briefing in 45 days or so, and tell you how it's 4 going. Okay? Does that satisfy? 5 All right. 6 MR. BOYD: Mr. Chairman, a quick comment here. 7 CHAIRMAN DUNLAP: Sure. 8 MR. BOYD: We're certainly not adverse to this at 9 all, Mr. Calhoun. And we'll be glad to work with the Board. 10 In fact, we'd solicit suggestions from the Board. One, just 11 for your information -- again from the accumulation of a lot 12 of years doing this -- we have a lot of difficulty, and we 13 can perhaps overcome that difficulty, in getting people from 14 the private sector because, when they are confronted with 15 the conflict of interest, and the need to reveal all kinds 16 of financial data in order to serve in these kinds of 17 capacities, we lose the lion's share of the people that we 18 approach. 19 And that's just a -- I'm sure there's somebody out 20 there somewhere, and we'll keep looking, but it always has 21 been a significant complication, particularly in California, 22 which I think is among perhaps the most stringent State 23 there is. 24 So, we have to overcome that as well. 25 CHAIRMAN DUNLAP: But, Jim, make no mistake that 141 1 there's much that could be offered in this area, and we need 2 to strive to try to secure these people. And if it takes 3 Mr. Kenny getting involved in reevaluating whatever kind of 4 disclosure requirements we may have imposed upon them, for 5 all the right reasons, we might need to make some changes. 6 So, let's do that. Mr. Calhoun, I'll work with 7 the staff. We'll come back to you on that. 8 All right. Any other questions? Issues? Okay. 9 We have no witnesses, as I understand it? 10 All right. Do we have any written communication 11 to us on these items? 12 MR. BARHAM: Yes, we have one letter from the City 13 of Gridley. 14 CHAIRMAN DUNLAP: Okay. Why don't you cover that 15 briefly if you would. 16 MR. BARHAM: In short, the letter was prepared by 17 Mr. Tom Stanford, Mayor Pro Tem of the City of Gridley. He 18 expresses concern about the rice phase-down program, rice 19 burning phase-down program that was established by the 20 Legislature and the Governor a number of years ago, and that 21 no viable alternatives have appeared on the horizon, and is 22 offering the facility that was proposed in the ICAT program, 23 a methanol production facility from using rice straw, rice 24 stubble as ethanol, as the fuel or the raw material for the 25 ethanol production. 142 1 He states in the letter that he's concerned about 2 our apparent opposition to the use of ethanol as a fuel 3 additive; that he expresses some concern about imposing this 4 as a market solution to the rice burn phase-down. 5 He raises some legal questions about the openness 6 of our review process for contracts. And, lastly, I think 7 this reflects back again to the openness of the review 8 process, discusses the fact that he was unable to compare 9 his proposal with the other 13 proposals that were submitted 10 as part of this program. 11 Just briefly to respond to some of these comments, 12 and I'm also going to ask Jim Ryden to address some of the 13 legal comments, legal issues that were raised in this. 14 But in terms of opposing ethanol, I think we are 15 aware of -- are all aware of the concerns about the increase 16 of evaporative emissions, particularly with use of ethanol 17 fuels. But that really did not enter into the deliberations 18 in this particular project. 19 We, in fact, had concerns specifically about the 20 proposal itself in terms of the amount of information that 21 was available in the proposal to make a real evaluation. It 22 was a very, to be blunt, skimpy proposal. 23 CHAIRMAN DUNLAP: Okay. I think you've covered 24 the ground there. I would this, that -- and you know this 25 well. People invest a lot of time in bidding for work, 143 1 research work with us and with others, and I would hope that 2 we would, as a matter of course, provide a high level of 3 customer service to them; we disclose to them the process we 4 went through, tell them clearly where there were 5 deficiencies, offer to work with them to refine the project; 6 let them know when there might be opportunities in the 7 future for funding from us or other places. 8 I think if we do that, we can win a few friends. 9 I'd ask that you do that in this case. Also, as far as the 10 process, be sure that our process for screening is above 11 reproach. I know it is. You briefed me. But just make 12 sure that people know -- 13 MR. BARHAM: Certainly. 14 CHAIRMAN DUNLAP: -- the time and attention we 15 give this process. 16 But we are, on occasion, going to get a 17 disgruntled bidder, and it's important they be treated with 18 consideration and kindness. And I'm sure you will do that. 19 I have no further questions about this one in 20 particular. 21 Yes, Supervisor Vagim. 22 SUPERVISOR VAGIM: Thank you, Mr. Vagim. 23 Now, Mr. Kenny, I get to ask my question I've been 24 waiting two months to ask. 25 I just want to know -- and in the interest of 144 1 time, I'll try to ask this as short as possible, and you can 2 give a short as possible answer if you can. 3 We had some time back a kind of an ancillary 4 contract that we put out there to examine a two-stroke 5 engine, because there was some promise in what one 6 individual came up and said, "Let's give it a try." 7 And we had some discussion here about, well, 8 should we fund this, why are we funding this, that kind of 9 thing. And I wanted to ask the question two months ago, why 10 wasn't that project folded into this? And why are these 11 types of projects ad hoc coming in from different sides 12 when, in fact, you have this process in place? 