EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 

# EO 12866 Review Draft: Economic Analysis for the TSCA Lead Renovation, Repair,

and Painting Program Opt-out and Recordkeeping Final Rulefor Target Housing and ChildOccupied Facilities

Economic and Policy Analysis Branch Economics, Exposure and Technology Division Office of Pollution Prevention and Toxics

U.S. Environmental Protection Agency

February 2010EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 

## Acknowledgment

EPA acknowledges the analytical and draft preparation support of Abt Associates Inc. of Cambridge, Massachusetts, provided under Contract No. EP-W-08-10, in the preparation of this report.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 

### Table of Contents

Executive Summary .............................................................................................................................. ES-1 Introduction ............................................................................................................................. ES-1 Number of Facilities Subj ect to the Rule................................................................................. ES-1 Rule Options Analyzed.......................................................................................................... .. ES-2 Costs ........................................................................................................................................ ES-3 Benefits.................................................................................................................................... ES-6 Small Entity Impacts ........................................................................................................... .... ES-10

1. Introduction ................................................................................................................................ 1-1 1.1 Purpose of the LRRP Rule Revisions...................................................................................... 1-1 1.2 Goal of the Economic Analysis............................................................................................... 1-2 1.3 Organization of this Report .................................................................................................... . 1-3

2. Lead, Renovation, Repair, and Painting Industry Profile...................................................... 2-1 2.1 Contractors that Supply Renovation Services ......................................................................... 2-2 2.2 Child Care and Schools: Child Occupied Facilities ................................................................ 2-11 2.3 Nonresidential Commercial Prope rty Owners and Managers ................................................. 2-24 2.4 The Demand for Renovation Services..................................................................................... 2-25 2.5 Renovation Industry Market Structure.................................................................................... 2-27 2.6 Residential Property Owners & Managers.............................................................................. 2-29 2.7 Training Providers............................................................................................................. ...... 2-31 2.8 Summary Characteristics: Numbers of Structures in the Regulated Universe........................ 2-33

3. Problem Definition ............................................................................................................. ........ 3-1 3.1 Lead Contamination Problem.................................................................................................. 3-1 3.2 Regulatory Background.......................................................................................................... . 3-4 3.3 Justification for Federal Regulations of Lead Exposure during Renovation........................... 3-11 3.4 Approaches for Reducing Lead Exposure Resulting from Renovation .................................. 3-16 Appendix 3A: The Role of Elasticities in Determining the Impacts of a Rule ............................... 3-20 3A.1 Elasticities of Supply and Demand ........................................................................................ .. 3-20 3A.2 How Price Elasticity of Demand Affects the RRP Rule.......................................................... 3-24 Appendix 3B: Elasticities of Demand and Supply for Housing / Renovation Services.................. 3-26

4. Costs of the Lead, Renovation, Repair, and Painting Rule Revisions ................................... 4-1 4.1 Definitions of Options............................................................................................................. 4-1 4.2 Estimating the Number of Regulated Renova tion, Repair, and Painting Events .................... 4-5 4.3 Work Practice Compliance Costs............................................................................................ 4-36 4.4 Estimating the Number of Firms and Personnel Obtaining Training and Certification to Meet the Demand for Lead -Safe RRP Services ...................................................................... 4-59 4.5 Training Costs ................................................................................................................. ........ 4-72 4.6 Certification Costs: Firm Paperwork Burden and EPA Administrative and Enforcement Costs.......................................................................................................................... .............. 4-75 4.7 Recordkeeping Checklist Provision Costs .............................................................................. 4-78EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4.8 Total Costs.................................................................................................................... ........... 4-82 4.9 Alternative Regulatory Options: Options E1 – E4.................................................................. 4-87

5. Benefits of the Revision s to the LRRP Rule ............................................................................. 5-1 5.1 Overview of Removal of Opt-Out Provisi on in Terms of Benefits Estimation ...................... 5-2 5.2 Calculated Benefits of Elimina ting the Opt-Out Provision..................................................... 5-5 5.3 Benefits of Additional Reco rdkeeping Requirements............................................................. 5-25 5.4 Lead-Related Health Effects and Ecological Effects .............................................................. 5-25

6. Estimated Impacts of the Lead, Renovation, Repair, and Painting Rule Revisions............. 6-1 6.1 Paperwork Reduction Act ....................................................................................................... 6 -1 6.2 Regulatory Flexibility Act..................................................................................................... .. 6-6 6.3 Unfunded Mandates Reform Act (UMRA)............................................................................. 6-39 6.4 Executive Order 13132 - Federalism....................................................................................... 6-41 6.5 Executive Order 13175 - Tribal Implications.......................................................................... 6-41 6.6 Protection of Children from Environmental Health Risk and Safety Risks............................ 6-42 6.7 Executive Order 13211 - En ergy Effects ................................................................................ 6-43 6.8 National Technology Transfer and Advancement Act............................................................ 6-44 6.9 Executive Order 12898 – Environmental Justice .................................................................... 6-44 APPENDIX 6A: Estimating average per- pupil expenditures of private schools ............................ 6-47EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** ES-1 

## Executive Summary 1 2 3 4 5 6 7 8 9 10
11 12 13 14 15 16
17 18 19 20
21 22 23 24 25 26 27 28
29 30 31 32 33
34

35 36 37 38 39 

### Introduction This report presents an economic analysis of alternative regulatory options for revising the lead, renovation, repair and painting (LRRP) program regul ations for target housing and child occupied facilities (COFs). 1 The LRRP rule for target housing and COFs was promulgated in 2008 (73 FR 21692) and is codified in Part 745 of Title 40 of the C ode of Federal Regulations (CFR). The rule was promulgated under the authority of §402(c) of the To xic Substances Control Act (TSCA). Section IV of TSCA was established by the Residential Lead-Based Paint Hazard Reduction Ac t of 1992, also known as Title X of the Housing and Community Devel opment Act of 1992, Public Law 102-550. Past use of lead-based paint has resulted in contamin ation that continues to pose human health hazards. While intact lead-based paint is not likely to contri bute to such hazards, the deterioration of a structure over time or acute environmental stresses, such as are commonly present during renovation activities, has been found to create lead hazards. Since many buildin gs constructed before 1978 have lead-based paint, it is likely that renovation activities in pre-1978 buildings will contribute to lead hazards unless appropriate containment and cl ean-up practices are employed. The 2008 LRRP regulations require entities that pe rform renovation, repair and painting work for compensation in buildings covered by the rule to become certified by EPA, ensure that their employees are trained as either renovators or workers, and use lead-safe work practices when disturbing lead-based paint.The rule contains two major revisions to the LRRP program. The first revision is the removal of the optout provision in 40 CFR §745.82(c), under which renova tors do not need to follow the work practices in the LRRP rule if they obtain a signed statement from the owner of a target housing unit agreeing that the required LRRP work practices will not be used and stating that the renovation will occur in the owner’s residence, no child under age 6 or pregnant woman re sides there, and the housing is not a COF. The second revision is a requirement that renovation firms pr ovide owners and occupants with a copy of the records demonstrating compliance with the training and work practice requirements of the LRRP rule (referred to here as the “recordkeeping checklist requirement”). Disturbing lead-based paint in renovation, repair, and painting events generates lead dust that is an important source of lead exposure. Exposure to lead results in increased blood lead levels associated with various adverse health effects. If EPA were to take no action, society would not incur the costs to comply with the rule, but the negative health and environm ental effects due to these preventable lead exposures would continue.



### Number of Facilities Subject to the Rule Table ES-1 provides summary information about the numbe rs of structures affected by the rule’s requirements. There are 78 million target housing units and COFs, composed of 77.9 million target housing units and 0.1 million COFs in public or comme rcial buildings. The 2008 LRRP rule applied to 37.7 million target housing units and 0.1 million public and commercial buildings. About 40.2 million

1 Target housing is defined as any housing constructed before 1978, except housing for th e elderly or persons with disabilities (unless any child under age 6 resides or is expected to reside in such housing) or any 0-bedroom dwelling. A COF is defined as a building, or portion of a building, constructed pr ior to 1978, visited regularly by the same child, under 6 years of age, on at least two different days within any week (Sunday through Saturday peri od), provided that each day’s visit lasts at least 3 hours and the combined weekly vis its last at least 6 hours, and the combined annual visits last at least 60 hours.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** ES-2 target housing units would be added to the regulated universe due to the elimination of the opt-out provision. The recordkeeping checklist provision of the rule would apply to all 78 million target housing units and COFs. 1 2 3
4
Table ES-1: Number of Structures in Regulated Universe by Type Affected by Removal of

Opt-out Provision Affected by Additional Recordkeeping Number of Structures Target housing: Owner-occupied housing where no child <age 6 or pregnant woman resides, and that does not qualify as a COF X X 40,222,000 Target housing covered by 2008 LRRP rule: Rental housing, COF in target housing, or a child <age 6 or pregnant woman resides in housing X 37,665,000 Subtotal – all target housing 77,888,000 COFs in public or commercial - covered by 2008 LRRP rule X 97,000 Total 77,985,000 Note: Number of structures includes buildings with and without lead-based paint. Estimated number of structures affected by the removal of the opt-out provision assumes that all owners of target housing eligible for the opt-out provision under the 2008 LRRP rule would have chosen to opt-out. 5

6 7 8 9 10 11
12 13 14 15 16
17 18 19 20
21 22 23 24 25 26 27 28 

### Rule Options Analyzed This economic analysis considers a variety of opti ons for addressing the risks created by renovation, repair, and painting (RRP) activities disturbing lead-based paint in housing previously eligible for the optout provision. These options include different alternatives for the effective date of the rule; an option phasing out the opt-out provision depending on when the housing was built; and different options for the work practices requirements. Options A through D all apply the 2008 LRRP requi rements to renovations in the housing previously eligible for the opt-out provision. However, the da te when the opt-out provision would be eliminated differs across options A through D. Options E1 thro ugh E4 all have the same effective date, but have varying work practice requirements. Table ES-2 summarizes the options consider ed in this analysis; they are described in more detail below. Options A and D both start eliminating the opt-out provision in June 2010, but Option A removes it for all houses in June 2010 while Option D allows the ow ners of houses built between 1960 and 1978 to continue to opt out until June 2011. Options B and C have effective dates of January 2011 and June 2011 (respectively) for the complete elimination of the opt-out provision. Options E1 through E4 have the same effective dat es and universe of regulated structures as Option A, but include alternative work practice requirements. Option E1 has the same containment requirements as the 2008 LRRP rule, but does not include any cleaning or cleaning verification work practices. Option E2 has the same cleaning and cleaning verification require ments as the 2008 LRRP rule, but does not include any containment work practices. Option E3 has the same cleaning requirements as the 2008 LRRP rule, but does not include any containment or cleaning veri fication work practices. Option E4 has the same containment, cleaning and cleaning verification require ments as the 2008 LRRP rule, but does not restrict or prohibit any paint removal practices.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** ES-3 All the options would also require renovation firms to provide owners and occupants of the buildings with a copy of the records demonstrating compliance with the training and work practice requirements of the LRRP rule. The effective date for the recordkeeping checklist requirement is June 2010 under all options. 1 2 3
4 Table ES-2: Options Included in Economic Analysis

Option Effective Dates and Scope For Opt-Out Elimination* Containment, Cleaning, and Cleaning Verification Requirements Paint Removal Practices Restricted or

Prohibited

A (final rule) June 2010, no phase-out Yes Yes

B January 2011, no phase-out Yes Yes

C June 2011, no phase-out Yes Yes

D June 2010 for pre-1960 housing, June 2011 for housing built between 1960 and 1978 Yes Yes

E1 June 2010, no phase-out Containment Only Yes

E2 June 2010, no phase-out Cleaning and Cleaning Verification Only Yes

E3 June 2010, no phase-out Cleaning Only Yes

E4 June 2010, no phase-out Yes No
*The effective date for the recordkeeping checklist requirement is June 2010 under all options.

5

6 7 8 9 10 11 12 13 14 15 

### Costs The costs associated with the revisions to the §402(c) LRRP Rule are divided into four categories: (1) work practice costs, (2) training costs, (3) certifica tion costs (which include the firm’s paperwork burden and EPA administrative and enforcement costs), and (4) recordkeeping checklist provision costs. 2 The costs associated with the first three components are all attributable to the elimination of the opt-out provision, which will extend the 2008 LRRP rule requirements to additional housing units. In addition to the work practice costs associated w ith the RRP events in these housing un its, this change is predicted to result in more individuals and firms seeking training and certification. 3 The fourth component, recordkeeping checklist provision costs, applies to all renovations regulated under the 2008 LRRP rule as well as the additional housing units that would no longer be eligible for the opt-out provision.

2 Note that the costs of the action as estimated in the Econom ic Analysis are expressed in 2005 dollars. The estimated costs would be approximately 10 percent higher if th ey were adjusted to be expressed in 2009$.

3 This analysis assumes that renovation firms are somewhat specialized in terms of whether they work in facilities where the RRP program is applicable. However, there may be many instances where firms working in opt-out housing will already have become certified, and their staff been trained, because they also work in regulated facilities ineligible for the opt-out provision. If firms are less specialized than the analysis assumed, there may be little to no incremental training and certification costs due to the rule.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** ES-4 Costs are driven, in part, by the additional number of renovation, repair, and painting (RRP) events where renovators test for lead-based paint once the opt-out provision is removed; and the subset of these events that test positive for lead-based paint and where RRP is performed using the lead-safe cleaning, containment, and verification practices required by the rule (referred to as lead-safe work practice events). 1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18 19 20
21 The number of events under each option is summarized in Table ES-3 and is compared with the number of events regulated under the 2008 LRRP rule. The diffe rences in the number of events in the first year for options A through D are due to variation in the date the opt-out provision is eliminated, so the differences in the costs estimated for Options A th rough D are all due to the timing of the opt-out elimination. And since Options A and E1 through E4 have the same effective dates and universe of regulated structures, the cost differences among these op tions are all attributable to their different work practice costs. Because not all buildings built before 1978 have lead-based paint, th e number of renovation events that need to use lead safe work practices (L SWP) is a subset of the total number of events covered by the rule. Currently available test kits for detecting whethe r lead-based paint is present have a high false positive rate resulting in the frequent use of lead safe work practices when they are not necessary, i.e., when leadbased paint is not present. EPA is working on the de velopment of test kits that accurately identify both the presence and absence of lead in paint at levels th at exceed the Federal standards. This analysis assumes that improved test kits will be in use starting in June 2011. Thus, the number of events with lead safe work practices is estimated to decrease from the fi rst year to the second year because of the adoption of the improved test kits.

Table ES-3: Number of Renovation Events and Total Rule Costs Scope Number of RRP Events (Millions) 2 Total Rule Costs (Millions 2005$) 3 Year 1 Year 2 Year 2 Annualized Option Total Events LSWP Events Total Events LSWP Events Year 1 3% Discount

Rate 7% Discount

Rate 3% Discount

Rate 7% Discount

Rate 2008 LRRP Rule 11.4 8.4 11.4 4. 4 $758 $395 $ 380 $404 $441 Option A 7.3 5.4 7.2 3.0 $507 $290 $279 $295 $320 Option B 3.6 2.7 7.2 3.0 $263 $336 $323 $287 $306 Option C 0.0 0.0 7.2 3.0 $20 $382 $368 $280 $291 Option D 3.8 3.1 7.2 3.0 $291 $334 $321 $288 $308 Option E1 7.3 5.4 7.2 3.0 $442 $254 $245 $258 $281 Option E2 7.3 5.4 7.2 3.0 $447 $257 $247 $261 $283 Option E3 7.3 5.4 7.2 3.0 $421 $242 $233 $246 $267Increase Due toRule1

Option E4 7.3 5.4 7.2 3.0 $502 $287 $276 $292 $317 1. The results for the rule options are incremental to the estimates for the 2008 LRRP rule (in shaded row). 2. Numbers of events for the options only in clude the events affected by the elimination of the opt-out provision. The events affected by the additional recordkeeping checklist requirement would also include those covered by the 2008 LRRP rule. For example, 18.7 (11.4 + 7.3) mill ion events have recordkeeping checklist provisi on requirements in the first year under Option A. 3. Costs for 2008 LRRP rule do not include recordkeeping checklist costs. Analysis assumes a 75% compliance rate with the rule. LSWP = Lead-Safe Work Practices. Option A represents the final rule. 22 23 24 Table ES-4 indicates the component costs that comprise the total cost for Option A. Work practice costs in housing formerly eligible for the opt-out provision represents the largest share of total costs of the rule.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** ES-5 1 Table ES-4: Costs for Option A by Cost Type (millions 2005$) 3 Percent Discount Rate Cost Type Year 1 Year 2 Year 3 Annualized Work Practice $336 $216 $209 $218 Training $76 $18 $17 $20 Certification $63 $25 $24 $26 Checklist - Target Housing $31 $30 $29 $30 Checklist - COF in Public or Commercial Bldg $1 $1 $1 $1 Total $507 $290 $281 $295 7 Percent Discount Rate Cost Type Year 1 Year 2 Year 3 Annualized Work Practice $336 $208 $194 $236 Training $76 $17 $16 $23 Certification $63 $24 $22 $29 Checklist - Target Housing $31 $29 $27 $32 Checklist - COF in Public or Commercial Bldg $1 $1 $1 $1 Total $507 $279 $260 $320
2
3 4 5 6 7 8 9 10 11 12 13 14
15 16 17 18 In addition to the number of renovation events complying with the rule, other major factors in determining the costs of the rule revisions are the additional number of firms certified and the additional number of renovators and workers trained. The elimina tion of the opt-out provision is predicted to result in more individuals and firms seeking training and certification in order to meet the increased demand for RRP performed by certified firms and trained renovato rs resulting from the increase in the number of events where it will be required. Each renovation pr oject covered by the LRRP rule must be performed by a certified firm and the work must be performed a nd/or directed by an individual who has become a certified renovator by successfully completing renovator training from an accredited training provider. The renovation activities may be performed by workers who have been provided on-the-job training by a certified renovator. However, the certified renovator mu st be physically present at the work site while signs are being posted, containment is being establis hed, and the work area is being cleaned after the renovation to ensure that these tasks are performed correctly.
Table ES-5 presents a summary of the estimated increase in the number of establishments that will seek firm certification each year as a result of the removal of the opt-out provision, as well as the increase in the estimated number of employees that will need to be trained as renovators and workers in the first three years, and compares this to prior estimates for the 2008 LRRP rule.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** ES-6 Table ES-5: Number of Establishments Certifie d and Renovators and Workers Trained (thousands) Additional Number Estimated under LRRP Revision Options 2008 LRRP Rule A & E1-E4 B C D Total Number of Establishments (with Employees and without) Seeking Certification 212 111 56 0 59 Total Number of Renovators Seeking Training 236 127 63 0 67 Year 1
Total Number of Workers Seeking Training 338 190 95 0 100 Total Number of Establishments (with Employees and without) Seeking Certification 70 22 67 111 64 Total Number of Renovators Seeking Training 78 22 74 126 72 Year 2
Total Number of Workers Seeking Training 337 189 189 189 189 Total Number of Establishments (with Employees and without) Seeking Certification 70 22 22 22 22 Total Number of Renovators Seeking Training 78 22 22 22 22 Year 3
Total Number of Workers Seeking Training 335 188 188 188 188 Results for the rule options only include the events affected by the elimination of the opt-out provision. These numbers are incremental to the estimates for the 2008 LRRP rule (in the shaded row). Analysis assumes a 75% compliance rate with the rule. Option A represents the final rule. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

16 17 18 19 20 21 22 23
24 25 26 27 28 The estimates presented in Table ES-5 reflect the simplifying assumption that additional initial certification and training due to the removal of th e opt-out provision takes place over a 12 month period starting from the effective date. For example, it is estimated that an add itional 127 thousand trained renovators would be necessary to meet the increased demand after the elimination of the opt-out provision, so under Option A all 127 thousand are assum ed to be trained from June 2010 through June 2011. Under Option B, the opt-out provision is eliminat ed half-way through the first year (January 2011). Thus, half of the 127 thousand, or 56 thousand renova tors, are assumed to incur the training costs in the first year. Since the opt-out provision is not e liminated until the second year under Option C (June 2011), it is assumed that no training costs are incurred in the first year under Option C. A simplifying assumption was necessary because it is not possible to predict the precise timing of the training and certification that would occur under the various options. In reality, any additional firms and renovators that become certified and trained because of the removal of the opt-out provisi on may do so before the removal of the opt-out provision goes into effect. Thus, under Option C, it is unlikely that there would actually be zero firms certified or renovators trained in the first year after promulgation of the rule. 

### Benefits A great deal of information on the numerous adverse h ealth effects of lead is available from decades of medical observation and scientific research. Inhaled or ingested lead is distributed throughout the body and is toxic to many organ systems. As a result, its toxicity manifests itself in the form of impacts on several organ systems. A reduction in lead exposure resulting from the rule would lead to a reduction in these adverse health effects and the costs of treati ng them. Young children (from birth through age five) are particularly sensitive to lead, which impairs a child’s neuropsychological development (frequently measured by IQ change). These cognitive and behavioral effects, discussed above , are strongly related to future productivity and expected earnings. The estimated value of an IQ poi nt is approximately $13,000, which represents the present value of a loss in expected lifetime earnings due to a one point IQ drop. This estimated value of an IQ point is limited to reduced income, and does not include other potential impacts such as additional education costs for special and remedial education, and medical costs to treat very high levels of lead.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** ES-7 Investigating associations between lead exposure and behavior, mood, and social conduct of children has been an emerging area of research. Early studies indicat ed linkages between lower-level lead toxicity and behavioral problems (e.g., aggression, attentional problems, and hyperactivity) in children. Blood-lead and tooth-lead levels have been associated with be havioral features of atten tion-deficit hyperactivity disorder (ADHD), including distractibility, poor organiza tion, lack of persistence in completing tasks, and daydreaming, in various cohorts of children with a wide range of lead exposures. The relationship between lead exposure and delinquent and criminal behavior also has been addressed in several investigations. Studies linking attention deficits, aggressive and disruptive be haviors, and poor selfregulation with lead have raised the prospect that early exposure may result in an increased likelihood of engaging in antisocial behaviors in later life. Elevated lead levels have been associated with several measures of behavioral distur bance and delinquent behavior. 1 2 3 4 5 6 7 8 9 10 11
12 13 14
15 16 17 18 19 20 21 22 23
24 25 26 27 28 29 30
31 32 33 34 35 36 37 38 39
40 41 42 43 44 45 Epidemiologic studies have consistently demonstrated associations between lead exposure and enhanced risk of deleterious cardiovascular outcomes, including increased blood pressure and increased hypertension. Both epidemiologic and toxicologic studies have shown th at environmentally relevant levels of lead affect many different organ systems. Neurotoxic effects in children and cardiovascular effects in adults are among those best substantiated as occurring at blood- lead concentrations as low as 5 to 10 ug/dL (or possibly lower); and these categories of effects are curre ntly of greatest public health concern. Other newly demonstrated immune and renal system eff ects among general population groups are also emerging as low-level lead exposure effects of potential public health concern. It appears that some of these effects, particularly changes in the levels of certain blood enzymes and in aspects of children's neurobehavioral development, may occur at blood-le ad levels so low as to be essentially without a threshold. The rule’s removal of the opt-out provision will a pply the LRRP program’s work practices, training and certification requirements to renovations in all target housing and COFs (including housing previously eligible for the opt-out provision). This will re duce lead exposure by increasing the containment and cleanup of dust and debris genera ted by RRP activities. Additional re ductions in lead exposure will be achieved by prohibiting the use of certain paint prepar ation and removal techniques in jobs that require lead-safe work practices. These reductions in exposure will in turn reduce the risks of adverse health and ecological effects in the vicinity of these activities. The requirement that renovators provide the owners and occupants of renovated buildings with copies of the records renovation firms must maintain to docume nt compliance with the rule’s training and work practice requirements will enable building owners a nd occupants to better understand what the renovation firm did to comply with the rule and how the rule ’s provisions affected their specific renovation. Educating the owners and occupants in this way is likely to help th em to be better able to protect themselves from lead-based paint hazards that may have been created by the renovation and improve their ability to assist the EPA in monitoring compliance with the LRRP rule. These improvements in education and monitoring will improve compliance with the rule , which will ultimately protect children and adults from exposure to lead hazards due to renovation activities. Removing the opt-out provision will protect children and adults from exposure to lead dust from renovations in a variety of situations. They include children under the age of six who visit a friend, relative, or caregiver’s house where a renovation has been performed under the opt-out provision; children who move into such housing when their family purchases it after such a renovation has been performed; and children who live in a property adjacen t to housing where renovation has been performed under the opt-out provision. Removing the opt-out pr ovision will also protect individuals age 6 and olderEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** ES-8 who live in houses that were renovated under the opt-out provision; who move into such housing after such a renovation has been performed; a nd who live in adjacent properties. 1 2
3 4 5 6 7
8 9 10 11
12 13 14 15 16 17 18 19
20 21 22 23
24 25 26 27 28 29 30
31 32 33 34 35
36 37 38 39 40 41 42 43
44 In addition, removal of the opt-out provision will provide additional protection for women who do not know they are pregnant at the time a renovation comm ences, women who become pregnant shortly after a renovation occurs, and women of child-bearing age in gene ral. This is particularly important because the transplacental transfer of lead in humans is well documented, and infants are generally born with a lead body burden reflecting that of the mother. Removing the opt-out provision will also result in fewer homes being purchased with pre-existing lead hazards. It is common for home owners to perform activities that disturb paint before selling a house. Removing the opt-out provision decreases the likelihood of lead hazards being present when new occupants move into the home. Eliminating the opt-out provision will also protect individuals residing adjacent to homes undergoing renovations. Renovations on the exterior of a residen ce can spread leaded dust and debris some distance from the renovation activity. There are approximately 1.6 million owner-occupied single-family attached homes built before 1978 eligible for the opt-out provision. If these homeowners opt out of the LRRP program, renovations on the exterior of these hom es are likely to contaminate neighboring yards and porches, resulting in exposure inside the neighbori ng houses as well as outside (because exterior dust is tracked into the home). Many more single-family de tached homes are located in close proximity to each other, and renovations performed under the opt-out provision present a similar risk for these homes. Removing the opt-out provision will also provide protection to family pets living in owner-occupied housing where no children under age 6 or pregnant women reside. Lead poisoning resulting from renovations has been documented in both cats and dogs, resulting in both veterinary care costs and, in some instances, loss of a family pet.
EPA has calculated crude benefits numbers for several groups of individuals protected by removing the opt-out provision. This has been done by estim ating the number of individuals in each group and combining this with the average benefit per indivi dual for a similar group from previous LRRP rule analyses. These averages do not replicate the scenarios used in the prev ious analyses, which included an array of factors such as age of child, type of renovation, size of job, and building vintage, so the calculations in this chapter do not reflect the methodol ogy that EPA previously had peer reviewed for the LRRP rule analysis. As a result of severe time constraints for the conduct of this analysis, the average benefits per individual from the previous analyses have not been modified to reflect any differences in exposure between populations protected by the 2008 rule and those protected by the removal of the opt-out provision. While these values can serve as a proxy to provide a sen se of the magnitude of benefits from this action, the amount of error in these values is unknown. Estimating benefits from avoided lead exposure is not an issue that lends itself to simplified calculations. Thus, the benefits calculations used here should be viewed as crude indicators of the magnitude of benefits. In light of this, the analysis calculates benefits under two different scenarios. In one of the scenarios, aggregate benefits are based on averag e benefits per individual from previous analyses multiplied by an estimate of the number of people affect ed by the rule. In the second scenario, benefits are calculated by applying a simple linear adjustment factor to one of the components in the first scenario, in order to reflect the uncertainties created by relyi ng on the average benefit per individual from previous analyses as a basis for the calculation.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** ES-9 Table ES-6 and Table ES-7 summarize the result of th e benefits calculations for both scenarios using a 3% and a 7% discount rate, respectively. 1 2
3 Table ES-6: Summary of Benefits for Option A (fina l rule) – millions of dollars, 3% discount rate) Children Under 6 IQ Benefits Adult Cardiovascular Benefits Combined Population Scenario 1 Scenario 2 Scenario 1 Scenario 2 Scenario 1 Scenario 2 (1) Reside in housing renovated under opt-out provision Not applicable – children under 6 do not reside in opt-out eligible housing $656.5 $2,626 $656.5 $2,626 (2) Live contiguous to attached house renovated under opt-out provision $15.4 $15.4 $119 $119 $134.4 $134.4 (3) Move into house renovated under opt-out provision $68.2 $272.7 45* $722* $68.2* $272.7* (4) Receive childcare in housing renovated under opt-out provision $6.9 $27.5 Not applicable $6.9 $27.5 Subtotal $90.5 $315.6 $775.5 $2,745 $866.0 $3,060.6 Uncalculated Benefits (5) Live near house renovated under opt-out provision, other than contiguous attached house; (6) Spend time in friend’s or relative’s house renovated under opt-out provision; (7) Health effects for all populations other than IQ loss in children <6 and blood pressure effects in older individuals. * Adult component not includ ed in subtotal because these benefits are assumed to be incorporated into row #1 above based on the exposure assumptions used. 4 5 Table ES-7: Summary of Benefits for Option A (fina l rule) – millions of dollars, 7% discount rate Children Under 6 IQ Benefits Adult Cardiovascular Benefits Combined Population Scenario 1 Scenario 2 Scenario 1 Scenario 2 Scenario 1 Scenario 2 (1) Reside in housing renovated under opt-out provision Not applicable – children under 6 do not reside in opt-out eligible housing $698.8 $2,795 $698.8 $2,795 (2) Live contiguous to attached house renovated under opt-out provision $16.4 $16.4 $127 $127 $143.4 $151.6 (3) Move into house renovated under opt-out provision $72.6 $290.3 $48* 768* $72.6* $290.3* (4) Receive childcare in housing renovated under opt-out provision $7.3 $29.2 Not applicable $7.3 $29.2 Subtotal $96.3 $335.9 $825.8 $2,922 $920.1 $3,257.9 Uncalculated Benefits (5) Live near house renovated under opt-out provision, other than contiguous attached house; (6) Spend time in friend’s or relative’s house renovated under opt-out provision; (7) Health effects for all populations other than IQ loss in children <6 and blood pressure effects in older individuals. * Adult component not includ ed in subtotal because these benefits are assumed to be incorporated into row #1 above based on the exposure assumptions used. 6 7 8
9
10EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** ES-10 1

2 3 4 5 6 7 8 9 10 11
12 13 14 15 16 17 18 19 20 21 22 23
24 25 26 27 28 29 30 31 32
33 

### Small Entity Impacts The Regulatory Flexibility Act (RFA) of 1980, amen ded by the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996, requires regulators to assess the effects of regulations on small entities including businesses, nonprofit organizations, and govern ments. The vast majority of entities in the industries affected by the rule are small. The small entity impact analysis considers firms that would seek certification as a result of the elimination of the opt -out provision (opt-out entities) separately from the firms that are currently regulated under the 2008 LRRP rule (currently regulated entities). The revisions to the renovation, repair, and paintin g program will affect approximately 289,000 small entities; of those small entities, it is predicted that up to 101,000 will incur certification, work practice, and training costs as a result of the elimination of the opt-out provision. Two factors are evaluated in analyzing the rule’s im pacts on small entities, (1) the number of firms that would experience the impact, and (2) the size of the impact. Average a nnual compliance costs as a percentage of average annual revenues are used to asse ss the potential average impact of the rule on small businesses and small governments. This ratio is a goo d measure of entities’ ability to afford the costs attributable to a regulatory requirement, because comparing compliance costs to revenues provides a reasonable indication of the magnitude of the regulat ory burden relative to a commonly available measure of economic activity. Where regulatory costs represent a small fraction of a typical entity’s revenues, the financial impacts of the regulation on such entities may be considered as not significant. For non-profit organizations, impacts are measured by comparing rule costs to the organization’s annual expenditures. When expenditure data were not available, however, revenue information was used as a proxy for expenditures. It is appropriate to calculate the impact ratios using annualized costs, because these costs are more representative of the continuing co sts entities face to comply with the rule. There are approximately 101,000 small entities that w ould be affected by the removal of the opt-out provision. The average annualized cost to a typical sm all entity in this group is estimated to range from about $1,133 to $6,408 per year, depending on th e number of renovation, repair, and painting events undertaken by a small entity in the industry sector involved. As shown in Table ES-8 , the cost impact of the revisions on small opt-out entities ranges from about 0.8 percent to 1.7 percent of revenues, depending on the industry sector. (If renovation firms are less speci alized than the analysis assumed, in terms of whether they work in facilities where the RRP progr am is applicable, impacts will be lower than calculated because some firms that also work in re gulated facilities ineligible for the opt-out provision will already have incurred costs for training and certification.)EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

Table ES-8: Typical-Year Number of Small En tities with RRP Events and Associated CostImpact Ratio to Entities Affected by both the Removal of the Opt-out Provision and the Additional Recordkeeping Requirements Final Rule (Option A)

Entity Type Number of Small Entities Average Cost-Impact Ratio Residential Contractors (working in target housing) Residential remodelers Business 32,093 0.83% Siding contractors Business 2,335 1.19% Finish carpentry contractors Business 22,790 1.13% Other building equipment contractors Business 1,059 1.14% Other building finishing contractors Business 1,450 1.11% Tile and terrazzo contractors Business 3,255 1.17% Plumbing and HVAC contractors Business 10,953 1.12% Glass and glazing contractors Business 966 0.90% Painting and wall covering contractors Business 12,650 1.70% Electrical contractors Business 7,787 1.37% Drywall and insulation contractors Business 5,326 1.14% Total 100,662
1
2 3 4 5 6 7 8 There are approximately 189,000 small entities that are not predicted to be affected by the removal of the opt-out provision, but that are expected to be aff ected by the additional r ecordkeeping requirements. These are all entities that were previously assumed to be affected by the 2008 LRRP rule. For a typical small entity in this group, the average annualized cost of the rule is estimated to range from about $1 to $283 per year, depending on the number of RRP events undertaken by a small entity in the industry sector involved. As shown in Table ES-9 , the cost impact on currently regulated small entities ranges from about 0.0001 percent to 0.08 percent of revenues, depending on the industry sector.

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** ES-11EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

Table ES-9: Typical-Year Number of Small Entities with RRP Events where the 2008 LRRP Rule is Applicable and Only Affected by the Additional Recordkeeping Requirements Final Rule (Option A) Description Entity Type Number of Small Entities Average Cost-Impact Ratio Public School Districts Government 6,492 0.0001% Private Schools Non-Profit 6,174 0.0005% Daycare Centers Non-Profit 10,481 0.0005% Non-Residential Landlords Business 11,056 0.0010% Non-Residential Contractors (working in public or commercial building COFs) Business 2,866 0.01% Residential Contractors (working in target housing) Residential remodelers Business 41,359 0.02% Siding contractors Business 3,008 0.03% Finish carpentry contractors Business 29,369 0.03% Other building equipment contractors Business 1,365 0.03% Other building finishing contractors Business 1,868 0.03% Tile and terrazzo contractors Business 4,195 0.03% Plumbing and HVAC contractors Business 14,114 0.03% Glass and glazing contractors Business 1,244 0.02% Painting and wall covering contractors Business 16,302 0.04% Electrical contractors Business 10,035 0.04% Drywall and insulation contractors Business 6,863 0.03% Residential Property Managers Business 5,824 0.08% Lessors of Residential Real Estate Business 15,970 0.03% Total 188,588 1
2 3 4 5 6 7 8
9 Combining the small entities affected by the removal of the opt-out provision with those affected only by the additional recordkeeping requirements, Table ES-10 presents the total number of small governments, non-profit organizations, and small for-profit businesses affected by the rule, and the average cost-torevenue ratios for each category. It is estimated that under Option A, a total of 289,000 small entities would be affected by the program, including 266, 000 small businesses with average impacts of 0.4 percent, nearly 17,000 small non-profits with averag e impacts of about 0.0001 percent, and over 6,000 small governments with average im pacts of about 0.0005 percent.

Table ES-10: Aggregate Impacts on All Small Entities

Total Number of Small Entities Affected Average Impacts, All Small Entities Option A Small Governments 6,492 0.0001% N on-Profit Organizations 16,655 0.0005% Small For-Profit Businesses 266,102 0.43% Total 289,250 10
11

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** ES-12EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

1 2 3 4 5 6
7 8 9 10 11 12

13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33 Some of the small entities subject to the rule have employees while others are non-employers. The nonemployers typically perform fewer jobs than firms with employees, and thus have lower work practice compliance costs. However, they also have lower average revenues than entities with employees, so their impacts (measured as costs divided by revenues) can be higher. Impact estimates for non-employers should be interpreted with caution, as some non-employ ers may have issues related to understatement of income, which would tend to exaggerate the average impact ratio for this class of small entities. As shown in Table ES-11, there are 75,000 non-employer renovation contractors estimated to be affected by the removal of the opt-out provision. The average cost to these contractors is estimated to be $1,193 apiece. This represents 1.3% to 4.7% of reported revenues, depending on the industry sector. This rule’s new recordkeeping requirement is estimated to a ffect an additional 96,000 non-employer renovation contractors not affected by removal of the opt-out pr ovision. The costs to these contractors are estimated to be $42 apiece. This represents 0.05% to 0.17% of revenues, depending on the industry sector.

Table ES-11: Cost-to-Revenue Ratios: Non-Employers Industry Description Number of Small Entities AverageCostImpact Ratio Residential Opt-Out Contractors Residential remodelers 22,522 3.48% Siding contractors 1,651 3.65% Finish carpentry contractors 19,170 3.91% Other building equipment contractors 664 3.03% Other building finishing contractors 1,222 1.56% Tile and terrazzo contractors 2,739 3.11% Plumbing and HVAC contractors 6,162 2.07% Glass and glazing contractors 685 1.96% Painting and wall covering contractors 10,639 4.73% Electrical contractors 4,869 2.96% Drywall and insulation contractors 4,497 1.30% Total, Small Construction Establishments 74,821 3.07% Currently Regulated Contractors Residential remodelers 29,024 0.12% Siding contractors 2,128 0.13% Finish carpentry contractors 24,705 0.14% Other building equipment contractors 856 0.11% Other building finishing contractors 1,575 0.06% Tile and terrazzo contractors 3,530 0.11% Plumbing and HVAC contractors 7,940 0.07% Glass and glazing contractors 883 0.07% Painting and wall covering contractors 13,710 0.17% Electrical contractors 6,275 0.10% Drywall and insulation contractors 5,796 0.05% Total, Small Construction Establishments 96,422 0.11%

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** ES-13EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 1-1 

## 1. Introduction 1 This report presents an economic analysis of alternative regulatory options for revising the lead, renovation, repair and painting (LRRP) program regul ations for target housing and child occupied facilities (COFs). The LRRP rule for target housing and COFs was promulgated in 2008 (73 FR 21692) and is codified in Part 745 of Title 40 of the C ode of Federal Regulations (CFR). The rule was promulgated under the authority of §402(c) of the To xic Substances Control Act (TSCA). Section IV of TSCA was established by the Residential Lead-Based Paint Hazard Reduction Ac t of 1992, also known as Title X of the Housing and Community Devel opment Act of 1992, Public Law 102-550. 2 3 4 5 6 7 8
9 10 11 12
13 14 15 16 17 18
19 20 21 22

24 25 26 27 28 29 30 31
32 33 34 35 36 37 38 39 40 41 The existing LRRP regulations require entities that perform renovation, repair and painting work for compensation in buildings covered by the rule to become certified by EPA, ensure that their employees are trained as either renovators or workers, and use lead-safe work practices when disturbing lead-based paint. Past use of lead-based paint has resulted in contamin ation that continues to pose human health hazards. While intact lead-based paint is not likely to contri bute to such hazards, the deterioration of a structure over time or acute environmental stresses, such as are commonly present during renovation activities, has been found to create lead hazards. Since many buildin gs constructed before 1978 have lead-based paint, it is likely that renovation activities in pre-1978 buildings will contribute to lead hazards unless appropriate containment and cl ean-up practices are employed. The proposed revisions to the LRRP program include: (1) the removal of the opt-out provision for owneroccupied target housing without either children under th e age of 6 or a pregnant woman in residence, and (2) an additional requirement that the renovator provid e a copy of their recordkeeping checklist to owners and occupants of renovated structures.


### 1.1 Purpose of the LRRP Rule Revisions 23 Removing the opt-out provision will protect individuals (including children under age 6 and pregnant women), who visit, move into, or live adjacent to a home renovated under the opt-out provision, from exposure to lead hazards due to renovation activiti es. Requiring renovators to provide owners and occupants of renovated buildings with copies of the records documenting the renovation firm’s compliance with the rule’s training and work practi ce requirements will enable them to better understand what the renovation firm did to comply with the ru le and improve their ability to assist the EPA in monitoring compliance with the RRP rule. EPA antic ipates that the rule will further develop a market 1
for lead safe renovation services that has been established by past lead rules. The LRRP rule requires certification of entities th at perform renovation, repa ir and/or painting in buildings covered by the regulations. This includes c onstruction contractors (including sole practitioners) as well as landlords and other build ing owners (such as school districts) that may perform RRP activities using their own staff. It does not, however, cover renovation, repair and painting (RRP) work performed by homeowners on their own homes. The certified en tity must ensure that all persons performing RRP activities on behalf of the entity in buildings covered by the rule are either renovators who have received formal training in EPA-approved work practices from an EPA-accredited course or workers who have received on-the-job training in these approved work prac tices. In addition, the rule requires the use of these approved work practices to ensure that pr oper cleanup has occurred. Supporting these work practices, training and certification requirements, EPA is undertaking an enhanced outreach program to

1 These markets are expected to consist of suppliers who offer lead safe renovation services (LSRS) and consumers who are willing to pay the incremental costs associated with using LSRS over non-LSRS.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 1-2 educate the general public about the dangers of l ead exposure and ways to limit exposure resulting from RRP activities. 1 2

4 5 6 7 8 9 10
11 12 13 14 15 16 17
18 19 20 21 22 23
24 25 26 27 28 29 30 31 

### 1.2 Goal of the Economic Analysis

3 The purpose of this report is to analyze various opt ions for the LRRP rulemaking revisions. The report addresses the requirements for economic analysis of Executive Order 12866 – Regulatory Planning and Review ; the Regulatory Flexibility Act (RFA) and the Small Business Regulatory Enforcement Fairness Act (SBRFA); Executive Order 12898 – Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations ; Executive Order 13045 – Protection of Children from Environmental Health Risks and Safety Risks ; the Unfunded Mandates Reform Act; Executive Order 12875 – Enhancing the Intergovernmental Partnership ; and the Paperwork Reduction Act (PRA). This economic analysis considers various regulatory options. The effective date for the recordkeeping checklist requirement is June 2010 under all options. Options A through D all include containment, cleaning, and cleaning verification requirements, as we ll as restricting or prohibiting certain paint removal practices. However, options A through D differ in terms of the effective dates of the elimination of the opt-out provision. In addition, the economic analysis considers four options with varying work practice requirements, Options E1 through E4. Table 1-1 summarizes the options consider ed in this analysis; they are described in more detail below. Options A and D both have effective dates of June 20 10 for the elimination of the opt-out provision, but Option A does not phase in the opt-out elimination while Option D is limits opt-out elimination to pre1960 structures during Phase 1 of the regulation and expands the requirements to structures built between 1960 and 1978 in Phase 2, which has an effective date of June 2011. Options B and C have effective dates of January 2011 and June 2011 for the eliminati on of the opt-out provision respectively, and neither option phases in this requirement. Options E1 through E4 have the same effective dat es and universe of regulated structures as Option A, but consider alternative work practice requirements. Option E1 has the same containment requirements as 40 CFR 745.85, but does not include any cleaning or cleaning verification work practices. Option E2 has the same cleaning and cleaning verification requirements as 40 CFR 745.85, but does not include any containment work practices. Option E3 has the sa me cleaning requirements as 40 CFR 745.85, but does not include any containment or cleaning verifica tion work practices. Option E4 has the same containment, cleaning and cleaning verification requirements as 40 CFR 745.85, but does not restrict or prohibit any paint removal practices.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 1-3 Table 1-1: Options Included in Economic Analysis

Option Effective Dates and Scope For Opt-Out Elimination* Containment, Cleaning, and Cleaning Verification Requirements Paint Removal Practices Restricted or

Prohibited

A June 2010, no phase-in Yes Yes

B January 2011, no phase-in Yes Yes

C June 2011, no phase-in Yes Yes

D June 2010 for pre-1960 housing, June 2011 for housing built between 1960 and 1978 Yes Yes

E1 June 2010, no phase-in Containment Only Yes

E2 June 2010, no phase-in Cleaning and Cleaning Verification Only Yes

E3 June 2010, no phase-in Cleaning Only Yes

E4 June 2010, no phase-in Yes No
*The effective date for the recordkeeping check list requirement is June 2010 under all options.

