Report 97114 Summary - July 1998

South Coast Air Quality Management District:

The District Should Establish a More Equitable Emission Fee Structure and Process Permits More Promptly

Results in Brief

The South Coast Air Quality Management District (district), which includes Orange County and parts of Los Angeles, Riverside, and San Bernardino Counties, is mandated to control air pollution using the best available and most cost-effective control technologies. To meet federal and state air quality standards, the district monitors emissions from stationary sources of pollution, such as factories and other businesses. Further, it established a permitting program for entities that construct and operate equipment that emits, or controls the emission of, air pollutants.

We found the district does not charge emission fees to all facilities that pollute. Its policy ensures that only the largest polluters pay-those facilities reporting emissions of four tons or more for most specified pollutants. For fiscal year 1995-96, only 1,400 (5 percent) of the 26,400 facilities regulated by the district paid the $21 million in emission fees it collected. Because only a small number of polluters pay emission fees, the method of charging these fees is inequitable.

The district regulates 25,000 other facilities that do not pay emission fees. Most of these facilities (22,500) do not report their emissions to the district because the district's emission billing system requires only a small percentage of facilities to report their actual emissions. Therefore, it does not know the magnitude of the actual emissions that these facilities produce, and we could not determine the full impact a proportionate-share rate structure would have on all participants. However, we believe that a proportionate-share rate structure would better ensure an equitable allocation of emission fees to those generating pollution in the district. By spreading out assessments, those who have not paid, and may collectively contribute a significant amount of emissions, would participate in the emission fee program.

Although the district lacks actual data on the emissions from the 22,500 facilities not required to report, it gathers information on their potential emissions as part of the permitting process. Based on information from the facilities, the district calculates an estimate of potential emissions. While not an exact measure, the district apparently believes this estimate is reasonable enough to use in combination with other district data for planning and rule-making purposes. Our analysis revealed that nonreporting facilities represent 15 percent to 27 percent of the district's estimated emissions of several key pollutants.

We also found that the district generally issues permits to construct within the time period allowed in law; however, many permits to operate take longer than the district's internal timeline of 180 days. Further, the district lacks processing timelines for certain permits. Although some delays are caused by the applicant, district workload and additional permitting requirements affect its ability to promptly process permit applications. Delayed processing potentially allows some equipment to operate outside of district guidelines for longer periods of time, slowing and potentially negatively affecting air quality attainment.

In addition to falling short of its processing goals, the district does not charge enough in permit fees to recover its processing costs. In fact, the district's revenues from permit processing have fallen short of expenditures for several years. To reduce this gap, the district adopted several fee increases at its May 1998 board meeting. However, if the shortfall in fiscal year 1998-99 is similar to that in 1996-97, expenditures will exceed revenues by $4 million even after the fee increases are implemented. Thus, the district will continue to subsidize its permit processing operations with revenues from emissions and permit renewal fees.

Our review of other district responsibilities disclosed that it follows procedures to ensure equal opportunity in contracting and employment. Further, we found the key functions and salaries of the district's legal office to be comparable to those of other districts. However, although it appropriately selects research, development, and demonstration projects, the district could improve its reporting of results to the public and its documentation of monitoring efforts. Also, by not fully complying with its guidelines for publishing literature, the district leaves itself vulnerable to criticism that it provides an unfair advantage to manufacturers of certain products by implying a recommendation of the products.

Recommendations

To ensure that those facilities generating pollution in the district pay their proportionate share of emission fees, the district should take the following actions:

  • Send a reporting form to all facilities in the district and assess fees based on actual emissions.

  • Alternatively, the district could send each facility an annual emission bill based upon the facility's estimate of potential emissions. Each facility would have the option to pay the amount billed or provide the district with documentation on actual emissions.

To ensure that it issues permits within the time period allowed by law or its own internal timelines, the district should take the following actions:
  • Continue to evaluate the permit process to reduce the time it takes to issue permits.

  • Establish processing timelines for permits to operate that are currently not subject to its timelines.

  • Ensure that permit fees are set to cover the costs of processing rather than depending on other revenue sources to subsidize the permitting function.

To avoid potential claims of unfair advantage from other manufacturers, the district should adhere to all its guidelines and policies when disseminating public information about products.

Finally, the district should ensure that it fully complies with reporting requirements for research, development, and demonstration projects and appropriately documents all monitoring efforts.

Agency Comments

Overall, the district disagrees with our characterization that it does not equitably charge emission fees. However, the district generally agrees with our recommendations regarding its permitting process. Additionally, it agrees with our recommendations related to the district's dissemination of public information about products and reporting on research, development, and demonstration projects. Moreover, while the district believes that it equitably charges emission fees and comments that our recommendations in this area may be administratively impracticable, it states that its fiscal year 1998-99 fee study will examine the issues presented.


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