13 MR. CACKETTE: Supervisor Vagim, I can try to 14 answer your question for you briefly. 15 The whole issue here is the Board adopted two 16 phases of standards for utility type engines, and the second 17 phase involved, at least in our technology assessment, the 18 need for catalytic controls on things like weed whips and 19 chainsaws, and those kinds of things, and it had not been 20 demonstrated as a commercial technology at the time the 21 Board adopted the standards. 22 We went out with a solicitation, a competitive 23 bid, to see if someone had any good ideas about this several 24 years ago. We did get three bids, I believe, and the most 25 responsive bid was one that the Board approved in that 145 1 contract. 2 We were still somewhat skeptical about its 3 commercial viability, since it was really in the development 4 phase at that time. The Board approved the contract with 5 two phases. The first phase has been completed. They did 6 develop a technology that looks like it will work fine. 7 However, the cost of the technology was about 8 double of what was anticipated at the time. So, in our 9 recent discussions with the contractor, we are probably not 10 going to go ahead with Phase 2. Because, while it works, it 11 costs too much money. 12 In the meantime, this proposal came along with a 13 technology here that appeared to be developed with private 14 sector funds to a much higher level. It does not involve 15 catalytic converters, yet it has promise of meeting the 16 standards. It's at a near commercialization phase. And 17 they submitted it under this project, which basically helps 18 people get through that "valley of death" that we showed. 19 SUPERVISOR VAGIM: So, I guess the question is, 20 what decision or what process did staff go through to say, 21 well, we need this now for this versus why don't we wait for 22 the ICAT process to put out some requests and see who we can 23 bring in with the most promise? 24 MR. CACKETTE: Well, the original proposal was -- 25 predated ICAT. There was no such program at the time. We 146 1 were trying directly to respond to the standards that the 2 Board had adopted that go into effect in 1999, and 3 demonstrate that there was a technology there, because we 4 were not seeing enough promise coming out of the industry 5 itself, the people that make the engines. 6 SUPERVISOR VAGIM: Right. I understood that. So, 7 are you saying then that from now on ICAT will probably be 8 the vehicle to use? 9 MR. CACKETTE: No, not at all. In fact -- 10 SUPERVISOR VAGIM: Will you still have some -- 11 (Thereupon, both parties smoke simultaneously.) 12 MR. CACKETTE: Some of the projects that came in 13 under ICAT didn't meet ICAT's criteria, because one of those 14 criterion happens to be your very near commercialization. 15 And the Board sometimes funds projects that are in much more 16 of a developmental stage. 17 Those projects were downgraded in ICAT, but might 18 be able to qualify under a research, for example, program. 19 So, it depends on the needs. I mean, this one has 20 a strong component of creating jobs, creating viable 21 products to use in California and for export, helping 22 companies get through that our other ones don't emphasize as 23 much. 24 So, it really depends on -- 25 SUPERVISOR VAGIM: So, you still have some of 147 1 those coming. 2 MR. CACKETTE: We'll have some in both categories. 3 And we'll try to put them in the right one. 4 SUPERVISOR VAGIM: Okay. Thank you. 5 CHAIRMAN DUNLAP: Okay. Any other questions or 6 comments? Okay. Very good. 7 MR. LAGARIAS: Mr. Chairman, I propose adoption of 8 Resolutions 95-33, 34, 35, and 36 that cover the ICAT 9 program. 10 CHAIRMAN DUNLAP: Very well. Is there a second? 11 MR. PARNELL: Second. 12 CHAIRMAN DUNLAP: Okay. Mr. Parnell. 13 Any further discussion? Okay. I think we'll take 14 this one -- since there are four resolutions, and they're in 15 our bound book, we'll take them on a voice vote. All those 16 in favor -- 17 (Ayes.) 18 -- of adopting all four of those resolutions, 19 please say aye? 20 (Ayes.) 21 Opposed? Okay. I need to blame Dr. Boston for 22 that, probably. 23 Thank you. Motion carries. They're approved. 24 Thank you, staff, for being flexible and getting this before 25 us quickly. 148 1 The third item on the agenda today is 95-7-3, 2 public meeting to consider planned air pollution research, 3 1995 update. 4 This item is the annual update of the Board's 5 planned air pollution research effort. This document was 6 reviewed by the Board's Research Screening Committee on May 7 11th. 8 As most of you know, this Committee was 9 established by law to advise the Board as we develop and 10 implement our research program, and to recommend for 11 approval the research proposals that are designed to meet 12 the objectives that we, this Board, establish. 13 The plan is updated annually to ensure that it 14 reflects the Board's current concerns and priorities. 15 At this point, again, I'd like to ask Mr. Boyd to 16 kick off the staff's presentation. Jim? 17 MR. BOYD: Thank you, Mr. Chairman. Today, we 18 want to present to you for your consideration, as indicated, 19 the annual update of the Board's planned research. The 20 planned research update, as you know, is developed over the 21 course of several months by the staff and the Research 22 Screening Committee. 23 The planned researched is keyed directly to the 24 Board's long-term goals and objectives. 