1

3 4 5 6 7 8 9
10 11 

### 1.3 Organization of this Report

2 Chapter 2 profiles the RRP industry, as well as non-profit and governmental suppliers of childcare including family daycare providers. It examines th e supply of and demand for renovation, remodeling and painting services. Using data from a variety of sour ces, including the U.S. Economic Census, the chapter discusses the size of the RRP industry and characteristics of its firms, as well as the organizational structure and competitiveness of the industry. Th e demand for RRP services is characterized and the factors that affect demand are di scussed. Other affected industries (e.g. training providers, property owners and managers) are also profiled in this chapter. Chapter 3 characterizes the lead contamination probl em to be addressed under the proposed rule. It discusses how incomplete information and external cost s have resulted in inefficient levels of lead contamination resulting from renovation activity, an d introduces regulation as a reasonable solution for these market failures. The chapter al so reviews state and local regulations that affect RRP activities and demonstrates that these are not sufficient to address the problem. 12 13 14
15 16 17 18 19 Chapter 4 describes in detail the methods used to calculate costs of the various regulatory options considered. It describes the data sources used and is organized around the four general categories of costs incurred under the proposed rule: work practice compliance costs, training costs, certification and administrative costs, and checklist provision costs. The last section of the chapter estimates the costs of each option over a 50-year period and presents annualized costs at both 3 percent and 7 percent.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 1-4 Chapter 5 calculates crude benefits numbers for sever al groups of individuals protected by removing the opt-out provision. While these values can serve as a proxy to provide a sense of the magnitude of benefits from this action, the amount of error in these values is unknown. 1 2 3
4 5

6 Chapter 6 presents findings of distributional analy ses relevant to specific rule-making requirements, including small business impacts, environmental just ice, protection of children and unfunded mandates.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-1 

## 2. Lead, Renovation, Repair, a nd Painting Industry Profile 1 The LRRP rule for target housing and child occupied facilities (COFs) was promulgated in 2008 (73 FR 21692) and is codified in Part 745 of Title 40 of the Code of Federal Regulations (CFR). The rule was promulgated under the authority of §402(c) of the To xic Substances Control Act (TSCA). Section IV of TSCA was established by the Residential Lead-Based Paint Hazard Reduction Ac t of 1992, also known as Title X of the Housing and Community Devel opment Act of 1992, Public Law 102-550. 2 3 4 5 6
7 8 9 10 11
12 13 14 15 16
17 18 19
20
21 22 23 24 25 26 27 28 29 30 31 32 33 34 The existing LRRP regulations apply to entities that perform renovation, repair and painting work for compensation in target housing or child occupied facilities, including building owners or managers who use their own staff to conduct RRP activities. These entities must become certified by EPA, ensure that their employees are trained as either renovators or workers, and use lead- safe work practices when disturbing lead-based paint. The revisions to the LRRP program include: (1) the removal of the opt-out provision for owner-occupied target housing without either children under the age of 6 or a pregnant woman in residence, (2) an additional requirement that the renovator provide a co py of their recordkeeping checklist to owners and occupants of renovated structures, and (3) clarifications and other technical changes to the LRRP program that do not have cost implications. Target housing is defined in section 401 of the Toxic Substances Control Act (TSCA) as any housing constructed before 1978, except housing for the elde rly or persons with disabilities (unless any child under age 6 resides or is expected to reside in such housing) or any 0-bedroom dwelling.
A COF is defined under the rule in Title 40 of the Code of Fede ral Regulations (CFR) §745.83, as: Child-occupied facility means a building, or por tion of a building, cons tructed prior to 1978, visited regularly by the same child, under 6 years of age, on at least two different days within any week (Sunday through Saturday period), provided th at each day’s visit lasts at least 3 hours and the combined weekly visits last at least 6 hours, and the combined annual visits last at least 60 hours. Child-occupied facilities may include, but are not limited to, day care centers, preschools and kindergarten classrooms. Child-occupied facilitie s may be located in target housing or in public and commercial buildings. With respect to common areas in public and commercial buildings that contain child-o ccupied facilities, the child-o ccupied facility encompasses only those common areas that are routinely used by children under age 6, such as restrooms and cafeterias. Common areas that children under age 6 only pass through, such as hallways, stairways, and garages are not included. In a ddition, for public and co mmercial buildings that contain child-occupied facilities, the child-occupi ed facility encompasses only the exterior sides of the building that are immediately adjacent to the child-occupied facility or the common areas routinely used by children under age 6.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-2 The term renovation is defined in 40 CFR §745.83 to encompass a wide variety of construction activities: 1
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
20 21 22 23 24 25 26 27

29 30 31 32 33 34 35 36 37
38 39 40
41 42 Renovation means the modification of any existing structure, or portion thereof, that results in the disturbance of painted surfaces, unless that activity is performed as part of an abatement as defined by this part (40 CFR § 745.223). The term renovation includes (but is not limited to): the removal, modification or repair of painted surfaces or painted components (e.g., modification of painted doors, surface restoration, window repa ir, surface preparation activity (such as sanding, scraping, or other such activities that may ge nerate paint dust)); the removal of building components (e.g., walls, ceilings, plumbing, wi ndows); weatherization projects (e.g., cutting holes in painted surfaces to install blown-in in sulation or to gain access to attics, planing thresholds to install weather-stripping), and in terim controls that disturb painted surfaces. A renovation performed for the purpose of converting a bu ilding, or part of a building, into target housing or a child-occupied facility is a renovation under this subpart. Thus, renovation includes repair work as well as painti ng work involving sanding, scraping, or other paint removal. Renovation activities are conducted without th e intent of removing lead, but may disturb it in the process. Lead abatement activities, on the other ha nd, are conducted with the intent to remove leadbased paint or otherwise permanently eliminate a l ead-based paint hazard. Depending on the reason they are undertaken, many activities, such as replacing windows, can be either renovation or abatement. Because the rule will address renovation, rather than abatement activity, this profile characterizes the renovation industry as opposed to the abatement services industry. The industry profile is categorized into eight sections. Section 2.1 discusses the supply of contractorprovided renovation services. Section 2.2 presents information on the numbers and types of child care facilities and schools. Section 2.3 presents information on the number and sizes of non-residential property owners and managers likely to be affected by the rule. Section 2.4 focuses on the demand-side of renovation by identifying the quantity of renovation activities performed. Section 2.5 discusses the overall market organization for the renovation industry. Section 2.6 describes the residential property owner and manager industry. Section 2.7 discusses training providers. Section 2.8 provides an overview of the structures that would be affected by the revisions to the LRRP rule.


### 2.1 Contractors that Supply Renovation Services 28 Data from the U.S. Economic Census were used to identify the North American Industry Classification System (NAICS) industry groups that may provide renovation, repair and painting work (U.S. Census Bureau 2004a). An establishment is assigned to a NAICS group based on the activities from which it derives the greatest share of its revenues. These activ ities may or may not make up the majority of work (i.e. labor hours) performed by the establishment, whic h may also be involved in a variety of other related (or unrelated) lines of work. The analysis identified 12 NAICS codes that are lik ely to include the vast majority of construction-related establishments that will be affected by the rule. Affected industry groups include two building construction sectors (NAICS 236118 – Residential Remodelers; and NAICS 236220 – Commercial and Institutional Building Construction) and ten specialty trade contractor sectors. The number of contracting establishments affected is al so discussed in Chapter 4. This profile examines the financial and employment characteristics of c onstruction establishments likely to provide renovation work in child-occupied facilities. NAICS sectors likely to perform projects regulated under the LRRP rule, as well as examples of the work they perform, are presented in Table 2-1

.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-3 Table 2-1: Contractor Sectors li kely to be affected by the rule 2002 NAICS Examples of Work Performed 236118 - Residential Remodelers • Addition, alteration and renovation of single-family homes

• Addition, alteration and renovation of multifamily buildings

• Home improvement (e.g., adding on, remodeling, renovating) 236220 - Commercial Building Construction • Addition, alteration, maintenance and repair of commercial and institutional buildings

• Commercial and Institutional building general
contractors 238150 - Glass and Glazing Contractors • Mirror Installation

• Window pane or sheet installation 238170 - Siding Contractors • Vinyl Siding, soffit and fascia, installation

• Wood Siding, Installation 238210 - Electrical Contractors • Electrical wiring contractors

• Lighting system installation

• Electrical power control panel and outlet installation 238220 – Plumbing and HVAC Contractors • Heating equipment installation

• Plumbing fixture installation

• Plumbing and heating contractors 238290 – Other Building Equipment Contractors • Pipe, duct and boiler installation

• Water pipe insulating

• Deodorization (i.e., air filtration) system installation 238310 – Drywall and Insulation Contractors • Panel or rigid board insulation installation

• Mineral wool insulation installation

• Plastering (i.e., ornamental, plain) contractors 238320 – Painting and Wall Covering Contractors • House painting

• Paint and Wallpaper Stripping

• Paperhanging and removal contractors 238340 – Tile and Terrazzo Contractors • Ceramic tile installation

• Mantel, marble or stone, installation

• Mosaic work 238350 – Finish Carpentry Contractors • Door and window, prefabricated, installation

• Millwork installation

• Paneling installation

238390 - Other Building Finishing Contractors • Window shade and blind installation

• Building fixture and fitting (except mechanical equipment) installation

• Drapery fixture (e.g., hardware, rods, tracks) installation Source: U.S. Census Bureau 2004a 1EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-4 2.1.1 Number of Establishments with Employees 1 The U.S. Economic Census tracks businesses with paid employees (employer establishments) and nonemployer establishments (self-employed contractors) separately. 2 3 4
5 6 7 8 9 10 11
12 1 This discussion deals with employer establishments only; non-employers are addressed in the next section.
Table 2-2 presents both the number of establishments and the number of employees in each NAICS group of interest. The number of establishments “includes all establishments that were in business at any time during the year are included. Construction establishments that were inactive or idle for the entire year were not included” (U.S. Census Bureau 2006a). Table 2-2 also presents the average per-establishment employment numbers by NAICS code. The average employment numbers are small for all affected sectors. Overall, Other Building Equipment contr actors have the largest number of employees per establishment (20.8 people), while Residential Re modelers have the smallest (3.9 people).

Table 2-2: Number of Employer Establishments and Employees by NAICS Code
NAICS Industry Establishments Number of Employees Average Size 236118 Residential Remodelers 82,750 320,208 3.9 236220 Commercial building construction 37,208 715,896 19.2 238150 Glass and glazing contractors 5,294 50,800 9.6 238170 Siding contractors 6,632 43,042 6.5 238210 Electrical contractors 62,586 771,184 12.3 238220 Plumbing and HVAC contractors 87,501 974,368 11.1 238290 Other building equipment contractors 6,087 126,559 20.8 238310 Drywall and insulation contractors 19,598 311,077 15.9 238320 Painting and wall covering contractors 38,943 234,562 6.0 238340 Tile and terrazzo contractors 8,950 60,001 6.7 238350 Finish Carpentry contractors 35,087 179,476 5.1 238390 Other building finishing contractors 3,729 50,617 13.6 Total, All sectors 394,365 3,837,790 9.7 Source: U.S. Census Bureau 2005c 13 14 15 16 17 18 19 20 21 22 Table 2-3 presents the total number of employees and the number of construction workers in each identified industry. The number of employees “incl udes all full-time and part-time individuals on the payrolls of construction establishments during any pa rt of the pay period which included the 12th of March, May, August, and Novemb er” (U.S. Census Bureau 2005m) . The number of construction workers “includes all payroll workers (up through th e working supervisory level) directly engaged in construction operations, such as painters, carpenters, plumbers, and electricians... journeymen, mechanics...truck drivers and helpers.” Non-construction employees include “payroll employees in executive, purchasing, accounting, ...and routine office functions” (U.S. Census Bureau 2005m). Because construction workers form the vast majority of the people who require training under the rule,

1 Data at the firm level were not available for th ese NAICS groups when the analysis was performed.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

1 2
3 4 5 6 7

8

10 11 12 13 14 15 16 17 18
19 20 21 22 23
24 25 26 their role in the composition of each sector’s labor fo rce provides an indication of the extent to which each sector will be affected by the regulations. In total, about 3.8 million people work for the 394 ,365 establishments in the potentially affected industries. About 73 percent of these employees are construction workers. The affected sectors differ in terms of the composition of their labor force. For example, construction workers make up 84 percent of employees in the Drywall and Insulation contractor sector. In the Residential Remodelers sector, however, construction workers make up only 65 percent of the labor force (U.S. Census Bureau 2005c)

Table 2-3: Number of Employer Establishments, Total Employees and Employees involved in Construction

NAICS Description Total Number of Employees Number of Construction

Workers Construction Workers as Percent of Total Employees 236118 Residential Remode lers 320,208 207,637 65% 236220 Commercial Building Construction 715,896 478,923 67% 238150 Glass and Glazing Contractors 50,800 34,086 67% 238170 Siding Contractors 43,042 30,284 70% 238210 Electrical Contractors 771,184 606,403 79% 238220 Plumbing and HVAC Contractors 974,368 712,452 73% 238290 Other Building Equipment Contractors 126,559 90,504 72% 238310 Drywall and Insulation Contractors 311,077 261,239 84% 238320 Painting and Wall Covering Contractors 234,562 184,328 79% 238340 Tile and Terrazzo Contractors 60,001 44,729 75% 238350 Finish Carpentry Contractors 179,476 129,888 72% 238390 Other Building Finishing Contractors 50,617 37,353 74% Total 3,837,790 2,817,826 73% Sources: U.S. Census Bureau 2005c

2.1.2 Number of Non-Employer Establishments 9 As mentioned above, the U.S. Ec onomic Census tracks non-employer establishments separately from establishments with employees. Data on the number of non-employer establishments were available from the U.S. Small Business Administration. A non-employer firm “is defined as one that has no paid employees, has annual business receipts of $1,000 or more ($1 or more in the construction industries), and is subject to federal income taxes” (U.S. Sm all Business Administration 2006a). Essentially, nonemployers are self-employed contractors. Because little financial and operational data is available for non-employers, the vast majority of this profile focuses on establishments with employees. This subsection discusses the number of non-employers in the affected industry sectors and the receipts of these establishments. The U.S. Small Business Administration did not provide data on the number or revenues of non-employer establishments in each of the 6-digit level NAICS i ndustries addressed in this profile. Data on the number of such establishments was available for Plumbing and HVAC contractors (NAICS 238220) and Electrical contractors (NAICS 238210) only; for the remaining industries, data was provided at the more general 4-digit NAICS level. In total, there are nearly 1.2 million self-employed contractors. To estimate the number of non-employer establishments in each of the 6-digit sectors, it was assumed that the distribution of non-employer establishments in each 4-digit NAICS code is the same as the distribution of establishments with payroll in the same 4-digit group. Similarly, to estimate the revenues

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-5EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-6 of these establishments, it was assumed that the distribu tion of receipts in each 4-digit NAICS code is the same as the distribution of revenues of payroll establishments in the same 4-digit industry. 1 2
3 4
5 Table 2-4 presents the estimated number and revenues of non-employer establishments in each of the 12 sectors affected by the rule.

Table 2-4: Number and Annual Revenues of Non-Employer Establishments in Affected Sectors

NAICS Description Number of Non-Employer Establishments Revenues of NonEmployer Establishments (000) 236118 Residential Remodelers 194,182 $6,187,917 236220 Commercial Building construction 74,255 $4,784,817 238150 Glass and Glazing contractors 12,723 $720,934 238170 Siding contractors 15,939 $485,112 238210 Electrical contractors 102,219 $3,834,347 238220 Plumbing and HVAC contractors 110,183 $5,920,986 238290 Other Building Equipment contractors 9,710 $356,461 238310 Drywall and Insulation contractors 103,398 $8,798,899 238320 Painting and Wall Covering contractors 205,462 $4,823,217 238340 Tile and Terrazzo contractors 47,220 $1,684,174 238350 Finish Carpentry contractors 185,118 $5,254,955 238390 Other Building Fini shing contractors 19,674 $1,396,611 Sources: U.S. Census Bureau 2005h, U.S. Census Bureau 2004q, U.S. Census Bureau 2005i 6

8 9 10 11 12 13 14 2.1.3 Financial Profile

7 In this section, Census data is used to examine ke y financial indicators for the renovation industry. The indicators include net value of construction (val ue of construction less value of construction subcontracted out to others) and labor costs. Net valu e of construction work is used instead of the total value of construction work because it is a measure of the work actually performed by the establishment. Table 2-5 presents the average per establishment net value of construction work (NVCW) for each industry sector. The table also presents labor costs as a percent of the net value of construction for each of the affected NAICS codes.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-7 Table 2-5: Financial Summary for Contractor Sectors Affected by the rule

2002 NAICS

code Industry Name Annual Net Value of Construction Work (000) Number of Establishments Net Value of Construction

Work per Establishment (000) Total Payroll (000) Payroll as % of Net Values of Construction Work 236118 Residential Remodelers $30,627,850 82,750 $370 $8,703,503 28 236220 Commercial Building construction $108,229,283 37,208 $2,909 $29,210,092 27 238150 Glass and Glazing contractors $6,016,766 5,294 $1,137 $1,764,314 29 238170 Siding contractors $3,810,070 6,632 $574 $1,185,348 31 238210 Electrical contractors $77,671,846 62,586 $1,241 $29,324,486 38 238220 Plumbing and HVAC contractors $105,323,163 87,501 $1,204 $35,942,262 34 238290 Other Building Equipment contractors $13,680,062 6,087 $2,247 $4,940,641 36 238310 Drywall and Insulation contractors $27,046,301 19,598 $1,380 $9,766,997 36 238320 Painting and wall covering contractors $15,316,726 38,943 $393 $6,005,447 39 238340 Tile and Terrazzo contractors $5,639,641 8,950 $630 $1,834,890 33 238350 Finish Carpentry contractors $15,640, 544 35,087 $446 $4,711,739 30 238390 Other Building Finishing contractors $4,560,138 3,729 $1,223 $1,719,039 38 Total, all industries $407,922,749 394,365 $1,034 $135,108,758 33 Source: U.S. Census Bureau 2005c 1 2 3 4 5 6 7 8 9 10
11 12 13 14 15 16 17 18 Table 2-5 shows the wide range of values of construc tion work per establishment across all NAICS codes of interest. The average estab lishment in the Residential Remode ler industry (NAICS 236118) has the smallest net value of construction work ($370,000), followed by the Finish Carpentry contractors industry ($446,000). Meanwhile, the average establishment in the Commercial Building Construction industry (NAICS 236220) has the largest net value of construction value ($2,909,000), with the Other Building Equipment contractors industry netting the second largest value ($2,247,000). It should come as no surprise that the Commercial Building Construction industr y’s net value of construction is so much larger than the Residential Remodeler industry’s net value of construction work given that commercial building construction projects tend to be substa ntially larger in scope and size than residential remodeling projects.
As demonstrated in Table 2-5 , while labor constitutes about 33% of net value of construction for all the industry sectors, the composition varies across industry sectors. The Painting and Wall Covering contractor (NAICS 238220) industry is most dependent on labor, with an overall labor cost to net value of construction ratio of 39 percent. The Commercial Building Construction industry, with an overall labor cost to net value of construction work ratio of 27 pe rcent, is the least dependent of the 12 sectors (U.S. Census Bureau 2005c). It is worth mentioning that labor (as measured by payroll) is a relatively small percentage (27% to 39%) of total net value, reflec ting the fact that a large percent of revenues go to covering the cost of materials and profit.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-8 2.1.3.1 Establishment Size by Revenue Bracket 1 The Small Business Administration (SBA) defines a small business in both the Residential Remodeler and Commercial Building Construction industries as one that has revenues of $33.5 million dollars a year or less. The small business definition for the ten sp ecialty contractor industries is $14 million per year (U.S. Small Business Administration 2008). The SBA size standards apply to firms rather than establishments; at the time the analysis was perform ed, revenue data in the 2002 Economic Census was only available at the establishment level. Sin ce a firm may consist of one establishment, a few establishments or even a very large number of estab lishments, by using establishment rather than firm data, this analysis overestimates the number of small businesses in the affected industry. 2 3 4 5 6 7 8 9
10 11 12 13 14 15 16 17 18 19 20 21
22 The remainder of this section examines the number of establishments, number of employees, net value of construction work and value of business done 2 distributed by establishment revenue bracket. These data were available from the 2002 Economic Census at th e NAICS code level only. Establishments were classified into two revenue categories based on the to tal value of business done – those with revenues less that $10 million and those with revenues greater th an $10 million. Because the Census groups all establishments with revenues of $10 million or more into one revenue bracket, it is not possible to determine what percentage of Residential Remodeler nor Commercial Building Construction establishments have revenues of less than $33.5 milli on. Note, however, that nearly 100 percent of Residential Remodeler establishmen ts have revenues of less than $1 0 million per year. The same cannot be said for Commercial Building Construction establis hments, as 12 percent have revenues greater than $10 million per year. The percent of establishments, employees and net value of construction contributed by establishments in each revenue bracket is presented in Table 2-6

.

2 Value of business done is defined by the U.S. Census Bureau as including “ the sum of value of construction work and other business receipts. Value of business done is the su m of receipts, billings, or sales from establishments of construction business activities plus receipts from other business activ ities” (U.S. Census Bureau 2004d ).EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-9 Table 2-6: Small and Large Establishments as Percent of Industry

NAICS NAICS Percent of Establishments Percent of Employees Percent of Net Value of Construction Percent of Value of Business done 236118 Residential Remodelers 236118 Revenues < $10 million 100% 95% 92% 91% 236118 Revenues > $10 million 0% 5% 8% 9% 236220 Commercial Building Contractors 236220 Revenues < $10 million 88% 41% 30% 24% 236220 Revenues > $10 million 12% 59% 70% 76% 238150 Glass and Glazing Contractors 238150 Revenues < $10 million 98% 82% 77% 77% 238150 Revenues > $10 million 2% 18% 23% 23% 238170 Siding Contractors 238170 Revenues < $10 million 100% 90% 88% 87% 238170 Revenues > $10 million 0% 10% 12% 13% 238210 Electrical Contractors 238210 Revenues < $10 million 98% 68% 61% 60% 238210 Revenues > $10 million 2% 32% 39% 40% 238220 Plumbing and HVAC Contractors 238220 Revenues < $10 million 98% 70% 63% 61% 238220 Revenues > $10 million 2% 30% 37% 39% 238290 Other Building Equipment Contractors 238290 Revenues < $10 million 95% 60% 55% 55% 238290 Revenues > $10 million 5% 40% 45% 45% 238310 Drywall and Insula tion Contractors 238310 Revenues < $10 million 97% 64% 60% 60% 238310 Revenues > $10 million 3% 36% 40% 40% 238320 Painting and Wall Covering Contractors 238320 Revenues < $10 million 100% 92% 88% 88% 238320 Revenues > $10 million 0% 8% 12% 12% 238340 Tile and Terazzo Contractors 238340 Revenues < $10 million 100% 91% 86% 86% 238340 Revenues > $10 million 0% 9% 14% 14% 238350 Finish Carpentry Contractors 238350 Revenues < $10 million 100% 86% 84% 83% 238350 Revenues > $10 million 0% 14% 16% 17% 238390 Other Building Finishing Contractors 238390 Revenues < $10 million 98% 81% 74% 74% 238390 Revenues > $10 million 2% 19% 26% 26% Total Total Revenues < $10 million 98% 69% 58% 50% Total Revenues > $10 million 2% 31% 42% 50% 100 percent = establishments in this reve nue category make up over 99.5 percent, but less than 100 percent of establishments in the industry. Source: U.S. Census Bureau 2004c,d,e,f,g ,h,i,j,k,l,m; U.S. Census Bureau 2005m 1
2 3 4 The distribution of the number of establishments for all twelve NAICS codes is greatly skewed toward smaller establishments. In five out of twelve i ndustry sectors, over 99.5 percent of establishments have revenues below $10 million. For the remaining sectors, establishments with revenues greater than $10EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-10 million make up less than 5 percent of establishments in any sector (with the exception of the Commercial Building Construction industry where 12% of establis hments earn more than $10 million in revenues 1 2 3 4
5 6 7 8 9 10 11 12 13 14

16 17 18 19 20 21 22 23 24 25
26 27 28 29 30 31 3 ). Thus, about 98 percent of all establishments in the affected industries have revenues well below the SBA definition of small business. Establishments with revenues of less than $10 milli on account for between 41 and 95 percent of total employment for each sector, and about 69 percent of employment overall. The distribution of the net value of construction work and the total value of business done is skewed toward smaller establishments in a manner similar to the distribution of employees. Establishments with revenues of less than $10 million account for between 30 and 92 percent of the net value of construction work and between 24 and 91 percent of the total value of business done in each sector. It is worth mentioning that if the Commercial Building Construction industry is removed, the lows in the previously cited categories jump to 55 percent. Overall (across all industry sectors) small businesses contribute about 58 percent of the net value of construction work and 50% of the total value of business (U.S. Census Bureau 2004c,d,e,f,g,h,i,j,k,l,m; U.S. Census Bureau 2005m).

2.1.3.2 Labor and Material Costs as a Percentage of Total Value of Business Done 15 In order to better understand the potential impacts of th e rule on the affected industries, and particularly on small businesses, it is important to observe whethe r establishment costs as a percentage of the total establishments’ total revenues differ for small and large establishments. Figure 2-1 examines labor and material costs, as well as the cost of construction work subcontracted out as a percentage of the total value of business done for the twelve affected sectors. While the rule will increase the cost of material slightly, the major impact will be on labor costs, including th e training of staff. Each of the sectors was broken down into two size categories by revenue bracket: le ss than $10 million and $10 million and more. The cost of labor, of materials, and of construction wo rk subcontracted out was summed across the 12 industry sectors for large and for small establishments. These va lues were then compared to their total value of business. Labor costs, material costs, and the cost of constr uction work subcontracted out as a percentage of total value of business done are presented in Figure 2-1 . Regardless of size of establishments, material costs tend to be a slightly larger percentage of total reve nues than do labor costs. Labor costs make up about 25 percent of revenues for small establishments and a bout 16 percent for large establishments. Based on Census data, large establishments subcontract out a much larger percentage of their work than do small businesses.

3 Once again, this difference arises beca use of the larger size of a majority of Commercial bu ilding construction projects. Regardless, if only 12% earn revenues greater than $10 million, it can easily be assumed that a much smaller percentage of establishments in this industry earn revenues greater than the SBA cutoff of $33.5 million.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

1 Figure 2-1: Labor and Material Costs as % of Total Value of Business Done

Labor Cost as % of

Total Value of Business Done M aterial Costs as % of Total Value of Business Done Cost of Construction Work subcontracted out as % of Total Value

of Business Done 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Type of Cost Establishments with value of Business Done of: < $10 million

Establishments with Value of Business Done of: $10 million+

2 3 4

6

10 11
12 13 14 15 16 17 18 Source: U.S. Census Bureau 2005a



### 2.2 Child Care and Schools: Child Occupied Facilities 5 For the purposes of analysis, COFs are divided into the following categories 4 :
 Kindergartens and Pre-Kindergartens in Schools: Located in public and private schools; 7

 Daycare centers: Organized (licensed) facilities located in public and commercial buildings; 8

 Family daycare: Organized (licensed) daycare facilities located in the provider’s home; and 9

 Informal daycare: Informal (i.e. not licensed) day care providers, including relatives and nonrelatives. Some of these providers may be paid for their services. There is a great deal of diversity and complexity in the childcare industry. The formal childcare sector consists primarily of two types of facilities – center-based care and family daycare. Daycare centers are typically located in commercial or educational buildings, including schools and university campuses. They include private for-profit and non-profit facilities that can operate as independent centers or as part of chains. For-profit facilities can be found in office buildings, factories, other workplace settings, or in stand-alone facilities. Non-profit facilities may be found in YMCAs or other community centers, churches, college and university campuses, as well as in office or stand-alone buildings. Government

4 The analysis is limited to kindergartens, pre-schools, dayc are centers, family daycare, and informal daycare. Due to a lack of data, it does not include other facilities that may qualify as COFs under the rule.
February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-11EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-12 education and human services agencies also provide da ycare through programs such as Head Start, as well as through kindergarten and pre-kinde rgarten programs at local schools. 1 2
3 4 5 6 7 8
9 10 11
12 Unlike center-based care, family daycare is typically offered in the home of the caregiver. Family daycare facilities tend to serve smaller groups of chil dren and have a smaller child-to-caregiver ratio (KeepKidsHealthy 2001). In addition to formal car e provided by daycare centers, schools, and family daycare, children may also be cared for informally by relatives, family friends, or other acquaintances. Informal care may be paid or unpaid, and usually ta kes place at the home of either the child or the provider.
Table 2-7 summarizes the types and numbers of faciliti es and childcare providers in this universe,grouping them by the age of their construction. It shows that the rule would apply to 1,656,000 childoccupied facilities, of which 1, 559,000 are in target housing.

Table 2-7: Total Number of Childcare Facilities in the United States, Number of Child-Occupied Facilities Potent ially Affected by the Rule Number by Date of Construction b,c,

Type Total Childcare Facilities in the United States a All Pre-1978 All Pre-1960(1) Schools with prekindergartens and/or kindergartens 79,000 46,000 25,000

(2) Pre-schools and daycare centers located outside of schools 88,000 51,000 28,000

(3) Childcare in target housing 2,398,000 1,559,000 823,000

Total 2,565,000 1,656,000 876,000

a. The Total Childcare Facilities in the United States count includes facilities constructed both before and after 1978. Facilities constructed after 1978 are not regulated under the rule. b. Not all facilities in the table have lead-based paint.

c. The number of facilities by date of construction is inclusive (pre-1960 is a subset of pre-1978). Sources: Center for the Childcare Workforce an d Human Services Policy Center 2002; U.S. Bureau of Labor Statistics 2006; U.S. Department of Education 2004; U.S. Department of Energy 2003; Wilder Research Center 2001, Wilder Research Center 2005. 13

15 16 17 18 19 20 2.2.1 Daycare Centers and Family Daycare 14 Establishments involved in the provision of day care of infants or children are classified under NAICS 624410 – Child Day Care Services. This industry cove rs child day care centers (including those located in the provider’s home), pre-school centers, nursery schools and pre-kindergarten centers (except as part of elementary schools). In 2002, Census reported that this industry included over 55,000 firms that employed nearly 752,000 people (U.S. Census Bur eau 2005d). Furthermore, Census reports 618,947 non-employers in the industry (U.S. Census Bureau 2005k).EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-13 While Census covers both family and center-based childcare under NAICS 624410, there is reason to believe that Census undercounts the number of employer fi rms in this industry. This is likely to occur for two reasons. First, it is likely that the number of firms reported by Census primarily includes centers, since care provided solely by one person (as occurs at many family daycare establishments) would be classified under non-employer statistics. Second, Census classifies a business into NAICS 624410 if its primary line of business is the provision of child day care services; it is likely that many facilities have alternate primary lines of business (YMCAs and churches, for example). The number of non-employers, on the other hand, is likely to include care providers such as nannies or babysitters that do not constitute formal care, but that cannot be disentangled from the total count. 1 2 3 4 5 6 7 8 9
10 11 12 13 14 15 16 17
18 19 20 In light of the limitations of the Census data, an alte rnative data source is used for this analysis. In 2005, the National Association for Regulatory Administra tion (NARA) in conjunction with the National Childcare Information Center (NCCIC) conducted a stud y on the number and licensed capacity of daycare centers and family daycare establishments in the 50 U.S. states. Based on these data, there are approximately 115,000 licensed daycare centers in the United States. Because licensing requirements differ from state to state, this count includes 105, 444 facilities licensed as daycare centers, as well as about 10,000 facilities such as Head Start, religious daycare, and other similar establishments, which are required to obtain a license in some states, but mu st only be registered or certified in others. According to the Department of Housing and Urban Development’s (HUD) First National Health Survey of Childcare Centers , about 22 percent of licensed daycare centers are located in elementary schools. Since throughout this analysis, schools are analy zed separately from daycare centers, the number of daycare centers was reduced by 22 percent, bringing the total number of centers to 89,260. According to 21 NCES data on public and private schools, however, an additional 1,421 schools without kindergartens 22 have a pre-kindergarten program (See Section 2.2.2.1 ). These 1,421 centers are also excluded from the total center counts to avoid double-counting, bringing the number of centers to 87,840. 23 24
25 26 27 28
29 30 31 32 33 34 35 In addition to the 115,000 centers , NARA reported a total of 166,514 licensed small family childcare homes and 47,452 large family childcare homes. 5 With the addition of about 16,000 family daycare homes that are reported as certified, not licensed, NA RA reports a total of 229,875 family daycare facilities. Because some states either completely exempt family daycare with fewer than a certain number of students from licensing requirements, or offer voluntary registration, the family daycare numbers reported by NARA are likely to underestimate the total family daycare universe. As such, to estimate the number of family daycares, this analysis relied on a 2002 re port by the Center for th e Childcare Workforce, which provides data on family childcare providers caring fo r unrelated children in their own homes. Based on these data, it is estimated that there are a total of 591,071 family daycare facilities in the United States. Table 2-8 summarizes the size of the formal (center and family daycare) childcare universe.

5 Here large and small refer to the number of children enrolled. It is not the same as the large and small definitions used by SBA.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-14 Table 2-8: Number of Daycare Centers and Family Daycare Facilities in the United States Daycare Centers (excluding schools) Total Family Daycare

Number of facilities 87,840 591,071
Sources: NARA 2006; Center for Childcare Workforce 2002

1

3 4 5 6 7 8 9 10 11 12 13 2.2.1.1 Daycare Center and Family Daycare Outlook

2 Figure 2-2 plots changes in the numbers of licensed child-occupied facilities between 1995 and 2004 using information compiled from the Childcare Licen sing Studies published annually by the Children’s Foundation and the National Association for Regulatory Administration (NARA). 6 These data give larger counts than the data above because they include fac ilities in Puerto Rico, Guam and the Virgin Islands. 7 But the trends displayed in this data are likely to be present in the smaller data set. The number of licensed Childcare Centers has grown gradually over time, from 92,000 in 1995 to 120,000 facilities in 2004. The number of Large/Group Family Childcare Homes grew in a similar manner, before tapering off in 2004. Over the time period specified, the num ber of Small Family Childcare Homes declined from 276,000 to 256,000, while exhibiting much more vari ation from year to year than the other two categories. Here, as noted earlier, large and small re fer to the number of children enrolled, not the SBA definition of a large or small entity.

6 When the Children’s Foundation closed in 2005, NARA assumed sole responsibility for collecting licensing information through the annu al study. However, because the methodol ogy was altered with the new leadership, data from the 2005 Childcare Licensing Study were not included into

. Figure 2-2

7 While the rule would apply to Puerto Rico, Guam and the Virgin Islands, they are not included in this analysis for reasons of consistency since some of the major data sour ces used elsewhere in the analysis were limited to the 50 states and the District of Columbia. Holding all other things equal, by not including COFs in Puerto Rico, Guam, and the Virgin Islands, the analysis underestimates the costs and benefits of the rule.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

1 Figure 2-2: Number of Licensed Child-Occupied Facilities: 1995-2004

0 50,000 100,000 150,000 200,000 250,000 300,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
TimeNumber

Small Family Child Care Homes Child Care Centers Large/Group Family Child Care Homes 2 3 4 5 6 7
8 9 10 11 12 13 14 15 16 17

19 20 21 22 23 Sources: National Childcare Information Center 2005 The market for lead-safe renovation activities in CO Fs is dependent on the number of care providing facilities. Figure 2-2 indicates that while there have been some fluctuations in the underlying components of the overall market, when considered over the en tire time frame, the number of licensed COFs has been relatively stable. While there wasn’t significant growth in childcare over the 1995-2004 timeframe, a study forecasts growth in the demand for childcare labor. Fueli ng the future demand for childcare services is the expected increase in the amount of children below 5 between 2004 and 2014. A dding to this growing demand will be an increased female labor force partic ipation rate, forcing families to find alternate care options for their children. Furthermore, many stat es will be implementing their own care programs for 3- and 4- year old children in the coming years. Th e government also plans to increase subsidies for lowincome families attending day care programs (Bureau of Labor Statistics 2005). While trends point to increased demand for childcare labor, it is difficult to assess whether this will be accompanied by an increase in the number of facilities, and to what extent these new facilities will be located in pre-1978 buildings.

2.2.1.2 Informal Daycare 18 Informal daycare is provided by unlicensed provi ders, including relatives, friends, and others. Calculations determining the number of informal da ycare providers are based on figures and percentages found in a report on the number of paid re latives and non-relatives providing childcare entitled “Estimating the Size Components of the U.S. Childcare Workforce and Caregiving Population: Key Findings from the Childcare Workforce Estima te” (Center for Childcare Work Force 2002). 8

8 For a more in-depth discussion of the methodology refer to Section 2 of Chapter 4 of this analysis.
February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-15EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-16 Target Housing COFs 1 Family daycare and informal daycare take place in target housing. Renovation events in some target housing COFs would be regulated un der the 2008 LRRP rule regardless of their status as a COF; for example, if they are owner-occupied units where a chil d under the age of six or a pregnant woman resides or if they are rental units. For a detailed explana tion of the methodology used to estimate the number of target housing COFs, please see Section 4.2 of Chapter 4. Section 2 3 4 5 6 7

9 10

12 13 14 15 16 17 18 19 20 21 22 23
24 2.8 presents the estimated numbers of target housing COFs affected by the rule.

2.2.2 Public and Private Schools 8 This section describes the number and size of public and private schools with kindergartens and prekindergartens.

2.2.2.1 Number of Schools 11 According to the National Center for Education St atistics, during the 2004-2005 academic year, there were 93,295 public schools with students in the United States. In total, these schools served 48.8 million students (NCES 2006a). The rule will apply only to those portions of schools that meet the COF definition. Thus, the rule is expected to prim arily impact schools that have kindergarten or prekindergarten programs. According to the NCES’s P ublic Elementary and Secondary School Universe Survey, which collects data on all operational public schools in the United States, in 2004-2005, 52,129 of the 93,295 U.S. public schools (roughly 56 percent) provided either pre-kindergarten or kindergarten services. 9 Of these 52,129 schools, 20,8 85 offered both pre-kindergart en and kindergar ten and 29,884 schools provided kindergarten services only. Only 1,400 schools offered pre- kindergarten, but not kindergarten services; this group of schools includ es standalone preschools operated by local school boards, as well as daycare centers lo cated in public middle schools, high schools, and ungraded schools (See Table 2-9 ). Note that these figures are not limited to schools with pre-1978 buildings.

Table 2-9: Number of Public Schools, by Type Type of Public School Number of Schools Total number of public elementary and secondary schools 93,295 Number of schools with pre-kindergartens and kindergartens 20,885 Number of schools with pre-kindergartens but no kindergartens 1,400 Number of schools with kindergartens, but no pre-kindergartens 29,844 Total number of schools with pre-kindergartens 22,285 Total number of schools with kindergartens 50,729 Total number of schools with pre-kindergartens or kindergartens 52,129 Source: NCES 2006a,b 25
26 27 28 29 As shown in Table 2-10 , in 2004-2005 a total of 990,421 pre-kinde rgartners and 3,543,554 kindergartners were enrolled in pre-kindergartens and kindergartens offered at public schools, respectively. Given the number of programs described above, this means that there are roughly 44 pre-kindergarten students per school and 70 kindergarten students per school.

9 A school was considered as having a pre-kindergarten if a) pre-kindergarten enrollment was greater than zero students, or b) the school reported that the lowest grade offered was pre-kindergarten, but enrollment data were not provided. Similarly, a school was considered as having a kindergarten if a) kindergarten enrollment was greater than zero, or b) the school reported that the lowest grade offered was pre-kindergarten or kindergarten, but did not report kindergarten enrollment.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-17 Table 2-10: Enrollment in Public Pre-kindergarten and Kindergarten Program Statistics Number of Schools offering program Number of Students Served Average Students Served per School Pre-kindergartens in public schools 22,285 990,421 44 Kindergartens in public schools 50,729 3,543,554 70 Source: NCES 2006a,b 1

3 4 5 6 7 8 9 10
11 12 13 14
15 16 17 18 19 20 21 Number of Public School Districts

2 Public schools in the United States are operated by local education agencies (LEAs), organizations “responsible for providing free public elementary/sec ondary instruction or education support services.” The National Center for Education Statistics collect s data on LEAs through its Common Core of Data (CCD) fiscal and non-fiscal surveys. NCES desi gned the Common Core of Data system to “accommodate the many and varied organizational struct ures used in the provision of public elementary and secondary education.” As such the CCD cont ains records that represent “administrative and operating units that are unlike typical public schools and school districts – for example, regional administrative service centers without students.” According to the CCD Local Education Agency Universe Survey, in 2004-2005, 17,647 LEAs operated in the 50 contiguous states and the District of Colu mbia. Of these 17,647 agencies, 14,473 operated at least one school that offered pre-kindergarten or kindergarten services and may thus be affected by the rule. Of the 14,473 local education agencies responsible for schools with pre-kindergarten and kindergarten programs, just under 13,200 are typical public school districts (usually county or town agencies responsible for providing education services in that location). An additional 949 agencies are charter school organizations. The remaining 333 agencies re present regional, state, and federal institutions, as well as supervisory union administrative centers. 10 Table 2-11 presents a detailed breakdown of the number of education agencies by agency type, as well as counts of schools with pre-kindergartens and/or kindergartens operated by each agency.