25 As Executive Officer, I've established seven 149 1 research teams within the staff of the Air Resources Board, 2 corresponding to the elements that you find in the plan. 3 These teams meet to discuss the ways in which research 4 projects can help us move more efficiently towards the 5 Board's objectives. 6 Each time identifies research projects, 7 prioritizes them, and submits them to the Executive Review 8 Committee, which I Chair, and consists of my two deputies, 9 Mike Scheible and Tom Cackette, and the Research Division 10 Chief, Dr. John Holmes, 11 We've spent many hours reviewing each of the teams 12 list of proposed projects, discussing how they will help us 13 meet the Board's objectives and the stated objectives of 14 the Governor's Budget and of the Administration in general, 15 and to be sure that they correspond to what we perceive to 16 be the Board's priorities based on our prior year's 17 discussion with you. 18 We can't, of course, do all the projects that 19 everybody wants to have done. The budget just doesn't 20 permit that. So, the final task of my Executive Review 21 Committee is to decide which projects are to be scaled back 22 or postponed until future years. 23 After we've done this, the plan goes to the 24 Research Screening Committee for their review and comment, 25 and, as you know, further amendments are made annually at 150 1 the Committee's suggestion. 2 The proposed extramural budget for fiscal year 95- 3 96 is $3,469,000, which is subject to the Governor's Budget, 4 and to legislative approval prior to the beginning of the 5 fiscal year. And, of course, another year and we don't have 6 that yet. But we remain optimistic. 7 This budget is allocated to program areas as shown 8 in the plan. Our budget is not in controversy before the 9 Legislature, luckily. 10 In addition to the extramural research program, 11 the Board sponsors research under several other programs for 12 which the Legislature has provided more narrowly defined 13 objectives, either in statutes or in the Budget Act itself. 14 These programs, which are periodically reviewed by you, are 15 listed for your information on page 3 of the plan, but don't 16 appear in the plan proper. 17 These programs are carefully coordinated with the 18 Board's extramural research program. The resulting research 19 projects are also reviewed by you before contracts are 20 awarded. 21 Now, I'd like to introduce Mr. Ralph Propper of 22 the Research Division staff, who will present this year's 23 update of the research program. Ralph? 24 MR. PROPPER: Thank you, Mr. Boyd. And good 25 afternoon, Chairman Dunlap and members of the Board. 151 1 In accordance with the California Health & Safety 2 Code, the Air Resources Board carries out a comprehensive 3 program of research into the causes and effects of air 4 pollution in California as well as possible solutions. 5 We're required to research several particular 6 areas. The ARB's Mobile Source, Stationary Source, 7 Technical Support, and Monitoring and Laboratory Divisions 8 all play major roles in designing our research program, and 9 they're actively involved in the research teams that Mr. 10 Boyd established. 11 Each team is represented here today if you have 12 any questions you'd like to have answered on specific 13 programs or project areas. 14 The document you've received includes an 15 introduction that describes how the plan was put together 16 and brief descriptions of proposed new research projects. 17 It also contains three appendices. 18 On the next slide, we have grouped the proposed 19 projects identified by the research teams into four general 20 ARB program areas. 21 Our research projects are designed to address 22 specific needs of the ARB. I will limit my presentation to 23 the new projects we plan to initiate next fiscal year, and 24 I'll discuss them by program area. 25 On the next slide are the first three projects 152 1 proposed in the first program area, motor vehicles and 2 fuels. The first project is designed to demonstrate an 3 advanced electric vehicle battery, known as a lithium-ion 4 battery. This battery may help to ensure compliance for the 5 1998 zero-emission vehicle mandate. 6 For mobile source fuel cell applications, a 7 reformer is usually used to produce hydrogen for more 8 conventional fuels. 9 This may result in emissions of reactive organic 10 gases. The purpose of the second project is to assess the 11 emissions from fuel cell reformers. The South Coast AQMD is 12 interested in co-funding this project. 13 Convenience of charging is often cited as a 14 concern in electric vehicle marketing studies. The purpose 15 of the third project is to develop and demonstrate an 16 automated electric vehicle autodocking system. The 17 contractor will coordinate with electric vehicle 18 manufacturers to ensure that the resulting system can be 19 smoothly integrated into an electric vehicle. 20 The ARB may be able to obtain matching funds from 21 industry parties. 22 The next slide shows the two remaining projects in 23 this program area. Radio transponders have been used to 24 transmit vehicle on-board diagnostic information to remote 25 sites. The fourth study is designed to advance this 153 1 technology, so that when a fault is detected, the vehicle 2 identification number and all the diagnostic codes stored 3 will be transmitted. 4 The results of the study will be used to determine 5 the feasibility of automated fleet monitoring for inspection 6 programs or new regulations. 7 Caltrans has expressed an interest in co-funding 8 this. 9 Emissions from diesel-powered heavy-duty vehicles 10 represent about 20 percent of the total NOx emissions 11 statewide. Engines capable of meeting ultra low-NOx 12 emission levels are necessary in the long term to attain air 13 quality standards. 14 The last project in this program area will 15 investigate innovative diesel technology and optimize 16 existing technology to develop a very low NOx engine. The 17 ARB will explore joining manufacturers and other government 18 agencies for this project. 19 The next slide shows the two new projects proposed 20 in the toxic air contaminants program area. A recent study 21 reviewed source test data collected by industry under the 22 air toxic hot spots program. If found that 500 reports 23 contain data that can be used to develop air toxic emission 24 factors. 25 However, funding only allowed 180 to be evaluated. 154 1 The first project in this area would develop additional 2 emission factors by evaluating the remaining 320 source test 3 reports. 4 The resulting emission factors will be used to 5 estimate emissions, thereby saving industry the expense of 6 source testing. 7 In 1991, the ARB identified nickel as a toxic air 8 contaminant. Nickel plating tanks may be sources of 9 airborne nickel emissions, but only limited data is 10 available. This project will collect and review available 11 nickel emission testing reports and either develop emission 12 factors for nickel plating or identify data gaps. 13 If significant data gaps are identified, a source 14 test would be developed to get the needed data. 15 On the next slide, we're proposing three new 16 projects to support the ARB's responsibilities under the 17 California Clean Air Act. 18 For the first project, speciation profiles will be 19 developed for selected consumer products and industrial 20 surface coatings. Using this information, ozone forming 21 reactivities will be estimated for these products as 22 required to meet SIP requirements. 23 Airshed models are used to develop controls 24 strategies for ozone standard attainment. In order to 25 understand how well a model can predict changes in air 155 1 quality that result from changes in emissions, the second 2 project will obtain ozone trends in the South Coast Air 3 Basin from meteorologically similar episodes. 4 The great improvement in air quality there allows 5 a test of airshed models if similar episodes can be found 6 over a range of years to compare with model predictions. 7 Vegetation emits substantial quantities of 8 reactive organic gases, which must be quantified to develop 9 effective ozone attainment strategies. 10 The last project in this area will develop a model 11 to estimate emission factors as a function of plant species. 12 A land-use database will be used to estimate the biomass 13 distributions, and biogenic emissions will be determined 14 using this database and the model. 15 The next slide shows the two projects proposed in 16 the area of air quality standards. The first project will 17 continue monitoring for acid deposition effects in the high 18 Sierras (sic). Acidity there is approaching levels that 19 cause biological damage, and long-term monitoring is needed 20 to provide a warning of changes that may be harmful. 21 The monitoring will be coordinated with a NASA 22 supported project. 23 The second project will continue operation of 24 forest health monitoring stations in the State. Reports 25 have documented severe ozone injury to trees in some areas 156 1 and moderate injury elsewhere. 2 The monitoring will help to determine whether 3 forest injury is due to exposure to damaging levels of ozone 4 and nitrogen derived pollutants. 5 As Mr. Boyd noted in his introduction, we have an 6 extramural research budget of just under $3.5 million. And 7 we propose 12 new projects next fiscal year. This pie chart 8 shows the proposed allocation among the various program 9 areas for next fiscal year. 10 I would now like to show you the significant 11 workload that we place on your Research Screening Committee, 12 or RSC. 13 On the table behind me, right over here, are the 14 items that each member reviewed at the last meeting in May. 15 These materials consist of 13 proposals solicited pursuant 16 to three separate requests for proposals, or RFPs, five 17 interagency agreements, and 12 draft final reports. 18 In addition, the Committee also considered an 19 update on an ongoing project as well as the air pollution 20 research plan update that I have just been describing to 21 you. 22 We would like to invite all Board members to 23 attend any meeting of the Research Screening Committee. In 24 addition, you are invited to join staff and visit any 25 contractor that is doing research of interest to you. 157 1 I would now like to describe the next steps in the 2 process. 3 If you approve this draft research plan update, 4 staff will prepare draft requests for proposals, RFPs, or 5 draft interagency agreements based on these 12 proposed 6 projects. 7 In either case, these will be presented for 8 comment and approval to your Research Screening Committee. 9 Looking at the RFP route in the next slide, the staff 10 prepares a draft RFP that will be circulated after review 11 and approval by your Research Screening Committee. 12 On the criteria contained within the RFP, staff 13 will then review the proposals received in response, and 14 recommend to your Research Screening Committee those that 15 pass. 16 If the Committee finds that valid proposals have 17 been received, the recommendations will be presented to you. 18 With your concurrence, the Executive Officer will 19 then executive a contract with the proponent. 