10 Supervisory union administrative centers operate schools only in Massachusetts, Vermont, and Virginia.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-18 Table 2-11: Number of Local Education Agenci es Operating Schools with Kindergartens or Pre-Kindergartens, by Agency Type

Type of Local Education Agency Number of Agencies Number of Schools with Pre-K or Kindergarten

Programs Average Number of Pre-K or K

Schools

Local School District 13,191 50,386 3.8
Supervisory Union Administrative Office 85 159 1.9
Regional Education Services Agency 167 308 1.8

State Institution 54 75 1.4

Federal Institution 27 188 7.0
Other Agency (Primarily Charter Schools) 949 1,013 1.1

Total 14,473 52,129 3.6
Source: NCES 2006b,c

1
2 3 4 5 6 7 The NCES collects data on the revenues and expenditures of local education agencies through its CCD School District Finance Survey. Table 2-12 presents the total revenues, average revenues, and percent revenues derived from federal, state, and local funds for education agencies operating schools with prekindergarten and/or or kindergarten programs. All figures are based only on agencies with available data; for each agency type, the table indicates the percent of LEAs represented in the totals. Note that financial data were not available for any federal ins titutions, nor for most state institutions.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-19

Table 2-12: Total Revenues, Average Revenues and Percent of Revenues by Source for Local Education Agencies Operating with Pre-Ki ndergarten and/or Kindergarten Programs

Revenues Percent of Revenues by
Revenue Source

% LEAs with Data Total Revenues, (Millions of $) Average LEA Revenues ($) Federal State Local

Local School District 99% $440,444 $33,560,173 8% 47% 45%
Supervisory Union Administrative Office 91% $1,269 $16,481,935 8% 41% 52%
Regional Education Services Agency 95% $7,612 $48,180,367 24% 35% 41%

State Institution 7% $8 $2,115,250 12% 54% 34%

Federal Institution 0% n.a. n.a n.a n.a n.a Other Agency (Primarily charter schools) 81% $2,074 $2,683,282 11% 68% 21%

All LEAs 98% $451,408 $31,933,217 9% 46% 45%
Source: NCES 2006b,c,d

1
2 3 4 5 6 7 8 9 10 Table 2-13 presents the total and average expenditures of local education agencies. Total expenditures are composed of total current expenditures for elementary/secondary education, as well as other expenditures. Elementary/secondary education current expenditures include expenditures for instruction (e.g. teacher salaries), support services (including, bu t not limited to, administrative, maintenance, and operations costs), and other expenses, such as tran sportation and food services. Other expenditures include spending not related to elementary/secondary education, such as expenditures for community service, or adult education, capital outlay expenditur es, payments to other government and educational entities, and debt interest payments. In Table 2-13 current expenditures are split out by type, while the remainder (capital and non-educational) are comb ined and labeled as “all other” expenditures.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-20 Table 2-13: Total Expenses, Average Expenses, and Percent of Expenditures by Expenditure Type for Local Education Agencies

Expenses Percent of Expenditures by Expenditure Type

% LEAs with Data Total Expenses (in Millions of $) Average Expenses Instruc. Support Service Other Current All
Other

Local School District 99% $451,464 $34,399,846 52% 28% 3% 17%
Supervisory Union Administrative Office 91% $1,203 $15,628,805 57% 32% 3% 8%
Regional Education Services Agency 95% $7,154 $45,278,905 28% 33% 1% 38%

State Institution 7% $7 $1,759,000 49% 39% 0% 11%

Federal Institution 0% n.a. n.a. n.a. n.a. n.a. n.a. Other Agency (Primarily charter schools) 81% $2,023 $2,616,922 47% 41% 3% 9%

All LEAs 98% $461,851 $32,671,971 51% 29% 3% 17%
Sources: NCES 2006b,c,d

1
2 3 4 5

6 7 8 For most LEAs, the majority of expenditures (51 percent on average, across all LEAs) are spent on instruction. In aggregate, the category containi ng maintenance costs (i.e. support service) makes up around one-third of all expenditures. Lastly, the “a ll other” expenditures category makes up a significant percentage of the expenditures for regional education services agencies. Under the Regulatory Flexibility Act, public school districts are considered large if they serve a population of more than 50,000. Table 2-14 presents the number of LEAs that operate schools that have pre-kindergartens and/or kindergartens, by agen cy type and the size of the population served.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-21 Table 2-14: Local Education Agencies that operate schools with Kindergartens and/or Pre-Kindergartens, by Agency Type and Size of Population Served

Type of Local Education Agency Total Number of LEAs with Pre-K

or K Programs Number of LEAs Serving < 50,000 a Small LEAs as % of all LEAs with Pre-K or K Programs

Local School District 13,191 12,130 92% Supervisory Union Administrative Office 85 84 99% Regional Education Services Agency 167 167 100%
State Institution 54 0 b 0%
Federal Institution 27 0 b 0% Other Agency (Primarily charter schools) 949 949 100%
All LEAs 14,473 13,330 92%

a. Local districts, supervisory union offices, regi onal education agencies and charter school

districts for which no population data were av ailable were assumed to serve a population of fewer than 50,000.
b. Assumes that all state and federal agencies are large. Source: NCES 2006b,c,e,g
1

3 4 5 6 7 8
9 Private schools 2 In 2003-2004, the National Center for Education Statistics conducted a survey of private schools in the United States. NCES’s Characteristics of Private Sc hools in the United States: Results From the 2003- 2004 Private School Universe Survey (2006) presents a summary of survey results, including numbers of schools currently in operation, the number of students enrolled, and teachers employed. Table 2-15 presents summary statistics on national private schools, including a total count of all private schools, enrollment and teachers, as presented in NCES’s report.

Table 2-15: Enrollment and Teacher Statistics for Private Schools

Entity Number of Schools Total Enrollment Total Teachers Average Enrollment Average Teachers Private Schools 34,681 5,212,992 441,384 150.3 12.7 Sources: NCES 2006e 10 11 12 13 14 15 According to the NCES data, in 2003-2004 there were 34,681 private schools in the U.S., enrolling a total of just over 5.2 million students, with a total teachi ng staff of over 441,000. On average, there were 150 students enrolled in a private school and 13 teacher s per school. These figures must be interpreted with caution however, since they encompass elementary school s, secondary schools, etc. which, by definition, include different numbers of classes.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-22 While the NCES report provides some data on the number of private schools by grade level, it does not provide data on grades offered by each individual school in the survey. In order to identify schools with kindergartens only, pre-kindergartens and kindergarten s, and pre-kindergartens only, this analysis relied on the Excel database underlying NCES’s 2003-2004 repor t. This database, which contains records for 29,907 of the estimated 34,461 private schools in the Un ited States, specifies the highest and lowest grade offered at each school, as well as the number of student s enrolled in each grade. The database, however, does not include sampling weights used to adjust some of the survey results to generate final numbers presented in NCES’s report. In order to most accurately estimate the number of schools offering each combination of kindergarten or pre-kindergarten programs, as well as the number of children enrolled in these programs, this analysis: 1 2 3 4 5 6 7 8 9 10
11 12
13 14 15 16 17 18
19 20
21 3⁄4 used the underlying database to identify schools with pre-kindergartens only, kindergartens only, and both kindergartens and pre-kindergartens, then
3⁄4 inflated these counts to account for the 4,500 schools that were not included in the database. The numbers of schools offering each combination of programs was inflated using the ratio of the number of schools presented in the published report to the number of schools included in the database. Similarly, the number of children in each school setting, estimated based on the underlying data, was adjusted using the ratio of the number of kindergartners presented in the published report to the number of kind ergartners reported in the database. 11

Table 2-16 breaks down the totals from the previous table to provide a count of the number of private schools with pre-kindergartens and/or kindergartens.

Table 2-16: Number of Private Schools, by Type

Type of Private School Number of schools Total number of private elementary and secondary schools 34,681 Number of schools with pre-kindergartens and kindergartens 19,305 Number of schools with pre-kindergartens and no kindergartens 21 Number of schools with kindergartens but no pre-kindergartens 7,205 Total number of schools with pre-kindergartens 19,326 Total number of schools with kindergartens 26,510 Total number of schools with pre-kindergartens or kindergartens 26,531 Source: NCES 2006e 22 23 24 25 Of the 34,681 private schools counted in the 2003-20 04 survey, 26,531 provided either pre-kindergarten or kindergarten services. 12 Furthermore, of these 26,531 private schools, 19,305 provided both prekindergarten and kindergarten services. Only 21 pr ivate schools provided pre-kindergarten but not

11 In its report, NCES tracks schools where kindergarten is the highest grade offered separately from regular elementary, middle and high schools. As such, when inflating counts obtained from underlying data, the analysis calculated two sets of ratios for the numbers of schools and numbers of children enrolled – one for regular, and another for kindergarten-terminal schools.

12 A private school was identified as having a pre-kindergarten or kindergarten in the same fashion as a public school was in Section 2.2.1.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-23 kindergarten services 13 ; while 7,205 private schools offered kindergarten but not pre-kindergarten services. Note that these figures are not limited to schools in pre-1978 buildings. 1 2
3 4
5 Table 2-17 presents a count of the number of pre-kinderga rten and kindergarten students served in private schools, as well as the average number of students served per school.

Table 2-17: Total Number and Average Kindergarten and Pre-Kindergarten Students Served Per School Number of Schools offering Program Number of Students Served Average Students Served per School Pre-kindergartens in private schools 19,326 863,542 45

Kindergartens in private schools 26,510 555,531 21 Source: NCES 2006e
6
7 8 9 10 11
12 13 14 15 16 17
18 According to Table 2-17 , there are 26,510 private schools with kindergartens, enrolling a total of 555,531 kindergarteners. Also, there are 19,326 private sc hools with pre-kindergartens, enrolling 863,542 prekindergarten students. The average number of private pre-kindergarten students per school (45) is more than double the average number of kindergarten students (21). Whereas public schools displayed nearly the opposite ratio with on average 44 pre-kindergarten students and 70 kindergarten students per school. Non-profit organizations, including private schools, are defined as small under the Regulatory Flexibility Act if they are independently owned and operated and not dominant in their field. While determining whether a school meets this definition is difficult, it is useful to present some st atistics describing the size distribution of private schools. Table 2-18 shows the distribution of private schools by the number of students they serve. This represents the total numbe r of students served, and not just the number of kindergarten and pre-kindergarten students.

Table 2-18: Schools with Kindergarten or Pre-Kindergarten programs, by Number of Students in the School Number of Students Served <100 100-499 a 500-999 1000-1499 >1500 Total % Total % Total % Total % Total % Number of Private School 10,862 41% 13,951 53% 1,519 6% 161 1% 38 0% Note: schools that did not report the total number of st udents were considered as having less than 100 student a. Includes all schools with missing total student data. These schools are assumed to have student enrollment equal to the average school with over 100 students, or 285.

Source: NCES 2006e
19 20 21 The distribution of private schools in the U.S. is h eavily skewed toward smaller schools, with 94% of private schools serving less than 500 students and 99% of private schools serving less than 1000 students.

13 Beginning in 1995, the definition of school employed by the Private School Survey was expanded to include schools whose highest grade was kindergarten. Theref ore, these statistics are lik ely to include some prekindergartens that are more likely also classified as pr eschools in other sources (NCES 2006e). Later sections explain how the calculations avoid doub le-counting. However, because this is a small figure, it is almost negligible.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-24 However, these data do not indicate whether the schools are affiliated with or part of a larger organization. 1 2

4 5 6

8 9 10
11 12 13 14 15 16 17
18 

### 2.3 Nonresidential Commercial Pr operty Owners and Managers

3 Nonresidential commercial property owners and managers will be affected by the rule if they rent space to daycare facilities or other COFs in buildings construc ted prior to 1978. The number and size of firms in this industry is described below.

2.3.1 Industry Definitions and Characteristics 7 Firms involved in the leasing of nonresidential build ings (except Miniwarehouses) are classified under NAICS 531120 – Lessors of nonresidential buildings (e xcept Miniwarehouses). In 2002, this industry included 28,426 firms that employed 154, 725 people (U.S. Census Bureau 2005b). Firms involved in the management of non-residential properties are classified under NAICS 531312 – Nonresidential property managers. In 2002, this indus try included 10,506 firms that employed 125,616 people (U.S. Census Bureau 2005b). 14 Table 2-19 includes only firms with employees. The U.S. Census Bureau does not differentiate between self-employed i ndividuals that lease or manage commercial real estate as opposed to residential buildings. This an alysis assumes that non-employers primarily lease residential buildings, rather than commercial propert y. As such, non-employer establishments are not included in this profile, or in the remainder of the analysis.

Table 2-19: Summary Statistics for NAICS 531120 and NAICS 531312

NAICS Code and Description Firms Annual Revenues (000) Annual Payroll (000) Employees 531120 - Lessors of nonresidential buildings (except miniwarehouses) 28,426 $51,778,431 $5,384,512 154,725

531312 - Nonresidential property managers 10,506 $12,297,703 $5,521,674 125,616

Total 38,932 $64,076,134 $10,906,186 280,341 Sources: U.S. Census Bureau 2005j 19
20 21 22 23 24 25

27 28 29 30 The 2008 LRRP rule economic analysis (EPA 2008) indi cated that a total of 17,705 daycare centers rent space in pre-1978 buildings. Because daycare centers are only one of many types of establishments renting non-residential space, and b ecause the rule applies only to centers in buildings cons tructed prior to 1978, the analysis also assumes that each property manager or lessor firm owns only one regulated building. As such, the number of affected lessor/manager firms is equivalent to the number of daycare centers renting space, or 17,705.

2.3.2 Establishment Size and Industry Environment 26 The U.S. Small Business Administration indicates that to qualify for small business status, a firm in NAICS 531120 must have revenues of less than $7 m illion, while firms in NAICS 531312 must have revenues of less than $2 million (U.S. Small Business Administration 2008). Average revenues in these NAICS codes are significantly below the small business designation threshold ( Table 2-20 ).

14 Firms involved in the leasing and/or management of residentia l buildings are already covered under the residential lead RRP rule.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-25 Table 2-20: Summary Statistics for NAICS 531120 and NAICS 531312 (Per Firm)

NAICS Code and Description Average Annual Revenues ($) Average Annual Payroll ($) Paid Emplo y ees Per Firm 531120 - Lessors of nonresidential buildings (except miniwarehouses) $1,821,517 $189,422 5.4

531312 - Nonresidential property managers $1,170,541 $525,573 12.0 Sources: U.S. Census 2005j 1
2 3 4 5

6 Census data are not specific enough to report revenues at either the $7 million dollar or $2 million dollar cutoff; Table 2-21 presents the percent of firms in NAICS 531120 and NAICS 531312 that have revenues below $5 million and $1 million respectively. Consequently, the figures in Table 2-21 are all underestimates of the true percentages of firms that qualify as small businesses.

Table 2-21: Small and Large Firms as Percent of Industry

NAICS Code: Description Percent of Firms by Revenue Bracket Percent of Industry Revenues by

Revenue Bracket Percent of Industry Emplo y ees b y Revenue Bracket 531120 Lessors of nonresidential buildings (except mini-warehouses) Firms with Revenues < $5 million 96% 32% 73% Firms with Revenues of $5 million+ 4% 68% 27% 531312 N onresidential property managers Firms with Revenues < $1 million 81% 19% 26% Firms with Revenues of $1 million + 19% 81% 74% Sources: U.S. Census 2005j
7
8 9 10 11 12 13

15 16 17 18 19 20 21 22 23 Based on 2002 data, 96 percent of NAICS 531120 fi rms and 81 percent of NAICS 531312 firms have revenues below $5 million and $1 million, respectively. In the Lessors of Nonresidential Buildings industry, these firms contribute 32 percent of the industry revenues while employing 73 percent of the workforce. The revenue and employment distributi on is more skewed in the Nonresidential Property Managers sector. Small firms in this industry contribute only 19 percent of the revenues, while employing only 26 percent of the workforce.


### 2.4 The Demand for Renovation Services 14 The demand for renovation is responsive to changes in the overall economic conditions. The same factors that stimulate economic growth, such as low unemplo yment, high consumer confidence and low interest rates, also stimulate the demand for renovation activities. For both residential and nonresidential building projects, the U.S. Census Bureau tracks information on the “value of construction put in place,” a figure composed of some of the variables previously discussed in this chapter such as labor and material costs (while also including other variables such as the c ontractors profit, the cost of architectural and engineering work, etc). Although the definition of construction includes renovations, alterations, additions, and other improvements, it does not include “maintenance and repairs to existing structures or service facilities” (U.S. Census Bureau 2006d), two co mponents of primary interest to this rule.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

Using this Census data, Figure 2-3 illustrates the relationship between the value of construction put in place for private preschools (a term that includes childcare and day-care centers, nurseries, and preschools), state and local elementary school build ings, private primary and secondary educational buildings, and real GDP (U.S. Census Bureau 2006b,c). 1 2 3 4 5 6 7 8
9 15 Both real GDP and the value of state and local construction of elementary school buildings substantially increased over the previous 12 years. Meanwhile, the value of private preschool construction and private primary and secondary educational buildings construction have seen more moderate growth, peaking around 2001 and then gradually tapering off. Figure 2-3: Annual Value of Construction Put in Place Compared to GDP

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
YearMillions of Dollars

7,000,000 7,800,000 8,600,000 9,400,000 10,200,000 11,000,000 11,800,000

State and Local Construction of Elementary School Buildings - Read Left-Hand Vertical Scale for Values in Millions of Dollars Private Preschool Construction - Read Left-Hand Vertical Scale for Values in Millions of Dollars
Private Primary and Secondary Educational Building Construction - Read Left-Hand Scale for Values in Millions of Dollars Real Gross Domestic Product in millions of chai ned 2000 dollars - Read Right-Hand Vertical Scale for Values in Millions of Dollars 10 11 12 13 14 15 16 17 Source: U.S. Census Bureau 2006b,c; U.S. Department of Commerce 2006

Construction is a term that encompasses not only the creation of new buildings but renovations to older structures as well. While the Census tracks this breakdown between re novation and new building construction for residential construction, it does not for non-residential construction. The U.S. Census Bureau, however, did compile statistics for the expe nditures of non-residential improvements in 1986, 1989, and 1992. The U.S. Census defines im provements as “additions, alterations (renovations,

15 State and Local Construction of Elementary School Buildings is meant to give an indication of public kindergarten construction, while Private Primary and Secondary Educational Building Construction is meant to give an indication of private school kindergartens. Since the variables shown in Figure 2-3 are more broadly defined than the variables of interest, they overes timate the value of cons truction put in place.
February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-26EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-27 remodeling, etc.) and major replacements.” While not being able to collect data on the number or extent of the individual projects, the Census was able to make some estimations in the non-residential domain, concluding that “about 23 percent of all buildings had some improvement work, while about 71 percent had some expenditures for repair” (U.S. Census Bure au 1999). The collected data, however, were not specific enough to capture improvement expenditures on COFs. Thus, 1 2 3 4 5 6 7
8 Table 2-22 presents improvement expenditures as the percentage of the total value of non-residential educational building construction put in place in each of the three years for which im provement expenditure data were available.

Table 2-22: Improvement Expenditures as a Percentage of the Value of Construction Put in Place for Non-Residential Educational Buildings Type of Construction 1986 1989 1992 Private Non-Residential Educational Buildings 40% 46% 19% State and Local Non-Residential Educational Buildings 58% 35% 41% Source: U.S. Census Bureau 1999, U.S. Census Bureau 2006b,c 9 10 11 12 13 14 15 16 17

19 20
21 22 23 24 25 26 27 28
29
30
31
32
33
34 As shown in Table 2-22 , expenditures on improvements as a percent of the total value of educational building construction put in place vary year to y ear. Expenditures on improvement made up between 35 and 58 percent of the total value of construction pu t in place in either private or state and local nonresidential buildings in the three selected years, with the data moderately variable. These figures indicate that a substantial amount of non-residential educati onal building expenditures are for activities that might disturb lead-based paint. The high frequency of th ese improvement activities points to the importance of schools in this rule.



### 2.5 Renovation Industry Market Structure 18 The previous sections focused on the supply and demand for renovation services. This section discusses the overall market structure of the renovation industry. Firms and consumers interact in markets for goods and services with the results of these interactions depending on the competitive characteristics of th e market. Competitive mark ets are characterized as markets with a large number of buyers (e.g., cons umers) and sellers (e.g., firms) and relatively homogeneous goods. In competitive mark ets, neither firms nor consumers can influence the price of the good by altering their supply or demand decisi ons. Oligopolistic, monopo listic and monopsonistic markets are markets where either firms or consumers ha ve market power and exhibit strategic behavior to change the price of the good sold. The competitive natu re of an industry can be estimated by examining the following market characteristics.
3⁄4 Number of establishments;
3⁄4 Specialization of establishments;
3⁄4 Number of consumers;
3⁄4 Barriers to entry;
3⁄4 Availability of substitutes; and
3⁄4 Homogeneity of the good/service.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-28 The data in Section 2.1 indicate that there are a large number of firms in the construction industry. Using data for the twelve NAICS codes, there are approximately 394,365 establishments with employees in construction sectors potentially affected by the ru le. Of these establishments, only 2.3 percent have annual revenues of $10 million or more. In addition, there are about 1.2 million self-employed contractors in these industries, all of which are, in all likelihood, considered small by SBA standards. Given the large number of small establishments, it is unlikely that any one firm exhibits substantial market share in the overall market for renovation services. It is possible in some geographic areas for a small number of firms or a single firm to establish a market niche, but overall the market for renovation services appears to be quite competitive on the supply side. 1 2 3 4 5 6 7 8 9
10 11 12 13 14
15 16
17 18 19 20 21 22 23 24 25
26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42
43 44 45 The relatively low barriers to entry in the renovation industry enhance the competition taking place within it. Much of the work covered by this rule does not require particularly unusual or high levels of skills. Renovation work has traditionally attracted recent immigr ants because a lack of English is not important (Farzad 2005). While any training required as part of th is rule will increase the skill level, the cost of the training is expected to be relatively low. There are also a large number of consumers in the i ndustry. As such, no single consumer of renovation services is expected to exhibit infl uence over the price of these services.
There are three sources of substitutes for renovation se rvices. First, consumers can substitute from one contractor to another. Second, consumers can s ubstitute away from professional renovation and into DIY work. This is less likely to occur fo r COFs than for residential RRP work. Operators of COFs must be certified and have their employees trained in order to do covered RRP in the fac ility. Third, consumers can reduce the scope of the project or forgo renovation altogether. However, that is unlikely as the cost of the rule is a relatively small share of the cost of a re novation. Again, this is less likely to occur for COFs than for residential RRP work. Many states require annual inspections in COFs that assess the amount of chipped or peeling lead-based paint and dictate that appropriate measures must be taken to alleviate the risk that it imposes.
Additional characteristics of the RRP market resu lt in reduced demand elasticity. First, some differentiation in RRP services does exist. Contractor s can provide services at a higher price if they can convince consumers that their services are better or distin ctly different from their competitors. This is an important factor in anticipating the impact of the RRP requirements on contractors. The costs of safely renovating or repairing target housin g and COFs are expected to be higher than traditional methods. If the consumer is indifferent between safe- or unsafe-l ead work practices, then th ose companies that choose not to use lead-safe work practices may have a compe titive advantage in the market due to lower costs. However, if the consumer recognizes that higher qual ity renovation jobs are those jobs completed with lead-safe work practices, then firms may be able to comply with the re gulation and charge a higher price. Under such a scenario, the consumer’s marginal bene fit for an additional unit of safe renovation may be higher than for an additional unit of unsafe renovation. The consumer who has a preference for lead-safe work practices would choose to do lead-safe renovation as long as the incremental cost of the lead-safe renovation is less than the incremental benefit of su ch a renovation. Also, the market for RRP services is fragmented and there are substantial costs involve d in getting prices. Getting bids from various contractors takes time and consumers need to co mpare prices across services that differ along many dimensions. These difficulties make it easier for firm s to increase their prices to cover the costs for the new requirements. The combination of a large number of firms, a large number of consumers, low barriers to entry, and available substitutes indicate that the renovation industry is likely to have a relatively high price elasticity of supply. The price elasticity of demand, however, may be small in absolute value.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-29 

### 2.6 Residential Property Owners & Managers 1 Property owners and managers also will be affected by the rule if they choose to perform their own RRP projects rather than hire an outside contractor or if their renovation and maintenance costs rise as a result of the regulations. 2 3 4
5 6 7 8 9 10

12 13 14 15 16 17
18 19 20 21
22 Property owners and managers may have in-house crews that perform RRP activities. If this is the case, then the property owners and managers will directly b ear the costs of training and certifying their workers as well as the cost of safe work practices. Furthe rmore, because all firms that perform regulated RRP projects will experience an increase in costs due to trai ning of supervisors and workers and the use of safe work practices, it is assumed that costs to property ow ners and managers who hire outside contractors will increase.

2.6.1 Industry Definitions and Characteristics 11 Establishments involved in the leasing of apartments and other residential units are classified under NAICS 531110 - Lessors of Residential Buildings and Dwelli ngs. This industry, in turn, is divided into two sub-sectors, NAICS 5311101—Lessors of Apartm ent Buildings and NAICS 5311109—Lessors of Dwellings Other than Apartment Buildings. According to the 2002 U.S. Economic Census data, together these industries include a total of 61,787 establishments that employ 292,405 people (U.S. Census Bureau 2004b). Establishments involved in the management of residential properties are classified under NAICS 531311—Residential Property Managers. In 2002, th is industry included 26,233 establishments that employed 289,870 people (U.S. Census Bureau 2004b). Table 2-23 presents summary statistics for the businesses in NAICS 531311 as well as NAICS 531110 and its sub-sectors.

Table 2-23: Summary Statistics for NAICS 531110, NAICS 5311101 and NAICS 5311109 NAICS Code and Description Establishments Annual Revenues (000) Annual Payroll (000) Paid Employees 5311101 - Lessors of Apartment Buildings 51,502 $51,708,553 $5,831,398 257,624 5311109 - Lessors of Dwellings other than Apartment Buildings 10,285 $5,263,795 $748,821 34,781 531311 - Residential property managers 26,223 $19,988,344 $8,193,831 289,870 Total 88,010 $76,960,692 $14,774,050 582,275 Source: U.S. Census Bureau 2004b 23

25 26 27 28 29 30 2.6.2 Establishment Size and Industry Environment 24 The U.S. Small Business Administration indicates that to qualify for small business status, a firm in NAICS 531110 must have annual revenues of less th an $7 million, while establishments in NAICS 531311 must have revenues of less than $2 million (U.S. Small Business Administration, 2004). Although data on the number of firms by revenue bracket were not available from the 2002 U.S. Economic Census when this analysis was performed , the average revenues of establishments in these NAICS codes are significantly below the small business designation threshold ( Table 2-24 ).EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-30 Table 2-24: Summary Statistics for NAICS 531110, NAICS 5311101 and NAICS 5311109 (Per Establishment)

NAICS Code and Description Average Annual Revenues ($) Average Annual Payroll ($) Paid Emplo y ees per Establishment 5311101 - Lessors of Apartment Buildings $1,004,011 $113,227 5.0 5311109 - Lessors of dwellings other than apartment buildings $511,793 $72,807 3.4 531311 - Residential property managers $762,245 $312,467 11.1 Source: U.S. Census Bureau 2004b 1 2 3 4 5 6 7 8 9
10 In 1997, 98.7 percent of the then 51,572 establishments in the Lesso rs of Residential Buildings and Dwellings sector had annual revenues below $5 million and about 85 percent of the 19,000 establishments in NAICS 531311 had revenues less than $1 million (U.S. Census Bureau 2000a). 16 Because 2002 data on the number of establishments by revenue bracket was not available at the time the estimates were developed, 1997 data was used to estimate the percen t of establishments in each industry that qualify for small business status. Table 2-25 presents the percent of NAICS 531311 and NAICS 531110 establishments that have revenues below $1 million and $5 million, respectively. The table also presents the percent of industry revenues and employment that can be attributed to these establishments.

Table 2-25: Small and Large Establishments as Percent of Industry

NAICS

Code Description Percent of Establishments b y Revenue Bracket Percent of Industr y Revenues by Revenue Bracket Percent of Industr y Employees by Revenue Bracket 531311 Residential Property Managers Establishments with Revenues < $1 million 85 35 40 Establishments with Revenues of > $1 million 15 65 60 531110 Lessors of Residential Buildings and Dwellings Establishments with Revenues < $5 million 99 82 86 Establishments with Revenues of > $5 million 1 18 14 Source: U.S. Census Bureau 2000a 11
12 13 14 15 16 17 18

20 21 Based on 1997 data over 85 percent of NAICS 531311 establishments, and about 99 percent of NAICS 53110 establishments have revenues below the sma ll business threshold defined by SBA. In the Residential Property Manager industry, these establishm ents contribute only 35 percent of the revenues, and employ only 40 percent of the workforce. The revenue and employment distribution is less skewed in the Lessor of Residential Buildings and Dwellings se ctor. Small establishments in this industry contribute about 82 percent of the revenues and employ 86 percent of the workforce (U.S. Census Bureau 2000a).

2.6.3 Industry Outlook 19 The market for lead-safe renovation activities will depend in part on the state of the rental housing market—an increase in rents would provide resources to construct new housing a nd/or renovate existing

16 Includes establishments open year-round only.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-31 housing. According to Harvard University’s Joint Cent er for Housing Studies (JCHS), “rents fell in 9 of the 27 metropolitan areas tracked by the federal government [in 2003]. Nationally, real contract and gross rents barely increased last year.” The JCHS indi cates that both the weak labor market and increased home ownership contributed to the softening of the rental market (JCHS 2004). 1 2 3 4
5 6 7 8 9 10

12 13

15 16 17 18 19 20 21
22 23 24 25 26
27 At the same time as rents fell, the nation-wide rental vacancy rate increased from 8.9 percent in 2002 to 9.8 percent in 2003. The vacancy rate was slightly above 10 percent during the first three quarters of 2004 (U.S. Census Bureau 2004e). None-the-less, the JCHS predicts a strengthening of the rental market over the next ten years due to the influx of immigran ts and the aging of the “echo baby-boom generation.” The strengthening of the market may also come fro m overall economic growth and a stemming of home ownership growth due to rising inter est rates and/or house prices (JCHS 2004).


### 2.7 Training Providers 11 Impacts of the rule will be felt beyond the constr uction industry. Certified renovators will need accredited training. Both initial and refresher trai ning courses will be required for certified renovators.

2.7.1 Definitions and Industry Characteristics 14 It is likely that lead-based paint training courses will be provided by establishments categorized as NAICS code 611519: Other Technical and Trad e Schools. Census defines NAICS 61159 as “establishments primarily engaged in offering job or career vocational or technical courses (except cosmetology and barber training, aviation and flig ht training, and apprenticeship training). The curriculums offered by these schools are highly structured and specialized and lead to job-specific certification” and these establishments are believed to currently provide training for lead abatement professionals (U.S. Census Bureau 2004p). According to the 2002 Economic Census, there are a total of 3,323 establishments in the U.S. certified as Other Technical and Trade Schools (see Table 2-26 ). On average, each establishment employs 15.3 people. A striking characteristic is that about 19% of these establishments are exempt from the Federal Income Tax (FIT). Exempt establishments include n on-profit organizations a nd educational institutions such as colleges or universities.

Table 2-26: Number of Establishments in NAICS 611519
Industry Number of Establishments Total Number of Employees Average Number of Employees

NAICS 611519 - Other Technical and Trade Schools 3,323 50,709 15.3

Source: U.S. Census Bureau 2004n 28
29 30 31 32 Table 2-27 summarizes available financ ial information for establishments categorized under NAICS 611519. These include total revenues for the sector, average annual revenues per establishment, annual payroll for the sector, and payroll as a percent of revenue. As Table 2-27 indicates, for Other Technical and Trade schools, annual payroll is equal to about 35 percent of establishment revenue.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-32 Table 2-27: Summary Statistics for NAICS 611519

Industry Number of Establishments Annual Sector Revenue

(000) Average Revenue per Establishment (000) Avera g e Pa y roll per Establishment (000) Labor Cost as percent of Revenue NAICS 611519 - Other Technical and Trade Schools 3,323 $4,118,995 $1,240 $429 35 %

Source: U.S. Census Bureau 2004n 1
2 3 4 5 6 7 8

10 11 12 13 14 15 16 17
18 19 20 21
22 23 24 25 26 According to the U.S. Small Business Administration, in order to qualify as a small business, a firm categorized under NAICS 611519 must have annual reve nues of $7 million or less (U.S. Small Business Administration 2006a). 17 The 2002 Economic Census provided data on the number of firms by revenue bracket. In 2002, 94 percent of the then 2,274 firm s classified as Other Technical and Trade Schools that were in operation for the entire year had revenues under $5 million (U.S. Census Bureau 2005f). This figure indicates that a large percentage of firms had revenues under the $6.5 million threshold and thus qualified for small business status.

2.7.2 Number and Type of Training Establishments 9 As mentioned in Section 2.7.1 , there are over 3,000 establishments in the Other Technical and Trade school industry. It is likely that only a small por tion of these establishments are involved in lead based paint-related training. To help characterize the lead training segment of the training provider industry, a random sample of firms that offer one or more of the courses required for EPA lead abatement certification were identified as part of the economic analysis of the 2006 proposed LRRP target housing rule (EPA 2006). The goal was both to collect tuition data for currently offered lead abatement training courses and to learn what types of institutions (p rivate establishments, non-profits, unions, etc.) offer these classes. The sample consisted of 83 establishments selected from the Lead Listing 18 directory of 194 training providers. 19 Data were collected from company web sit es (when available) and/or over the phone. Information was obtained from 68 training providers; a total of 15 training providers could not be reached. Seven of the 68 contacted providers no longer offered lead abatement training courses. There were five types of training providers in th e sample: private for-profit establishments, non-profit establishments, educational institutions, trade unions a nd public/government training institutions. Trade unions provide tuition-free training to their members. Public/government providers train state employees and workers who qualify for financial assistance th rough government programs. They do not offer training to the general public.

17 Effective July 31 st , 2006.

18 The Lead Listing ( www.leadlisting.org ) website was run for the U.S. Department of Housing and Urban Development’s Office of Healthy Homes and Lead Hazard Control that contained a directory of lead service providers. It is no longer in operation (as of late 2004).

19 The sample included all the establishments on the list th at are certified to offer a Pr oject Designer course (42 total), as well as a random sample of 41 establishments th at were not certified to offe r this class. The data were weighted by the inversed probability of selection into the sample (P=1 for providers that offer a ProjectDesigner course and P=.270 for providers that do not offer this class). It was assumed that there was no nonresponse bias.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-33 Table 2-28 summarizes the number of priv ate establishments, educational institutions, non-profits, unions and public government providers that appeared in the sample. The table also presents the estimated national number of providers that fall into each of th ese categories. More than a third of lead hazard reduction training providers are private, for-profit estab lishments. The next largest group of providers is labor unions, followed by educational institutions (c olleges and universities). None of the unions, however, are certified to offer the Project Designer cour se. About 13 percent of certified providers either do not offer training at this time, or have permanently stopped offering lead courses. 1 2 3 4 5 6 7
8 9 10 11 12 13
14 More than half of the privately owned, for-profit establishments in the samp le (19 out of 35) offer environmental consulting services in addition to training. Thirteen of the 35 privately-owned providers specialize in training and do not offer other services. All of these 13 firms offer both lead and asbestos training courses, as well as, in most cases, OSHA safet y, HAZ-MAT and/or mold classes. Although there was not enough information to determine the services provided by the remaining three companies, these findings indicate that lead-based paint training provide rs generally participate in several lines of business.

Table 2-28: Estimated Number of Training Providers National Estimates Type of Provider Number in Sample Total Percent Private Providers 35 74 38 Educational Institutions 11 27 14 Non-Profit 4 19 10 Union 9 42 22 Pub/Gov Providers 2 6 3 No Longer Offer Training 7 26 13 Total Companies 68 194

a. Adjusted for non-response assuming no non-response bias and weighted based on the probability of selection into the sample Source: U.S. Environmental Protection Agency 2006
15

17 18 19 20 21 22
23 24 25 26 27 28 

### 2.8 Summary Characteristics: Numbers of Structures in the Regulated 16 

### Universe This section provides summary information about the numbers of target housing and public or commercial building COFs that form the basis for the analyses presented in the subsequent chapters of this report. Each tally is then subdivided into cate gories based on the age of the building and the type of structure. After each table, there is a discussi on of how the numbers presented in that table were calculated.
Table 2-29 provides counts of the number of buildings by type and vintage of building. There are 78.0 million structures covered by the recordkeeping checklist provision of the revisions to the rule, including 77.9 million target housing units and 0.1 million COFs in public or commercial buildings. About 40.2 million target housing units would be added to the regulated universe due to the elimination of the opt-out provision. Table 2-29 also shows the regulated universe under th e existing 2008 LRRP rule (37.7 million target housing units and 0.1 million public and commercial buildings).EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-34 Table 2-29: Number of Structures, by Type and Age of Construction Type All Pre-1960 All Pre-1978 Target Housing where LLRP rule is applicable af ter opt-out provision removal 41,040,000 77,888,000 Target Housing where LRRP program was applicable under 2008 LRRP Rule: Rental, COF, or where a child <6 or pregnant woman resides) 20,321,000 37,665,000 Rental where a child <6 or pregnant woman resides 2,187,000 4,130,000 Rental where no child <6 or pregnant woman resides 14,180,000 26,289,000 Owner-Occupied where a child <6 or pregnant woman resides 3,529,000 6,422,000 Owner-Occupied COF where no child <6 or pregnant woman resides 424,000 824,000 Target Housing COFs 823,000 1,559,000 Renter-Occupied COF where a child <6 or pregnant woman resides 33,000 62,000 Renter-Occupied COF where no child <6 or pregnant woman resides 214,000 397,000 Owner-Occupied COF where a ch ild <6 or pregnant woman resides 152,000 276,000 Owner-Occupied COF where no child <6 or pregnant woman resides 424,000 824,000 Target Housing Universe affected by elimination of the opt-out provision (Owner-Occupied where no child <6 or pregnant woman resides that is not a COF) 20,719,000 40,222,000 Public or Commercial Building COFs 54,000 97,000 Daycare Centers* 29,000 52,000 Schools* 25,000 45,000 Kindergarten Only 12,000 21,000 Kindergarten and Pre-Kindergarten 13,000 23,000 Note: Counts include buildings with and without lead-based paint. * There are 800 pre-1978 schools that have pre-kindergartens but no kindergarten. In this table and in the cost and benefits analysis in Chapters 4 and 5, they are accou nted for as daycare centers. In the small entity impact and Unfunded Mandates Reform Act an alyses in Chapter 6 these buildings are accounted for as schools. 1

3 4 5

6 7 8 9 10 11 12 13 14 15 16 2.8.1 Target Housing

2 This section provides a brief discussion of the estimates of the number of the target housing units presented in Table 2-29 ; a detailed explanation of the data sour ces used to develop these estimates can be found in Section 4.2 of Chapter 4. Estimates of the number of housing units by tenure of o ccupant (owner or renter), age of occupants, and pregnancy status of occupants were estimated us ing the 2003 American Housing Survey, which is described in more detail in Section 4.2 of Chapter 4. Section 4.2 of Chapter 4 also provides a detailed explanation of the estimated number of target housing un its that are defined as COFs. The COFs in target housing include family daycare providers and the homes of family, friends, and neighbors who regularly care for someone else’s children. These estimates include care provided for pay and not for pay, and rely primarily on estimates of the size of the childcare workforce as published by the Center for Childcare Workforce, 2002. This report includes data on the number of: (1) family childcare providers caring for unrelated children, (2) paid relatives and non-relativ es providing childcare, and (3) unpaid relatives and non-relatives providing childcare. Based on data provid ed by the Center for Childcare Workforce, a total of just under 2.4 million caregivers provide care outside of the child’s home for more than six hours perEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-35 week. As described in detail in Section 4.2, these data are used to estimate the number of COFs in target housing. These numbers are further reduced to estimate the number of pre-1960 and pre-1978 housing units based on American Housing Survey data. 1 2 3

5 6 7 8 2.8.2 Childcare Centers 4 In 2006, the National Association for Regulatory Ad ministration (NARA) released a report entitled “The 2005 Childcare Licensing Study” providing counts of all the licensed childcare centers and family childcare homes in the United States. The NARA report indicated that there were approximately 115,000 licensed childcare centers, 66,700 of which are est imated to be built before 1978 according to Commercial Building Energy Consumption Suevey (CBECS) data (DOE 2003). According to HUD's First National Health Survey of Childcare Centers (HUD 2003), approximately 24 percent of licensed 9 10 centers are located in elementary schools. These 15,753 centers are assumed to be included in the 11 estimated 40,190 elementary schools with pre-schools and kindergartens. Thus, there are a total of 12 50,947 pre-1978 daycare centers located outside of elementary schools. According to NCES data on 13 public and private schools, however, an additional 824 pre-1978 schools without kindergartens have a 14 pre-kindergarten program, which brings the total numbe r of buildings accounted for as daycare centers to 15 51,771 (EPA 2008). 16

18 19 20 21 22 23 24 25 26 27 28

30 31 32 33 34 35 36 37 38 39
40 41
42 43 44 2.8.2.1 Public Schools 17 The National Center for Education Statistics (NCES) reported that during the 2004-2005 academic year, there were more than 93,000 public schools in the United States. Of these 93,295 public schools, 52,129 had either a pre-kindergarten (PK) or kindergarten (K) program. The Common Core of Data Public Elementary/Secondary School Universe Survey data w as used to calculate the number of private schools with PK or K programs. Using this data, a school was considered as having a pre-kindergarten if a) prekindergarten enrollment was greater than zero students, or b) the school reported that the lowest grade offered was pre-kindergarten, but enrollment data were not provided. Similarly, a school was considered as having a kindergarten if a) kindergarten enrollment w as greater than zero, or b) the school reported that the lowest grade offered was pre-kindergarten or kind ergarten, but did not report kindergarten enrollment. Again, the educational building age distribution fo und in CBECS and HUD (2003) was applied to the total counts, resulting in the estimated 17,000 pre-1960, and 30,000 pr e-1978 public schools.