20 Next slide. 21 For some projects, staff may find that suitable 22 capabilities to satisfy needs reside within the University 23 of California or another State agency. 24 If so, staff may negotiate an interagency proposal 25 to take to your Research Screening Committee. If the 158 1 Committee concurs, staff would then take the proposed 2 agreement to your Board in a similar fashion. 3 Let me now describe in more detail how we present 4 a research proposal for your consideration. In fact, we 5 will be doing that later today. 6 Your Board resolution package consists of a 7 proposed summary, proposed resolution, and a budget summary. 8 The budget summary -- the project summary describes what the 9 contractor will do, what the expected product will be, and 10 when it will be delivered, and how the results will be 11 useful for you. 12 The resolution authorizes the Executive Officer to 13 execute the contract and the budget page summary outlines 14 both the direct and indirect costs. 15 On the next slide, you'll see the direct costs 16 part of the budget summary. It provides a breakdown of 17 costs into the several categories as you see. 18 The next slide shows the indirect costs portion of 19 the budget summary, which delineates among overhead, general 20 and administrative expenses, other indirect costs, and fee 21 or profit. 22 We have been paying great attention to overhead 23 rates for many years, and Mr. Cackette and Mr. Ahuja will 24 provide an overview after I finish. 25 So, in closing, the ideas for projects I've 159 1 presented are in the conceptual stage at this time. Unless 2 our needs change, with your approval, you may expect to see 3 them presented to you again as proposals for research after 4 a thorough review by your Research Screening Committee. 5 This concludes my presentation. I'll be happy to 6 answer any questions you may have. 7 CHAIRMAN DUNLAP: Okay. Any questions or comments 8 of staff on the presentation? 9 All right. 10 MR. CACKETTE: Mr. Chairman, if you'd like, we 11 could just blast into the part about the budget then. 12 CHAIRMAN DUNLAP: Sure. 13 MR. CACKETTE: And we'll keep an eye on the clock 14 here. 15 In our last meeting, you expressed particular 16 interest in the budget associated with one of our research 17 proposals. So, as part of this presentation, we would like 18 to spend a few minutes with your reviewing what goes into 19 the evaluation of proposed research contracts with special 20 emphasis on our review of the project's budget. 21 We're very sensitive to the indirect costs 22 associated with our research, because these costs do not 23 lead to time spent on the study. Some of the steps we have 24 taken to assure that we are getting competitive rates 25 include asking the contractors to provide us with federal 160 1 audit letters to verify their costs or information so we can 2 determine whether the overhead costs are justified, asking 3 the contractors to provide detailed budget information that 4 is summarized and included in your resolution package, and 5 conducting a detailed review of budget information that has 6 been approved by federal audit agencies to that we can 7 understand how rates vary amongst the different studies we 8 undertake. That gives us sort of a baseline to make 9 judgments on. 10 Further, I've asked our staff to review these 11 current procedures with an eye on providing additional 12 emphasis to prospective bidders that they will be 13 scrutinizing and we will be scrutinizing all bids to assure 14 that there is no unnecessary overhead in any projects. 15 Now I'd like to turn it over to Manjit Ahuja, 16 Manager of the Emissions Control Technology Research 17 Section, who will give you a little more detail on this 18 overhead issue that was raised by the Board. 19 MR. AHUJA: Thank you, Mr. Cackette. 20 As Mr. Cackette mentioned, I would like to review 21 with you what goes into the preparation of resolutions for 22 extramural research contracts with emphasis on our review of 23 project budgets. I will pay special attention to the issue 24 of indirect costs. 25 For many years, ARB staff has been very sensitive 161 1 to the issue of overhead rates as well other indirect costs. 2 Whenever we can, we negotiate lower overhead rates. 3 As shown on the next slide, in reviewing the 4 project budget information, we rely heavily on the indirect 5 cost rates approved by the federal audit agencies. Agencies 6 such as the Defense Contract Audit Agency, or DCAA, the 7 Environmental Protection Agency, and the Department of 8 Health and Human Services routinely approve overhead rates 9 for their contractors. 10 An example of a DCAA audit letter is shown on the 11 screen. It has also been included in your package, and the 12 copies have been made available to the public that are here 13 on the tables in the back of the room. 14 As we do not have our own auditing department, we 15 rely heavily on these federal audit agencies for approved 16 overhead rates. These agencies generally determine their 17 contractors' billing rates for fringe benefits, overhead, 18 and general and administrative expenses. 19 As shown on the bottom of the next slide, we 20 require that all our prospective bidders, when submitting 21 proposals to us, must sign a budget submittal form that 22 responds to the question, "Have you used federally approved 23 or lower rates or schedules for computing overhead or other 24 indirect costs in this proposal?" 