2.8.2.2 Private Schools 29 This analysis used NCES’s Results from the 2003-2 004 Private School Universe Survey report and the underlying dataset to estimate the number of private sc hools with kindergartens and/or pre-kindergartens. A school was considered as having a pre-kindergarten if a) pre-kindergarten enrollment was greater than zero students, or b) the school reported that the low est grade offered was pre-kindergarten, but enrollment data were not provided. Similarly, a school was considered as having a kindergarten if a) kindergarten enrollment was greater than zero, or b) the school reported that the lowest grade offered was prekindergarten or kindergarten, but did not report kind ergarten enrollment. The previously cited CBECS and HUD educational building age distribution was then applied to the private school universe to calculate the number of private schools by age of construction. This adjustment yielded 9,000 pre-1960, and 15,000 pre-1978 private schools. For the purpose of the total cost analysis, privat e and public schools were categorized according to whether they offered kindergarten only, kindergarten and pre-kindergarten, and pre-kindergarten only.
Table 2-29 uses information drawn from Table 2-9 and Table 2-16 to obtain the total number of schools with each combination of programs. Table 2-9 and Table 2-16 indicate that there are 29,844 public schools and 7,205 private schools with kindergarten programs only, for a total of 37,049 such schools.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-36 Table 2-9 and Table 2-16 also indicate that there are 20,885 public schools and 19,305 private schools with both pre-kindergarten and kindergarten programs. Finally, there are a total of 1,400 public and 21 private schools with pre-kindergarten, but no kindergar ten, which are accounted for as daycare centers for the purposes of the analysis. 1 2 3 4 5 6 7
8 Table 2-29 presents the total number of schools with kindergartens, kindergartens and pre-kindergartens, and pre-kindergar tens only by age of construction. Information about the age distribution of buildings was taken fro m CBECS and HUD and applied to the data to give estimates of the number of schools by the age of the building.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-37 

### References 1

2 Bureau of Labor Statistics. 2005. “Child Day Care Services.” Available at: http://www.bls.gov/oco/cg/cgs032.htm#outlook . (Accessed: 12/12/2006) 3
4 5 6 Center for the Childcare Workforce and Human Se rvices Policy Center. 2002. “Estimating the Size Components of the U.S. Childcare Workforce and Caregiving Population: Key Findings from the Childcare Workforce Estimate (Preliminary Report).” May 2002. Farzad, Roben. “A Housing Boom Brings Jobs and Sometimes, Abuse.” The New York Times 07 July. 7 2005. 8
9 KeepKidsHealthy.com. 2001. “D aycare Issues.” Available at: http://www.keepkidshealthy.com/welcome/daycare.html . (Accessed 1/30/2007). 10
11 12 13
14 15 16 17 18 Joint Center for Housing Studies (JCHS) at Harvard University. 2004. The State of the Nation’s Housing . Available at: http://www.jchs.harvard.e du/publications/markets /son2004.pdf. (January 21, 2004). Mulligan, G.M., Brimhall, D., and West, J. (2005) . Childcare and Early Education Arrangements of Infants, Toddlers, and Preschoolers: 2001 (NC ES 2006-039). U.S. Department of Education, National Center for Education Statistics. Wash ington, DC: U.S. Government Printing Office. National Administration for Regulatory Administrati on. 2006. “Number of Licensed Childcare Facilities in 2005.” 2005 Childcare Licensing Study . Available at: http://www.nara.affiniscape.com/associations /4734/files/Number of Licensed Programs 19 2005.pdf (Downloaded 12/12/2006) 20
21 22 National Center for Education Statistics (NCES). 2006a. “Overview of Public Elementary and Secondary Students, Staff, Schools, School Districts, Re venues, and Expenditures: School Year 2004-2005 and Fiscal Year 2004.” Available at: http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2007309

. 23 (Downloaded 12/22/2006). 24
25 26 National Center for Education Statistics (N CES). 2006b. Common Core of Data Public Elementary/Secondary School Universe Survey Data, 2004-2005.” Available at: http:///nces.ed.gov/gov /ccd/pubschuniv.asp . (Accessed 12/22/2006). 27
28 National Center for Education Statistics (NCES). 2006 c. Common Core of Data Local Education Agency (School District) Universe Survey Data. Available at: http://nces/ed/gov/ccd/pubschuniv.asp

. (Accessed 12/22/2006). 29 30
31 National Center for Education Statistics (NCES). 2006 d. Common Core of Data Local Education Agency (School District) Finance Survey (F-33) Data. Available at: http://nces.ed.gov/ccd/f33agency.asp

. (Accessed 12/22/2006). 32 33
34 35
36 37
38 39 National Center for Education Statistics (NCES). 2006e. “Characteristics of Private Schools in the United States: Results From the 2003-2004 Private Sc hool Universe Survey.” (Accessed 12/15/2006). National Center for Education Statistics (NCES). 2006f. 2003-2004 Private School Universe Survey Data. Received from Stephen Broughman (NCES) December 15, 2006. National Center for Education Statistics (NC ES). 2006g. Crosswalk Between 2004-2005 Local Education Agency Universe Survey Data and Year 2000 U.S. Census Population Data. Table created at: http://www.nces.ed.gov/ccd/bat/index.asp (Accessed 12/15/2006). 40
41EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-38 National Childcare Information Center. 2005. “Number of Licensed Facilities: 1991-2004.” http://www.nara-licensing.org 1 2
3 4
5 U.S. Bureau of Labor Statistics. 2006. “Current Population Survey: Basic Monthly Survey.” January 2006. U.S. Census Bureau. 1999. “Expenditures for Nonr esidential Improvements and Repair Statistics.” Available at: http://www.census.gov/const/www/nrsupndx.html (Accessed 12/8/2006). 6
7 8 9
10 11
12 13 14 15
16 17 18
19 20 21
22 23 24
25 26 27
28 29 30
31 32 33
34 35 36
37 38 39 U.S. Census Bureau. 2000a. Establishment and Firm Size (Including Legal Form and Organization). 1997 Economic Census: Subject Series for Real Es tate and Rental and Leasing. Subject Series. EC97F53S-SZ.
U.S. Census Bureau. 2004a. North American Indus try Classification System – Revisions for 2002. Available at: http://www.census.gov/epcd/naics02/ (Accessed 12/4/2006). U.S. Census Bureau. 2004b. “Sector 53: Industry Series: Summary Statistics for the US: 2002.” American Fact Finder. Available at: http://factfinder.census.gov/servlet/EconSectorServlet?caller=dataset&s v_name=*&_SectorId=53 &ds_name=EC0200A1&_lang=en&_ts=1417 36463723 (Downloaded 8/3/2005).
U.S. Census Bureau. 2004c. 2002 Economic Census: I ndustry Series: Commercial and Institutional Building Construction ECO2-231-236220 (RV). Available at: http://www.census.gov/prod/ec02/ec0223i236220.pdf (Accessed 11/18/2006).
U.S. Census Bureau. 2004d. 2002 Economic Census: I ndustry Series: Drywall and Insulation Contractors ECO2-231-238310. Available at: http://www.census.gov/pr od/ec02/ec0223i238310.pdf (Accessed 11/18/2006).
U.S. Census Bureau. 2004e. 2002 Ec onomic Census: Industry Series: Electrical Contractors ECO2-231- 238210. Available at: http://www.census.gov/ prod/ec02/ec0223i238210.pdf (Accessed 11/18/2006).
U.S. Census Bureau. 2004f. 2002 Economic Cens us: Industry Series: Finish Carpentry ECO2-231- 238350. Available at: http://www.census.gov/ prod/ec02/ec0223i238350.pdf (Accessed 11/18/2006). U.S. Census Bureau. 2004g. 2002 Economic Census : Industry Series: Glass and Glazing Contractors ECO2-231-238150. Available at: http://www.census.gov/pr od/ec02/ec0223i238150.pdf (Accessed 11/18/2006).
U.S. Census Bureau. 2004h. 2002 Economic Cens us: Industry Series: Other Building Equipment Contractors ECO2-231-238290. Available at: http://www.census.gov/prod/ec02/ec0223i238290.pdf (Accessed 11/18/2006).
U.S. Census Bureau. 2004i. 2002 Economic Cens us: Industry Series: Other Building Finishing Contractors ECO2-231-238390. Available at: http://www.census.gov/prod/ec02/ec0223i238390.pdf (Accessed 11/18/2006). U.S. Census Bureau. 2004j. 2002 Economic Census: Industry Series: Painting and Wall Covering Contractors ECO-231-238320. Available at: http://www.census.gov/prod/ec02/ec0223i238320.pdf (Accessed 11/18/2006).EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-39 U.S. Census Bureau. 2004k. 2002 Economic Census : Industry Series: Plumbing, Heating, and AirConditioning Contractors ECO2 -231-238220. Available at: 1 2 3
4 5 6
7 8 9
10 11 12 13
14 15 16
17 18 19
20 21 22 23
24 25 26 27
28 29 30 31
32 33 34 35
36 37 38 39
40 41
42 http://www.census.gov/prod/ec02/ec0223i238220.pdf (Accessed 11/18/2006).
U.S. Census Bureau. 2004l. 2002 Economic Cens us: Industry Series: Siding Contractors ECO2-231- 238170. Available at: http://www.census.gov/ prod/ec02/ec0223i238170.pdf (Accessed 11/18/2006).
U.S. Census Bureau. 2004m. 2002 Ec onomic Census: Industry Series: Tile and Terrazzo Contractors ECO2-231-238340. Available at: http://www.census.gov/pr od/ec02/ec0223i238340.pdf (Accessed 11/18/2006).
U.S. Census Bureau. 2004n. “Educational Services: Industry Series: Summary Statistics for the United States: 2002.” American Fact Finder. Available at: http://factfinder.census.gov/servlet/IBQTa ble?_bm=y&-geo_id=&-ds_name=EC0261I1&- _lang=en (Downloaded 11/13/2006). U.S. Census Bureau. 2004p. “Other Technical and Tr ade Schools - Definition.” Census Data Information. American Fact Finder. Available at: http://factfinder.census.gov/servle t/MetadataBrowserServlet?typ (Accessed 12/4/2006). U.S. Census Bureau. 2004q. “Nonemp loyer Statistics.” Available at: http://www.census.gov/epcd/nonemploye r/download/04_data/nonemp04us.txt (Accessed 12/4/2006).
U.S. Census Bureau. 2005a. “Sector 23: Construc tion: Industry Series: Selected Statistics for Establishments by Value of Business Done: 2002.” American Fact Finder. Available at: http://factfinder.census.gov/servlet/IBQTa ble?_bm=y&-geo_id=&-ds_name=EC0223I06&- _lang=en (Downloaded 11/13/2006). U.S. Census Bureau. 2005b. “Sector 53: Real Estate and Rental and Leasing: Subject Series – Estab and Firm Size: Employment Size of Establishments for the United States: 2002.” American Fact Finder. Available at: http://factfinder.census.gov/servlet/IBQTable?_bm=y&-geo_id=&- ds_name=EC0253SSSZ2&-_lang=en (Downloaded 11/13/2006).
U.S. Census Bureau. 2005c. “Section 23: Construc tion: Industry Series: Detailed Statistics for Establishments: 2002.” American Fact Finder. Available at: http://factfinder.census.gov/servlet/IBQTa ble?_bm=y&-geo_id=&-ds_name=EC0223I04A&- _lang=en (Downloaded 11/13/2006).
U.S. Census Bureau. 2005d. “Sector 62: Health Care and Social Assistance: Subject Series – Estab and Firm Size: Employment Size of Establishments for the United States: 2002.” American Fact Finder. Available at: http://factfinder.census.gov/servlet/IBQTable?_bm=y&-geo_id=&- ds_name=EC0262SSSZ2&-_lang=en (Downloaded 11/14/2006).
U.S. Census Bureau. 2005f. “Educational Serv ices: Subject Series – Estab and Firm Size: Receipts/Revenue Size of Firms for the United States: 2002.” American Fact Finder. Available at: http://factfinder.census.gov/servlet/IBQTa ble?_bm=y&-geo_id=&-ds_name=EC0261SSSZ4&- _lang=en (Downloaded 11/13/2006).
U.S. Census Bureau. 2005h. 2002 Economic Cens us: Construction by Subsector. Available at: http://www.census.gov/econ/census02/data/us/US000_23.HTM (Accessed 12/1/2006). U.S. Census Bureau. 2005i. 2002 Economic Census: Construction: By Industry. Available at:EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-40 http://www.census.gov/econ/census02/data /us/US000_23.HTM (Accessed 8/3/2005). 1
2 3 4 5

6 7 8
9 10 11
12 13 14
15 16
17 18
19 20
21 22
23 24 25
26 27 28 29
30
31 32
33 34 35 36
37 38
39 40 U.S. Census Bureau. 2005j. “Sector 53: Real Estate and Rental and Leasing: Subject Series - Estab & Firm Size: Revenue Size of Firms for the United States: 2002.” American Fact Finder. Available
at: http://factfinder.census.gov/servlet/IBQTabl e?_bm=y&-geo_id=&-fds_name=EC0200A1&- _skip=100&-ds_name=E C0253SSSZ4&-_lang=en . (Downloaded 12/19/2006). U.S. Census Bureau. 2005k. “Nonemployer Statisti cs – Heatlh Care and Social Assistance – United States.” http://www.census.gov/epcd/nonemployer/2002/us/US000_62.HTM . (Downloaded 3/24/2007).
U.S. Census Bureau. 2005m. 2002 Ec onomic Census: Industry Series: Residential Remodelers ECO2- 23I-236118 (RV). Available at: http://www.census.gov/prod/ec02/ec0223i236118.pdf (Accessed 11/18/2006).
U.S. Census Bureau. 2006a. “Number of Establishmen ts: General Definition.” Ce nsus Data Information. American Fact Finder. Available at: http://factfinder.census.gov/servlet/MetadataBrowserServlet ? (Accessed 12/1/2006).
U.S. Census Bureau 2006b. “Annual Value of State and Local Construction Put in Place.” Available at: http://www.census.gov/const/C30/state.xls (Downloaded 12/8/2006).
U.S. Census Bureau 2006c. “Annual Value of Priv ate Construction Put in Place.” Available at: http://www.census.gov/const/C30/private.xls (Downloaded 12/8/2006).
U.S. Census Bureau. 2006d. “Definitio ns of Construction.” Available at: http://www.census.gov/const/C30/definitions.pdf (Accessed 2/15/2006.) U.S. Department of Commerce. 2006. Table 1.1.6. R eal Gross Domestic Product, Chained Dollars. Last revised: November 29, 2006. U.S. Department of Education, Institute of Education Sciences. 2004. “Full-day and Half-day Kindergarten in the United States: Findings from the Early Childhood Longitudinal Study, Kindergarten Class of 1998-99” June 2004. U.S. Department of Education, National Center for Education Statistics. Kindergarten Teachers: Public and Private School Teachers of the Kindergart en Class of 1998–99, NCES 2004–060, by Elvira Germino-Hausken, Jill Walston, and Amy H. Rathbun. Project Offi cer: Elvira Germino-Hausken. Washington, DC: 2004. U.S. Department of Energy. 2003. Commercial Bu ildings Energy Consumption Survey (CBECS). U.S. Department of Housing and Urban Development (HUD). 2003. Firs t National Environmental Health Survey of Childcare Centers. U.S. Environmental Protection Agency. 1996. “Lead; Requirements for Lead-Based Paint Activities in Target Housing and Child-Occupied Fac ilities; Final Rule.” Federal Register. http://www.epa.gov/docs/fedrgstr/EPA-TOX/1996/ August/Day-29/pr-24181DIR/pr-24181.pdf (Accessed 12/8/2006). U.S. Environmental Protection Agency. 2006. “Econo mic Analysis for the Renovation, Repair and Painting Program Proposed Rule”, February 2006.
U.S. Small Business Administration. 2006a. “Firm Size Data.” Available at: http://www.sba.gov/advo/research/data.html . (Accessed 11/30/2006).EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 2-41 U.S. Small Business Administration. 2006b. “Small Business Size Standards matched to North American Industry Classification System.” Available at: 1 2 3 4
5 6 7 8
9 10
11 12
13 http://www.sba.gov/services/contractingopportunities/sizestandardstopics/tableofsize/SERV_TA BLE_HTML.html (Downloaded 11/24/2006).
U.S. Small Business Administration. 2008. “Small Business Size Standards matched to North American Industry Classification System.” Available at: http://www.sba.gov/idc/groups/public/documen ts/sba_homepage/serv_sstd_tablepdf.pdf (Downloaded 7/29/2009). Wilder Research Center. 2001. “Staff recruitment and retention in early childhood care and education and school-age care.” April 2001. Wilder Research Center. 2005. “Family, Friend and Ne ighbor Caregivers: Results of the 2004 Minnesota statewide household childcare survey.” December 2005.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-1 

## 3. Problem Definition 1 This chapter begins by characterizing the lead c ontamination problem, including the various sources of exposure, presented in Section 2 3 4 5 6

8 9 10 11 12

14 15 16 17

18 19 20 21 22 23 24 25 26 27 28 29 30

31 32 33 34 35

36 37 38 39

40 41 42 3.1 . This is followed by a summary of the regulatory background in Section 3.2 . Section 3.3 discusses how market failure due to inco mplete information and external costs result in inefficient levels of lead containment a nd control in renovation activities, requiring regulatory intervention. Section 3.4 describes how the rule will address these market failures.



### 3.1 Lead Contamination Problem 7 Despite recent reductions in air, water, and food contamination, important sources of lead exposure remain, due largely to the widespread presence of lead -based paint. Exposure to lead results in increased blood lead levels associated with various adverse he alth effects, including reductions in IQ and other negative cognitive effects, particularly in children. In addition, exposure to lead can result in a variety of adverse health effects in adults.

3.1.1 Exposure Sources 13 As described in Chapter 5 lead may cause adverse health effects in any i ndividual, exposed at any stage of life ( in utero through adulthood) (U.S. EPA 2005c). However, young children are particularly susceptible to lead hazards because their central nervous systems are rapidly developing, and because their behavior is likely to result in greater exposure to lead than older individuals experience.
Currently, the most significant high-dose source of l ead exposure in children under school age is leadbased paint. Through the 1940's, paint manufacturers used lead as a primary ingredient in many oil-based interior and exterior house paints. During the 1950's and 1960's, the usage gradually decreased as new paints were developed, and in 1978 the Consumer Product Safety Co mmission (CPSC) ruled that paint used for residences, toys, furniture, and public areas mu st not contain more than 0.06% lead by weight. Nevertheless, about 50 percent of housing units and public and commerc ial buildings constructed before 1980 still contain lead-based paint (U.S. HUD 2000). Ch ildren’s exposure to lead from lead-based paint is likely to be high when the paint is in a deteriorat ed state or is found on accessible, chewable, impact, or friction surfaces, making the lead paint available to children who ingest paint chips. This “pica” behavior appears to be rare, but is the likely cause of many of the highest blood lead levels observed in children. Renovation activities can create lead-based paint h azards for children by making paint chips more accessible for ingestion. These h azards can occur both within and outside the building unit being renovated.
In addition to being a source of di rect exposure, lead-based paint can be the source of lead contamination in soil and dust. Children are exposed to lead from so il or dust in their homes as a result of typical handto-mouth activities. Lead-contaminated dust and soil are the major pathway through which most young children are exposed to lead from lead-based paint hazards. Renovation activities increase the level of lead dust in the facility and in th e soil, thereby increasing the risk of lead ingestion in young children.
While occupational exposure is the primary exposure pathway to lead for adults, other common exposure pathways for teenagers and adults include gardeni ng, housework, drinking water and certain hobbies such as creating objects from stained-glass and making pottery. Individuals (children, teenagers and adults) are also exposed to a variety of other lead sources, some of which are localized in nature.
Airborne lead is present in emissions from lead sm elters, battery manufacturing plants, and solid waste incinerators. The phase-out of leaded gasoline has substantially reduced airborne lead. Drinking water may become contaminated with lead after it leaves the treatment plant. Although lead levels in drinkingEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-2 water generally do not have a statistically significant effect on blood-lead concentrations as a result of regulations stemming from the 1986 Safe Drinking Water Act, water is still considered an important localized exposure source where lead solder and/or brass plumbing fixtures are present because of the high absorption rate of lead in water. Lead exposure through food ingestion has declined greatly due to the phase-out of lead-soldered food cans and public education. With these improvements in exposure from air, water, and food, lead-based paint remains as the largest widespread source of lead exposure. 1 2 3 4 5 6

8 9 10 11 12 13 14 15 16 17 18 19 20 21

22 23 24 25 26 27 28 29 30 31 32 33 34 35

36 37 38 39 40 41 42 43 44 45 3.1.2 Lead from Renovation Activities

7 EPA exposure data (EPA 1997) indicate that renovatio n activities potentially increase both short-term and long-term lead exposure levels. Lead concentrations are greatest in the area where the renovation work is performed, but lead does settle into other areas of the building and potentially the surrounding area, causing longer-term exposure. The study found that , with the exception of carpet removal and drilling into plaster, all renovation activities examined deposite d significant amounts of lead onto the floors in the area where the work was being performed, ranging fr om 480 micrograms per square foot for sawing to 15,500 micrograms per square foot for paint removal. This lead may be ingested or inhaled by occupants if proper containment and clean-up practices are notused. The study found that sweeping and shopvacuum clean-up, considered to be standard practi ce in the industry, reduced the total amount of lead available to occupants. However, as the distance from the activity increased, the cleanup left a higher percentage of the lead behind so that lead hazards remained following cleanup. These findings demonstrate that these practices do not adequately reduce risks from lead dust generated by renovation activities. Lead dust settled in carpeted areas or in soil is the most difficult to remove with simple broom and vacuum clean-up and thereby creates the longest lasting exposure pathway for facility occupants.
EPA conducted a field study in 2007 (Characterization of Dust Lead Levels af ter Renovation, Repair, and Painting Activities) (the ‘‘Dust Study’’) to character ize dust lead levels resulting from various renovation, repair, and painting activities (EPA 2007). This study was designed to compare environmental lead levels at appropriate stages after various types of renovati on, repair, and painting preparation activities were performed on the interiors and exteriors of target housing units and child-occupied facilities. All of the jobs disturbed more than 2 square feet of lead-based paint, so they would not have been eligible for the minor maintenance exception. The renovation activiti es were conducted by local professional renovation firms, using personnel who received lead safe work pr actices training using the curriculum developed by EPA and HUD, ‘‘Lead Safety for Remodeling, Repa ir, and Painting’’ (EPA 2003a). The activities conducted represented a range of activities that woul d be permitted under the 2006 Proposal, including work practices that are restricted or prohibited fo r abatements under 40 CFR 745.227(e)(6). Of particular interest was the impact of using specific work pr actices that renovation firms would be required to use under the proposed rule, such as the use of plastic to contain the work area and a multi-step cleaning protocol, as opposed to more typical work practices.
In the Dust Study, 12 different interior and 12 diffe rent exterior renovation activities were performed at 7 vacant target housing units in Columbus, Ohio, and 8 vacant target housing units (including four apartments) in Pittsburgh, Pennsylvania. Three different interior and three different exterior renovation activities were conducted at a building representing a child-occupied facility, a vacant school in Columbus. The presence of lead-based paint was confir med by laboratory analysis before a building was assigned a particular renovation activity or set of activ ities. Before interior renovation activities were performed, the floors and windowsills in the work area and adjacent rooms were cleaned. In most cases, pre-work cleaning resulted in dust lead levels on floors of less than 10 μ g/ft 2 ; nearly all floors were less than 40 μ g/ft2 before work started. Most windowsills that would be used for later sampling were cleaned to dust lead levels less than 250 μ g/ft2. In the few cases where that level was not achieved on aEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-3 windowsill needed for sampling, dust collection trays were used. Interior renovation activities included the following jobs: 1 2

10 11 12

13 14

15 16

17

18

19 20 21 22

23

24

25

26

27

28

29

30

31

32 33 3⁄4 Making cut-outs in the walls.

3

3⁄4 Replacing a window from the inside. 4

3⁄4 Removing paint with a high temperature (great er than 1100 degrees Fahrenheit) heat gun. 5

3⁄4 Removing paint with a low temperature (less than 1100 degrees Fahrenheit) heat gun. 6

3⁄4 Removing paint by dry scraping. 7

3⁄4 Removing kitchen cabinets. 8

3⁄4 Removing paint with a power planer. 9 To illustrate the impact of the containment plastic and the specialized cleaning and cleaning verification protocol that would be required by the 2006 Proposal, each activity was performed a minimum of four times:

3⁄4 With the plastic containment described in the 2006 Proposal followed by the cleaning protocol described in the proposal.

3⁄4 With the plastic containment described in the 2006 Proposal followed by dry sweeping and vacuuming with a shop vacuum.

3⁄4 With no plastic containment followed by the cleaning protocol described in the 2006 Proposal.

3⁄4 With no plastic containment followed by dry sweeping and vacuuming with a shop vacuum.
Dust samples were collected after the renovation work was completed, after cleaning, and after cleaning verification. If a building was being used again for th e same job under different work practices, or for a completely different job, the unit was recleaned and re tested prior to starting the next job. All buildings were cleaned and tested after the last job.
Exterior renovation activities performed as part of the study included the following:

3⁄4 Replacing a door and doorway.

3⁄4 Replacing fascia boards, soffits, and other trim.

3⁄4 Removing paint with a high temperature (great er than 1100 degrees Fahrenheit) heat gun.

3⁄4 Removing paint with a low temperature (less than 1100 degrees Fahrenheit) heat gun.

3⁄4 Removing paint by dry scraping.

3⁄4 Removing paint with a needle gun.

3⁄4 Removing paint with power sanding or grinding.

3⁄4 Removing paint with a torch or open flame.
For the exterior jobs, plastic sheeting was placed on th e ground to catch the debris and dust from the job, in accordance with the requirements of the proposed rule. Additional plastic sheeting was laid out beneathEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-4 and beyond the ‘‘proposed rule’’ plastic. Trays to collect dust and debris we re placed on top of and underneath the ‘‘proposed rule’’ plastic. Trays were al so placed just outside of the ‘‘proposed rule’’ plastic to assess how far the dust was spreading. A ve rtical containment, as high as the work zone, was erected at the end of the additional plastic. 1 2 3 4

5 6 7

8 9 10 11 12 13 14 15

16

17 18 19 20 21

22 23 24 25 26 27 28 29 30 31 32

34 35 36 37 38 39 40 41

42 The use of the ‘‘proposed rule’’ plastic as a ground c overing captured large amounts of leaded dust. For all job types except removing paint with a torch, ther e was a substantial difference between the amount of lead captured by the ‘‘proposed rule’’ plastic and the amount under the ‘‘proposed rule’’ plastic.
The 2008 final LRRP rule was supported by the Dust Study discussed above. Therefore, EPA conducted a peer review in accordance with OMB’s Final Info rmation Quality Bulletin for Peer Review. EPA requested this review from the Clean Air Scientific Advisory Committee (CASAC) Lead Review Panel. The CASAC, which is comprised of seven members appointed by the EPA Administrator, was established under the Clean Air Act as an independen t scientific advisory co mmittee. The CASAC’s comments on the Dust Study, along with EPA’s responses, have been placed into the public docket for this action. More information on the CASAC cons ultation process, along with background documents, is available on EPA’s website at http://www.epa.gov/ lead/pubs/casac.htm.
According to the peer review report, the CASAC Panel found
“. . .that the [Dust Study] was reasonably well- designed, considering the complexity of the problem, and that the report provided information not available from any other source. The study indicated that the rule cleaning procedures reduced the residual lead (Pb) remaining after a renovation more than did the baseline cleaning pr ocedures. Another positive aspect of the Dust Study was that it described deviations fr om the protocol when they occurred. “

The CASAC Panel also contended that the limited da ta from residential housing units and child-occupied facilities included in the Dust Study, most likely do no t represent a statistically valid sample of housing at the national level. They noted that there are aspects of the study that would underestimate the levels of lead-loadings while other aspects of the study would overestimate the loadings. EPA agrees that the Dust Study is not nationally representative of all housing. EP A notes that there are several reasons why this is the case, including the fact that all of the housing studied was built during 1925 or earlier, and a large number of the floors were in poor condition. A major purpose of the Dust Study was to assess the proposed work practices. A statistically valid sample of housing at the national level is not needed to assess the work practices. If anything, the Dust Study is conservative with respect to the age of housing because it studied older houses and therefore is appropriate for assessing the effectiveness of the work practices.



### 3.2 Regulatory Background 33 This section outlines the extensive history of lead-based paint regulations at the federal level. Childhood lead exposure continues to be a major public health problem among young children in the United States. Most children with blood lead levels in excess of CD C’s current level of concern have been exposed to lead in non-intact paint, interior settled dust, and dust and soil in and around deteriorating older housing (CDC 2004). The nature and extent of the problem s associated with lead-based paint in housing units have been thoroughly investigated. Approximately 40% of all U.S. housing units (about 38 million homes) have some lead-based paint. Use of lead safe work practices during renovation can advance the goal of primary prevention of lead poisoning (CDC 2004).
The Federal Lead-based Paint Program.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-5 Title X and the Federal goal 1

2 3 4 5 6 7 8 9 10 11

12
13 14
15 16 17
18 19 20
21 22
23 24 25
26 27
28 29 30

31

32
33 34 35 36 37
38 39
40 Primarily in response to the persistent health threat posed by lead-based paint, in 1992 Congress enacted Title X. Congress found that low-level lead poisoning was widespread among American children, affecting, at that time, as many as 3 million childre n under age 6; that the ingestion of household dust containing lead from deteriorating or abraded l ead-based paint was the most common cause of lead poisoning in children; and that the health and de velopment of children living in as many as 3.8 millionAmerican homes was endangered by chipping or peeling lead paint, or excessive amounts of leadcontaminated dust in their homes. Congress determined that the prior Federal response to this crisis was insufficient and established, in Title X, a nationa l goal of eliminating lead-based paint hazards as expeditiously as possible. Congress decided that the Federal government would take a leadership role in building the infrastructure necess ary to achieve this goal.
The stated purposes of Title X are:
3⁄4 To develop a national strategy to build the infr astructure necessary to eliminate lead-based paint hazards in all housing as expeditiously as possible.
3⁄4 To reorient the national approach to the presence of lead-based paint in housing to implement, on a priority basis, a broad program to evaluate and reduce lead-based paint hazards in the Nation’s housing stock.
3⁄4 To encourage effective action to prevent chil dhood lead poisoning by establishing a workable framework for lead-based paint hazard evaluati on and reduction and by ending the current confusion over reasonable standards of care.
3⁄4 To ensure that the existence of lead-based paint hazards is taken into account in the development of Government housing policies and in the sale, rental, and renovation of homes and apartments.
3⁄4 To mobilize national resources expeditiously, through a partnership among all levels of government and the private sector, to develop th e most promising, cost-effective methods for evaluating and reducing lead-based paint hazards.
3⁄4 To reduce the threat of childhood lead poisoning in housing owned, assisted, or transferred by the Federal Government.
3⁄4 To educate the public concerning the hazards a nd sources of lead-based paint poisoning and steps to reduce and eliminate such hazards (Resid ential Lead-Based Paint Hazard Reduction Act of 1992).
EPA’s lead-based paint program
Under Title X, EPA is directed to take actions that can be divided into 4 key categories:
3⁄4 Establishing a training and certification program for persons engaged in lead-based paint activities, accrediting training providers, estab lishing work practice standards for the safe, reliable, and effective identification and elimina tion of lead-based paint hazards, and developing a program to address exposure to lead-based pa int hazards from renovation and remodeling activities.
3⁄4 Ensuring that, for most housing constructed before 1978, lead-based paint information flows from sellers to purchasers, from landlords to tenants, and from renovators to owne rs and occupants.
3⁄4 Establishing standards for identifying dangerous levels of lead in paint, dust and soil.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-6 3⁄4 Providing information on lead hazards to the pu blic, including steps that people can take to 1 protect themselves and their families from lead-bas ed paint hazards. Each of these categories is discussed in more detail in the following sections. 2 3

4 5 6 7 8 9 10 11

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

39 40 41 42 43 44 45 a. Training and certification, accreditation, and work practice standards. Title X added a new title toTSCA entitled ‘‘Title IV Lead Exposure Reduction.’’ Most of EPA’s responsibilities for addressing leadbased paint hazards can be found in this title, w ith section 402 being one source of the rulemaking authority to carry out these responsibilities. TSCA sec tion 402(a) directs EPA to promulgate regulations covering lead-based paint activities to ensure persons performing these activities are properly trained, that training programs are accredited, and that contr actors performing these activities are certified. These regulations must contain standards for performi ng lead-based paint activities, taking into account reliability, effectiveness, and safety.
On August 29, 1996, EPA promulgated final regula tions under TSCA section 402(a) governing leadbased paint inspections, lead hazard screens, risk asse ssments, and abatements in target housing (U.S. EPA 1996). TSCA section 401 defines ‘‘target housin g’’ as any housing constructed prior to 1978, except housing for the elderly or persons with disabiliti es (unless any child who is less than 6 years of age resides or is expected to reside in such housing for the elderly or persons with disabilities) or any 0- bedroom dwelling. These regulations also apply to ‘‘child-occupied facilities,’’ which are defined at 40 CFR 745.223 as buildings constructed before 1978, or portions of such buildings, where children under age 6 are regularly present. TSCA section 402 define s lead-based paint activities in target housing as inspections, risk assessments and abatements. The 1996 regulations cover lead-based paint abatement activities in target housing and child-occupied faciliti es, along with limited screening activities called lead hazard screens. The regulations also established an accreditation program for training providers and a certification program for individuals and firms perfo rming these activities. Training providers who wish to provide lead-based paint traini ng for the purposes of the Federal l ead-based paint program must be accredited by EPA. Implementing regulations at 40 CFR 745.225 describe in detail the requirements for each course of study, how training programs mu st be operated, and the process for obtaining accreditation. Training programs must have a trai ning manager with experience or education in a construction or environmental field, and a principal in structor with experience or education in a related field and education or experience in teaching adults. Training programs must also have adequate facilities and equipment for delivering the training. To become accredited, an application for accreditation must be submitted to EPA on behalf of the training program. The application must either include the course materials and syllabus, or a statement that EPA model materials or materials approved by an authorized State or Tribe will be used. The application mu st also include a description of the facilities and equipment that will be used, a copy of the test blue print for each course, a description of the activities and procedures that will be used during the hands-on sk ills portion of each course, a copy of the quality control plan, and the correct amount of fees. If EPA finds that the program meets the regulatory requirements, it will accredit the training program for 4 years. To maintain accreditation, the training program must submit an application and the correct amount of fees every 4 years.
Individuals and firms that perform inspections, lead hazard screens, risk assessments, or abatements in target housing or child-occupied facilities must be cer tified. Certification requirements and the process for becoming certified are described in 40 CFR 745.226. A firm that wishes to become certified must submit an application, along with the correct amount of fees, attesting that it will use only certified individuals to perform lead-based pa int activities and that it will follow the work practice standards in 40 CFR 745.227. An individual who wishes to become certified must take an accredited training course in at least one of the certified disciplines: Inspector, risk assessor, project designer, abatement worker, andEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-7 abatement supervisor. The risk assessor, project designer, and abatement supervisor disciplines have additional requirements for educa tion or experience in a construction or environmental field. The inspector, risk assessor, and abatement supervisor disciplines also require the applicant to pass a certification examination administered by a third party. 1 2 3 4

5 6 7 8 9 10 11 12 13 14 15 16 17

18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

33 34 35 36 37 38 39 40 41 42

43 44 45 The regulations at 40 CFR part 745, subpart L, also contain work practice standards for performing inspections, lead hazard screens, risk assessments and abatements in target housing and child-occupied facilities. The regulations contain specific re quirements for conducting paint sampling during an inspection and specify information that must be gathered and samples that must be taken as part of a lead hazard screen or risk assessment. The requirements for abatements are also set forth in the regulations. When conducting abatements, an occupant protection plan must be prepared by a certified supervisor or project designer; certain work practices such as open -flame burning, machine sanding or abrasive blasting without high-efficiency exhaust control, dry scraping, and heat guns at high settings are prohibited; and a visual inspection and dust clearance sampling must be pe rformed after the abatement is finished to ensure that the area is ready for re-occupancy. Any sampl es collected during any of these regulated lead-based paint activities must be analyzed by a laboratory r ecognized by EPA as being capable of analyzing paint chips, dust, and soil for lead. Requirements for in spection, lead hazard screen, risk assessment or abatement reports are also described in this section
Recognizing the importance of States and Territories in achieving the goal of eliminating lead-based paint hazards in housing, Congress specifically directed EPA to establish a model State program and a process for authorizing States to operate such programs in lie u of the Federal program. Concurrently with the subpart L rulemaking in 1996, EPA codified, at 40 CFR part 745, subpart Q, a model training and certification program and a process for enabling States, Territories, and Tribes to apply for authorization to administer their own lead-based paint activity prog rams. Providing Indian Tribes with this opportunity is consistent with EPA’s Policy for the Admi nistration of Environmental Programs on Indian Reservations (U.S. EPA 1984). EPA also provides grants under TSCA section 404 to States, Territories, and Tribes to assist them in developing and administering these programs, as well as programs implementing TSCA section 406(b). On June 9, 1999, the subpart L regulations were amended to include a fee schedule for training programs seeking EPA accreditation and for individuals and firms seeking EPA certification (U.S. EPA 1999). These fees were estab lished as directed by TSCA section 402(a)(3), which requires EPA to recover the cost of admini stering and enforcing the lead-based paint activities requirements in unauthorized States. The most recent amendment to the subpart L regulations occurred on March 20, 2009 (U.S. EPA 2009).
In addition, Congress directed EPA, in TSCA section 405, to establish protocols, criteria, and minimum performance standards for analysis of lead in paint, dust, and soil. TSCA section 405 further directed EPA, in consultation with HHS, to develop a program to certify qualified laboratories. The National Lead Laboratory Accreditation Program (NLLAP) provides the public with a list of laboratories that have met EPA requirements and demonstrated the capability to accurately analyze paint chip, dust, or soil samples for lead. All laboratories recognized by NLLAP must pass on-site audits conducted by one of the two accrediting organizations currently participating in N LLAP, the American Industrial Hygiene Association (AIHA), and the American Association for Laboratory Accreditation. Recognized laboratories must also perform successfully on a continuing basis in the En vironmental Lead Proficiency Analytical Testing (ELPAT) Program established by NIOSH, AIHA, and EPA.
More recently, the LRRP rule for target housing a nd COFs was promulgated in 2008 (73 FR 21692) and is codified in Part 745 of Title 40 of the Code of Federal Regulations (CFR). The rule was promulgated under the authority of §402(c) of the Toxic Substan ces Control Act (TSCA). Section IV of TSCA wasEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-8 established by the Residential Lead-Based Paint Haza rd Reduction Act of 1992, also known as Title X of the Housing and Community Development Ac t of 1992, Public Law 102-550. 1 2

3 4 5 6

7 8 9 10 11 12 13 14 15 16 17 18

19 20 21 22 23 24 25 26 27

28 29 30 31 32 33 34 35 36 37 38 39 40 41

42 43 44 The 2008 LRRP regulation requires entities that pe rform renovation, repair and painting work for compensation in buildings covered by the rule to become certified by EPA, ensure that their employees are trained as either renovators or workers, and use lead-safe work practices when disturbing lead-based paint.
b. Lead-based paint information for purchasers, renters, owners, and occupants of target housing. Another of EPA’s responsibilities under Title X is to requi re that purchasers and tenants of target housing, as well as occupants of target housing and parent s of children in COFs undergoing renovation are provided information on lead-based paint and lead-b ased paint hazards. As directed by TSCA section 406(a), CPSC, HUD, and EPA, in consultation with CD C, jointly developed a lead hazard information pamphlet entitled ‘‘Protect Your Family From Lead in Your Home’’ (‘‘PYF’’) (U.S. EPA et al 2003b). This pamphlet was designed to be distributed as pa rt of the disclosure requirements of section 1018 of Title X and TSCA section 406(b), to provide home purch asers, renters, owners, and occupants with the information necessary to allow them to make informed choices when selecting housing to buy or rent, or deciding on home renovation projects. The pamphlet contains information on the health effects of lead, how exposure can occur, and steps that can be taken to reduce or eliminate the risk of exposure during various activities in the home.
Pursuant to the authority provided in section 1018 of Title X, on March 6, 1996, HUD and EPA jointly promulgated regulations requiring persons who are selling or leasing target housing to provide the PYF pamphlet and information on known lead-based paint and lead-based paint hazards in the housing to purchasers and renters (HUD and U.S. EPA 1996). These joint regulations, codified at 24 CFR part 35, subpart A, and 40 CFR part 745, subpart F, describe in detail the information that must be provided before the contract or lease is signed and require that sellers, landlords, and agents document compliance with the disclosure requirements in the contract to se ll or lease the property. Title X does not provide for these requirements to be administered by States or Trib es in lieu of the Federal regulations. Therefore, HUD and EPA are responsible for administering and enforcing these disclosure obligations.
TSCA section 406(b) directs EPA to promulgate regulations requiring pe rsons who perform home renovations for compensation to provide a lead hazard information pamphlet to owners and occupants of target housing being renovated. Th ese regulations, promulgated on June 1, 1998, are codified at 40 CFR part 745, subpart E (U.S. EPA 1998). The term ‘‘re novation’’ is defined, at 40 CFR 745.83, as the modification of any existing structure, or portion of a structure, that results in the disturbance of painted surfaces. Lead-based paint abatement projects are spec ifically excluded, as are small projects that disturb 2 square feet or less of painted surfaces, emergenc y projects, and renovations affecting components that have been found to be free of lead-based paint, as that term is defined in the regulations, by a certified inspector or risk assessor. Like the regulations regarding disclosure during sales or leases, these regulations require the renovation firm to documen t compliance with the requirement to provide the owner and the occupant with the PYF pamphlet. One important difference from the disclosure requirements in section 1018 of Title X is that TSCA section 404 allows States to apply for, and receive authorization to administer, the TSCA section 406(b) requirements. Two States are currently authorized to operate this program.
c. Standards for lead in paint, dust, and soil. Another responsibility assigned to EPA by Title X is the development of standards for identifying dangerous levels of lead in pain t, dust and soil. These standards, promulgated pursuant to TSCA section 403 on January 5, 2001 and codified at 40 CFR part 745, subpartEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-9 D, provide various Federal agencies, including HUD, and State, local and Tribal governments with uniform benchmarks on which to base decisions on reme dial actions to safeguard children and the public from lead-based paint hazards (U.S. EPA 2001b). These st andards also allow certified inspectors and risk assessors to easily determine whether a particular s ituation presents a lead-based paint hazard and whether to recommend remedial actions such as lead-based paint abatement, cleaning of dust, or removal of soil. The standards define lead-based paint hazards in targ et housing and child-occupied facilities as paint-lead, dust-lead, and soil-lead hazards. A paint-lead hazar d is defined as any damaged or deteriorated leadbased paint, any chewable lead-b ased painted surface with evidence of teeth marks, or any lead-based paint on a friction surface if lead dust levels underneath the friction surface exceed the dust-lead hazard standards. A dust-lead hazard is surface dust that contains a mass-per-area concentration of lead equal to or exceeding 40 micrograms per square foot (μg/ft 2 ) on floors or 250 μg/ft 2 on interior windowsills based on wipe samples. A soil-lead hazard is bare soil that contains total lead equa l to or exceeding 400 parts per million (μg/g) in a play area or average of 1,200 parts per million of bare soil in the rest of the yard based on soil samples. 1 2 3 4 5 6 7 8 9 10 11 12 13 14