25 If so, they must include a copy of the letter from 162 1 the reviewing agency approving the rates used in the 2 proposal. If not, they are requested to give the reasons 3 and explain how their rates are justifiable. 4 Indirect Cost Rates - The next slide shows the 5 contractors generally have two types of indirect cost rates, 6 one for federal contracts and the other for commercial 7 contracts. The federally approved rates generally tend to 8 be lower than the company's commercial rates. 9 There are three reasons for this. First, federal 10 contracts are cost plus fixed fee as opposed to State 11 contracts that are firm fixed price. This means that if a 12 contractor's cost increases over what was expected, the 13 federal government may, in fact, pay the increment along 14 with the percentage fee on top of the increased cost. 15 In contrast, the State's contracts are firm fixed 16 price with no mechanism to reimburse the contractors who 17 encounter unexpected cost increases. 18 Second, the federal government may allow increases 19 in overhead rates if a contractor can show a basis to 20 justify increased overhead costs, that contractor may be 21 able to recover these increased costs in a subsequent year 22 of the contract. The State does not allow this. 23 And third, the federal government engages in a 24 huge volume of contracts. As a result, it has a greater 25 negotiating power to obtain favorable rates from 163 1 contractors. 2 About five years ago, we entered into the 3 discussions with several of our larger contractors regarding 4 the use of federal rate structures for State contracts. 5 We found that although they were reluctant to 6 provide the State with the federal overhead and other 7 indirect cost rates, most ultimately agreed to do so. Their 8 reluctance was based on the three factors I just mentioned 9 above. 10 Based on these discussions, we began requiring our 11 contractors to use lower federal rates, even though State 12 contracting procedures do not contain the safeguards for the 13 contractors that are built into the federal contracting 14 system. 15 As the next slide shows, the bottom line is that 16 the Air Resources Board pays the lower federal indirect 17 rates on our contracts. 18 In the next slide, we will show you the fringe 19 benefits. We have reviewed in detail the federally approved 20 rates for several types of ongoing studies. We found that 21 fringe benefits are almost always applied as a percentage of 22 direct labor costs. The slide shows some of the examples of 23 fringe benefits, allowable fringe benefits. 24 The next slide shows overhead costs. These are 25 usually a percentage of direct labor costs but, in some 164 1 instances, they are based on total direct costs, which 2 include other costs such as travel, analyses, mail, et 3 cetera. 4 The next slide shows the general and 5 administrative expenses, which are usually a percentage of 6 total direct cost. General and administrative expenses may 7 include costs for quality control and for preparation for 8 accounting and tax reports. 9 Different companies may choose to put a particular 10 cost, for example, supervisor and support staff salaries, 11 into either the overhead cost category or the general 12 administrative expense category. Therefore, when comparing 13 the costs of one contractor with another, it is better to 14 sum up these rates, even though they are charged on 15 different bases, rather than to look at them individually. 16 This gives us an approximate, relative comparison 17 of the total indirect costs and how they vary from one type 18 of study to another. 19 As shown on the next slide, we generally bring 20 three types of proposals to your Board for approval. One 21 type is called a "paper study," which involves no testing or 22 fieldwork. An example of this study is "Solvent 23 Cleaning/Degreasing Source Category Emission Inventory," by 24 E. H. Pechan. 25 This study has a federally approved overhead rate 165 1 at 89 percent of direct labor, which includes all indirect 2 costs except for a 10 percent fee. 3 The average overhead rate for this type of study 4 is about 110 percent, with a range of 80 to 130 percent. 5 Next come the studies that involve fieldwork and 6 lab testing, but do not involve automotive testing. An 7 example of this study is "Heavy-Duty Truck Population, 8 Activity, and Usage Patterns," by Jack Faucett Associates. 9 This has a federally approved rate of 130 percent 10 of direct labor, which again includes all indirect costs. 11 For this type of study, the average overhead rate is 130 12 percent with a range of about 95 to 150 percent. 13 Finally, studies that involve automotive testing 14 usually have the highest overhead rate with an average 15 of 200 percent and a range of 180 to 215 percent. 16 An example of this type of study is "Effect of 17 Phase 1 and Phase 2 Gasolines on Evaporative and Exhaust 18 Emissions from Light-Duty Vehicles," by Automotive Testing 19 Laboratories. 20 This study has a federally approved overhead rate 21 of 216 percent of direct labor, which includes all of the 22 indirect costs. 23 As you can see, in these three examples, the 24 overhead rate increased from 89 percent for a paper study to 25 130 percent for a field study to 216 percent for the 166 1 automotive testing study. An automotive testing laboratory 2 requires a large investment in equipment and capital, 3 therefore justifying a high overhead rate. 4 Starting with the next slide, I will quickly go 5 through the sample cost proposal with you. This is a budget 6 submittal from E. H. Pechan and Associates from the paper 7 study that I just mentioned. The total budget requested is 8 a bit over $174,000. 