15 16 17 18 19 20 21 22 23 24 25 26 27

28 29 30 31 32

33

34 35 36

37 38 39 40 41 42 43 44 d. Public outreach and education . Among other things, TSCA section 405(d) directs EPA, along with the Agency for Toxic Substances and Disease Registry (ATSDR) and HUD, to sponsor public education and outreach activities to increase public awareness of the health effects of lead, the potential for exposures, the importance of screening children for elev ated blood lead levels, and measures that can be taken to reduce or eliminate lead-based paint hazards . Accordingly, EPA has worked to provide the public with information and increase public awareness of such matters. To date, these activities have included web site management, deve lopment of public outreach strategi es, development of partnership agreements, distribution of materials, participation in national conferences and exhibits, and developing hazard information documents (and other media, such as videos), as necessary to implement Title X. EPA has collaborated closely with other Federal agencies a nd its State, Tribal, and local government partners in developing outreach campaigns. EPA has also been involved in developing mode l tool kits of various educational tools to provide to part ners, such as slogans and graphic ma terials for public buses, trains, and mass transit stations.
TSCA section 405(e) further directs EPA to establis h, in connection with HUD, CDC, other Federal agencies, and State and local governments, a clear inghouse for information on lead-based paint and a hotline for the public to use for questions and requ ests for information on lead-based paint. This clearinghouse, the National Lead Information Center , handles approximately 50,000 calls per year, and disseminates up to 500,000 documents per year to the public.
Lead-based paint programs at other Federal agencies
In addition to EPA, other Federal agencies have impor tant roles in achieving the goals of reducing or eliminating lead-based paint hazards in housing. Other agencies specifically assigned tasks in Title X include HUD, CDC, and OSHA.
The Federal agencies have long realized that they mu st work together to develop and implement Federal strategies for addressing lead-based paint hazards in order to be efficient and effective. In 1989, HUD and EPA formed an inter-agency task force to wo rk through issues associated with lead-based paint abatement. The Federal Interagency Lead Based Pa int Task Force has remain ed active throughout the years and continues to meet on a quarterly basis. Participating agencies include the Department of Defense, the Veterans Administration, the National Institute of Standards and Technology (NIST), the U.S. Public Health Service, the National Aer onautics and Space Administration (NASA), the United States Department of Agriculture (USDA), the Gove rnment Accountability Office (GAO), the NationalEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-10 Institute for Environmental Health Sciences (NIE HS), ATSDR, CDC, CPSC, NIOSH, OSHA, HUD, and EPA. This Task Force serves as an important forum for coordinating the strategic plans of the Federal agencies who have responsibilities under Title X or who have responsibilities for maintaining and disposing of property that ma y contain lead-based paint. 1 2 3 4

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

20 21 22 23 24 25 26 27 28 29 30 31 32 33 34

35 36 37 38 39 40

41 42 43 44 Title X assigned certain responsibilities to HUD. One of HUD’s functions is the administration of the Lead-Based Paint Hazard Control Grant Program establishe d by the Act. This program provides grants of $1 million to $3 million to State and local government s for control of lead-based paint hazards in privately owned, low-income owner-occupied and rent al housing that is not receiving federal assistance. These grants are also designed to stimulate the de velopment of a trained and certified hazard evaluation and control industry. Evaluation and hazard control work funded by the program must be conducted by either contractors who are certified by EPA or an EPA-approved State or Tribal program, or by contractors trained in lead-safe work practices, in the case of interim controls. Through these requirements, HUD hopes to create infrast ructure that will last beyond the life of the grant. In awarding grants, HUD promotes the use of cost-effective approaches to hazard control that can be replicated across the nation. Since 1993, approximately $971 million has been awarded to over 200 local and State jurisdictions across the country. The work approved to date will lead to the control of lead-based paint hazards in more than 70,000 homes where young childr en reside or are expected to reside. Other HUD lead grant programs include the Lead Hazard Reduc tion Demonstration program, the Lead Elimination Action Program (LEAP), the Lead Outreach program and the Lead Technical Studies program.
HUD was also given regulatory authority over some asp ects of lead based paint hazard control. As noted previously, on March 6, 1996, HUD and EPA jointly pr omulgated regulations requiring the disclosure of lead-based paint information during sale or lease transactions involving target housing. The HUD disclosure regulations are codified at 24 CFR part 35, subpart A. Subparts B through R of 24 CFR part 35 are known as the ‘‘Lead Safe Housing Rule,’’ in itially promulgated on September 15, 1999, and updated in June 2004 (HUD 2004b). Th is rule was designed to protect young children from lead-based paint hazards in target housing that is being sold by the Federal government or receives financial assistance from the government. The requirements ge nerally depend upon the level of assistance being provided, and may include such things as inspections, risk assessments, abatement, paint stabilization, or interim controls, which are temporary measures to reduce potential exposure to lead-based paint hazards. The emphasis is on reducing lead-based paint hazards, so, after paint is disturbed, a visual assessment for surface dust, debris, and residue and dust clearance testing is required to ensure that no dust lead hazards were created or left in the work area or, for rehabilitation projects of m oderate or substantial scope, in the entire housing unit. More information on the Lead Sa fe Housing Rule is available on the HUD website at http://www.hud.gov/offices/lead.
Section 1017 of Title X required HUD to issue ‘‘guide lines for the conduct of federally supported work involving risk assessments, inspections, interim controls , and abatement of lead-based paint hazards.’’ In response to this directive, HUD completed the Guide lines for the Evaluation and Control of Lead-Based Paint Hazards in Housing (Guidelines), in June 1995 (HUD 1995). The Guidelines provide detailed, comprehensive, technical information on how to identify lead-based paint hazards in housing and how to control such hazards safely and efficiently.
Other core activities of HUD’s lead-based paint progr am include providing technical assistance to housing authorities, nonprofit housing providers, local a nd State agencies, other Federal agencies, housing developers, inspectors, real estate professionals, cont ractors and financiers, and public health authorities; evaluating the hazard reduction methods used in the gr ant program to measure their effectiveness, costEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-11 and safety; and maintaining a community outreach program in coordination with the other Federal agencies involved in lead-based paint hazard reduction. 1 2

3 4 5 6 7 8 9 10 11 12 13

14 15 16 17 18 19 20 21 22 23

24 25 26 27 28

31 32 33 34 35 36 37

38 39 40 41 42 43 CDC also provides significant funding for the prevention of childhood lead poisoning. CDC provides funding to support State, city and county programs in the areas of primary prevention, case management and screening, surveillance, strategic partnerships , and program evaluation. Since 2002, CDC has recommended that a blood lead level of 10 micrograms per deciliter (μg/dL) be used as a threshold for individual intervention (CDC 2002). Additional CDC r ecommendations address the type and intensity of individual intervention strategies that should be undert aken, depending upon the child’s blood lead level. These strategies range from nutritional and educational interventions, along with more frequent testing, for a child with a blood lead level of 10–14 μg/dL, to medical and environmental interventions for children with blood lead levels a bove 45 μg/dL (CDC 2002). CDC h as established a national surveillance system for children with elevated blood lead leve ls. In addition, CDC works with HUD and EPA to coordinate outreach and education campaigns.
OSHA is another agency with regulatory authority under Title X. As directed by the Act, OSHA promulgated an interim final standard on May 4, 1993, which regulates lead exposures in the construction industry (OSHA 1993). This standard, codified at 29 CFR 1926.62, limits worker exposures to 50 micrograms of lead per cubic meter of air averaged over an 8–hour workday. Employers must use a combination of engineering controls and work practices to reduce employee exposure as much as possible, using appropriate respiratory protecti on where necessary to achieve the exposure limit. Employees must receive training on the health effect s of lead and how to limit exposure through proper work practices and personal prot ective equipment. Exposure monitoring and medical monitoring, including blood lead testing, are also required. Th is standard remains in effect and OSHA retains the authority to protect workers from occupational exposure to lead.
Many Federal agencies have been working to reduce or eliminate lead-based paint hazards in housing and to end lead poisoning. EPA, HUD, and other Federal agencies have been working for many years on the problem of lead-based paint hazards that can be created during renovation and remodeling activities in housing and child-occupied facilities. This rulemaking is an important component of the Federal strategy for eliminating lead poisoning.



### 3.3 Justification for Federal Regulations of Lead Exposure during Renovation 29

3.3.1 Market Failure 30 From an economic perspective, a necessary condition for re gulations is the existence of inefficiency in the allocation of resources. This inefficiency is common ly labeled a market failure since the market is the mechanism assumed to make efficient resource allocati ons possible. A market failure can come from one or more of several sources. These include poorly de fined property rights (such as negative externalities, common property resources, and public goods); imperfect markets for trading property rights (because of a lack of perfect information or of contingent ma rkets; monopoly power; distortionary taxes and subsidies and other inappropriate government regulations); and the divergence of private and social discount rates.
The occurrence of any of these conditions justifies furt her inquiry into the need for government regulation to reduce inefficiencies in the allocation of society’ s resources. This section considers whether any of these conditions are linked to lead exposures resulting from renovation in target housing and public or commercial building COFs. If so, u nderstanding the nature of the inefficiencies involved facilitates the design of more effective regulations. The specific regulatory approach considered here involves the removal of the opt-out provision (currently available for renovations in owner-occupied target housingEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-12 where no child under the age of 6 or pregnant wo man resides and no COF operates), and a requirement that renovators provide owners and occupants with information documenting compliance with the training and work practice requirements of the LRRP rule. 1 2 3

4 5 6 7 8

9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

26 27 28 29 30 31 32 33 34 35 36

37 38 39 40

41 42 43 Economic efficiency suggests that “lead-safe” re novation will occur as long as the property owners’ willingness-to-pay for reduced lead ri sks exceeds the cost of reducing these risks. If the property owners are aware of the risks and of the availability and costs of reducing these risks, then arguably they might be able to accurately trade off risk and cost without th e aid of government regulation. However, there are two arguments for why individual property owners may not trade off risk and cost efficiently.

Externalities and Public-Good Characteristics of Lead-Safe Renovation A major cause of failure in the market for l ead-safe renovations stems from externalities due to renovations disturbing lead-based paint that do not us e lead-safe work practi ces because they occur in target housing units eligible for the opt-out provisi on. An efficient outcome is achieved when the marginal willingness-to-pay for a service is equivalent to the marginal cost of providing that service. Because the use of lead-safe work practices is likel y to benefit not only the consumer of the renovation (the homeowner and his or her family members) but also residents of adjacent properties, future occupants, visitors, and children receiving child car e on the premises, lead-safe renovation services are, in part, a public good. As such, even with perfect in formation, the maximum amount that the individual consumer of the renovation would be willing to pay for lead-safe work is likely to be lower than the total amount that that particular consumer plus the other beneficiaries (neighbors, future occupants, etc.) would be willing-to-pay for the service. For example, occ upants of neighboring properties may also experience an increased exposure to lead and may be willing to pa y to reduce or eliminate this exposure but may not be consulted by the property owner making the decision. As another example, children do not testify to their willingness-to-pay for risk reduction and rely on their parents’ or the property owners’ willingnessto-pay. Even if other parties were consulted, th e transaction costs of reaching an agreement would be high, so that this would be an inefficient process.
An example of an externality can be found in an owner’s decision about which contractor to hire to perform renovation in his or her ho using unit. Contractors that provide lead-safe renovation services are likely to charge more for their work than establishments that do not use lead-safe practices. Lead-safe work practices may also increase the duration of the project because contractors need to take additional steps to prevent the spread of lead dust. Since the property owner pays for the renovation, but not necessarily for the consequences of a ll the resulting lead exposure, he or she is faced with powerful shortterm incentives (lower cost and a faster turn-around) to hire a contractor that does not use lead-safe work practices. Other parties (such as residents of adjacent properties, future occupants, visitors, and children receiving child care and their parents) pay for the consequences of lead exposures, not the property owner. This externality results in a socially in efficient outcome of too little lead-safe renovation services being purchased.
A similar external cost problem also leads to ineffi ciencies on the supply side of this market. Renovators that use lead-safe work practices incur higher costs than other contractors who are faced with the incentives to keep their co sts as low as possible. Similar to property owners, contractors may not incur the costs of consumer lead exposure resulting from unsafe renovation work.
Because the legal/liability system is not perfect, the contractor’s financial responsibilities (in terms of costs related to the customer’s lead exposure) are not clear and consistently enforced. The same situation occurs with respect to a property owner’s responsib ilities to residents of adjacent properties, futureEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-13 occupants, visitors, and child-care customers. This is likely to result in an inefficient outcome of either too little lead-safe renovation services being consumed. 1 2

3

4 5 6 7 8 9 10

11 12 13 14 15 16 17 18 19

20

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

36
37 Inadequate Information

Another cause of failure in the market for lead-safe work practices is due to inadequate information. Correct information is an important prerequisite to the demand for containment and clean-up practices that reduce lead exposure during renovation projects. In deciding whether lead-safe work practices or well-trained contractors are worth the extra cost, the property owner has to know whether there is lead in the work area, what risks are implied by having re novation done in areas with lead-based paint, the significance of these risks, what can be accomp lished in reducing those risks through specific containment and clean-up practices, and how much these practices cost.

Misinformation can lead to inefficient outcomes. Without knowing there is a lead problem, or how renovation might create lead hazards, the owner will have too low a demand for proper work practices and may be unwilling to pay additiona l costs for contractors who voluntarily abide by these containment and clean-up standards. Furthermore, a great deal of uncertainty can exist if the consumer is unsure about the quality of lead-safe renovation services being purchased and their likely benefits. If consumers do not have any guarantee that contractor are qualified to identify and control lead-b ased paint hazards, demand for these services is likely to be lower than in the presence of such a guarantee. On the supply side, contractors may be unaware of the risks they are creat ing and the methods they can use to reduce risks of lead exposure.
Impacts of the Regulation on Demand for Lead -Safe Renovation Services in Opt-out Housing
A consumer’s demand for renovation services is a function of the price of these services, the characteristics of the services (e.g., quality, lead safet y etc.), and the characteristics of consumers. Assume that all renovation services are identical ex cept that some are performed using lead-safe containment and clean-up practices and some are not. Assume for illustration purposes that there is only one consumer and one supplier in the market. Of th e services that are performed not using these lead-safe practices, some are done by the supplier, while others are do-it-yourself projects performed by the consumer. The general market failure rela tionships discussed above are illustrated in Exhibit 3-1 as three markets for close substitutes. Figure (a) represents the market for lead-safe renovation projects, Figure (b) represents the professional market for “standard pr actice” renovations that do not use lead-safe work practices, and Figure (c) represents the do-it-yourself market for “standard practice” renovations. In each market, S 0 represents the supply of renovation services and D 0 represents the demand for renovation services in the baseline with incomplete information. Note that, moving from left to right, each supply curve is lower than the prior one, corresponding to the lower cost in terms of materials and time combined. The area under the demand curve in each ma rket represents the consumer’s willingness-to-pay for renovation services.

Exhibit 3-1: Impact of Regulation on Markets for Renovation/Remodeling Services in Opt-out HousingEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

S 0

D 1

Work Practices Figure (b) Professional Market with “Standard” Work Practices Q Lead-Safe Q Standard Professional P Lead-Safe P Standard Professional

D 0 S 0

Q Standard Do-it-yourself 

## ?

Figure (c) Do-it-Yourself Market with “Standard” Work Practices P 0

P Standard Do-it-yourself

D 0 S 1

D 0 D 1 S 0 S 1

Q 1 Q 0 P 0 P 1

Q 0 P 0 P 1

Figure (a) Market with Lead-Safe Q 1 Q 0 S 0

D 1

Work Practices Figure (b) Professional Market with “Standard” Work Practices Q Lead-Safe Q Standard Professional P Lead-Safe P Standard Professional

D 0 S 0

Q Standard Do-it-yourself 

## ?

Figure (c) Do-it-Yourself Market with “Standard” Work Practices P 0

P Standard Do-it-yourself

D 0 S 1

D 0 D 1 S 0 S 1

Q 1 Q 0 P 0 P 1

Q 0 P 0 P 1

Figure (a) Market with Lead-Safe Q 1 Q 0

The LRRP program alters the nature of these three ma rkets by providing information to the consum contractor about the risk associated with lead-b ased paint renovation activities and by requiring lead-safe containment and clean-up practices for professional projects. The implementation of the LRRP program will help to establish a more structured market for lead-safe renovation services. Prior to the LRRP program, consumers of renovation services generally ha d no guarantee that a contractor who claimed to provide lead-safe renovation services would actually perform the project in a lead-safe manner. The implementation of work practice standards and traini ng/certification requirements is like 1 er and 2 3 4 5 6 7 ly to increase 8 consumer confidence in the quality of the work pr ovided by certified contractors, increasing their 9 10

y 11 12 13 14 15 16 17 18 19

se. 20 With the implementation of the LRRP program, however , consumers are more likely to avoid the dangers 21 22 re (a) 23 ce” 24 25 26 27 28 29 additional costs for lead-safe work practices. This would shift the supply curve back up. On the other 30 willingness-to-pay for these services.
EPA’s targeted outreach program is also likely to increase demand for lead-safe renovation services b raising consumer awareness about the dangers of unsafe work. Although contractors that currently provide well-trained staff and perform lead-safe work practices are expected to find it in their vested interest to provide the kinds of information cited a bove, this possibility has not closed the information gaps for the public. One impediment may be public uncertainty about the reliability of information that contractors themselves provide. Their information may be considered unreliable because consumers are not fully competent to assess the lead contamination and what needs to be done, because the businesses are subject to moral hazard (which occurs, for exam ple, because businesses have a financial interest in minimizing their work practice costs), or both. Since many property owners may lack easy access to independent sources of information to motivate their decisions, doing nothing may be the likely respon

posed by unsafe renovation and hire a qualified contr actor to perform the work in a lead-safe manner.
The increased demand discussed above is shown by an upward shift of the demand curve in Figu from D 0 to D 1 and an associated increase in price. Simultaneously, the demand for “standard practi renovation services decreases with an associated d ecrease in price. Given scarce resources for enforcement, it is expected that some “standard practice” professional work will continue, even in properties where there is the potential for lead exposure. The effect of the regulation on the do-it-yourself market is ambiguous. Some propert y owners that might have hired a professional to perform “standard practice” renovation work in the baseline may decide to perform this work themselves rather than pay the

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-14EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-15 hand, with increased information, property owners that would have performed do-it-yourself “standard” practice” renovation in the baseline may decide to e 1 ither forgo renovation altogether or hire a lead-safe 2 3

4

5 6 7 f 8 he 9 ill affect the final changes in quantity and price of both lead-safe and 10 11

12 13 14 novation services altogether, resulting 15 on services provided after regulation. 1 16

17

18 of the 19 20 21 22 ased 23 24 25

or 26 27 28 he 29 ovation activities; renovation activity thus continues to pose a 30 significant risk of lead exposure. 31

32

gress 33 34 35 36 ies 37 which may create a risk of exposure to dangerous le vels of lead. Accordingly, the 2008 LRRP rule 38 professional, thus reducing do-it-yourself demand.
Impacts of the Regulation on the Supply of Lead-Safe Renovation Services
The regulation will increase both the costs of supplying lead-safe services and standard services. In Figures (a) and (b), S 1 represents the supply of services with the regulations. A contractor that already uses lead-safe practices will also in cur the costs of training, certification and cleaning verification. A contractor that continues to provide standard (not lead-safe) renovation services will have higher costs o operation due to potential enforcement actions, and pot entially higher liability. The relative size of t shifts in the two submarkets w standard renovation services.
The net impact on the quantity of renovation projects pe rformed is also ambiguous. If all property owners are willing to pay the full amount for lead-safe work pr actices, then the total quantity performed across all three markets will remain constant but the average pri ce will rise. However, if some property owners are not willing to pay for the risk reduction they may c hose to forgo re in a net decline in renovati

Conclusions
As demonstrated in this review, due to inadequate info rmation and the existence of externalities, the quantity of lead-safe RRP services currently provided is lik ely to be inefficiently lo w. The results market failures discussed in this review are significant in bo th qualitative and quantitative terms. Childhood lead exposure continues to be a major public health problem among young children in theUnited States. During 1999 through 2002, approximately 310,000 children aged 1 to 5 years, had bloodlead levels greater than 10 μ g/dL, despite the removal of lead from gasoline and the banning of lead-b paint in 1978 (CDC 2005). Most children with blood- lead levels in excess of CDC’s current level of concern have been exposed to lead in non-intact pa int, interior settled dust, and dust and soil in and around deteriorating older housing or ot her buildings where they spend time. According to the Center f Disease Control (CDC), “renovation and remodeling ac tivities that disturb lead-based paint can create substantial amounts of lead dust in the home; such dust can then be inhaled or ingested by children” (CDC 1997). An insufficient number of lead-based pa int interventions have occurred to remove t dangers posed by uncontrolled ren

3.3.2 Justification for Regulation at the Federal Level
In the Residential Lead-Based Paint Hazard Reduc tion Act of 1992 (Title X), the United States Con stated that the elimination of lead-based paint hazards was a national goal. Under §402, Congress directed EPA to promulgate regula tions governing lead-based paint activ ities to ensure that individuals are properly trained, that training programs are accred ited, and that contractors engaged in such activities are certified; and to promulgate guidelines for th e conduct of such renovation and remodeling activit

1 The amount by which price and quantity change in each of these markets is a function of both the amount by which the supply and/or demand functions shift and the relative elasticities of the two functions. See Appendix 3A for a discussion of how these factors affect the price of renovation services and the quantity provided by the market. Appendix 3B presents price elasticity estimates for construction and RRP.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-16 established training, certification and accreditation re quirements, as well as work practice requirements for renovation work in target housing and COFs. 1 2

3 4 5 6 7

9 10

12 13 14 15 16 17 18 19 20 21 22

23 24 25 26 27 28 29 30

31

32 33 34 35 36 37 38 39 40 41 42 The rule revises the LRRP program by removing the opt-out provision in the 2008 LRRP rule. The rule also requires renovation firms to provide owners and o ccupants with a copy of the records demonstrating compliance with the training and work practice re quirements of the LRRP rule. Since both of these provisions revise the existing Federal RRP regulation, it is appropriate that the changes be made at the Federal level, instead of the state or local level.



### 3.4 Approaches for Reducing Lead Expos ure Resulting from Renovation 8 This section examines how the information provision and the mandatory training and work practice requirements in the rule address the market fa ilures discussed in the previous section.

3.4.1 Information Provision 11 Information provision will occur in several ways under the LRRP program, in conjunction with other sections of Title X. Consumers will be directly informed about lead-based paint hazards and risks associated with renovation work through educationa l programs and through the expanded notification requirements. The aim of these programs will be to educate the property owner about the risks associated with lead-based paint and lead-based paint hazards and having renovation work done in areas where these are present, the significance of these risks, and how sp ecific work practices can reduce those risks. In addition, requiring training of professionals w ho carry out renovation pr ojects will provide these individuals information about the hazards of lead exposure and the use of appropriate procedures to reduce exposure during their work. Similarly, the entity certification process will act as an indirect form of information provision to the consumer by assuring them that the services they are purchasing will reduce or eliminate lead exposure.
The rule addresses the market failure due to inadequate information in two ways. First, removing the optout provision will bring renovati ons in these housing units under the purview of the LRRP program, which assures consumers that firms are certified and renovation staff are trained and qualified to minimize exposure to lead-based paint hazards created during renovations. S econd, requiring renovators to provide owners and occupants with a record of th e steps taken to comply with the requirements of the LRRP program (using the checklist or other means) can facilitate a review and discussion between the parties of how well the renovator complied with the work practice requirements in the LRRP program. Both of these information provision activities are described below.
Effect of Removing the Opt-Out Provision The objective of removing the opt-out provision is to reduce exposure to lead dust generated by renovation projects and thereby protect children and adults from the health hazards posed by lead. Due to the nature of the problem, uncertainty currently exists on the part of consumers about the quality of leadsafe renovation services and their likely benefits. The l ack of information regarding the benefits of and the lack of confidence in the quality of a good or service generally leads to a lower demand and a lower willingness-to-pay for that good or service. Thus, if consumers of renovation services are not aware of the dangers posed by lead dust genera ted during renovation, or if they are not confident that a contractor who claims to use lead-safe work practices has been properly trained, they may not be willing to pay the additional costs of contractors who voluntarily abid e by these work practice standards. Removing the opt-out provision will bring renovations in these housi ng units under the purview of the LRRP program, which assures consumers that firms are certified and renovation staff are trained and qualified toEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-17 minimize exposure to lead-based paint hazards created during renovations. This provision of information will act as an important instrument in alleviating th e problems contributing to undue lead exposure. An example of the market failure stemming from inadequa te information is presented in the previous section and is shown graphically in 1 2 3 4

5 6 7 8 9 10 11

12

13 14 15 16 17 18 19 20 21 22

23 24 25 26 27 28 29 30 31 32 33 34

35 36 37 38 39

40 41 42 43 Exhibit 3-1

. An additional information flow will occur under these re gulations. The teaching of safe work practices to contractors and other personnel performing RRP wo rk in opt-out housing will provide them with information they need to undertake renovation activ ities in ways that will minimize exposure to the occupants of the building and others. The training co urse will also provide information about the hazards associated with lead and renovation activities, which c ontractors will pass along to their clients. This provision of information is likely to increase the demand for lead-safe work practices and assist in eliminating the market failure that currently exists due to incomplete or misinformation.
Effect of Requiring Checklist Provision
The rule’s requirement for renovators to provide the ow ner and occupant with a record of the steps taken to comply with the requirements of the LRRP program is one of several information provision requirements under Title X. For example, the ru le will function in conjunction with EPA’s prerenovation education rule, promulga ted under TSCA section 406(b), that requires renovators to provide owners and occupants of target housing and COFs with a lead hazard information pamphlet before conducting renovations. The pamphlet th at renovators must provide (entitled Renovate Right: Important Lead Hazard Information for Fam ilies, Child Care Providers and Schools ) covers topics including the potential health effects resulting from lead exposure; how to prepare for a renovation; the work practices that contractors must follow (containment, cleaning, cleaning verification, etc.); and what to look during the job and after the job is done.
The rule requires renovators to provide a copy of the checklist (or other information documenting the steps taken to comply with the requirements of the LRRP program) when the final invoice for the renovation is delivered, or within 30 days of the co mpletion of the renovation, whichever is earlier. Because the owner will receive the information prior to making the final payment for the work, he or she can use this information in a discussion with the renovator about any differences between the work practices required in the rule and those identified on the checklist as having been completed, or between the work practices that the renovator identified on the checklist and those that the owner observed being used. If there were any deficiencies in the contractor’s work practices, the two parties may then be able to negotiate a resolution to address them. For example, if the renovator failed to appropriately contain the work area, he or she may agree to have the dus t levels checked through dust wipe sampling, and (depending on the results) to perform additional cleaning in order to decrease dust lead levels. Or owners may want to perform additional cleaning on their own.
In situations where the occupant is not the owner (i.e ., in a rental unit), the occupant may be in a better position than the homeowner to note whether the re novator followed all of the steps noted on the checklist. Because the renovator also provides the occupant with a copy of the checklist, the occupant can raise with the owner any discrepancies between wh at the occupant observed and what the completed checklist says. The owner can then take the steps outlined above.
Requiring the renovator to provide the owner and occupa nt with a record of the steps taken to comply with the LRRP program creates an additional incentive for the renovator to comply. A renovator is more likely to adhere to all of the work practice requi rements knowing that a consumer with a copy of the completed checklist will be in a better position to evalua te whether the work followed the requirements.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-18 A mandatory information provision requirement is usef ul for renovators as well as consumers, since it provides renovators with an affirmative indication th at they have followed the work practice requirements in the rule. Having the option of using a checklist de veloped and suggested by EPA (instead of using a checklist that has been developed by private parties) may address possible questions of whether the checklist renovators are using is sufficient and appropriate. 1 2 3 4 5

6 7 8 9 10 11

12 13 14 15 16 17 18 19 20 21 22 23 24

25 26 27 28 29 30 31

33 34 35 36 37 38 39 40 41 42 43 EPA’s version of the checklist is shor t (one page long) and is written in simple and clear language. The information provided by the renovator is supplied in checkboxes or in short fill-in-the-blank answers. Thus, the information is provided in a format the ow ners and occupants can readily understand. Because renovators must provide the checklist prior to fina l payment for the work, owners will receive the information in a timely fashion. This provides them with the ability to act on the information in an appropriate manner.
If renovators were not mandated to provide this info rmation to consumers, responsible renovators might theoretically provide it voluntarily (although renovators who are not as responsible are unlikely to provide this information voluntarily). But there is no eviden ce that even responsible renovators are doing this. EPA’s analyses for this rule and for the 2008 LRRP ru le assumes that some of the work practices required by the LRRP program are already used in a fraction of the renovations in the baseline (that is, without the LRRP program applying). If renovators were inte rested in voluntarily providing consumers with information similar to that on the checklist, then presu mably some of them would already be doing it (i.e., providing consumers with documentatio n of the types of containment, cleaning, and other work practices they are using in the baseline). However, there h as been no indication that renovators are providing owners with documentation of the work practices used, much less that renovators are providing documentation comparing the work practices used with the suite of work practices required by the LRRP program. The failure of the marketplace to provide this information on its own means that owners and occupants may not be able to react appropriately to avoid or prevent risks from lead-based paint.
The rule does not require owners and occupants to read the checklist or to take further actions to reduce lead-based paint hazards. Thus, the extent to whic h lead exposure is reduced (beyond the expected increase in the compliance rate discussed above) de pends upon how participants in the transaction respond to the information provision required by th e rule. Neither the costs nor benefits of these responses can be quantified because doing so would require predicting the behavior of the parties, which is influenced by many factors unique to each individual situation. Data are not available to estimate the behavior changes.

3.4.2 Mandatory Training and Work Practice Requirements 32 The information provision described above will aid in reducing the extent of the market failure that currently exists for lead-safe renovation services. Howe ver, relying solely on information provision is unlikely to be sufficient to correct the market failure because of the natu re of the lead paint problem. The lead in lead-based paint cannot be seen on visual in spection, so the owner a nd occupant do not know if lead is present and whether a lead exposure hazard exis ts. Likewise, the adverse health effects are not noticeable for several years, and the source may not be recognized. In such situations, education may not be sufficient and other mechanisms are needed to ensu re that if a potential risk exists, it is suitably addressed. The LRRP program introduces other mechan isms for the elimination of lead-based paint hazards during renovation work. These include tr aining requirements for personnel engaged in renovation work, and the use of standard practices for the containment and cleanup of lead dust and debris generated during the project, and the prohibition or restriction of certain high-hazard techniques. The ruleEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-19 requires the use of these work practices in all target housing by removing the opt-out provision from the LRRP program. 1 2EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-20 

## Appendix 3A: The Role of Elastici ties in Determining the Impacts of a Rule 1 2 3 4 5 6 7 8 9 10 11 12 13

14
15 16 17 18 19 20 21 22

23 24 25 26 27 28

29 30 31 32 33 34

35 36 37 38 39 40 41 42 43 EPA is often faced with deciding on a regulatory policy in the absence of good information about the likely effects of the policy on consumers and producers. In particular, data on the own-price elasticity of supply and demand often are uncertain. This appe ndix provides background information on the likely effects of own-price elasticity of demand and supply on the outcomes of EPA’s regulatory efforts. The bulk of the discussion focuses on the case of perfect competition, not because the majority of markets EPA is likely to affect will exhibit competitive behavi or, but simply because the theory is clearly defined in this case. However, this appendix also exam ines the likely impacts of relaxing the assumption of perfect competition. It focuses on two general classe s of regulatory options: re gulations that alter the market outcome by imposing additional costs upon produ cers, and regulations that alter the market by providing information to consumers. 

### 3A.1 Elasticities of Supply and Demand The market equilibrium for a commodity (e.g., pu rchasing renovation, remode ling or painting (RRP) work that uses lead-safe work practices) is determin ed by the intersection of the aggregate demand and supply curves. The aggregate demand curve depicts cons umer behavior and is ba sed on consumer income and preferences. Likewise, the aggregate supply curve describes the behavior of producers in the market, and is dependent upon the costs of production. At market equilibrium, the price is referred to as market clearing. In other words, at this price, the qua ntity demanded by consumers and supplied by producers are equal and neither the consumer nor producer has an y incentive to move away from this steady state as long as current demand and supply conditions prevail.
However, when demand and supply conditions do change, for example when new information causes consumers to adjust their preferences and thus shift the demand curve, or changes in input prices affect costs of production and shift the supply curve, the market gravitates to a new equilibrium. This new equilibrium is represented by a new combination of market clearing price and quantity. The magnitude of the change in price and quantity is dependent not only upon the extent of the shift in the demand or supply curve, but also on the own-price elasticity of demand and supply for the commodity.
The own-price elasticity of demand is defined as the ra tio of the percent change in quantity demanded to the percent change in price, and is reflected in the slope of the demand curve, similarly for the own-price elasticity of supply. By determining the level of ch ange in price and quantity, the elasticities of the two curves also determine the distribution of the burde n or benefit between the consumer and producer resulting from a change in equilibrium conditions. Analyzing changes in consumer and producer surpluses provides a means for quantif ying such distributional changes.
Figure 3A-1 below provides a hypothetical example of how the effects of regulation may impact consumer and producer surpluses. In the base line, the supply curve is represented by S 1 , and producers supply Q 1 at a price P 1 . On all the inframarginal units supplied, producers receive a price above the cost of production. The difference between the price a nd the cost of production represents the producer surplus resulting from supplying Q 1 at price P 1 (triangle P 1 CD). Similarly, in the baseline consumers demand quantity Q 1 at price P 1 . For all the inframarginal units de manded, consumers would be willing to pay more than that price and thus receive a surplu s. The difference between what consumers are willing to pay as measured by the height of the demand curve, and what they have to pay is the consumer surplus (triangle ACP 1 ).EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

1 2 3 4 5 6 7 8 9
10 11 So what are the effects of regulation? In Figur e 3A-1, the upward shift in the supply curve to S 2 (say from a rise in production costs due to the implementation of the RRP rule which requires use of the more costly lead-safe work practices) results in a new equilibrium at the point B, with a new market price of P 2 and quantity of Q 2 . Note that producer surplus decreases from P 1 CD to EBP 2 and the consumer surplus also decreases from ACP 1 to ABP 2 . Thus, in the arbitrary case drawn in Figure 3A-1, the social costs of the regulation are born by both consumers and producers of the pollution-generating good. This result turns out to be a function of the way the supply and demand curves have been drawn, and the distribution of costs between consumers and producers depends on the slope (elasticity) of the demand and supply

curves. Figure 3A-1: Effect on consumer and producer surplus due to a supply curve shift

A

B C

D E

Q 1 Q

2 P 1 P 2 S 2

S 1

D

12 13 14 15 16 17 18 19 20 21
22 23 24 In general, for a given production cost increase, the more elastic the demand curve, the greater the inability on the part of the producers to pass the add itional costs of production on to the consumers. As shown in Figure 3A-2 (a) and 3A-2 (b) below, th e differing slopes of the demand curve lead to differential impacts on the consumer and producer su rplus. In Figure 3A-2 (a) demand for the good is relatively price elastic, while in Figure 3A-2 (b) the good has a relatively inelastic demand. Notice that when demand is less elastic, the price increase resulti ng from a shift in supply is greater and consumers bear a greater share of the loss in consumer surplus. On the other hand, with a more elastic demand, the overall price increase is smaller and the share of total costs born by producers is larger. Figure 3A-2(a) Figure 3A-2(b) 2(a): Effect of a change in i nput prices when demand is elastic 2(b): Effect of a change in input prices when demand is inelastic

S2

S1

D

Q2 Q1 P1 P2

Q2 Q1 P1 P2

D S1 S2

25

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-21EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-22 The elasticity of demand is determined in genera l by the existence of suitable substitutes for a commodity. If several commodities exis t in the market that are consider ed to be close substitutes for each other, then a consumer is likely to have a great deal of choice available to him while making his consumption decision. This being the case, if the pri ce of the commodity that he is presently consuming happens to rise, he is easily able to reduce his cu rrent consumption level of that commodity and switch over to consuming more of one of the substitutes. This flexibility limits the ability of the producer to pass on the burden of the cost increase on to the consumer . Thus, the availability of close substitutes in the market explains why the demand curve for a commod ity will be relatively elastic, and why the rise in price will be relatively small. On the other hand, if substitutes are lacking for a commodity that experiences a price increase (and it is not a luxury good ), then the consumer has little choice but to carry on consuming similar quantities of the same product. T hus, in this situation he will have to shoulder a larger share of the increased costs by paying a much higher price, and this rigi dity in his consumption behavior explains the inelastic nature of the demand curve for that commodity. 1 2 3 4 5 6 7 8 9 10 11 12 13

14 15 16 17 18 19 20 21 22

23 24 25 26 27 28

29 30 31 32 33 34 35 36 37

38 39 40 41 42 43 44 Recognizing that most markets are not perfectly competitive, product differentiation allows firms to charge prices higher than marginal costs and charge different prices for similar goods. The degree to which producers can pass on the cost of production depends heavily on the degree to which they can convince consumers that their product is different from ot her products. In its limit this argument is just a restatement of the fact that markets with lower elasticities of demand will experience higher price increases. If “market demand” is defined to be the demand for a single brand of good, then the number of substitutes for the good affects its demand elasticity and thus affects the degree to which the producer can pass on cost increases. If the firm can convince cons umers that the product is distinct then it in essence lowers the elasticity of demand for its product.
The own price elasticity of supply, on the other hand, is dependent on the degree of specialization of inputs. If the inputs are highly specialized or firms ar e locked into long-term contracts then firms in this industry can be left with substantial sunk investment s creating high transition costs which are reflected in an inelastic supply curve. However, if supply is high ly elastic then firms can easily switch production to other uses and minimize the effect of the demand shoc k. In essence the elasticity of supply measures the amount of resources lost or tied up indefinitely when consumption patterns change suddenly.
The EPA seeks to reduce hazards from lead-based paint by two separate pathways of regulatory impact. First, it hopes to reduce exposure to lead-based pain t by regulating the “method of production” of RRP work in opt-out housing by establishing standards fo r such activities and through requiring certifications and/or training. This is likely to result in an in crease in the “costs of production” of RRP work thereby affecting the supply curve for such activities. Second, the rule will provide information to consumers. In this case EPA is likely to alter the market outcom es by changing the demand for products (lead-safe and non lead-safe work practices). To the extent that the demand and supply of RRP work will be affected by the rule, one must consider the price elasticities involve d to determine the distributive impact of the rule on consumers and producers.
An important factor on which the price elasticity will depend is the number of substitutes that exist for the RRP service that is sought in the market. As previous ly explained, the greater the number of available substitutes, the more elastic the demand and lesser the burden of a production cost increase likely to fall on the consumer. Under this rule three classes of substitutes may be said to exist for RRP services. These are (1) professionals using lead-safe work practices, (2) professionals using non lead-safe work practices, and (3) the do-it-yourself jobs. Thus, a certain amount of flexibility is available to the consumer when it comes to hiring RRP services.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-23 Currently a sizeable number of RRP firms may not necessarily be following lead-safe work practices thereby limiting the size of the class of firms that do so . However, with the implementation of the rule, a much larger number of firms are expected to adhere to these practices in the future, thus enlarging the size of this class. In addition, this increase in the numbe r of professionals using lead-safe work practices will also have a geographical impact. Presently, the limited number of professionals who use lead-safe work practices are concentrated in a select number of locati ons where state and local regulations have fostered their development. As a result, in many parts of th e country the choice of hiring “lead-safe” professionals currently does not exist. But this situation will chan ge as a larger number of firms switch to lead-safe work practices once the rule come into effect. 1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19

20 21 22 23 24 25 26 27

28 29 30 31 32 33 34

35 36 37 38 39 40 However, if the increase in production costs from the ru le is extremely high such a large transition of firms from using lead-unsafe to lead-safe work pr actices may not occur. This is because the cheaper option of using non-certified (non lead-safe work prac tice using) RRP workers or doing the work yourself will limit the ability of the certified (lead-safe work pr actice using) professional to charge the consumer for all or a large portion of this significant cost incr ease. In this situation a large number of lead-unsafe firms may remain in existence. Thus, one may assu me that as long as an appreciable difference exists between “costs of production” of lead-safe and non lead-safe work practices, firms of both types will continue to exist. The continued existence of fi rms using non lead-safe practices also depends on the extent and effectiveness of enforcement activities. Th e greater the cost differential between lead-safe and non lead-safe practices, the greater th e need for enforcement activities.
In addition to the number of substitutes, the closeness of substitutes in their ability to replace one another needs to be judged. The important question is whet her RRP work done by uncertified professionals and the do-it-yourself efforts are substantially less safe th an the services of certified professionals. To the extent an appreciable difference ex ists between the quality of service (in terms of preventing or reducing lead-based paint hazards) provided by the two groups, th ey will not be perceived as close substitutes for each other and their demand curves will not be as elastic as they would have been if they were considered close substitutes. In such a situation, consumers f eel that a sufficiently differentiated product is being offered by the two groups, and thus their choice is limited.
This judgment on the degree of closeness of substitute s will to some extent depend upon the importance that lead safety holds with the property owner compared to other priorities. To the extent that the priority assigned to lead exposure is relatively small, the uncertified professionals and do-it-yourself jobs will tend to be seen as closer substitutes for certified pr ofessionals, than if lead-based paint hazards are perceived as a larger threat by the property owner. Thus, the elasticity of demand will also vary according to owner priorities, and in this rega rd, the informational aspect of the rule may in fact assist in raising more awareness, resulting in lead safety being assigned a higher priority.
Of a related nature, the firm certification aspect of the rule is likely to increase consumer ability to differentiate between the services being offered by the three classes of substitutes. The certification process will create a distinct divide which will permit the property owner to get a better appreciation of the varied benefits to be gained from the alternatives at hand. This is likely to reduce to some extent the perceived closeness of the substitutes and thereby ma ke the demand more inelastic for each class of RRP service.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-24 

### 3A.2 How Price Elasticity of Demand Affects the RRP Rule 1
2 3 4 5

6
7 8 9 10 11 12 13

14 15 16 17 18 19 20 21 22 23

24
25 26 27 28 29 30 31 32

33 34 35 36 37 38 39 40 41 42 43 As discussed above, EPA foresees tw o separate pathways by which th e rule will take effect; increasing costs of production leading to a shift in supply and provision of information to consumers leading to a shift in demand. The way these two effects will play out and the role that price elasticities will play in the adjustment of prices and quantities under the two scenarios is discussed below.

3A.2.1 Effect of Rule on the Cost of Production (Supply Shift) EPA seeks to reduce exposure to lead-based paint hazar ds by the introduction of lead-safe work practices during RRP work. These practices involve the use of in creased precautions in situ ations where lead-based paint hazards may potentially be created during RRP wo rk, and as a result costs of RRP work are likely to increase above current levels. Since producers seek to maximize profits and in the baseline will produce goods using the lowest-cost combination of inputs, a rule requiring producers to change their input mix will necessarily increase the cost of production. Thus, one impact of the rule will be to increase the production costs, leading the supply curve to shift upward and to the left.
Figures 3A-2(a) and 3A-2(b) demonstrate the distributiona l affects of such a hypothetical shift in supply in markets with different elasticities of demand. The price increase is much higher (P1 to P2) and the decrease in quantity demanded is much lower (Q1 to Q2) with a given shift in supply when demand is less elastic (as shown in Figure 3A-2(b)) as compared to the elastic demand scenario in Figure 3A-2(a). Thus, the consumers bear a higher share of the tota l social cost from the regulation (represented by the relatively larger decrease in the consumer surplus compar ed to that in the produ cer surplus). On the other hand, Figure 3A-2(a) shows that the higher the elas ticity of demand, the lower the overall price increase, the larger the reduction in quantity demanded, and thus the larger the share of total costs to be born by producers (represented similarly by the larger decrease in producer surplus as compared to the consumer surplus).