9 As shown on the next slide, this submittal 10 includes a letter from the Defense Contract Audit Agency 11 that we showed you earlier that approved an overhead rate of 12 80 percent. 13 As shown on the next slide, the next slide shows a 14 budget summary which contains the same items that we include 15 in the budget summary of your Board Book for Resolutions. 16 Starting with the next slide, I will quickly walk 17 through the budget details that we get in addition to the 18 budget summary. 19 Under direct costs, the labor charges for seven 20 named individuals were presented. For each individual, 21 Pechan provides information. These budget forms are also 22 completed by all our subcontractors. 23 Continuing to the next slide, under "Travel and 24 Subsistence," itemization is provided for air 25 transportation, lodging, meals, and auto travel. Our RFPs 167 1 specify that these costs cannot exceed those provided in the 2 State Administrative Manual. 3 As shown on the next slide, details are provided 4 on other miscellaneous items. 5 The next slide shows the indirect costs, which is 6 89 percent, which we've already discussed. 7 In summary, we are very sensitive to the budget 8 details regarding all of our research studies. We strive to 9 get the lowest possible overhead rates from our contractors. 10 Whenever possible, we try to negotiate our rates. 11 This concludes my presentation. I'll be happy to 12 answer any questions that the Board may have. 13 CHAIRMAN DUNLAP: If you wouldn't mind, Mr. 14 Cackette, would you speak briefly to the issue that we 15 followed up on at the last Board meeting, where we sent a 16 letter and followed up with the one contractor? 17 We don't necessarily need to name that contractor, 18 but talk about the action that we took to follow up; that 19 is, the Board staff took. 20 MR. CACKETTE: I'll be glad to do that, but 21 actually I'll let Mr. Ahuja do that, if that's okay. 22 CHAIRMAN DUNLAP: Sure. 23 MR. BARHAM: Bob Barham, Assistant Chief of the 24 Research Division. I'll address that question, Mr. 25 Chairman. 168 1 As Mr. Ahuja mentioned, we try to get as low 2 overhead rates as we possibly can and have gone -- and in 3 that particular contract, we spent many, many hours in 4 discussion, writing letters and pursuing as many options as 5 we could in terms of pursuing a lower rate. 6 And we've learned a number of things. One is 7 that, in that particular case, because it was a DOE 8 facility, those rates were established by the Department of 9 Energy. And the contractor could not unilaterally reduce 10 those rates, so that we're faced with the situation of 11 having to go beyond the contractor -- back to the Department 12 of Energy. And we're pursuing that avenue, in fact, as a 13 way of trying to get the rates lowered. 14 We've also found that that process takes somewhere 15 between 6 and 12 months. Wheels of government grind slowly 16 apparently. So, it's not going to happen overnight if it 17 does happen. 18 CHAIRMAN DUNLAP: I just wanted to get a sense 19 that you were following up, and it seems you are. 20 MR. BARHAM: We are definitely pursuing all the 21 avenues we can. 22 SUPERVISOR ROBERTS: Mr. Chairman? 23 CHAIRMAN DUNLAP: Sure, Supervisor Roberts. 24 SUPERVISOR ROBERTS: I appreciate all that effort. 25 Is that the only lab that can do the work that we were 169 1 talking about? 2 I mean, why waste all this time? 3 MR. BARHAM: No, in fact, there are other labs 4 that can do that work, but they're really much more costly 5 than doing it -- 6 SUPERVISOR ROBERTS: The bottom line was more 7 costly? 8 MR. BARHAM: That's the bottom line. 9 SUPERVISOR ROBERTS: So, they had lower overhead, 10 but higher cost otherwise? 11 DR. BOSTON: They had higher indirect costs than 12 we normally see with a university contractor. I think 13 that's one of the things that stood out in that particular 14 proposal. 15 But when you compare those costs to the direct 16 costs that are associated with the project as well as the 17 indirect costs through a private facility, it would be much 18 higher, I think in the range of around a hundred thousand 19 dollars, perhaps as high as a hundred thousand dollars more. 20 MR. CACKETTE: I would just like to emphasize that 21 what we get from the University of California is a -- when 22 it's strictly the University, is a very good deal. We get 23 an overhead rate that doesn't even come close to covering 24 the overhead of the University. It's like 10 percent. 25 That's often why we do business with them, because not only 170 1 are they the center of a lot of expertise in the State of 2 California and the world, but they're pretty cheap. 3 In this case, though, I think what triggered that 4 was that this lab is run by the University of California, so 5 it seemed like it was the University of California program. 6 But, in fact, the lab is run by the University under 7 contract to the Department of Energy. And so, it was the 8 Department of Energy of the U. S. Government that dictated 9 the budget for this lab. And that laboratory, when we 10 reviewed it, the overhead rate was about a hundred percent. 11 And it falls right in the middle of a typical contractor's 12 overhead rate. In fact, it falls in the low end of it for 13 what we showed you up there, which I think was an average of 14 130 percent for that type of lab, and a range of 90 to -- 15 the top was 150 I think. 