3A.2.2 Effect of Rule on the Provision of Information to Consumers (Demand Shift) The alternative regulatory approach is to provide information to consumers in the hopes that they will make more environmentally friendl y consumption choices. In this case EPA alters the market outcomes by changing the demand for products. Figures 3A-3(a) a nd 3A-3(b) depict such a hypothetical example. In these cases the commodity in question (non lead-safe work practices) has negative environmental effects (byproducts). By educating consumers about these byproducts and alterna tive products that have lower levels of adverse effects (lead-safe work practices), EPA can change consumer preferences and shift demand for the “bad product” inward and to the left. This lower demand curve would more accurately reflect the true “social” margin al benefits of consuming the product.
What are the likely distributional and efficiency effect s of this type of regulatory policy? Figures 3A-3(a) and 3A-3(b) reveal that under both scenarios (for an elastic and inelastic supply curve), the downward shift in the demand curve will lead to a decrease in price and quantity demanded of the commodity. However, in the case of an elastic supply curve when the transition costs associat ed with switching to the production of other products is relatively low, the de crease in price of the commodity is smaller and the decrease in quantity demanded larger, as compared to the changes in the case of an inelastic supply curve involving high transition costs. Restated in terms of changes in producer and consumer surpluses, the producer surplus is reduced under each scenario, but th e elastic supply curve causes a relatively smaller burden to fall on the producer than the inelastic supply curve. Similarly, the consumer receives a reduction in social benefit under each scenario; however , the magnitude of this reduction is larger under the inelastic supply curve case.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

1
2 3 4 Figure 3A-3(a) Figure 3A-3(b) 3(a): Effects of a regulation-induced ch ange in demand when supply is elastic 3(b): Effects of a regulation-induced ch ange in demand when supply is inelastic

D1

D2 S

Q1Q2 P1 P2

Q1Q2 P1 P2

D2 D1 S

5 6

7
8 9 10

11 12 13 14 15 16 17 18 19 20 21 22

23 24 25 26 27 28 29 30 3A.2.3 Application to Renovation In the rule, EPA is both affecting production and pr oviding information. The likely effects of the regulation on prices and welfare are difficult to discu ss without more accurate information on the supply and demand elasticities. However, some general observations are warranted.
The welfare effects of the regulation will likely be driv en by the supply side rather than the demand side. This is because the elasticity of supp ly for RRP services is likely to be re latively higher than the elasticity of demand. Supply elasticities are expected to be relatively high because there are relatively few barriers to entering or leaving this industry. Little capital equipment or specialized labor skills are needed for RRP work, and what is needed is easily transf erred from non-compliant renovation to “lead-safe” projects. On the demand side, there are two primary categories of RRP events – those of a maintenance character and those of an improvement character. Maintenance activities usually cannot be postponed and thus are not particularly sensitive to price. Improvement projects, however, can more easily be postponed and thus tend to be more price elastic. Complicating matters, however, are the existence of different categories of purchasers. Some place a hi gh premium on quality and ti meliness, while others actively seek low prices. Appendix 3B discusses some of the empirical evidence on elasticities of demand and supply.
However, the analysis does not suggest that the educa tion factor is unimportant. If the regulation is not accompanied by education efforts and enforcement, then EPA could unintentionally drive up demand for non-compliant renovation projects creating additional we lfare losses. These loss es are the result of the fact that if consumers were aware of the lead pa int issues their true marginal valuation for the noncompliant projects is lower than the price of these proj ects. Thus, if enforcement is not perfect, education is essential. EPA can compensate fo r the fact that it is raising the costs of lead-free renovation on the supply side by educating consumers on the environm ental effects of non-compliant renovations thereby making these cheaper, non-compliant projects less attractive.

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-25EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-26 

## Appendix 3B: Elasticities of Demand and Supply for Housing / Renovation Services 1 2 3 4 5 6 7 8 9 10 11

12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27

28 29
30
31 32

33 34 35

36 37 38

39 40 As described in Chapter 3 and Appendix 3A, the im pact of increases in the cost of RRP services on demand for RRP will depend on both the size of the cost increase and the elasticity of demand for these services. Likewise, the impact on the supply of RRP services will depend on both the size of the cost increase and the elasticity of supply for these services. These impacts are expressed in terms of changes in price and in the quantity of services purchased. Chapter 4 estimates the cost increases due to the requirements of the various regulatory options, b ased on the increased labor and materials costs of complying with the containment and clean-up requireme nts, as well as the training and certification costs imposed by the requirements. This appendix revi ews the existing literature on residential demand elasticities.
Unfortunately, RRP has received relatively little atten tion by housing economists. While there are many studies that estimate elasticities for new construction, these studies have only limited applicability to renovation and remodeling. The income elasticity of demand for housing is generally estimated to be somewhat inelastic (in the 1.0 to 0.8 range). Th is is consistent with housing being a necessity – expenditures on housing do not increase as rapidly as income (Green and Malpezzi 2003). Demand for housing is also considered to be somewhat price in elastic, with generally accepted values either in the range of -0.5 to -1.0 or -0.75 to -1.2 (Mayo 1981, Malpezzi and Maclenna n 2001, Ellwood and Polinski 1979). One study is available that estimated a renovation demand elasticity (Gyourko and Saiz 2003). This study found renovation demand to be very inel astic, with an elasticity estimated to be –0.28.
On the other hand, housing supply a ppears to be very elastic – cons istent with the highly competitive nature of the residential construction market and the large number of small contractors. Because it is very easy to enter (and to leave) the construction business, supply is very responsive to changes in prices, especially in the long run. 2 Based on the literature surveyed, estimates of housing supply elasticities tend to range from 1.0 to 4.0, but a couple of studies found elasticities as high as 13 or higher (DiPasquale and Wheaton 1994, Topel and Rosen 1988, Blackley 1999, Malpezzi and Maclennan 2001). No elasticity numbers specific to the supply of renovation services could be found.

Several characteristics of RRP tend to make its dema nd more price elastic than the demand for housing in general. For example:
3⁄4 The existence of close substitutes to compliant RRP. These substitutes include:

à Do-It-Yourself RRP –owners of buildings ma y be tempted to do their own RRP work without proper training and certification.

à Firms that do not complying with the regulati ons. These regulations may be difficult to enforce against contractors, particularly the large number of small contractors who may be hard to identify and monitor.

à Reductions in the scope of the projects, or postponement of the projects, to compensate for the price increase. Purchasers can reduce other RRP-related costs by substituting lower-priced fixtures/finishes and/or less extensive remodeling.
3⁄4 Many RRP projects are discretionary. The price elasticity of discretionary projects is likely to be higher than replacement projects (e.g. new roof). For discretionary RRP projects, it is relatively

2 Note – stock adjustment models give lower elasticities than flow models. Malpezzi and Maclennan (2001).EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-27 easy for the purchaser to reduce the scale/scope of the project, postpone the project, or never do it. 1 2

3 4 5 6 7 8 9 10 11
12 13
14 15

16 17 18 19 20

21 22 23 24 25 26 27 28 29

30 31 32

33
34 Offsetting these characteristics that foster higher elasticities of demand, are ones that foster lower elasticities. The major one is that the product pur chased cannot be separated from the firm providing the product, which is true of all services. In addition to the various RRP events analyzed in the subsequent chapters, RRP firms themselves are relatively diffe rentiated. Some firms specialize in high-end, complicated projects (e.g. elaborate new kitchens) while other firms specialize in performing small routine tasks (repainting apartments at tenant turn-ove r). Some firms only work in historic or Victorian homes, while others will work on an y type of home. Some firms do only one type of project (e.g. replacing siding) while other firms will do any and all ty pes of RRP work. This differentiation results in lower demand elasticities, because producers may not be considered particularly close substitutes.
3⁄4 To the extent that lead-safe work can be di stinguished from non-lead-safe work, a higher price can be charged for it.
3⁄4 Many contractors already employ lead-safe practices (or at least control the dispersion of dust and clean well before leaving). The regulations will serve to reduce this differentiation.
Second, the nature of RRP projects may also reduce pr ice competition. For relatively small jobs, property owners frequently will not get multiple bids – the assumed cost of the job does not warrant the effort. In this case, the compliance cost can be passed on without fear of losing the work. In the case of large jobs, where owners will get bids, compliance costs will make up a relatively small proportion of the total cost and, again, passing on the costs may be easy.
Characteristics of the purchaser of the RRP services may also affect their demand price elasticity. Highincome purchasers are likely to be less price sensitive th an low-income purchasers. In addition, owners of rental properties may be more price sensitive than owner occupants because they have different objective functions. Owner-occupants operate so as to maximize their utility (their enjoyment of the house) and asset growth is likely to enter their decision as a seconda ry factor. Owners of rental housing, on the other hand, are assumed to be maximizing their profits. It is reasonable to expect that the optimal level of capital of an absentee landlord’s rental building is lower than that of an owner-occupier’s house, since the landlord’s marginal rent revenue from renovations is likely to be less than the homeowner’s marginal utility.
Because of the lack of detailed price elasticity estimates for RRP, the analysis in Chapters 4, 5 and 6 does not incorporate any reduction in professional RRP activities in response to th e cost increases resulting from the regulation.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-28 

## References 1

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
18 19 20 21 22 23 24
25
26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Center for Disease Control. 1997. “Children with Elevated Blood Lead Levels Attributed to Home Renovation and Remodeling Activ ities -- New York, 1993-1994.” Morbidity and Mortality Weekly Reports . 45(51&52);1120-3. Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/00045033.htm.

Center for Disease Control. 2002. Managing El evated Blood Lead Levels Among Young Children (March).

Center for Disease Control. 2004. Preventing Lead Exposure in Young Children: A Housing Based Approach to Primary Prevention of Lead Poisoning: Recommendations from the Advisory Committee on Childhood Lead Poisoning Prevention (October).

Center for Disease Control. 2005. “Blo od Lead Levels --- United States, 1999—2002.” Morbidity and Mortality Weekly Reports. 54(20);513-516. Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5420a5.htm#tab1.

Residential Lead-Based Paint Hazard Reduction Act of 1992, Pub. L. no. 102-550. 106 Stat. 3672 (1992).

U.S. Department of Housing and Urban Development (HUD). 1990 . Comprehensive and Workable Plan for the Abatement of Lead-Based Paint in Privately Owned Housing: Report to Congress

. Washington, DC, February.

U.S. Department of Housing and Urban Development (HUD). 1995. Guidelines for the Evaluation and Control of Lead-Based Paint Hazards in Housing (June).

U.S. Department of Housing and Urban Development (HUD). Data as of August, 2000. National Survey of Lead and Allergens in Housing. Office of Healthy Homes and Lead Hazard Control, Washington, DC.

U.S. Department of Housing a nd Urban Development (HUD). 2004b. Requirements for Notification, Evaluation, and Reduction of Lead-based Paint H azards in Housing Receiving Federal Assistance and Federally Owned Residential Property Being Sold (Lead Safe Housing Rule); Final Rule, Conforming Amendments and Corrections. Federa l Register (69 FR 34262, June 21, 2004).

U.S Department of Housing and Ur ban Development (HUD) and U.S. EPA. 1996. Lead; Requirements for Disclosure of Known Lead-Based Paint and/or Lead-Based Paint Hazards in Housing; Final Rule. Federal Register ( 61 FR 9064, March 6, 1996)

U.S. Department of Labor, Occ upational Safety and Health Administration (OSHA). 1993. Lead Exposure in Construction; Interim Final Rule. Federal Register (58 FR 26590, May 4, 1993).EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-29 U.S. Environmental Protection Agency (EPA). 1984. EPA Policy for the Administration of Environmental Programs on Indian Reservations (November 8). 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 U.S. Environmental Protection Agency (EPA). 1995. Lead Hazard Information Pamphlet; Notice of Availability. Federal Register (60 FR 39167, August 1, 1995).

U.S. Environmental Protection Agency (EPA). 1996. Lead; Requirements for Lead-Based Paint Activities in Target Housing and Child-Occupied Fa cilities: Final Rule. Federal Register (61 FR 5778, August 29, 1996).

U.S. Environmental Protection Agency (EPA). 1997 . Lead Exposure Associated with Renovation and Remodeling Activities: Environmental Field Samp ling Study (EFSS). EPA 747-R-96-007, May 1997. http://www.epa.gov/lead/pubs/r96-007.pdf

U.S. Environmental Protection Agency (EPA). 1998 . Lead; Requirements for Hazard Education Before Renovation of Target Housing; Final Rule. Fede ral Register (63 FR 29908, June 1, 1998).

U.S. Environmental Protection Agency (EPA). 1999. Lead; Fees for accreditation of Training Programs and Certification of Lead-based Paint Activities Cont ractors; Final Rule. Federal Register (64 FR 31092, June 9, 1999).

U.S. Environmental Protection Agency (EPA). 2001b. Lead; Identification of Dangerous Levels of Lead; Final Rule. Federal Register (66 FR 1206, January 5, 2001)

U.S. Environmental Protection Agency (EPA). 2003a. Lead Safety for Remodeling, Repair, And Painting. Joint EPA/HUD Renovation Training Curriculum (EPA 747-B-03-001/2, July 2003).

U.S. Environmental Protection Agency (EPA). 2003b. Protect Your Family From Lead in Your Home. U.S. Environmental Protection Agency, U.S. C onsumer Product Safety Commission, and U.S. Department of Housing and Urban Devel opment, (EPA 747-K-99-001, June 2003).

U.S. Environmental Protection Agency (EPA). 2004a. Lead; Notification Requirements for Lead-Based Paint Abatement Activities and Training; Final Ru le. Federal Register (69 FR 18489, April 8, 2004)

U.S. Environmental Protection Agency (EPA). 2004b. Targeted Grants to Reduce Childhood Lead Poisoning; Notice of Funds Availability. Federal Register (69 FR 69913, December 1, 2004).

U.S. Environmental Protection Agency (EPA). 2005c. Air Quality Criteria for Lead (First External Review Draft). EPA/600/R-05/144aA-bA. December. http://cfpub2.epa.gov/ncea/cfm/ recordisplay.cfm?deid=141779

U.S. Environmental Protection Agency (EPA). 2007. Characterization of Dust Lead Levels After Renovation, Repair, And Painting Activities . November 13, 2007.

U.S. Environmental Protection Agency (EPA). 2008. Renovate Right: Important Lead Hazard Information for Families, Child Care Provide rs and Schools (EPA 740-F-08-002, March 2008).EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 3-30 1 2 3 4

5 U.S. Environmental Protection Agency (EPA). 2009. Lead; Fees for Accreditation of Training Programs and Certification of Lead-based Paint Activiti es and Renovation Contractors. 74 FR 11863, March 20, 2009.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-1 

## 4. Costs of the Lead, Renovation, Repair, and Painting Rule 1 

## Revisions 2 The revisions to the LRRP program include: (1) the removal of the opt-out provision for owner-occupied 3 target housing without either children under the age of 6 or a pregnant woman in residence, and (2) an 4 additional requirement that the renovator provide a co py of their recordkeeping checklist to owners and 5 occupants of renovated structures. 6 The costs associated with the revisions to the §4 02(c) Lead, Renovation, Repair, and Painting (LRRP) 7 Rule are divided into four categories for the purposes of this analysis: (1) work practice costs, (2) training 8 costs, (3) certification costs (which include the firm’s paperwork burden and EPA administrative and 9 enforcement costs), and (4) recordk eeping checklist provision costs. Th e costs associated with the first 10 three components are all attributable to the elimina tion of the opt-out provision, which will extend the 11 2008 LRRP requirements to additional housing units. In addition to th e work practice costs associated 12 with the RRP events in these housing units, this change is expected to result in more individuals and firms 13 seeking training and certification. The fourth componen t, recordkeeping checklist provision costs, applies 14 to all housing units regulated under the 2008 LRRP rule as well as the additiona l housing units that would 15 no longer be eligible for the opt-out provision. 16 The general approach of the analysis is to first estimate the number of affected activities or entities and 17 then estimate the incremental regulatory cost per-activity or entity affected. Finally, the incremental costs 18 and the number of affected activities and entities are comb ined to estimate the tota l costs. The analysis 19 estimates the total costs associated with the first thr ee years of regulation and then extrapolates to the 20 costs of the regulation over a fifty year period—estimat ed with three and seven percent discount rates. 21 The chapter is organized as follows: Section 4.1 defines the regulatory options considered in this analysis; 22 Section 4.2 estimates the number of regulated renovation, repair, a nd painting events under the various 23 regulatory scenarios; Section 4.3 presents the estimated costs of using the required work practices; 24 Section 4.4 presents the estimated number of firms, renovators, and workers seeking training and 25 certification; Section 4.5 presents the incremental training costs; Section 4.6 presents the estimated 26 certification, ad ministrative and enforcement cost estimates; Section 4.7 presents the recordkeeping 27 checklist provision cost estimates; S ection 4.8 presents the total costs of the regulation; and Section 4.9 28 presents the total costs ass ociated with va rious alternative regulatory options. 29


### 4.1 Definitions of Options 30 This economic analysis considers various regulatory options. The effective date for the recordkeeping 31 checklist requirement is June 2010 under all options. However, options A through D differ in terms of 32 the effective dates of the elimination of the opt-o ut provision. In addition, the economic analysis 33 considers four options with varying work pr actice requirements, Options E1 through E4. Table 4-1 34

su mmarizes the options considered in this analys is; they are described in more detail below. 35 Options A and D both have effective dates of June 20 10 for the elimination of the opt-out provision, but 36 Option A does not phase in the opt-out elimination while Option D limits opt-out elimination to pre-1960 37 structures during Phase 1 of the regulation and expa nds the requirements to structures built between 1960 38 and 1978 in Phase 2, which has an effective date of June 2011. Options B and C have effective dates of 39 January 2011 and June 2011 for th e elimination of the opt-out provis ion, respectively and neither option 40 phases in this requirement. 41 Options E1 through E4, analyzed in Section 4.9, have the same effective dates and universe of regulated 42
structures as Option A, but consider alternative work practice requirements. Option E1 has the same 43 containment requirements as specified in 40 CFR 74 5.85, but does not include any cleaning or cleaning 44EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-2 verification work practices. Option E2 has the same cleaning and cleaning verification requirements as 1 specified in 40 CFR 745.85, but does not include any containment work practices. Option E3 has the 2 same cleaning requirements as specified in 40 CFR 745.85, but does not include any containment or 3 cleaning verification work practices. Option E4 has the same containment, cleaning and cleaning 4 verification requirements as specified in 40 CFR 745.85, but does not restrict or prohibit any paint 5 removal practices. 6
7 Table 4-1: Options Included in Economic Analysis

Option Effective Dates and Scope For Opt-Out Elimination* Containment, Cleaning, and Cleaning Verification Requirements Paint Removal Practices Restricted or

Prohibited
A June 2010, no phase-in Yes Yes
B January 2011, no phase-in Yes Yes
C June 2011, no phase-in Yes Yes
D June 2010 for pre-1960 housing, June 2011 for housing built between 1960 and 1978 Yes Yes

E1 June 2010, no phase-in Containment Only Yes
E2 June 2010, no phase-in Cleaning and Cleaning Verification Only Yes

E3 June 2010, no phase-in Cleaning Only Yes
E4 June 2010, no phase-in Yes No
*The effective date for the recordkeeping check list requirement is June 2010 under all options.

8

4.1.1 Affected Universe 9 The term “target housing” is defined in TSCA S ection 401 as any housing c onstructed before 1978, 10 except housing for the elderly or persons with disabiliti es (unless any child under 6 resides or is expected 11 to reside in such housing) or a ny 0-bedroom dwelling. A child-occupied facility (COF) is defined as ‘‘a 12 building, or portion of a building, constructed prior to 1978, visited regularly by the same child, under the 13 age of six, on at least 2 different days within any week (Sunday through Saturday period), provided that 14 each day’s visit lasts at least 3 hours and the combined weekly visits last at least 6 hours, and the 15 combined annual visits last at least 60 hours. Child-occupied facilities may include, but are not limited 16 to, day-care centers, preschools and kindergarten classrooms” as follows: 17
3⁄4 Kindergartens: Located in public and private schools. 18EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-3 3⁄4 Pre-Schools and Daycare centers: Organized (licensed) facilitie s located in public or 1 commercial buildings. 2
3⁄4 Family daycare: Organized (licensed) daycare facilities located in the provider’s home. 3
3⁄4 Informal daycare: Informal (i.e. not licensed) day care providers, including relatives and non4 relatives. Some of these providers may be paid for their services. 5 Some COFs are also target housing (e.g., daycar e facilities located in the provider’s home). The 2008 6 LRRP rule applied to rental units, all target hous ing COFs, and all owner-occ upied target housing units 7 where a child under the age of 6 resides within the vintage categories specified above. The 2008 LRRP 8 rule provided an opt-out provision for owner-occupied target housing units that are not COFs and where 9 no child under the age of 6 or pregnant woman resides. The revisions to the LRRP program include the 10 removal of this opt-out provision and an additional re quirement that the renovator provide a copy of their 11 recordkeeping checklist to owners a nd occupants of renovated structures. 12

4.1.2 Containment, Cleaning, and Verification Standards 13 The containment, cleaning, and verification standard s discussed in this section are the same for Options 14 A-D as for the 2008 LRRP rule. Options with alte rnative work practice are considered in section 4.9 of 15 this analy sis. 16

4.1.3 Occupant protection 17 Under Title 40 of the Code of Fe deral Regulations (CFR), Section 745.85(a)(1), work areas must be 18 clearly defined with signs warning occupants and other persons not involved in renovation activities to 19 remain outside of the work area. These signs must be posted before beginning the renovation and must 20 remain in place until the renovation has been completed and the work area h as been verified to have been 21 adequately cleaned. If warning signs have been posted in accordance with HUD’s Lead Safe Housing 22 Rule (24 CFR §35.1345(b)(2)) or OSHA’s Lead in Construction Standard (29 CFR §1926.62(m)), 23 additional signs are not required by this proposal. 24

4.1.4 Containing the work area 25 Under 40 CF R §745.85(a)(2), a firm must contain the work area so that no visible dust or debris leaves 26 the work area while the renovation is being performed . Containment refers to methods of preventing 27 leaded dust from migrating beyond the work area. It includes everything from the simple use of 28 disposable plastic drop cloths to the sea ling of openings with plastic sheeting. 29

4.1.4.1 Interior renovations 30 Under 40 CFR §745.85(a)(2)(ii), a firm must take the n ecessary work site preparation steps in order to 31 prevent dust and debris from leaving the work area. Renovation projects generate varying amounts of 32 leaded dust, paint chips, and other lead-contamin ated materials depending on the type of work, area 33 affected, and applied work methods. For example, repairing a small area of damaged drywall would 34 likely generate less lead-contaminated dust and debris than sanding a large area in preparation for 35 painting. 36

4.1.4.2 Exterior renovations 37 Under 40 CFR §745.85(a)(2)(ii), a firm preparing the work area for an external renovation must close all 38 doors and windows within and below the area undergoing renovation and to cover the ground with plastic 39 sheeting or other disposable impermeable material extending out from the edge of the structure a 40 sufficient distance to collect falling paint debris. In addition, doors within the work area that must be 41EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-4 used while the job is being performed must be cove red with plastic sheeting to prevent dust and debris 1 from entering the building. 2

4.1.5 Waste from renovations 3 Renovation p rojects can generate a considerable amount of waste material. Lead-contaminated building 4 components and work area debris must be handled caref ully to prevent the release of lead-contaminated 5 dust and debris. Under 40 CFR §745.85 (a)(3), a firm must contain the waste from renovation activities to 6 prevent releases of dust and debris before the waste is removed from the work area for storage or 7 disposal. If a chute is used to remove waste from the work area, it must be covered. At the conclusion of 8 each work day and at the conclusion of the renovatio n, waste that has been collected from renovation 9 activities must be stored under containment, or behind a barrier that prevents release of dust and debris 10 out of the work area and prevents access to dust and debris. 11 In addition, transporting lead-based paint waste in uncovered vehicles is a possible source of releases of 12 paint chips or dust. Therefore, lead-based pain t waste from RRP activities must be transported under 13 containment that prevents identifiable rel eases (e.g., inside a plastic garbage bag). 14

4.1.6 Cleaning the work area 15 Under 40 CF R §745.85(a)(4), a firm must clean the work area until no visible dust, debris, or residue 16 remains. The firm must also conduct a more thor ough, specialized cleaning, which would remove both 17 visible debris and dust particles too small to be seen by the naked eye. 18

4.1.7 Cleaning verification 19 Under 40 CF R §745.85(b), a firm must conduct an ad ditional cleaning verification step following the 20 visual inspection. This step involves wiping the wi ndowsills and floors with specialized cleaning cloths 21 and comparing them to a cleaning verification card de veloped and distributed, or otherwise approved, by 22 EPA for the purpose of determining, through comparison of disposable cleaning cloths with the card, 23 whether post renovation cleaning has been properly completed. 24

4.1.8 Exceptions 25 As defined in 40 CFR §7 45.83, minor repair and ma intenance activities (including minor electrical work 26 and plumbing) are not considered renovations and ar e not subject to the work practice requirements 27 described above if they disrupt 6 square feet or l ess of a painted surface per room for interior renovations 28 or 20 square feet or less for exterior renovations. Such activities are only considered minor maintenance 29 if they do not involve prohibited or restricted practices, window replacement , or demolition of painted 30 surface areas. 31 Under 40 CFR §745.82, the work practice requirements of the rule do not apply to renovations that only 32 affect painted components that a certified inspector or risk assessor has determined do not contain 33 regulated lead-based paint (at least 1.0 mg/cm 2 or 0.5% by weight lead). Furthermore, the work practice 34 requirements do not apply to renovations that onl y affect painted components that have been 35 demonstrated to be free of regulated lead-based pain t through the use of an EPA-recognized test kit by a 36 certified renovator. Test kits for LBP that are current ly available have false positive rates that range from 37 47 percent to 78 percent. EPA believes that by the en d of 2010, improved test ki ts will be developed that 38 will have a false positive rate of 10 percent or less. 39EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-5 

### 4.2 Estimating the Number of Regulated Renovation, Repair, and P ainting 1 

### Events 2

4.2.1 Estimating the Number of Regulated Renovation, Repair, and Painting Events in 3 Target Hou sing 4 To achieve the rule’s objective of controlling l ead exposure through containment, cleanup, and 5 verification, most of the compliance costs associated with the RRP rule’s work practices pertain to the 6 room or area where the renovation work is performed. Therefore, this analysis defines a regulated event 7 as any group of renovation tasks where two or more square feet of a painted surface are disturbed in a 8 specific room or area of a housing unit. The 2003 Am erican Housing Survey (AHS) is the primary data 9 source for the estimates of regulated RRP events that occur in owner-occupied housing. The 1995 10 Property Owners and Managers Survey (POMS) is the primary data source utilized for estimating the 11 number of regulated events in renter-occupied housing. 12 Following the methodology from the economic analysis of the 2008 LRRP rule (EPA 2008), event counts 13 are estimated separately by housing type (single-family or multi-family) and tenure of occupant (owner or 14 renter). The housing units affected by the eliminati on of the opt-out provision include both single-family 15 and multi-family owner-occupied units. 1 Since single-family owner-occupied units have larger average 16 sizes compared to multi-family owner-occupied un its, separate work practice compliance costs are 17 estimated for these two types of housing units. Since all rental units are ineligible for the opt-out 18 provision under the 2008 LRRP rule, no work practice costs, training costs, or certification costs are 19 associated with these units under the LRRP rule re vision. However, recordkeeping checklist provision 20 costs are estimated for events in all housing types, since this provision affects both the units regulated 21 under the 2008 LRRP rule and the units that will be re gulated under the removal of the opt-out provision. 22
Available renovation data do not include informa tion specific enough to determine when a renovation 23 task disturbs a painted surface or when renovation tasks are performed together in the same room or area. 24 Thus, it was necessary to make some assumptions a bout which types of renovation tasks are likely to 25 disturb painted surfaces and which sets of tasks are li kely to be performed together as part of one 26 renovation project. Note that the counts of exterior ev ents for multi-family housing units are adjusted to 27 correspond to building-specific compliance costs. 2 28

4.2.1.1 Data Sources 29 U.S. Census: American Housing Survey 30 According to the U.S. Census (2005g): 31 The survey is conducted by the Bureau of the Ce nsus for the Department of Housing and Urban 32 Development (HUD). 33 The American Housing Survey (AHS) collects data on the Nation's housing including apartments, single34 family homes, mobile homes, vacant housing units , household characteristics, income, housing and 35 neighborhood quality, housing costs, equipment and fuels, size of housing unit, and recent moves. 36 National data are collected in odd numbered years. Data for each of 47 selected Metropolitan Areas are 37 collected currently about every six years. 38

1 Multi-family owner-occupied units include rental properties wh ere the owner resides in one of the units, owner-occupied condo units, and owner-occupied co-op units.

2 For example, when siding is replaced on the outside of a th ree-unit building, the analysis accounts for this as one siding replacement event rather than the siding replacement outside of three units.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-6 The surveys utilized in this analysis, 1997 and 2003, have sample sizes of 45,932 and 55,452, 1 respectively. Of the housing units sampled, 33,549 and 35,996, for the 1997 and 2003 surveys 2 respectively, have at least one bedroom, are not publi c housing, receive no rent subsidies, and were built 3 before 1980. The 2003 AHS groups housing units bui lt in the 1970’s as units built between 1970-74 or 4 1975-1979, so this analysis counts all housing units built before 1980 in the pre-1978 regulated universe. 5 The sample weights provided by the U.S. Census fo r analyzing the AHS data were designed so that 6 estimates using the provided sample weights would re present the national housing population. However, 7 the U.S. Census weights were not designed to co rrect for underreporting within housing units—such as 8 information reported on occupants living in the hous ing units. Since there is underreporting within9 housing units, estimates of the number of individuals cal culated using the U.S. Census weights results in 10 lower population estimates than those estimated using ot her U.S. Census population data sources. In 11 addition, according to Harvard’s Joint Center for Housing Studies (personal communication with Kermit 12 Baker, August 2005), it appears that the 2003 survey labels too many housing units as vacant; these units 13 are actually occupied by individuals that did not respo nd to the survey. To correct for this bias, the Joint 14 Center for Housing Studies has adjusted the weight s provided by the U.S. Census for the 2003 AHS. 15 These adjusted weights provided by the Joint Center for Housing Studies are utilized for all of the 16 calculations using the 2003 AHS in this analysis; population estimates calculated from the AHS are more 17 closely aligned with other U.S. Census population es timates when calculated with these adjusted weights. 18
U.S. Census: Property Owners and Managers Survey 19 According to the U.S. Census (2005h): 20 The Property Owners and Managers Survey (POMS) w as designed to learn more about rental housing and 21 its providers. The purpose was to gain a better unde rstanding of the property owners and managers on 22 whom the nation depends to provide affordable re ntal housing and what motivates their rental and 23 maintenance policies. Survey interviews were conducted between November 1995 and June 1996. 24 A nationwide sample of approximately 16,300 housing units which were rented or vacant-for-rent in the 25 1993 American Housing Survey National Sample (A HS-N) was selected and a questionnaire was mailed 26 to the property owner, manager, or other agent of the owner of each property containing a selected unit. 27 Detailed information was collected on maintenance, management practices, tenant policy, financial 28 aspects of rental property ownership, ow ner characteristics, and related topics. 29
POMS Sample Areas 30 The addresses included in the POMS sample were lim ited to counties and indepe ndent cities in the 438 31 sampling areas used for the Census Bureau's 1993 American Housing Survey (AHS) National Sample. 32

Units Included 33 A unit (and t he property containing the unit) was included in the survey if it was a privately owned rental 34 unit in the 1993 AHS-N and was still a rental at th e time of the POMS (November 1995 to June 1996). A 35 unit was considered a rental if it was either rented for cash rent, occupied by someone other than the 36 owner without payment of cash rent, or vacant but available for rent. 37 Since the POMS survey is relatively old (1995), this analysis first calculates the percentage of rental38 housing units performing renovations according to the POMS and then applies these percentages to the 39 corresponding number of rental-housing units in 20 03 according to calculations using the AHS. This 40 approach is described in greater detail in the section below. 41EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-7 4.2.1.2 Number of Regulated Events in Owner-Occupied Housing Units 1 The 2003 AHS is the primary data source used for estimating the number of RRP events in owner2 occupied housing for which compliance costs will be incurred. The 1997 AHS is also used for estimating 3 the number of RRP events since it contains some more specific renovation information that was not 4 included in the 2003 survey. AHS respondents report information about the ages of householders who are 5 defined in the survey as persons who live or sleep there most of the time. Thus, child-occupied 6 households are defined as those households with a house holder under the age of 6 at the time of the RRP. 7 Child-occupied households are estimated to be house holds with a householder between the ages of one 8 and seven at the time of the survey since it is assume d that any RRP reported occurred a year earlier (RRP 9 performed up to two years earlier may be reported). It follows that a household is defined as being 10 occupied by a pregnant woman if there is a woman of childbearing age and a child who is under the age 11 of one at the time of the survey. This section descr ibes how the numbers of events are estimated from the 12 renovation module of the AHS and the methodology for estimating the number of Interior Painting and 13 Exterior Painting events using data from the (one-time) 1997 lead paint module of the AHS. 14

AHS Renovation Tasks 15 The 2003 AHS allows respondents to report 40 different renovation tasks; this analysis categorized 24 of 16 these 40 as tasks that may disturb more than 6 square feet or more per room of a painted surface for 17 interior renovations, or 20 square feet or more for exterior renovations. Since tasks performed within two 18 years of the survey can be reported, it is assumed that half occurred in the first year and half occurred in 19 the second (i.e. the total number of events counted for the two year period is divided by two). Since do-it20 yourself RRP is not covered by the rule, only tasks that are reported to be performed by professionals are 21 included in the analysis. 22 Table 4-2 lists these 24 AHS renovation tasks by their ev ent categor y. Note that while the respondents do 23 not specifically report whether or not painted surfaces were disturbed, the survey instrument instructed 24 them to only include major work. 3 This analysis groups the 24 AHS tasks into seven event categories 25 (bathroom event, kitchen event, addition event, window/door event, wall-disturbing event, whole exterior 26 event, contained exterior event) based on the room or area where each AHS renovation task is likely to be 27 performed. 28 When a household reported multiple tasks to AHS th at fall under the same EPA event category, it is 29 assumed that these tasks are performed together in the same area of the housing unit. Therefore, one set 30 of compliance costs are assumed to apply to each ev ent. For example, if a household reported to AHS 31 that they replaced their air conditioning system and replaced their heating system, this analysis assumes 32 that they would incur the complianc e costs associated with one wall-di sturbing event. Compliance costs 33 are dependent on the size of the work area. Thus, when a household reported a wall-disturbing task to 34 AHS that is not specific to a particular room as we ll as a room-specific task—e.g. remodeling the kitchen 35 (specific to the kitchen) and replacing water pipes ( not room-specific)—this analysis accounts for this as 36 one event with a work area that includes the room in which a room-specific task was reported. However, 37 if a household reported tasks to AHS corresponding to multiple room-specific events (such as remodeling 38 the kitchen and bathroom), these are counted as separate events. . 39
As shown in Table 4-2 and discussed above, some tasks reporte d to AHS are not necessarily confined to a 40 specific room or area of the unit. Most of these tasks are likely to involve disturbing a wall or the ceiling 41

3 Specifically, the survey instrument inst ructed respondents with the following language: “We are only interested in jobs that were MAJOR alterations or improvements, such as rewiring, a new roof, new windows or doors. Do NOT include minor repairs or other routine maintenance.” This analysis assumes that jobs that were not reported to AHS would qualify for the minor maintenance exception under the LRRP rule.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-8 (e.g., replacing wiring or pipes); in these cases, the tasks are assigned to a wall-disturbing event. Window 1 or door replacement tasks are assigned to their ow n event category, because (as described in Section 2 4.2.1.5) there is a higher likelihood that windows a nd doors contain lead-based paint (LBP), and this 3 analysis accounts for the likelihood of LBP by component type. 4 As stated above, the 2003 AHS did not explicitly ask respondents whether a renovation task involved 5 disturbing a painted surface. Therefore, in order to estimate the number of events subject to the rule’s 6 requirements, this analysis makes assumptions about whic h tasks might disturb paint. In general, when a 7 tasked reported to AHS will sometimes involve disturbing a painted surface, it is assumed that 8 compliance costs are incurred each time that task is reported to AHS. For example, replacing internal 9 water pipes will sometimes, but not always, requir e disturbing painted walls to access old pipes and 10 replace them with new ones. However, the analysis makes no adjustment to the AHS data to account for 11 the instances where no painted surfaces are distur bed or when a job will qualify for the minor 12 maintenance exception 4 . Sufficient data for making such an ad justment are not available. Thus, these 13 assumptions may lead to an overestimate of the number of regulated events. 14 In the case of adding or replacing heating equipment (AHS task 58) and/or central air conditioning 15 equipment (AHS task 57)—Heating Ventilation and Air Conditioning (HVAC) tasks—it is assumed that 16 only a fraction of these HVAC tasks require disturbing a painted surface. In addition, 18 percent of the 17 households reporting tasks listed in Table 4-2 to AHS reported at least one HVAC task without reporting 18 any other wall-disturbing task. Therefore, assuming that all HVAC work disturbs painted surfaces likely 19 results in a substantial overestimate of wall-disturbing events that disturb LBP and are subject to the 20 LRRP rule. 21 The percentages of HVAC tasks that are assumed to di sturb painted surfaces are estimated using the 1997 22 AHS. Unlike the 2003 AHS, the 1997 AHS distingui shes between installing new HVAC equipment and 23 replacing existing equipment. Since disturbing a painted surface is most likely to occur while performing 24 work on the HVAC ducts (which often are behind painte d walls), it is assumed that this occurs when new 25 systems are installed but not when existing systems are replaced. 5 26
In addition to the seven event definitions in Table 4-2, the analysis estimates costs for Interior Painting 27 events and Exterior Painti ng events. The remode ling module of the 2003 AHS data does not cover these 28 types of activities but the 1997 AHS did, so data fro m the 1997 (one-time) lead module are utilized to 29 estimate the number of these events. 30

4 Jobs that disturb 6 square feet or less of a painted surface per room for interior renovations or 20 square feet or less for exterior renovations; and do not involve prohibited or restricted practices, window replacement, or demolition of painted surface

areas.

5 When heating equipment work (but not air conditioning work) is reported, 7 percent and 9 percent of these tasks involve adding a new system for single- and multi-family units, respectively. When air conditioning equipment work (but not heating work) is reported, 36 percent and 17 percent of these tasks involve addi ng a new system for single- and multi-family units, respectively

. When both heating and air-conditioning equipm ent work is reported, 52 percent and 29 percent of the households install a new system for single- and multi-family units, respectively.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-9 1
Interior Painting Events 2 In the 1997 AHS, respondents were asked two questions related to painting activities that are used to 3 estimate the number of Interior Painting events. Respondents were asked: 4
3⁄4 Was there any painting done on the inside of the unit? 5
3⁄4 Before painting, did anyone sand or scrape off any of the old paint? 6 The number of painting events involving sanding or scraping is important because painting without 7 sanding, scraping, or other substrate preparation does not qualify as disturbing LBP and is not subject to 8 the LRRP rule. 9 Table 4-2: Renovation Events Used in the Analysis and Corresponding 1997 and 2003 AHS Renovation Tasks EPA Renovation Event 2003 AHS Task ID AHS Task Description

Bathroom Event 71 Remodeled bathroom Kitchen Event 72 Remodeled Kitchen 7 Added Bathroom onto home 8 Added Kitchen onto home 9 Added Bedroom onto home 10 Added other inside room onto home 35 Bedroom created through structural changes 36 Other room created through structural changes Addition Event

73 Bathroom created thr ough structural changes Window/Door Event 45 Added/Replaced doors/windows to home

40 Added/replaced internal water pipes in home 42 Added/replaced electrical wiring, fuse boxes, or breaker switches in home 47 Added/Replaced plumbing fixtures in home 55 Installed paneling or ceiling tiles 57 Added/replaced cent ral air conditioning 58 Added/replaced built-in heating equipment 64 Other major improvements or repairs (up to three could be reported) Wall-Disturbing Event

74 Added/replaced secur ity system in home Whole Exterior Event 38 Added/replaced siding on home

11 Added attached garage onto home 12 Added porch onto home 13 Added deck onto home 14 Added carport onto home Contained Exterior Event
69 Added/replaced shed, detached garage, or other building Interior Painting * Interior Painting Exterior Painting * Exterior Painting * Not reported in 2003 AHS.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-10 In contrast with the other AHS renovation questions, respondents were not asked to specify whether the 1 work was performed by a professional. Thus, obtaining a count of the number of Interior Painting events 2 is not as simple as adding up the number of respondents th at answered yes to both of these questions. It is 3 also necessary to estimate: (1) how many of the respondents that had painting done with sanding or 4 scraping hired a professional to do the work, and (2) how many of these events occur in conjunction with 5 other professional events reported (so the analysis doe s not double count if, for example, someone painted 6 with sanding or scraping in their kitchen and re ported both painting with sanding or scraping and 7 remodeling their kitchen). 8 This analysis assumes that 44 percent of the interi or painting with sanding and scraping reported in AHS 9 was performed by professionals. An Angie’s List (B ucksot 2006) online poll found that 44 percent of 10 respondents reported that they hired professionals to perform painting rather than doing it themselves. 11 Since Angie’s List is used to find professional contr actors it seems likely that respondents would be more 12 likely to hire professionals than the general population. Thus, this assumption may lead to an 13 overstatement of the number of interior pain ting events that are subject to the rule. 14
Exterior Painting Events 15 This analysis assumes that exteriors of 100 percent of homes with some paint on their exterior are painted 16 with sanding or scraping every eight years. 6 Since data on the percentage of homes with some paint on 17 their exteriors are not available, it is assumed that 75 percent of all pre-1978 homes have some exterior 18 paint; this assumption is based on data from HUD’s (2001) National Survey of Dust Lead Hazards and 19 Allergens in Housing, which indicates that 70 percent of pre-1960 homes have some lead paint on their 20 exterior. Not all pre-1960 homes have exterior paint. Bu t of those that do, nearly all have at least some 21 exterior lead-based paint. Since n early all exterior painted surfaces on pre-1960 homes are likely to have 22 some lead paint, it was assumed that slightly mo re, 75 percent, of all pr e-1978 homes have exterior 23 painted surfaces. The annual number of Exterior Painting events is estimated as one eighth of the number 24 of regulated structures with exterior paint. 25

4.2.1.3 Number of Regulated Events in Renter-Occupied Housing Units 26 The 1995 POMS is the primary data source used fo r estimating the number of RRP events in renter 27 occupied housing where compliance costs will be incurred. Renter occupied units are only affected by the 28 rule’s additional recordkeeping checklist require ment. The 1997 and 2003 AHS are also used for 29 estimating the number of renter-occupied RRP events, since these data contain more current estimates of 30 the number of potentially regulated households as well as some other information not available from the 31 POMS. 32
This section first describes how the POMS data are used to obtain the annual percentage of renter33 occupied housing units where there is a regulated RRP event. Second, it describes the methods employed 34 for combining the percentages estimated from the PO MS and the AHS data to obtain an estimate of 35 regulated RRP events in renter-occupied units for the first year the rule is in effect. 36

POMS Data 37 The POMS data generally has less detail then the AHS but is still the best source of renter-occupied 38 renovation information available. The POMS asked prope rty owners or managers about 12 or 13 types of 39 maintenance and repair activities (for single-family and multi-family units respectively) and about 11 40 types of capital improvements that may have been made to their properties. It is likely that 12 of these 41

6 According to the Painting and Decorating Coun cil, exteriors of homes are usually pain ted every 4-12 years; thus, the analysis uses the midpoint, eight, for estimating th e number of Exterior Painting events.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-11 maintenance, repair, or upgrade ac tivities require disturbing painted surf aces; these activities are listed in 1 Table 4-3 according to the event category that the y are classified by in this analysis. 2 The percentage of units where at least one of th e RRP activities listed under each event was performed is 3 calculated separately for single- and multi-family units. This is because the average square footage of 4 these two groups of housing differs, and the estimated costs for many of the work practices required by 5 the rule depend on the size of the work area. Si milar to the owner-occupied event estimates, when 6 multiple tasks are reported in POMS, this analysis ass umes that these tasks are pe rformed together in the 7 same area. Therefore, the compliance costs are estim ated based on those costs associated with the task 8 with the largest work area. Unlike in the AHS da ta, POMS respondents were not asked whether sanding 9 or scraping was performed before painting (and painting without sanding or scraping is not subject to the 10 rule’s requirements). Therefore, it is assumed th at 40 percent of the households reporting interior 11 painting are subject to the rule’s requirements based on the percentage of rental households that reported 12 sanding or scraping before painting in the AHS. 7 13 In POMS, questions about capital improvements were ask ed about the entire property rather than about a 14 specific unit. To account for this difference, it was assumed that a specific unit was worked on 40% of 15 the time an upgrade was reported for a property. Si nce properties average about three units each, this 16 assumption results in more renovation compared to the assumption that upgrades are performed on one 17 unit at a time. The assumption utilized in this anal ysis results in renovation frequencies in multi-family 18 properties that are similar to those estimated for single-family properties. 19 Window or door replacement tasks are assigned to th eir own event category, because (as described in 20 Section 4.2.1.5 there is a higher likelihood that windo ws and doors contain LBP, and this analysis 21 accounts for the likelihood of LBP by component type. Since POMS does not ask respondents about 22 replacing windows or doors, the frequency for these tasks is assumed to be the same in rental units as was 23 reported in AHS for owner-occupied units. Therefore, it is assumed that 3.7 and 3.4 percent of renter24 occupied single- and multi-family units, respectivel y, replace windows or doors each year. Since these 25 improvements are likely to be reported in the POMS da ta as “other major upgrades,” this analysis adjusts 26 downward the numbers of “other major upgrade” tasks that are reported in POMS to reflect this. Since 10 27 and 14.8 percent of owner-occupied single- and multi-family units, respectively, reported other major 28 upgrades, 37 and 23 percent of “other major upgrades” reported in the POMS are assumed to be window 29 or door replacements, for single- and multi-family units respectively. 8 30 Similar to the methodology for the owner-occupied RRP event estimates, it is assumed that HVAC 31 related activities do not always incur compliance cost s. The analysis assumes that compliance costs are 32 incurred 28 percent and 15 percent of the time for singl e- and multi-family units respectively, which is the 33 percentage of the time new equipment is installe d when HVAC work is performed in owner-occupied 34 units according to the 1997 AHS. 35
36

7 The 40 percent of rental units that reported sanding or scraping before painting in AHS compares to the 35 percent of owner-occupied units that reported sanding or scraping before painting in AHS.

8 37% = 3.7%/10% and 23% = 3.4%/14.8%.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-12 1

4.2.1.4 Extrapolating from the POMS and AHS Data 2 After calculating the percentages of rental units where RRP was performed in the event categories listed 3 in Table 4-3, the number of renter-occupied events in these categor ies are calculated by applying the 4 event frequencies calculated with the 1995 POMS data to the number of rental-units according to the 5 2003 AHS. It is assumed that Whole Exterior events a nd Contained Exterior events occur in rental units 6 with the same frequency as they do in owner-occupied units (since data on these types of events are not 7 available in the POMS). Additional tasks reported in the AHS data but not the POMS data are not 8 estimated for rental units since these renovation activi ties are fairly uncommon in rental units and likely 9 to already be reported as “other major upgrade” and counted as a wall-disturbing event. 10
Estimating the Number of Target Housing Events Affected by the Removal of the Opt-out 11 Provision 12 The LRRP revisions remove the opt-out provision from the LRRP rule for certain owner-occupied 13 housing units. Owner-occupied target housing units where a child under the age of six or a pregnant 14 woman resides, rental units, and COFs (including owner-occupied target housing units that qualify as 15 COFs) would not be affected by the elimination of the opt-out provision because these units were not 16 eligible for this provision under the 2008 LRRP rule. 17 The number of housing units that would be affected by the elimination of the opt-out provision is 18 estimated by taking the number of owner-occupied housing units and subtracting the number of owner19 occupied target housing units that: (1) have a child un der the age of six or pregnant woman in residence, 20 or (2) are COFs. 21 Table 4-3: Renovation Events Used in the Analysis and Corresponding 1995 POMS RRP Activities EPA Event Category POMS Task Interior Painting Event Any Interior Painting in 1995
Bathroom Event Upgraded Bathroom in 1995 Kitchen Event Upgraded Kitchen in 1995 Unit Rewired in 1995 Other major repairs in 1995 a Upgraded Plumbing in 1995 Upgraded Security System in 1995 Other Major Upgrade in 1995 Repaired Heat or AC in 1995 Upgraded Heat in 1995 Upgraded AC in 1995 Wall-Disturbing Event

Other Major Upgrade in 1995 a Exterior Painting Event Any Exterior Painting in 1995 (single-family units only) Whole Exterior ** Contained Exterior **

a Some ‘Other Major Upgrades’ are counted as wall-disturbing events, others are counted as Window/Door

Replacement events. See text above for a de scription of how the task is apportioned. ** Not reported in POMS. Assumed to occur with the same frequency as in owner-occ upied units reported in AHS.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-13 Owner-occupied housing units with a child under the age of six or pregnant woman in residence 1 The 2003 AHS data identifies owner-occupied housing units where a child under the age of six or a 2 pregnant woman resides. AHS respondents report in formation about the ages of householders, who are 3 defined by the survey as persons who live or sleep there most of the time. Thus, child-occupied 4 households are defined as those households with a house holder under the age of 6 at the time of the RRP. 5 Child-occupied households are estimated as households with a householder between the ages of one and 6 seven at the time of the survey since it is assumed that any RRP reported occurred a year earlier (RRP 7 performed up to two years earlier may be reported). It follows that a household is defined as being 8 occupied by a pregnant woman if there is a woman of childbearing age and a child who is under the age 9 of one in the household at the time of the survey. 10
Owner-Occupied housing units that are COFs 11 COFs in target housing include family daycare provide rs and the homes of family, friends, and neighbors 12 who regularly care for someone else’s children. Th e estimated number of target housing COFs includes 13 care provided with and without compensation and relies primarily on estimates of the size of the childcare 14 workforce (Center for the Child Care Workforce 2002). The Center for the Child Care Workforce (2002) 15 report includes: (1) data on family child care provide rs caring for unrelated children in their own homes, 16 (2) paid relatives and non-relatives providing child care, and (3) unpaid relatives and non-relatives 17 providing child care. 18 The number of target housing COFs is projected based on estimates of the caregiver workforce in the 19 Center for the Child Care Workforce (2002) report. Based on a Wilder Research Center report, it is 20 assumed that 10 percent of family child care provide rs caring for unrelated children in their own homes 21 employ 2 workers (Wilder Research Center 2001, p.16). For the remaining childcare providers, one 22 worker is assumed per location. Based on 2003 American Housing Survey data for the general 23 population of housing, it is assumed that 65 percent of these housing units were built before 1978. 24 The number of target housing units where child care is provised was also adjusted to exclude those units 25 that are already included in the RRP rule universe because care is provided in a child’s own home, or 26 where the units do not qualify as COFs because less than six hours of care per-week is provided 9 . In 27 addition, the number of target housing COFs that are not eligible for the opt-out provision under the 2008 28 LRRP rule because they are rental units or have a child under the age of six or pregnant woman in 29 residence must be estimated to avoid double countin g. The basis for these ad justments is discussed 30 below. 31

Care Provided in Child’s Own Home 32 It is assu med that 22 percent of relatives and non -relatives (paid or unpaid) providing care provide it in 33 the child’s home based on a Wilder Research Cent er (2005, p.28) report on the results of the 2004 34 Minnesota Statewide Household Child Care Survey. 35
Less Than Six Hours of Care Per-Week is Provided 36 Of those providing care in t heir own home, it is assumed that 27 percent of relatives and non-relatives 37 (paid or unpaid) provide care for less than six hours a week (Wilder Research Center 2005, p.28). All 38 family daycare providers caring for unrelated children in their own homes are assumed to care for at least 39 one child for more than six hours a week. 40

9 There is not sufficient data to adjust for the other COF crit eria that the building is visited at least 2 different days with in any week, that each day’s visits lasts at least 3 hours, or th at the combined annual visits last at least 60 hours.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-14 Caregiver Lives in a Rental Unit 1 It is assumed that family, friend, and neighbor caregiv ers have the same likelihood of living in a rental 2 unit as the general population of target housing occupants (39 percent). 3
Caregiver has a Child Under Six Living With Them 4 Based on the January 2006 Current Population Survey (U.S. Bureau of Labor Statistics 2006), 16 percent 5 of Child Care Workers have children under six. T hus, it is assumed that 16 percent of in-home family 6 daycare providers (formal care providers) caring for unrelated children in their own homes have children 7 under the age of six. Based on the Wilder Research Center (2005, p.19) report, 57.5 percent of family, 8 friend, and neighbor caregivers (informal care providers ) have children under the age of 12. Thus it is 9 assumed that half as many, or 29 percent, have children under the age of six. 10 Table 4-4 presents the estimated number of targ et ho using COF units regulated under the 2008 LRRP 11 rule. 12 Table 4-4: Number of Owner-Occupied Pre-1978 Target Housing Units Regulated Under 2008 LRRP Rule (Excluding Rental Units and Units Where a Child Under 6 or Pregnant Woman Resides)

Type of Care a Number of Target Housing

COFs (thousands) b In child’s

own home Less than 6- hoursperweek Post-78 In rental unit Child under 6 resides Pregnant

woman resides Total Adjustment c Total Regulated

Units (thousands) d

Paid InHome Family Daycare 591 n.a. n.a. 35% n.a. 16% 1.1% 55% 319

Paid Relative Care 804 22% 27% 35% 39% 29% 1.1% 84% 128 Unpaid Relative and Non-Relative Care 2,354 22% 27% 35% 39% 29% 1.1% 84% 376

Total (Pre-78) 824 Total (Pre-60) e 424

a. Paid In-Home Family Daycare refers to formal licen sed daycare located in the provider’s home. Paid relative care is when family members are paid to care for the child in the family member’s home (unlicensed care). Unpaid relative and non-relativ e care refers to informal unpaid care provided at the homes of family, friends or neighbors (unlicensed care). b. Based on the size of the childcare workforce (Center for the Child Care Workforce 2002), assuming 1.1 workers per location for paid in-home family daycare and 1 worker per location for other types of

care.
c. Calculated as one minus the product of one minus the adjustments. e.g., for the first row, 55% = 100% - (100%-35%)*(100%-16%)*(100%-1.1%). d. Components may not sum to totals due to rounding. Not adjusted for compliance rates.

e. Adjusted based on the total number of target housing units by vintage. Source: U.S. Census Bureau 1995, 1997, and 2003; EPA Calculations. 13EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-15 Target Housing Units Affected by the Removal of the Opt-out Provision 1 As described in Table 4-4, there are about 824,000 target housing COFs where no child under the age of 2 six or a pregnant woman resides. Thus, of the 47 ,080,000 owner occupied hous ing units (see Section 2.8 3 of Chapter 2): 4 5 3⁄4 A child under six resides or pregnant woman r esides in 6,370,000 units (see Section 2.8 of 6 Chapter 2) 7
3⁄4 About 824,000 units are COFs where no child under the age of six or pregnant woman resides 8 (see Table 4-4) 9 Therefore, about 3 9,886,000 units would be aff ected by the elimination of the opt-out provision. 10 The 10 frequency of RRP events in these housing units is est imated using the 2003 AHS data as described in 11 section 4.2.1.2. 12

4.2.1.5 Likelihood of Positive Test Kit Result for LBP 13 It is assumed that all certified renovators use a test kit for LBP before performing any RRP, given that 14 performing this relatively inexpensive test may allow the renovator to avoid the costs of using Lead-Safe 15 Work Practices (LSWP) that are required when LBP is disturbed. Since LBP is most likely to be found 16 on certain components of housing units—and therefore most likely to be disturbed during certain types of 17 renovations—the analysis accounts for this by estima ting LBP likelihoods specific to each event type. 18 These LBP likelihoods are estimated using data from HUD’s 2000 National Survey of Lead and 19 Allergens in Housing (HUD 2001). 11 The survey has information on approximately 630 housing units 20 built before 1978 including data on the presence of LBP in certain rooms (e.g. kitchen) and on certain 21 components or surfaces (e.g. floors, walls, ceilings, doors and windows). 22 The probability that LBP is disturbed during a RRP ev ent is estimated as the probability of LBP in any of 23 the rooms where RRP is performed or on any of the components that might be disturbed during the RRP 24 event. This assumption leads to an upward bias in the estimates of the number of events where LSWP are 25 required. For example, if there is LBP in the kitc hen, it is assumed that a kitchen remodeling will disturb 26 LBP. However, the LBP component(s) will not necessarily always be disturbed. For example, the LBP 27 in the kitchen may be on the window trim, but the renovation may not disturb the window trim. 28 Unfortunately, there is no reasonable basis for correcti ng this bias using currently available data. For the 29 purposes of this analysis, data from HUD (2001) are used to estimate event-specific likelihoods of 30 positive test kit results based on the estimated likelihood of disturbing LBP for each event type, as 31 described in Table 4-5. 32

10 39,886,000 = 47,080,000 – 6,370,000 – 824,000.

11 In addition to the likelihood of the presence of lead-based paint varying by age of housing, there is evidence that the concentration of lead in the paint varies by the ag e of housing. A review of the data in HUD 2000 is presented in EPA 2005c. This document is available in the docket for this rulemaking.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-16 1 Test kits for LBP that are currently available have false positive rates that range from 47 percent to 78 2 percent. This analysis assumes a false positive rate of 63 percent, the midpoint, for the first year following 3 rule implementation. This analysis assumes that an improved test kit that will have a false positive rate of 4 10 percent or less will be in use by June 2011. 12 A false negative rate of 5 percent is also assumed for 5 both the current and improved test kits. Thus, the likeli hood of a positive test kit result in the first year is 6 estimated as 95 percent of the likelihood of LBP, pl us 63 percent of the percentage of homes without 7 LBP. In the second year, the likelihood of a positive test kit result is estimated as 95 percent of the 8 likelihood of LBP plus 10 percent of th e percentage of homes without LBP. Table 4-6 shows the 9 likelihoods of LBP that are used to estimate the percen tage of events where LBP is disturbed. 10
11

12 In cases where a household performed more than one inte rior event, the likelihood of disturbing LBP is 13 estimated as the likelihood of LBP anywhere in the inte rior of the unit. There are two exceptions to this: 14 (1) when one of the events is an Addition, the Add ition likelihood is used, and (2) when the sum of the 15

12 EPA believes that the sensitivity of test kits can be adju sted so the results reliably correspond to one of the two Federal standards for lead-based paint (1.0 mg/cm 2 and 0.5% by weight). EPA is working on the development of test kits that accurately identify both the presence and absence of lead in paint at levels that exceed the Federal standards. EPA is confident that improved test kits can be commercially available by September 2010, although for ease of computation, this analysis do es not assume they will be in use until June 2011. Table 4-5: Types of Estimates Used for Calculating the Likelihood of Disturbing LBP for Each Event Type Event Type Estimate of Likelihood of Disturbing LBP Kitchen Likelihood of LBP in the kitchen Bathroom Likelihood of LBP in “other room” (up to two “other rooms” were inspected for LBP in each housing unit; these rooms might be bathroom s, living rooms, dens, or laundry rooms) Additions Likelihood of LBP on the interior or exterior of the unit (since these events typically require some demolition of the interior and exterior) Wall-Disturbing Likelihood of LBP on any walls, floors or ceilings of the housing unit Window/Door Replacement Likelihood of LBP anywhere on the interior or exterior of windows and doors

Interior Painting Likelihood of LBP anywhere in interior of unit Whole Exterior Likelihood of LBP anywhere on exterior of unit Contained Exterior Likelihood of LBP anywhere on exterior walls of unit (since Contained Exterior events— such as replacing a porch—are likely to disturb exterior walls, but not very likely to disturb other exterior components such as windows Exterior Painting Likelihood of LBP anywhere on exterior of unit EPA estimated LBP Likelihoods with room and component/s urface specific data from HUD (2001).

Table 4-6: Likelihood of LBP

Year Built Kitchen Bathroom Addition WallDisturbing Window/ Door Interior Painting Whole Exterior Contained Exterior Exterior Painting Likelihood of LBP Pre-1930 53% 34% 87% 40 % 81% 79% 70% 55% 70% 1930-1949 45% 27% 75% 25% 71% 64% 70% 35% 70% 1950-1959 23% 12% 67% 16% 56% 38% 55% 27% 55% 1960-1979 6% 4% 22% 5% 14% 14% 13% 10% 13% Source: EPA calculations using HUD (2001)EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-17 individual event probabilities is less than the likeliho od of LBP anywhere in the interior of the unit, the 1 sum of the event probabilities is used. These simplifying assumptions are necessary because the data are 2 not sufficient for calculating the joint probabilities that would be necessary for relaxing this assumption. 3 As a result, the estimates of the number of events wh ere LSWP will be used are biased upward. That is, 4 for a housing unit performing multiple interior events, it is assumed that if there is LBP in the housing 5 unit, all the interior events in that unit require LSW P. However, the LBP component(s) may be disturbed 6 only in certain areas throughout the house, requiring l ess containment than is assumed. Similar to the 7 assumptions pertaining to households performing multiple interior events, for households performing 8 multiple exterior events the likelihood of disturbi ng LBP is assumed to be the maximum likelihood for 9 the events performed. Unlike for inte rior events, this is always the same as the largest and most costly 10 exterior event that determines the housing unit’s exterior compliance costs. 11

4.2.1.6 Event Sizes 12 For interior events, the average square footage of pa rticular rooms was determined by taking the average 13 square footage of the whole unit from the AHS and re viewing house plans for homes of similar square 14 footage (Homestyles.com 2002). The work area siz es for wall-disturbing events were estimated as 15 follows: 16
17
Table 4-7: Kitchen and Bathroom Event Size Definitions Bathroom (onebathroomsized work area) One average work area size.

48 Square Feet.

Kitchen (one kitchen-sized work area) One average work area size:
160, 120, and 80 Square Feet for single-family-owner, single-family-renter, and multifamily units, respectively. 18EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-18 1 Table 4-8: Wall-Disturbing Event Size Definitions Small(bathroomsized) Where bathrooms were or were not remodeled, kitchens were not remodeled, rooms were not added, and less than 3 of the following tasks were performed: (1) Added/Replaced Internal Water Pipes In Home, (2) Added/Replaced Plumbing Fixtures In Home, (3) Added/Replaced Electrical Wiring To Home, (4) Installed Paneling Or Ceiling Tiles, (5) Added/Replaced Central Air Conditioning, (6) Added/Replaced Built-In Heating Equipment, (7) A dded/Replaced Security System In Home, (8) HVAC work;

Or where one room was added , bathrooms were not remodeled, kitchens were not remodeled, and less than 3 of the following tasks were performed: (1) Added/Replaced Internal Water Pipes In Home, (2) Added/Replaced Plumbing Fixtures In Home, (3) Added/Replaced Electrical Wiring To Home, (4) Installed Paneling Or Ceiling Tiles, (5) Added/Replaced Central Air Conditioning, (6) Added/Replaced Built-In Heating Equipment, (7) A dded/Replaced Security System In Home, (8) HVAC work 48 Square Feet. Medium(kitchensized) Where bathrooms were not remodeled, kitchens were or were not remodeled, rooms were not added, and less than 3 of the following tasks were performed: (1) Added/Replaced Internal Water Pipes In Home, (2) Added/Replaced Plumbing Fixtures In Home, (3) Added/Replaced Electrical Wiring To Home, (4) Installed Paneling Or Ceiling Tiles, (5) Added/Replaced Central Air Conditioning, (6) Added/Replaced Built-In Heating Equipment, (7) A dded/Replaced Security System In Home, (8) HVAC work;

Or where one room was added , bathrooms were not remodeled, kitchens were not remodeled, and 3 or mor e of the following tasks were performed: (1) Added/Replaced Internal Water Pipes In Home, (2) Added/Replaced Plumbing Fixtures In Home, (3) Added/Replaced Electrical Wiring To Home, (4) Installed Paneling Or Ceiling Tiles, (5) Added/Replaced Central Air Conditioning, (6) Added/Replaced Built-In Heating Equipment, (7) A dded/Replaced Security System In Home, (8) HVAC work 160, 120, and 80 Square Feet for single-family-own er, single-family-renter, and multi-family units, respectively. Large (size of a bathroom and kitchen) Where bathrooms and kitchens were remodeled , rooms were not added, and at least 1 of the following tasks were performed: (1) Added/Replaced Internal Water Pipes In Home, (2) Added/Replaced Plumbing Fixtures In Home, (3) Added/Replaced Electrical Wiring To Home, (4) Installed Paneling Or Ceiling Tiles, (5) Added/Replaced Central Air Conditioning, (6) Added/Replaced Built-In Heating Equipment, (7) A dded/Replaced Security System In Home, (8) HVAC work;

Or where at least two rooms were added and at least 1 of the following tasks were performed: (1) Added/Replaced Internal Water Pipes In Home, (2) Added/Replaced Plumbing Fixtures In Home, (3) Added/Replaced Electrical Wiring To Home, (4) Installed Paneling Or Ceiling Tiles, (5) Added/Replaced Central Air Conditioning, (6) Added/Replaced Built-In Heating Equipment, (7) A dded/Replaced Security System In Home, (8) HVAC work 208, 168, and 128 Square Feet for single-family-owner, single-family-ren ter, and multi-family units, respectively. 2EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-19 1 Table 4-9: Addition Event Size Definitions Small(bathroomsized) Where one room was added , and fewer than three of the following tasks were performed:

(1) Added/Replaced Internal Water Pipes In Home, (2) Added/Replaced Plumbing Fixtures In Home, (3) Added/Replaced Electrical Wiring To Home, (4) Installed Paneling Or Ceiling Tiles, (5) Added/Replaced Central Air Conditioning, (6) Added/Replaced Built-In Heating Equipment, (7) A dded/Replaced Security System In Home, (8) HVAC work, (9) Remode led Bathroom, (10) Remodeled Kitchen.

48 Square Feet. Medium(kitchensized) Where one room was added , and three or more of the following tasks were performed:

(1) Added/Replaced Internal Water Pipes In Home, (2) Added/Replaced Plumbing Fixtures In Home, (3) Added/Replaced Electrical Wiring To Home, (4) Installed Paneling Or Ceiling Tiles, (5) Added/Replaced Central Air Conditioning, (6) Added/Replaced Built-In Heating Equipment, (7) A dded/Replaced Security System In Home, (8) HVAC work, (9) Remode led Bathroom, (10) Remodeled Kitchen.

160, 120, and 80 Square Feet for single-family -owner, single-family-renter, and multi-family units, respectively. Large (size of a bathroom and kitchen) Where more than one room was added.
208, 168, and 128 Square Feet for single-family-owner, single-family-ren ter, and multi-family units, respectively. 2 3 Table 4-10: Interior Painting Event Size Definitions Small (square root of 25% of the square footage times 5 feet) Accounts for one third of all interior painting events. The square root of 25% of the total square footage times 5 feet is equivalent to the area along one wall and five feet out.

112, 96, and 84 Square Feet for single-family-o wner, single-family-renter, and multi-family units, respectively.

Medium (midpoint between small and large sized) Accounts for one third of al l interior painting events.

308, 232, and 184 Square Feet for single-family-owner, single-family-ren ter, and multi-family units, respectively.

Large (25% of the total unit square footage) Accounts for one third of al l interior painting events.

504, 368, and 284 Square Feet for single-family-owner, single-family-ren ter, and multi-family units, respectively. 4EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-20 1 Table 4-11: Window/Door Replac ement Event Size Definitions Small (square rootof a kitchensized work area times 5 feet) Accounts for one third of window/door replacement events. In the 1997 AHS respondents who reported replacing windows or doors also re ported how many windows and doors they repaired or replaced. These respondents were divided into three groups accord ing to how many doors and windows they reported replacing. The average numbers or doors and windows re ported repaired or replace d were 1, 3, and 12 for these three groups. The work area fo r replacing one window/door is assume d to be along one wall and five feet out, estimated as the square root of 25% of a kitchen-sized work area times 5 feet.
63, 55, and 45 Square Feet for single-family-own er, single-family-renter, and multi-family units, respectively. Medium(kitchensized work area) Accounts for one third of window/door replacement events. In the 1997 AHS respondents who reported replacing windows or doors also re ported how many windows and doors they repaired or replaced. These respondents were divided into three groups accord ing to how many doors and windows they reported replacing. The average numbers or doors and windows re ported repaired or replace d were 1, 3, and 12 for these three groups. The work area fo r replacing three windows/doors is assu med to be the size of a typical room (i.e., kitchen-sized).
160, 120, and 80 Square Feet for single-family -owner, single-family-renter, and multi-family units, respectively. Large (the size of 4 Rooms) Accounts for one third of window/door replacement events. In the 1997 AHS respondents who reported replacing windows or doors also re ported how many windows and doors they repaired or replaced. These respondents were divided into three groups accord ing to how many doors and windows they reported replacing. The average numbers or doors and windows re ported repaired or replace d were 1, 3, and 12 for these three groups. The work area for replacing 12 windows is assumed to be the size of 4 typical rooms (i.e., four times kitchen-size).

640, 480, and 320 Square Feet for single-family-owner, single-family-ren ter, and multi-family units, respectively. 2EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-21 1 Table 4-12: Exterior Event Size Definitions 1-Wall Exterior Painting The perimeter estimates were calculated following th e procedure used in EPA’s Economic Analysis for the TSCA Section 403 rule (EPA 2000b). It was assumed that the home is rectangular w ith a front to side ratio of 2:3 and an average first floor area of 1,390 sq. feet. a This assumption leads to a perimeter of 152 feet for a single-family owner occupied home. The perimeter of a single-family renter unit was estimated to be 130 feet, which assumes that the proporti on of a single-family renter unit has the same proportion of total square footage to square footage of the first floor of a single-family owner unit. The perimeter of a multi-family housing structure (which contains an average of units) was calculated assu ming the first-floor area was three times as large as a single-family unit. This perimete r estimate is 264 feet. A 1-Wall Exterior Painting Event is assumed to be 1⁄4 of the full perimeter. 4-Wall Exterior Painting and Whole Exterior Renovation Events The perimeter estimates were calculated following th e procedure used in EPA’s Economic Analysis for the TSCA Section 403 rule (EPA 2000b). It was assumed that the home is recta ngular with a front to side ratio of 2:3 and an average first floor area of 1,390 sq. feet. a This assumption leads to a perimeter of 152 feet for a single-family owner occupied home. The perimeter of a single-family renter unit was estimated to be 130 feet, which assumes that the proporti on of a single-family renter unit has the same proportion of total square footage to square footage of the first floor of a single-family owner unit. The perimeter of a multi-family housing structure (which contains an average of 3 units) was calculated assuming the first-floor area was three times as large as a single-family unit. This perimeter estimate is 264 feet. Contained Exterior Renovation Events The structures in a Contained Exterior event are outs ide the main body of the house and the structural work and contamination is primarily outdoors. The perimeter of a contained exteri or structure (such as a garage) is estimated to be 60 feet (10’×20’). Containment is necessary along the entire perimeter of a detached structure. However, it is assumed that less containment is required for attached contained exterior structures, which are assumed to be attached to the main struct ure of the house along a 20 foot side of the detached contained exterior structure. The analysis assumes half are attached structures and half are detached
structures.

a Estimated based on information from http://www.dreamhomesource.com ( 2005) on the average size of the first floor of nine 2,000 square foot two stories homes (1,280 sq. feet). The weight ed average of a first floor was calculated using 2003 AHS data which shows that 85% of single-family housing units are two stor ies high and the remaining 15% of homes are one story (i.e., first floor is 2,016 sq. feet). 2

4.2.1.7 Estimated Number of RRP Events in the First and Second Years 3 The numbers of regulated events are estimated us ing the methodology outlined above along with the 4 assumption that 75 percent of the RRP events subjec t to the rule’s requirements comply with the 5 requirements. This assumption is based on compliance rates observed for the Occupational Safety and 6 Health Administration’s (OSHA) regulations for th e construction industry (Gilkeya 2003 and Weil 1999). 7 The variation in the number of regulated events in compliance under the different options reflects the 8 variation in the regulated universe. 9 Table 4-13 through Table 4-16 present the numbers of RRP events potentially affected by the removal of 10 the opt-out provision by type of event, for the first and second year the rule is in effect. Note that Option 11 C does not go into effect until the second year, so this op tion does not affect any events in the first year. 12 Each table shows the total number of events where co mpliance costs are incurred, labeled “All Events.” 13 “All Events” include all the events wh ere a test kit was used to test fo r LBP. The columns labeled “LBP 14 Events” include all the events wher e test kits correctly identified th at LBP was present; it does not include 15 events where there was a false positive or a false nega tive test kit result. The columns labeled “LSWP 16 Events” include all events where there was a positiv e test kit result – including false positives. The 17 LSWP event estimate is the estimated number of events where compliance costs asso ciated with cleaning, 18 containment, and verification are incurred. Table 4-17 through Table 4-19 present the likelihoods of 19 events where LBP is correctly identified as well as those where there was a pos itive test kit result (LSWP 20 Events). 21
22EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-22 Table 4-13: Option A: First Year (thousands) All Events With Costs LB P Events LSWP Events SF-O Multi-O Total SF-O Multi-O Total SF-O Multi-O Total Bath 252 18 269 60 5 65 179 13 192 Kit 255 22 277 74 6 81 186 16 202 Ad-S 54 1 55 24 0 25 42 1 43 Ad-M 21 0 21 10 0 10 16 0 16 Ad-L 83 1 84 39 0 39 65 1 66 Wl-S 840 45 885 125 8 132 571 31 602 Wl-M 47 3 51 12 1 13 34 2 36 Wl-L 0 0 0 0 0 0 0 0 0 WD-S 221 7 228 85 3 88 168 6 173 WD-M 256 10 267 101 5 106 195 8 204 WD-L 341 17 358 138 8 147 261 13 275 IP-S 573 39 612 238 17 255 441 30 471 IP-M 322 23 345 133 10 143 248 18 266 IP-L 272 20 292 112 9 120 209 16 225 EP 2,682 146 2,828 1,008 54 1,062 2,029 110 2,139 C Ext 347 0 347 89 0 89 249 0 249 W Ext 337 15 352 129 7 136 256 12 268 Total 6,904 368 7,272 2,376 135 2,510 5,150 277 5,427 Notes: Events where compliance costs are incurred include those that are: (1) subject to the rule’s requirements, and (2) in compliance. Thus, this includes some events where LSWP are not required because a test kit indicates that LBP is not present. It excl udes the 25% of regulated events that are assumed to be noncompliant. A “-” indicates that zero events were es timated; a “0” indicates that fewer than 500 events were estimated. All Events With Costs include those where there is a negative test kit result for LBP. LBP Events include all the events where test kits correctl y identified that LBP was present; it does not include events where there was a false positive or a false negative test kit result. LSWP events include all events with test kit results that are positive for LB P, including false positive results. See Table 4-1 for options descriptions. No te that the number of LSWP events is equal to the number of LBP events (which exclude false negatives) plus the number of fa lse positive events; i.e., (LSWP Even ts) = (LBP Events) + ((All Events With Costs) – (LBP Events)/0.95) * (False Positive Rate).

Abbreviations: SF-O = Single-Family Owner-Occupied Unit; Multi-O = Multi-Family Owner-Occupied Unit; Kit = Kitchen Event; Bath = Bathroom Event; Ad-S = Small Additi on; Ad-M = Medium Addition; Ad-L = Large Addition; Wl-S = Small Wall-Disturbing Event; Wl-M = Me dium Wall-Disturbing Event; Wl-L = Large WallDisturbing Event; WD-S = Small Window or Door Repl acement Event; WD-M = Medium Window or Door Replacement Event; WD-L = Large Wi ndow or Door Replacement Event; IP-S = Small Interior Painting; IPM = Medium Interior Painting; IP-L = Large Interior Painting; EP = Exterior Painting; C Ext = Contained Exterior Event; W Ext = Whole Exterior Event.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-23 1 Table 4-14: Option B: First Year (thousands) All Events With Costs LB P Events LSWP Events SF-O Multi-O Total SF-O Multi-O Total SF-O Multi-O Total Bath 126 9 135 30 2 32 89 6 96 Kit 127 11 139 37 3 40 93 8 101 Ad-S 27 0 27 12 0 12 21 0 21 Ad-M 10 0 10 5 0 5 8 0 8 Ad-L 42 1 42 19 0 19 33 0 33 Wl-S 420 23 443 62 4 66 286 16 301 Wl-M 24 2 25 6 1 7 17 1 18 Wl-L 0 0 0 0 0 0 0 0 0 WD-S 111 4 114 42 2 44 84 3 87 WD-M 128 5 133 51 2 53 98 4 102 WD-L 171 8 179 69 4 73 131 7 137 IP-S 286 19 306 119 9 127 220 15 236 IP-M 161 11 173 66 5 71 124 9 133 IP-L 136 10 146 56 4 60 105 8 112 EP 1,341 73 1,414 504 27 531 1,015 55 1,070 C Ext 173 0 173 45 0 45 124 0 124 W Ext 168 7 176 65 4 68 128 6 134 Total 3,452 184 3,636 1,188 67 1,255 2,575 138 2,713 Notes: Events where compliance costs are incurred include those that are: (1) subject to the rule’s requirements, and (2) in compliance. Thus, this includes some events where LSWP are not required because a test kit indicates that LBP is not present. It excl udes the 25% of regulated events that are assumed to be noncompliant. A “-” indicates that zero events were es timated; a “0” indicates that fewer than 500 events were estimated. All Events With Costs include those where there is a negative test kit result for LBP. LBP Events include all the events where test kits correctl y identified that LBP was present; it does not include events where there was a false positive or a false negative test kit result. LSWP events include all events with test kit results that are positive for LB P, including false positive results. See Table 4-1 for options descriptions. No te that the number of LSWP events is equal to the number of LBP events (which exclude false negatives) plus the number of fa lse positive events; i.e., (LSWP Even ts) = (LBP Events) + ((All Events With Costs) – (LBP Events)/0.95) * (False Positive Rate).

Abbreviations: SF-O = Single-Family Owner-Occupied Unit; Multi-O = Multi-Family Owner-Occupied Unit; Kit = Kitchen Event; Bath = Bathroom Event; Ad-S = Small Additi on; Ad-M = Medium Addition; Ad-L = Large Addition; Wl-S = Small Wall-Disturbing Event; Wl-M = Me dium Wall-Disturbing Event; Wl-L = Large WallDisturbing Event; WD-S = Small Window or Door Repl acement Event; WD-M = Medium Window or Door Replacement Event; WD-L = Large Wi ndow or Door Replacement Event; IP-S = Small Interior Painting; IPM = Medium Interior Painting; IP-L = Large Interior Painting; EP = Exterior Painting; C Ext = Contained Exterior Event; W Ext = Whole Exterior Event. 2 3EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-24 1 Table 4-15: Option D: First Year (thousands) All Events With Costs LB P Events LSWP Events SF-O Multi-O Total SF-O Multi-O Total SF-O Multi-O Total Bath 111 8 119 48 4 52 87 6 93 Kit 115 9 124 60 5 65 93 7 100 Ad-S 25 1 25 18 0 18 22 1 22 Ad-M 11 0 11 8 0 8 10 0 10 Ad-L 41 0 41 30 0 30 36 0 36 Wl-S 414 21 436 105 7 112 296 16 312 Wl-M 28 3 31 11 1 12 21 2 23 Wl-L 0 0 0 0 0 0 0 0 0 WD-S 109 4 113 69 3 72 92 3 95 WD-M 131 6 137 84 4 88 111 5 116 WD-L 179 11 190 115 8 123 152 9 161 IP-S 355 23 379 207 15 222 294 20 313 IP-M 199 13 212 115 9 124 164 11 175 IP-L 168 12 180 97 7 105 138 10 148 EP 1,386 71 1,457 853 45 898 1,161 60 1,220 C Ext 178 0 178 72 0 72 137 0 137 W Ext 179 10 189 110 7 117 150 9 158 Total 3,630 191 3,821 2,004 115 2,119 2,962 159 3,121 Notes: Events where compliance costs are incurred include those that are: (1) subject to the rule’s requirements, and (2) in compliance. Thus, this includes some events where LSWP are not required because a test kit indicates that LBP is not present. It excl udes the 25% of regulated events that are assumed to be noncompliant. A “-” indicates that zero events were es timated; a “0” indicates that fewer than 500 events were estimated. All Events With Costs include those where there is a negative test kit result for LBP. LBP Events” include all the events where test kits correc tly identified that LBP was present; it does not include events where there was a false positive or a false negative test kit result. LSWP events include all events with test kit results that are positive for LB P, including false positive results. See Table 4-1 for options descriptions. No te that the number of LSWP events is equal to the number of LBP events (which exclude false negatives) plus the number of fa lse positive events; i.e., (LSWP Even ts) = (LBP Events) + ((All Events With Costs) – (LBP Events)/0.95) * (False Positive Rate).

Abbreviations: SF-O = Single-Family Owner-Occupied Unit; Multi-O = Multi-Family Owner-Occupied Unit; Kit = Kitchen Event; Bath = Bathroom Event; Ad-S = Small Additi on; Ad-M = Medium Addition; Ad-L = Large Addition; Wl-S = Small Wall-Disturbing Event; Wl-M = Me dium Wall-Disturbing Event; Wl-L = Large WallDisturbing Event; WD-S = Small Window or Door Repl acement Event; WD-M = Medium Window or Door Replacement Event; WD-L = Large Wi ndow or Door Replacement Event; IP-S = Small Interior Painting; IPM = Medium Interior Painting; IP-L = Large Interior Painting; EP = Exterior Painting; C Ext = Contained Exterior Event; W Ext = Whole Exterior Event.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-25 1 Table 4-16: Option A, B, C, a nd D: Second Year (thousands) All Events With Costs LB P Events LSWP Events SF-O Multi-O Total SF-O Multi-O Total SF-O Multi-O Total Bath 250 18 268 60 5 64 78 6 84 Kit 254 22 276 74 6 80 92 8 99 Ad-S 54 1 55 24 0 25 27 0 27 Ad-M 21 0 21 10 0 10 11 0 11 Ad-L 83 1 84 38 0 39 43 0 43 Wl-S 837 45 882 124 8 132 195 11 206 Wl-M 47 3 50 12 1 13 16 1 17 Wl-L 0 0 0 0 0 0 0 0 0 WD-S 220 7 227 84 3 88 97 4 101 WD-M 255 10 266 101 5 105 116 5 121 WD-L 340 17 356 138 8 146 157 9 167 IP-S 571 39 609 237 17 254 269 19 288 IP-M 321 23 344 132 10 142 150 11 162 IP-L 271 20 291 111 9 120 127 10 136 EP 2,671 145 2,817 1,004 54 1,058 1,165 63 1,228 C Ext 346 0 346 89 0 89 114 0 114 W Ext 336 15 350 129 7 136 149 8 156 Total 6,876 366 7,242 2,366 134 2,500 2,804 157 2,961 Notes: Events where compliance costs are incurred include those that are: (1) subject to the rule’s requirements, and (2) in compliance. Thus, this includes some events where LSWP are not required because a test kit indicates that LBP is not present. It excl udes the 25% of regulated events that are assumed to be noncompliant. A “-” indicates that zero events were es timated; a “0” indicates that fewer than 500 events were estimated. All Events With Costs include those where there is a negative test kit result for LBP. LBP Events include all the events where test kits correctl y identified that LBP was present; it does not include events where there was a false positive or a false negative test kit result. LSWP events include all events with test kit results that are positive for LB P, including false positive results. See Table 4-1 for options descriptions. No te that the number of LSWP events is equal to the number of LBP events (which exclude false negatives) plus the number of fa lse positive events; i.e., (LSWP Even ts) = (LBP Events) + ((All Events With Costs) – (LBP Events)/0.95) * (False Positive Rate).

Abbreviations: SF-O = Single-Family Owner-Occupied Unit; Multi-O = Multi-Family Owner-Occupied Unit; Kit = Kitchen Event; Bath = Bathroom Event; Ad-S = Small Additi on; Ad-M = Medium Addition; Ad-L = Large Addition; Wl-S = Small Wall-Disturbing Event; Wl-M = Me dium Wall-Disturbing Event; Wl-L = Large WallDisturbing Event; WD-S = Small Window or Door Repl acement Event; WD-M = Medium Window or Door Replacement Event; WD-L = Large Wi ndow or Door Replacement Event; IP-S = Small Interior Painting; IPM = Medium Interior Painting; IP-L = Large Interior Painting; EP = Exterior Painting; C Ext = Contained Exterior Event; W Ext = Whole Exterior Event. 2 3EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-26 1 Table 4-17: Likelihoods of LBP and LSWP –Options A and B, First Year LBP Events LSWP Events SF-O Multi-O Total SF-O Multi-O Total Bath 24% 26% 24% 71% 72% 71% Kit 29% 28% 29% 73% 73% 73% Ad-S 45% 82% 45% 78% 91% 78% Ad-M 47% - 47% 79% - 79% Ad-L 46% 21% 46% 79% 70% 78% Wl-S 15% 17% 15% 68% 69% 68% Wl-M 26% 39% 27% 72% 76% 72% Wl-L - - - - - - WD-S 38% 45% 39% 76% 78% 76% WD-M 39% 47% 40% 76% 79% 76% WD-L 41% 50% 41% 77% 80% 77% IP-S 42% 44% 42% 77% 78% 77% IP-M 41% 44% 41% 77% 78% 77% IP-L 41% 43% 41% 77% 78% 77% EP 38% 37% 38% 76% 76% 76% C Ext 26% - 26% 72% - 72% W Ext 38% 48% 39% 76% 79% 76% Total 34% 37% 35% 75% 75% 75% Notes: Events where compliance costs are incurred include those that are: (1) subject to the rule’s requirements, and (2) in compliance. Thus, this includes some even ts where LSWP are not required because a test kit indicates that LBP is not present. It excludes the 25% of regulated events that are assumed to be noncompliant. A “-” indicates that zero events were estimated; a “0” indicates that fewer than 500 events were estimated. All Events With Costs include those where there is a negative test kit result for LBP. LBP Events include all the events where test kits correctly identified that LBP wa s present; it does not include events where there was a false positive or a false negative test kit result. LSWP ev ents include all events with test kit results that are positive for LBP, including false positive results. See Table 4-1 for options descriptions. Note that the number of LSW P events is equal to the number of LBP events (which exclude false negatives) plus th e number of false positive events; i.e., (LSWP Events) = (L BP Events) + ((All Events With Cost s) – (LBP Events)/0.95) * (False Positive Rate).