16 SUPERVISOR ROBERTS: It wasn't my intention to 17 make a year-long project out of this and the negotiation a 18 year long project. You know, if the bottom line is it's 19 that much lower than anywhere else, I think I don't want to 20 lose sight of that. 21 MR. CACKETTE: I don't want to send the signal 22 that this is not productive, because the letter that we're 23 sending back to the Department of Energy addresses the theme 24 that, as the government goes through a conversion from 25 defense to commercialization, they might want to encourage 171 1 these laboratories that are looking for a new mission to do 2 business with the State of California in other nondefense 3 areas. 4 And then, perhaps one way of doing that is to make 5 their overhead rates look a little bit more attractive to 6 help facilitate that transfer. We'd give them business; 7 they help in the transfer from defense to -- it may have a 8 very good effect overall. And you know we have several of 9 those labs in our State, and they do -- we've been meeting 10 with them and working with them for a couple of years trying 11 to come up with projects we could work on together. So, it 12 would be very helpful if it's successful. 13 SUPERVISOR ROBERTS: Well, that's fine. I just -- 14 I didn't want to be an obstacle that you're going to be 15 chasing for a year. Your presentation was excellent in 16 terms of putting all that stuff in perspective, and I 17 appreciate that. 18 CHAIRMAN DUNLAP: Okay. Very good. Thank you for 19 following up on that aggressively. 20 We don't have any witnesses. Has there been any 21 written comments submitted on this item by anyone? Very 22 good. 23 Does the staff have any further comments? I think 24 we've covered the ground. 25 MR. BOYD: No further comments, Mr. Chairman. 172 1 CHAIRMAN DUNLAP: Okay. We don't need to 2 officially close the record, but we do have a resolution 3 before the Board for action. It's been handed out, 95-37, 4 which contains the staff recommendations. 5 Do I have a motion and a second? 6 SUPERVISOR ROBERTS: I'd move approval, Mr. 7 Chairman. 8 CHAIRMAN DUNLAP: Okay. Is there a second? 9 MAYOR HILLIGOSS: Second. 10 CHAIRMAN DUNLAP: Okay. Mayor Hilligoss. Very 11 good. Any discussion by the Boad? 12 DR. BOSTON: Just a comment, Mr. Chairman. 13 CHAIRMAN DUNLAP: Sure. Dr. Boston. 14 DR. BOSTON: I just wanted the Board to take note 15 of the fact that the medical profession, more than any 16 other, is very cost conscious in this day, and our budgetary 17 constraints are noted by the fact that we've put forth no 18 new projects for this budgetary period. 19 (Laughter.) 20 CHAIRMAN DUNLAP: Very good. Duly noted, Dr. 21 Boston. 22 MR. LAGARIAS: Would you tell that to my doctor, 23 that you're cost conscious? 24 (Laughter.) 25 MS. EDGERTON: Which resolution is this? 95-37 or 173 1 95-38? 2 CHAIRMAN DUNLAP: 95-37. Okay. I think we can do 3 that via voice vote. All those in favor, say aye? 4 (Ayes.) 5 Any opposed? Very good. 6 One final piece of business, 95-7-4, which are the 7 final items of business before the Board. They are two 8 research proposals; they're in our packet. I trust all 9 members of the Board have had an opportunity to review these 10 proposals. 11 Are there any issues, concerns, or comments that 12 need to be expressed at this time? 13 Okay. Very good. Do I have a motion and a second 14 to move these items? 15 SUPERVISOR VAGIM: So moved. 16 MAYOR HILLIGOSS: Second. 17 CHAIRMAN DUNLAP: So moved. This would be 18 Resolution 95-38 -- excuse me, 95-22 and 95-38. Before we 19 do that, we need to hear from a witness. 20 Is there someone here, Joan Daisey from Lawrence 21 Berkeley Laboratories? Madam, I don't wish to rush you, 22 except we're going to lose our quorum in a moment. 23 So, if you would be brief, I would be grateful. 24 Mr. Kenny, if I'm out of line here with any of my 25 process, please speak up. 174 1 MS. DAISEY: It's Joan Daisey, and I am from the 2 Lawrence Berkeley Laboratory. And I believe the overhead 3 issues have been very effectively covered and put in some 4 perspective. 5 And I'm just here to address any questions you 6 have. 7 And one small correction. The Lawrence Berkeley 8 Laboratory is not a weapons laboratory. We're a general 9 purpose laboratory. 10 CHAIRMAN DUNLAP: Very good. Thank you. 11 MS. DAISEY: Thank you. 12 CHAIRMAN DUNLAP: Thank you for coming. 13 Appreciate it. 14 Back to the motion and the second; is there any 15 further discussion by my colleagues on the Board? Hearing 16 none. I will call the question. The vote is on two 17 resolutions, 95-22 and 95-38. 18 All those in favor, say aye? 19 (Ayes.) 20 Any opposed? Motion carries. 21 This concludes our business for the day. Mr. 22 Boyd, you have nothing I trust? 23 MR. BOYD: No further business. 24 CHAIRMAN DUNLAP: Very good. 25 This June meeting of the Air Resources Board is 175 1 now adjourned. 2 (Thereupon, the meeting was adjourned 3 at 1:15 p.m.) 4 --o0o-- 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 176 CERTIFICATE OF SHORTHAND REPORTER I, Nadine J. Parks, a shorthand reporter of the State of California, do hereby certify that I am a disinterested person herein; that the foregoing meeting was reported by me in shorthand writing, and thereafter transcribed into typewriting. I further certify that I am not of counsel or attorney for any of the parties to said meeting, nor am I interested in the outcome of said meeting. IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of July, 1995. Nadine J. Parks Shorthand Reporter