Abbreviations: SF-O = Single-Family Owner-Occupied Unit; Multi-O = Multi-Family Owner-Occupied Unit; Kit = Kitchen Event; Bath = Bathroom Event; Ad-S = Small Additi on; Ad-M = Medium Addition; Ad-L = Large Addition; Wl-S = Small Wall-Disturbing Event; Wl-M = Medium Wall-Disturbing Even t; Wl-L = Large Wall-Disturbing Event; WD-S = Small Window or D oor Replacement Event; WD-M = Me dium Window or D oor Replacement Event; WD-L = Large Window or Door Replacement Event; IP -S = Small Interior Painting; IP-M = Medium Interior Painting; IP-L = Large Interior Painting; EP = Exterior Painting; C Ext = C ontained Exterior Event; W Ext = Whole Exterior Event. 2EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-27 1 Table 4-18: Likelihoods of LBP and LSWP –Option D, First Year LBP Events LSWP Events SF-O Multi-O Total SF-O Multi-O Total Bath 43% 47% 44% 78% 79% 78% Kit 52% 57% 53% 81% 82% 81% Ad-S 73% 82% 73% 88% 91% 88% Ad-M 69% - 69% 86% - 86% Ad-L 72% - 72% 87% - 87% Wl-S 25% 31% 26% 72% 73% 72% Wl-M 39% 43% 39% 76% 78% 76% Wl-L - - - - - - WD-S 64% 70% 64% 84% 87% 85% WD-M 64% 70% 64% 85% 87% 85% WD-L 64% 71% 65% 85% 87% 85% IP-S 58% 64% 59% 83% 85% 83% IP-M 58% 66% 59% 83% 85% 83% IP-L 58% 64% 58% 82% 85% 83% EP 62% 64% 62% 84% 85% 84% C Ext 41% - 41% 77% - 77% W Ext 62% 65% 62% 84% 85% 84% Total 55% 60% 55% 82% 83% 82% Notes: Events where compliance costs are incurred include those that are: (1) subject to the rule’s requirements, and (2) in compliance. Thus, this includes some even ts where LSWP are not required because a test kit indicates that LBP is not present. It excludes the 25% of regulated events that are assumed to be noncompliant. A “-“ indicates that zero events were estimated; a “0” indicates that fewer than 500 events were estimated. All Events With Costs include those where there is a negative test kit result for LBP. LBP Events include all the events where test kits correctly identified that LBP wa s present; it does not include events where there was a false positive or a false negative test kit result. LSWP ev ents include all events with test kit results that are positive for LBP, including false positive results. See Table 4-1 for options descriptions. Note that the number of LSW P events is equal to the number of LBP events (which exclude false negatives) plus th e number of false positive events; i.e., (LSWP Events) = (L BP Events) + ((All Events With Cost s) – (LBP Events)/0.95) * (False Positive Rate).

Abbreviations: SF-O = Single-Family Owner-Occupied Unit; Multi-O = Multi-Family Owner-Occupied Unit; Kit = Kitchen Event; Bath = Bathroom Event; Ad-S = Small Additi on; Ad-M = Medium Addition; Ad-L = Large Addition; Wl-S = Small Wall-Disturbing Event; Wl-M = Medium Wall-Disturbing Even t; Wl-L = Large Wall-Disturbing Event; WD-S = Small Window or D oor Replacement Event; WD-M = Me dium Window or D oor Replacement Event; WD-L = Large Window or Door Replacement Event; IP -S = Small Interior Painting; IP-M = Medium Interior Painting; IP-L = Large Interior Painting; EP = Exterior Painting; C Ext = C ontained Exterior Event; W Ext = Whole Exterior Event. 2EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-28 1 Table 4-19: Likelihoods of LBP and LSWP –Options A, B, C, and D, Second Year LBP Events LSWP Events SF-O Multi-O Total SF-O Multi-O Total Bath 24% 26% 24% 31% 33% 31% Kit 29% 28% 29% 36% 35% 36% Ad-S 45% 82% 45% 50% 84% 50% Ad-M 47% - 47% 52% - 52% Ad-L 46% 21% 46% 51% 29% 51% Wl-S 15% 17% 15% 23% 25% 23% Wl-M 26% 39% 27% 33% 45% 34% Wl-L - - - - - - WD-S 38% 45% 39% 44% 50% 44% WD-M 39% 47% 40% 45% 52% 46% WD-L 41% 50% 41% 46% 55% 47% IP-S 42% 44% 42% 47% 50% 47% IP-M 41% 44% 41% 47% 49% 47% IP-L 41% 43% 41% 47% 49% 47% EP 38% 37% 38% 44% 43% 44% C Ext 26% - 26% 33% - 33% W Ext 38% 48% 39% 44% 53% 45% Total 34% 37% 35% 41% 43% 41% Notes: Events where compliance costs are incurred include those that are: (1) subject to the rule’s requirements, and (2) in compliance. Thus, this includes some even ts where LSWP are not required because a test kit indicates that LBP is not present. It excludes the 25% of regulated events that are assumed to be noncompliant. A “-“ indicates that zero events were estimated; a “0” indicates that fewer than 500 events were estimated. All Events With Costs include those where there is a negati ve test kit result for LBP. LBP Events include all the events where test kits correctly identified that LBP wa s present; it does not include events where there was a false positive or a false negative test kit result. LSWP ev ents include all events with test kit results that are positive for LBP, including false positive results. See Table 4-1 for options descriptions. Note that the number of LSW P events is equal to the number of LBP events (which exclude false negatives) plus th e number of false positive events; i.e., (LSWP Events) = (L BP Events) + ((All Events With Cost s) – (LBP Events)/0.95) * (False Positive Rate).

Abbreviations: SF-O = Single-Family Owner-Occupied Unit; Multi-O = Multi-Family Owner-Occupied Unit; Kit = Kitchen Event; Bath = Bathroom Event; Ad-S = Small Additi on; Ad-M = Medium Addition; Ad-L = Large Addition; Wl-S = Small Wall-Disturbing Event; Wl-M = Medium Wall-Disturbing Even t; Wl-L = Large Wall-Disturbing Event; WD-S = Small Window or D oor Replacement Event; WD-M = Me dium Window or D oor Replacement Event; WD-L = Large Window or Door Replacement Event; IP -S = Small Interior Painting; IP-M = Medium Interior Painting; IP-L = Large Interior Painting; EP = Exterior Painting; C Ext = C ontained Exterior Event; W Ext = Whole Exterior Event. 2

4.2.2 Estimating the Number of Regulated Renovation, Repair, and Painting Events in 3 COFs in Pu blic or Commercial Buildings 4 This section describes the methodology for estimating the number of events in daycare centers, pre5 schools and kindergartens—i.e., COFs in public or commercial buildings. Events in these structures are 6 all regulated under the existing LRRP program. Events in these structures, however, will be affected by 7 the rule’s requirement to provide the recordkeeping checklist to owners or occupants. 8EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-29 4.2.2.1 Data Sources 1 This section provides a brief summary of the primary data sources used to estimate the number of RRP 2 events in COFs in public or commercial buildings. 3
HUD's (2003) First National Health Survey of Child Care Centers 4 HUD’s (2003) First National Environmental Health Su rvey of Child Care Centers was conducted under 5 the sponsorship of the Department of Housing and Urban Development (HUD), the Environmental 6 Protection Agency (EPA), and the Consumer Pr oduct Safety Commission (CPSC) to assess children's 7 potential exposure to lead, allergens, and pesticides in licensed child car e centers. The survey data were 8 collected in 2001 and were published in 2003; they in clude data on 98 childcare centers that are known to 9 have been built before 1978. Note that while the data only includ es child care centers, some of these 10 centers are located in schools and the information on lead likelihoods, characteristics of classrooms, and 11 the frequencies of painting are extrapolated to elementa ry schools with pre-schools or kindergartens. This 12 survey can be used to estimate lead levels in dust, paint, and soil in childcare cen ters. This analysis uses 13 these data to estimate: (1) likelihoods of LBP on va rious components that might be disturbed during RRP, 14 (2) various characteristics of the rooms and buildings (such as the size and number of rooms, windows, 15 and doors), and (3) the frequency of interior painting, exterior painting, and cleaning. 16
Whitestone (2006) Building Maintenance and Repair Cost Reference 2006-2007 17 Whitestone Research is a commercial service that pr ovides data on the frequency of different types of 18 maintenance activities and their costs, for use by build ing managers and investors. For over 50 building 19 types (including both elementary schools and childcare centers), Whitestone defines a typical building 20 and lists the building components they are likely to co ntain (e.g. type of windows, type of interior and 21 exterior wall coverings, type of heating system, etc.). Whitestone lists the frequency and type of repairs 22 each building component will need, including replacement s. The Whitestone data can be used to estimate 23 the types and frequency of RRP work for CO Fs in public or commercial buildings. 24

4.2.2.2 Description of Methodology for Estimating the Number of RRP Events in COFs in Public or 25 Commercial Buildings 26 The basic steps for estimating the number of events are: 27
1. Estimate the number of COFs (rooms and buildings), 28
2. Estimate the frequency of performing an event, 29
3. Estimate the likelihood that an event will be covered by the rule (disturbing paint). 30
4. Combine the results of the above four steps to estimate: (1) annual number of buildings and 31 classrooms where more than six square feet of a painted surface per room is disturbed for interior 32 renovations, or twenty square feet for exterior renovations. 33 The methodology for performing these steps is described below in more detail. 34EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-30 Step 1: Estimate the Number of Public or Commercial Building COFs (rooms and centers) 1 Based on the number of daycare centers reported to be located in schools according to the HUD (2003) 2 data, 22 percent of the estimated 115,000 centers are estimated to be located in elementary schools. Thus, 3 these 25,300 daycare centers are assumed to be accounte d for in the estimated 40,190 elementary schools 4 with pre-schools and kindergartens. Although an additional 1,421 pre-schools are located in schools 5 without kindergarten programs (such as middle or hi gh schools), these pre-schools are included in the 6 count of daycare centers for the purposes of the to tal cost analysis. In summary, there are 40,190 7 elementary schools with pre-schools and kindergartens , 37,049 elementary schools with kindergartens but 8 no pre-school and 89,261 daycare centers (see Section 2.9 of Chapter 2). 13 Using data from the 9 Commercial Buildings Energy Consumption Survey (CBECS) for education buildings (DOE 2003), it 10 was estimated that 58 percent of buildings were bu ilt prior to 1978. The HUD (2003) data was used to 11 estimate the relative number of pre-1960 buildings. 12 This analysis considers three categories of COFs in public or commercial buildings: (1) daycare centers, 13 (2) elementary schools with kindergartens only, and (3) elementary schools with kindergartens and pre14 schools. The analysis distinguishes between these ty pes of buildings because they have different sizes 15 and thus different compliance costs. The number of childcare center classrooms was estimated using the 16 HUD (2003) data. The estimated numbers of pre-ki ndergarten and kindergarte n classrooms per building 17 are 3.8 and 6.7 for elementary schools with kindergartens and elementary schools with pre-schools and 18 kindergartens, respectively. The number of pre-school classrooms per building was estimated based on 19 the number of pre-kindergarten schools and classes reported in the NCES Prekindergarten in U.S. Public 20 Schools 2000-2001 Report (U.S. Department of Education 2003). The number of kindergarten 21 classrooms per building was estimated based on the number of kindergarten schools and classes reported 22 in the Full-Day and Half-Day Kindergarten in the United States 1998-1999 (U.S. Department of 23 Education 2003). In addition, this analysis accounts for RRP events in spaces othe r than classrooms in the 24 public or commercial buildings that might be visite d by children under the age of six on a regular basis 25 (libraries, cafeterias, gyms, etc.). 26
Spaces in Addition To Regular Kindergarten and Pr e-Kindergarten Classrooms Regularly Visited 27 by Children Under Age Six 28 At least for part of the year, children under the age of 6 are in first grade. In addition, in some schools 29 children under the age of 6 might use other rooms on a regular basis, including libraries, cafeterias, gyms, 30 computer rooms, and music and/or art rooms. 31 According to NCES’s 2005 After-School Programs and Activities Survey of the National Household 32 Education Surveys Program data, just under 0.5 percent of all first graders are 5 years old. Thus there are 33 nearly 19,000 first graders who are age 5 (NCES 2005). The survey collected age data as of December 34 31 st of 2004 and as such does not include children who turned 6 after the start of the school year in 35 September but before the end of December. Thus it is thus likely that this figure underestimates the 36 number of children who are 5 years old when they enter first grade. While the total number of five year 37 olds in first grade is relatively small, any class w ith one of these children is subject to the rule. 38 Unlike for pre-kindergartens or kindergartens, there is no data on the number of first grade classrooms in 39 the United States. The number of first grade classr ooms was estimated based on student enrollment and 40 the average number of first graders in a typical classroo m. Data on the average number of students in first 41 grade were obtained from four states – Texas, New Hampshire, New York, and Illinois (Texas Education 42

13 The 89,261 daycare centers include 1,421 schools with pre-kindergarten but no kindergarten, and 87,840 daycare centers located outside of schools (see Section 2.9 of Chapter 2).EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-31 Agency 1999; New Hampshire Department of Edu cation 2006; New York State Office of the State 1 Comptroller 2005; ASU 2007). The number of stude nts per classroom reported in these states ranged 2 from 18 to 21.6, with an average of 20 students per cl assroom. To estimate the total number of first grade 3 classrooms, the total number of first graders (3, 663,005 in public schools + 439,510 in private schools) 4 was divided by the average of 20 students per firs t-grade class. The resulting number of classrooms 5 (205,126) was divided by the total number of schools with a first grade (51,572 public schools + 22,362 6 private schools) to estimate the average number of classrooms per school. 14 Based on these calculations, 7 there is an average of 2.8 first grade classrooms per school. 8
Data were not available on the amount of the school day or week that kindergartners and first graders 9 spend outside of their primary classroom or the rooms th ey visit. Nor were data available on the average 10 size of these rooms in older elementary schools. Thus the following assumptions were made: 11 Gyms are about the size of 5 classrooms. This estimate is based on the assumption that most elementary 12 school gyms will accommodate a basketball court. A bask etball court is 3,108 square feet and an average 13 classroom is 729 square feet (Pro DunkHoops 2006; HUD 2003). Thus, a basketball court is about 4.25 14 classrooms, which was rounded up to 5 to accommodate bleachers, etc. 15
3⁄4 Cafeterias are about the same size as an elementary school gym. 16
3⁄4 Elementary school libraries are about the size of 2 classrooms 17
3⁄4 Students were also assumed to regularly spend time in at least one other classroom (e.g. computer 18 room, music or art room). 19 Estimates were generated using data on the percentage of public elem entary schools that have various 20 non-classroom facilities as follows: 21
3⁄4 Cafeteria 98% 15 (NCES 2006g) 22
3⁄4 Library 95% (NCES 2004) 23
3⁄4 Gymnasium 80% (NCES 2007) 24 Using these percentages and the classroom-equivalent si zes for rooms specified above, the equivalent of 25 an additional 12 rooms was assumed to be covered by the rule because children under the age of 6 use 26 them in addition to their regular classrooms. The calculation is: 27
28 98% * (1 cafeteria)*(5 classroom equivalents) + 95% * (1 library)*(2 classroom equivalents) + 29 80% * (1 gym)*(5 classroom equivalents) + (1 extra room) = 12 classroom equivalents. 30 31

14 The numbers of first graders in public and private schools were drawn from NCES’s Overview of Public Elementary and Secondary Students, Staff, Schools, School Districts, Revenues, and Expenditures: School Year 2004-2005 and Fiscal Year 2004 (NCES 2006a) and Characteristics of Private Schools in the United States: Results From the 2003-2004 Private School Universe Survey (NCES 2006e), respectively. The numbers of public and private schools with first grades were calculated using NCES’s Common Core of Data Public Elementary/Secondary School Universe Survey Data, 2004-2005 (NCES 2006b) and 2003-2004 Private School Universe Survey Data (NCES 2006f), respectively.

15 This figure is based on the number of schools providing food services in a cafeteria or lunch room. Since many elementary schools use the gymnasium as a lunch room, there may be substantial overlap between cafeterias and gymnasiums. Also, in some schools children do not eat in the cafeteria until 1st grade. Thus, this may overestimate the areas in schools potentially impacted by the rule.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-32 In addition, an average of 2.8 first grade classrooms are assumed to be covered by the rule, making the 1 average total number of additional classroom equivalents 14.8. The estimated numbers of pre2 kindergarten and kindergarten classrooms per build ing are 3.8 and 6.7 for elementary schools with 3 kindergartens and elementary schools with pre-schools and kindergartens, respectively. Thus, the average 4 numbers of classrooms and classroom equivalents covere d under the rule are 18.6 and 21.5 for elementary 5 schools with kindergartens and elementary schools w ith pre-schools and kindergartens, respectively. 6 The resulting estimates of the number of regulated daycare centers and elementary schools with 7 preschools or kindergartens, as well as the number of regulated classrooms in these buildings are 8 presented in Table 4-20. 9

10 Step 2: Estimate the fr equency of performing an event 11
Interior Painting 12 When asked how often they repainted the interior , respondents to the HUD (2003) survey could respond: 13 (1) every 1 to 4 years, (2) every 5 to 10 years, or (3) every 10 to 20 years. The average frequency of 14 painting was estimated using the midpoints for these ra nges (weighted averages were calculated using the 15 buildings’ survey weight). On averag e, building interiors are painted ever y 4.4 years. It is assumed that 16 35 percent involve sanding and/or scraping before pain ting, based on data for housing units (EPA 2006). 17
Exterior Painting 18 When asked how often they repainted the exterior , respondents to the HUD (2003) survey could respond: 19 (1) every 1 to 4 years, (2) every 5 to 10 years, or (3) every 10 to 20 years. The average frequency of 20 painting was estimated using the midpoints for these ra nges (weighted averages were calculated using the 21 building’s survey weight); on average, buildings paint their exterior every 7 years. Thus, the analysis 22 assumes that buildings with exterior paint (about 90 pe rcent of the buildings have exterior paint) are 23 painted every seven years. It is assumed that the ex terior is always sanded or scraped before painting 24 (EPA 2006). 25
Wall Disturbing Events 26 The number of events where walls are disturbed is c onsidered separately from those events that generally 27 disturb trim, doors, and windows, which have higher likelihoods of LBP. The number of wall disturbing 28 events is estimated using the Whitestone Mainte nance and Repair (M&R) Cost Reference. The 29 Whitestone M&R Cost Reference provides information on the frequency of a wide variety of maintenance 30 and repair activities. As described in their Pr eface, the book is intended for two audiences. 31 “The first group has a common need to know the long-term M&R costs of specific 32 buildings. This group consists of analysts, developers, architects, bankers, investors and 33 Table 4-20: Number of Regulated Buildings a nd Classrooms, by Building Type and Year Built

Daycare Centers Elementary Schools with Kindergartens Only Elementary Schools with Pre-Schools and Kindergartens Buildings Classrooms Buildings Classrooms Buildings Classrooms Pre-1978 51,771 170,472 21,488 399,685 23,310 501,169 Pre-1960 28,687 103,566 11,907 242,817 12,917 304,471 *The stock of public or commercial buildings is assumed to decline by 0.41% per year. That rate was calculated using the average annual compound rate of change in the pre-1980 housing stock using data from the 1990 and 2000 Decennial Census (U.S. Census Bureau 1990 and 2000c). Source: Calculated using HUD 2003 data.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-33 others who must account for M&R costs that, over a 50-year building lifetime, can easily 1 exceed the cost of construction. ... The second audience consists of facility managers and 2 all those responsible for estimating and ju stifying facility maintenance budgets.” 3 The bulk of the reference is composed of detaile d lists of building components and M&R tasks, along 4 with their average size, frequency of the M&R tasks, trade involved (e.g. plumber, carpenter) and 5 estimated cost. The reference also provides building profiles for 56 different building types, including 6 childcare centers and elementary schools. Each prof ile lists the typical building components for that 7 building type and then generates a 50-year stream of expenditures that cover these building components. 8 The number of wall disturbing events is estimated b ased on the following categories of RRP events: 9
3⁄4 Replace Plumbing Pipes and Fixtures 10
3⁄4 Replace HVAC Systems 11
3⁄4 Replace Electrical System and Fixtures 12 Using the frequencies of major renewal and replacement tasks that are likely to disturb lead-based paint 13 for the building components described in the childcare center and elementary school profiles, this analysis 14 developed the assumed frequency of RRP events shown in Table 4-21. 15EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-34 Table 4-21: Frequency of Wall Disturbing RRP Events

Category of RRP Event and Whitestone Components and Frequencies Used to Estimate Frequency of RRP Events Assumed Average Frequency of Performing RRP Event Resulting Total Number of RRP Events per Classroom per Year
RRP Event - Replace Plumbing Pipes and Fixtures Pipe & Fittings, 3/4" Copper, Cold Water Replace 10' section every 20 years, replace all pipes and fittings every 25 years. Pipe & Fittings, 3/4" Copper, Hot Water Replace 10' section every 13 years, replace all pipes and fittings every 25 years. Pipe & Fittings, 2" Copper, Cold Water Replace 10' section every 20 years, replace all pipes and fittings every 25 years. Pipe & Fittings, 6" Cast Iron Replace 10' section every 13 years, replace all pipes and fittings every 75 years. Pipe & Fittings, 10" Cast Iron Replace 10' section every 13 years, replace all pipes and fittings every 75 years. Pipe & Fittings, 4" DWV PVC Replace 10' section every 10 years, replace all pipes and fittings every 30 years. Since replacing 10’ sections of pipes is done as often as

once every 10 years, the analysis assumes 1 job per classroom every 10 years – 1⁄2 are assumed to be large and 1⁄2 are assumed to be small (0.05 small jobs and 0.05 large jobs per year)

RRP Event - Replace HVAC Systems

Pipes & Fittings, 4" Steel, Gas

Replace 10' section every 12 years, replace all pipes and fittings every 75 years. Rounding to the nearest 10 years, it is assumed that there is 1 job per classroom every 10 years. Since 10’ sections are replaced about every 10 years and all pipes and fittings

are replaced about every 80 years, it is assumed that 1/8

are large jobs and 7/8 are small jobs. (0.0875 small jobs and 0.0125 large jobs per year)
RRP Event - Replace Electrical System and Fixtures Fluorescent Lighting Fixture, 160 W

Replace every 20 Years 1 job per classroom every 20 years, assumed to be large*

(0.05 large jobs per year)

RRP Event - Unscheduled Maintenance Assumes a small job is performed in 1 out of every

11 classrooms each year. This is equivalent to one job

per building on average. Each of the 4 categories is considered a separate event. Aggregating the

frequencies provides annual averages of: 0.34 jobs, composed of: 0.23 small jobs 0.11 large jobs where a small job disturbs

paint on one wall of a classroom, and a large job disturbs paint on all four walls.

* All unplanned maintenance events are assumed to be small jobs. Source: Derived from Whites tone M&R Reference (2006).
1 Because historical data on M&R activities for wall dist urbing events in these build ings are not available, 2 and to simplify the calculations, it is assumed that th e RRP events are evenly spread over the population 3 of buildings. In other words, if a plumbing replacement job typically occurs once every 10 years, the 4EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-35 analysis assumes that one-tenth of the buildings experience this RRP event in any given year. Thus in 1 any given year, it is assumed that plumbing is repl aced in 10 percent of buildings, HVAC systems are 2 replaced in 10 percent of buildings and electrical sy stems are replaced in 5 percent of buildings. If 3 multiple jobs are occurring in the same building, the analysis assumes they occur at different times in the 4 year and thus each incurs its own work practice cost s. To the extent that these events are actually 5 occurring at the same time, the analysis overestimates the work practice costs. The Whitestone data does 6 not include information on the frequency of unschedul ed maintenance events. Instead, this analysis 7 assumes that 1 out of 11 classrooms have an unsche duled maintenance job performed in a given year – 8 this is approximately one job per building. The number of unscheduled maintenance events is based on 9 an assumption, and not on empirical data. 10
Window and Door Replacement Events 11 The number of events where windows and doors are di sturbed is also estimated using the Whitestone 12 M&R Cost Reference, which listed the frequency with which door and window types typically found in 13 elementary schools and daycare centers must be re placed—about every 20 years. Thus, in any given 14 year, windows and doors are assumed to be replaced in 5 percent of buildings. 15 Step 3: Estimate the likelihood that an event will be affected by the rule (disturbing paint) 16 The next step is to estimate how many events in public or commercial building COFs disturb painted 17 surfaces and therefore would be affected by the r ecordkeeping checklist provision requirement of the 18 LRRP rule revision. This analysis considers four types of events for public or commercial buildings: (1) 19 Interior Painting, (2) Exterior Painting, (3) Window Replacement, and (4) Wall Disturbing Events (e.g., 20 plumbing, electrical). It is estimated that 35 percent of interior painting jobs involve disturbing painted 21 surfaces (i.e., sanding and/or scraping before painting) , based on data for housing units (EPA 2006). All 22 other event types are always assumed to disturb painted surfaces. 23 24 Step 4: Combine the results 25 The number of affected classrooms or buildings is multiplied by the frequency of renovation activities 26 that disturb painted surfaces to yield the number of events in public or commercial buildings where the 27 recordkeeping checklist will have to be provided by the renovator. These results are presented in Table 4- 28 22. 29EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-36 1 2



### 4.3 Work Practice Compliance Costs 3 RRP projects generate varying amounts of leaded dust, paint chips, and other l ead-contaminated materials 4 depending on the type of work, size of area affected , and work methods used. For example, repairing a 5 small area of damaged drywall is likely to generate less lead-contaminated dust and debris than sanding a 6 large area in preparation for painting. Because of this variability, the size of the area that must be isolated 7 and the containment methods used will vary from project to project. Large renovation projects could 8 involve one or more rooms and potentially encompa ss an entire home or building while small projects 9 may involve a portion of a room or a building’s ex terior. The necessary work area preparations will 10 depend on the size of the surface(s) being disturbed, the method used in disturbing the surface, and the 11 building layout. The certified renovator assigned to a renovation would weigh all of these factors in 12 determining the appropriate work area size for that par ticular situation. For example, repairing a small 13 area of damaged drywall would probably require a smaller work area while demolition work would 14 probably require a larger work area in order to prev ent the migration of dust and debris from the work 15

area. 16
Note that the costs of the action as estimated in th e Economic Analysis are expressed in 2005 dollars. To 17 express values in terms of current dollars, the Imp licit Price Deflator for Gross Domestic Product as 18 determined by the Bureau of Economic Analysis can be consulted for an indication of how nominal prices 19 for goods and services produced in the economy have changed over time. From 2005 to the second 20 quarter of 2009, the implicit price deflator increased from 100 to 109.753, a difference of approximately 21 10 percent (BEA 2009). 22

4.3.1 LBP Test Kit Compliance Costs 23 It is assu med that spot test kits are used to test for LBP before each RRP event where a lead inspection 24 has not been performed; they are in expensive to use and a negative resu lt will allow the renovator to forgo 25 the more costly containment, cleaning and verification requirements. Lead test kits currently can be 26 Table 4-22: Summary of the Number of Public or Commercial Building COF Events Events Where Recordkeeping Checklist is Provided

Interior Painting Exterior Painting Window and Door Disturbing

Events Wall Disturbing

Events All Events Year 1 Daycare Centers 10,244 4,989 6,393 42,427 64,053 Kindergartens Only 24,018 2,071 14,989 99,473 140,551 Kindergartens and Pre-Schools 30,116 2,246 18,795 124,730 175,887 All Public or commercial building COFs 64,378 9,306 40,177 266,630 380,491 Year 2* Daycare Centers 10,202 4,969 6,367 42,253 63,790 Kindergartens Only 23,920 2,063 14,928 99,065 139,975 Kindergartens and Pre-Schools 29,993 2,237 18,718 124,219 175,166 All Public or commercial building COFs 64,114 9,268 40,012 265,537 378,931 Note: Following EPA (2008), it is assumed that 75 percent of COFs comply with the rule. *The stock of public or commercial buildings is assumed to decline by 0.41% per year. That rate was calculated using the average annual compound rate of change in the pre-1980 housing stock using data from the 1990 and 2000 Decennial Census (U.S. Census Bureau 1990 and 2000c).EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-37 purchased in bulk at a cost of approximately $0.50 per test. It is assumed that the renovator will take an 1 average of four samples, because some jobs may disturb multiple components (walls, trim, windows, etc.) 2 or multiple rooms, and testing four samples will requi re about 15 minutes of a certified renovator’s time. 3 The loaded wage rate for ce rtified renovators is $31.64/hour 16 . Thus, testing using the test kits is 4 estimated to cost $10 per event (15 minutes * $31.64/hour + 4 test kits * $0.50/test = $10). 5 RRP purchasers may choose to have x-ray fluorescence (X RF) testing conducted to detect the presence of 6 LBP instead of using a test kit. XRF testing has th e advantage of having lower false positive rates but the 7 testing cost per event is much higher than a test kit. Therefore, it is assumed that test kits are used in lieu 8 of XRF testing. 9

4.3.2 Containment, Cleaning, and Verification 10 The containment and cleaning practices c overed in the cost estimates are: 17 11 For large interior events: 12

• Remove or cover all objects in the room wh ere the renovation will be performed including 13 furniture, rugs, and window coverings. 14

• Close and cover all ducts opening into the r oom with taped-down plastic sheeting or other 15 impermeable material. 16

• Close windows and doors in the work area. Doors mu st be covered with plastic sheeting or other 17 impermeable material. Doors used as an entrance to the work area must be covered with plastic 18 sheeting or other impermeable material in a ma nner that allows workers to pass through while 19 confining dust and debris to the work area. 18 20

• Cover the floor with taped-down plastic sheeting or other impermeable material. Place a tack pad 21 at the edge of the sheeting at the entrance to the room. Cover paths through the rest of the 22 buildings used by persons performing the renovati on with plastic sheeting or other impermeable 23 material. 24 For small interior events: 25

• Remove or cover all objects within five feet of the work area, including furniture, rugs, and 26 window coverings. 27

• Close all windows, doors, and ducts within five feet of the work area. Cover ducts with plastic 28 sheeting or other impermeable material. 29

• Cover the floor within five feet of the work area with taped-down plastic sheeting or other 30 impermeable material. 31

• Wear disposable shoe covers and vacuum clothes. 32

16 Wages are based on U.S. Bureau of Labor Statistics (2005a) da ta, from the occupational employme nt statistics series. All wages are fully loaded to account for fringe benefits with an average fringe rate for the construction industry of 23.5 percent

. Certified renovators’ fully loaded wages ($31.64/hour) are estimated from the wages earned by First-Line Supervisors/Managers of Construction Trades and Extraction Workers (Occupation 47-1011) who work in the residential building construction industry. Workers’ loaded wages ($16.94/hour) are estimated from the wages of Construction Laborers who work in the residential building construction industry (Occupation 47-2061).

17 For the purposes of simplifying the modeling of the costs, some of the work practices described here are slightly different than those practices required by the rule. The co sts of these practices are expected to be representative of the practices required by the rule.

18 This analysis assumes that contractors will meet the en trance door requirement by creating an airlock using two sheets of plastic.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-38 For large and small exterior events: 1

• Cover the ground with plastic sheeting or other disposable impermeable material extending out 2 from the edge of the structure a sufficien t distance to collect falling paint debris. 3

• Ensure that doors within the work area that must be used while the job is being performed are 4 covered with plastic sheeting or other impermeable material in a manner that allows workers to 5 pass through while confining dust and debris to the work area. 6 For all events: 7

• Post signs warning occupants and other persons not involved in renovation activities to remain 8 outside of the work area. 9

• Isolate the work area so that no visible dust or debris leaves the work area while the renovation is 10 being performed. 11

• Contain waste from renovation activities to prevent re leases of dust and debris before the waste is 12 removed from the work area for storage or disposal. 13

• At the conclusion of each workday, store waste from renovation activities under containment, in 14 an enclosure, or behind a barrier that prevents release of dust and debris and prevents access to 15 dust and debris. 16

• Pick up all paint chips and debris. 17

• Remove plastic sheeting from objects in the work ar ea and the floor or ground. Mist the sheeting 18 before folding it, fold the dirty side inward and tape shut to seal. Dispose of the sheeting as 19
waste. 20 Additional Cleaning for interior events 21

• Clean all objects and surfaces in and around the wo rk area for interior events in the following 22 manner, cleaning from higher to lower: 23

a. Thoroughly vacuum all surfaces and objects in the work area, including furniture and 24 fixtures, with a vacuum equipped with a high-efficiency particulate air (HEPA) filter. 25 Where feasible, floor surfaces underneath a rug or carpeting must also be thoroughly 26 vacuumed with a HEPA vacuum. 27 b. Wipe all surfaces and objects in the work area with a damp cloth (except for walls, 28 ceilings, carpeted surfaces and upholstered surfaces). 29

c. Mop uncarpeted floors thoroughly, using a two-bucket mopping method that keeps 30 the wash water separate fr om the rinse water, or using a wet mopping system. 31 Post-renovation cleaning verification for interior events: 32

• A certified renovator m ust perform a visual inspec tion to determine if visible amounts of dust, 33 debris or residue are still present. If visible amounts of dust, debris or residue are present, these 34 conditions must be eliminated by re-cleaning a nd another visual inspection must be performed. 35

• After a successful visual inspection, a certified renovator must: 36

a. Wipe uncarpeted floors within the work area with a disposable wet cleaning cloth. 37 The cloth must remain damp at all times while it is being used to wipe the floor for 38 post-cleaning verification. If the floor surface within the work area is greater than 40 39 square feet, the floor within the area must be divided into roughly equal sections that 40 are less than 40 square feet. Wipe each such section separately with a new 41 disposable cleaning cloth. If the cloths used to wipe each section of the floor within 42 the work area match the cleaning verification card, that section of the floor has been 43 adequately cleaned. 44 b. If the cloth used to wipe a particular section of floor does not match the cleaning 45 verification card, re-clean that section of the floor using the two-bucket mopping 46 method. Then wipe that section of the floor using a new wet cleaning cloth. If the 47EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-39 cloth matches the cleaning verification card, that section of the floor has been 1 adequately cleaned. 2

c. If the second cloth used to wipe a particular floor section does not match the cleaning 3 verification card, re-clean that section of the floor using the two-bucket mopping 4 method described above and allow the entir e floor within the work area to dry 5 completely. After the entire floor within the work area has completely dried, wipe 6 the floor with electrostatic cleaning cloths until a cloth that has wiped the entire floor 7 matches the cleaning verification card. 19 8 d. Wipe the windowsills in the work area following the same protocol as used for floors 9 but with one wet-wipe per-windowsill. 10

e. When the area passes the post-renovation cleaning verification, remove the warning 11 signs. 12 Post-renovation cleaning verification for exterior events: 13

• A certified renovator must perform a visual inspec tion to determine if visible amounts of dust, 14 debris or residue are still present. If visible amounts of dust, debris or residue are present, these 15 conditions must be eliminated by re-cleaning a nd another visual inspection must be performed. 16 When the area passes the visual insp ection, remove the warning signs. 17

4.3.3 Cost of Each Containment and Cleaning Practice 18 The prim ary source of information on the cost of containment and cleaning practices, equipment, and 19 materials was the Means CostWorks Repair & Remode ling Cost Data (R.S. Means 2005). The data are 20 designed to help contractors estimate the cost of a renovation project. The database provides the total 21 labor and material costs of differe nt renovation components on a unit basis. Most of the unit costs taken 22 from the R.S. Means database utilized in this analysis were for an asbestos abatement project, which 23 requires much more elaborate containment and clean up than required under the analyzed options. The 24 R.S. Means labor estimates have been adjusted downwards to reflect the less stringent requirements of the 25 LRRP rule. Depending on the type of activity, the un it may be a square foot, each item, or some other 26

measure. Table 4-23 and Table 4-24 show the material costs, la bor requirem ents and total cost for the 27 containment and cleaning practices for interior events and exterior events, respectively. 28
29

19 It is assumed that a second cleaning is required 30 percen t of the time and a third cleaning is required 2 percent of the time.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-40 1 Table 4-23: Unit Costs of RRP Interior Activities (2005$) Cost Type Material Cost Units Labor Hours Total Cost a Containment Sign $0.11 b Ea. 0 $0.11 Floors (labor): Cover surfaces with polyethylene sheeting, each layer, 6 mil, incl. glue & tape $0.00 S.F. 0.006 $0.12

Floors (materials): Cover surfaces with polyethylene sheeting, each layer, 6 mil, incl. glue & tape $0.08 c S.F. 0.000 $0.08

Walls d : Cover surfaces with polyethylene sheeting, each layer, 6 mil, incl. glue & tape $0.08 c S.F. 0.008 $0.25 Tack pad $0.51 e Per sheet 0 $0.51 Disposable shoe covers $0.38 f Per pair 0 $0.38 Roll down polyethylene sheeting $0.00 S.F. 0.002 $0.03 Bag polyethylene sheeting $1.15 Ea. 0.05 $2.24 Cleaning HEPA vacuum for work area $0.63 g,h Ea. 0 $0.63 HEPA vacuum use (floor) $0.01 S.F. 0.002 $0.05 HEPA vacuum use (walls) $0.01 S.F. 0.002 $0.05 HEPA vacuum clothes $0.00 Hours 0.167 $3.44 Wet wipe, flat surfaces (clean ing) $0.01 S.F. 0.002 $0.06 Verification Wet wipe, flat surfaces (verifi cation) $0.01 S. F. 0.002 $0.06 Electrostatic clot h sweeper $0.01 g,i Ea. 0 $0.01 Disposable wet cloth $0.01 j S.F. 0.002 k $0.05 Disposable dry cloth $0.01 j S.F. 0.002 k $0.05

a Using a mean loaded wage rate of $20.62 (2005$) based on the wages of three construction laborers ($16.94/hr

each) and one supervisor ($31.64.hr each) from the Ma y, 2004 Occupational Employment Statistics data from the Bureau of Labor Statistics.
b The cost of a 9”x12” aluminum sign is $10.99; assumed to be used 100 times.

c Based on a web search, which showed that duct tape costs $0.02 per square foot and 6 mil. polyethylene sheeting

costs $0.06 per square foot.
d Estimate used for plastic on the doors, windows, and ducts.

e Based on a review of price lists on the web, which showed that the average cost per disposable sheet is $0.51.
f Based on a review of price lists on the web, which showed that the average cost per pair of shoe covers is $0.38.

g Assumes that it will be used for 1,000 events.
h Based on a review of price lists on the web that showed that the average cost fo r a HEPA vacuum is $626.
i Based on a review of price lists on the web that showed th at the average cost of an electrostatic cloth sweeper is

$13.60. j Based on a review of price lists on the web that showed th at the average cost of an electrostatic cloth wet cloth is

$0.46. Also based on clearance requirements that the work area must be divided into roughly equal sections that are 40 square feet, therefore it costs $0.01 per square foot.
k Based on EPA’s (2005b) “Disposable Cleaning Cloth (DCC) Lead Clearance Field Study” document that it would

take 5 minutes per cleaning cloth and clearance requirements that the work area must be divided into roughly equal sections that are 40 square feet that is equivalent to 0.125 minutes per square foot or 0.002 hours per square foot. Abbreviations: S.F. = Square Feet; Ea. = Each Item Source: RS Means 2005; U.S. Bureau of Labor Statistics 2005b.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-41 4.3.4 Quantities of Each Containment and Cleaning Practice 1 Table 4-25 and Table 4-26 describe how the number of units required for each work practice is estimated 2 for the variou s event types. This methodology is the same as that used to estim ate work practice costs in 3 the 2008 LRRP rule analysis (EPA 2008). Appendix 4A in the Economic Analysis of the 2008 LRRP 4 rule (EPA 2008) presents the resulting estimates for e ach type of event. The number of units is multiplied 5 by the per-unit costs, which can be per-each, per-squa re foot, or per hour, as described above in section 6 4.3.3. 7 Table 4-24: Unit Costs of RRP Exterior Activities (2005 $) Cost Type Material Cost Units Labor Hours Total Cost a Sign $0.11 b Ea. 0 $0.11 Ground: Cover surfaces with polyethylene sheeting, each layer, 6 mil, incl. glue & tape $0.06 c S.F. 0.001 $0.08

Doors d : Cover surfaces with polyethylene sheeting, each layer, 6 mil, incl. glue & tape $0.08 c S.F. 0.008 $0.25
Roll down polyethylene sheeting e $0.00 S.F. 0.0005 $0.01

a Based on a mean loaded wage rate of $20.62 (2005$) based on the wages of three construction laborers

($16.94/hr each) and one supervisor ($31.64/hr) from the May, 2004 Occupational Employment Statistics data from the Bureau of Labor Statistics.
b The cost of a 9”x12” aluminum sign is $10.99 and it is assumed that the sign will be used 100 times.

c Based on a web search that showed that duct tape costs $0.02 per square foot and 6 mil. polyethylene sheeting

costs $0.06 per square foot. Based on the EPA 2000a Model Renovation Training Course, duct tape will be used to tape the plastic to the building and rocks or other heav y objects will be used to weight down the edges therefore it is assumed that only 1⁄4 of the duct tape is needed for floors.
d Estimate used for plastic on the doors.

e Assume that for exterior events the contractor would tape the plastic up rather than bagging it. Abbreviations: S.F. = Square Feet; Ea. = Each Item Source: RS Means 2005; U.S. Bureau of Labor Statistics 2005a and 2005b.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-42 1 Table 4-25: Number of Units Required for RRP Interior Activities (2005$) Cost Type Units Number of Units Required Containment (1) Sign Ea. Two signs are assumed to be required. (2) Floors (labor): Cover surfaces with polyethylene sheeting, each layer, 6 mil, incl. glue & tape S.F. Estimated as 110% of the square footage of the work area (to include horizontal surfaces besides the floor) pl us 60 square feet of sheeting for paths (except for small events). (3) Floors (materials): Cover surfaces with polyethylene sheeting, each layer, 6 mil, incl. glue & tape S.F. Same as (2).

(4) Walls d : Cover surfaces with polyethylene sheeting, each layer, 6 mil, incl. glue & tape S.F. Estimated as the number of doors times 20 square feet (door size), plus 20 square feet (for an extra layer of plastic over the entry door), plus the number of ducts times 1 s quare foot (duct size). (5) Tack pad Per sheet One tack pad per room affected. (6) Disposable shoe covers Per pair Two for small jobs, none for large jobs. (7) Roll down polyethylene sheeting S.F. (2) plus (4). (8) Bag polyethylene sheeting Ea. (7) divided by 76.2 square feet (the amount of plastic th at will fit in a bag). Cleaning (9) HEPA vacuum for work area Ea. Estimated as 1.

(10) HEPA vacuum use (floor) S.F. Estimated as 110% (125% for kitc hens and bathrooms, to include countertops) of the square footage of the work area plus the number of windows times 2/3 of a square foot (the size of a window sill). (11) HEPA vacuum use (walls) S.F. Estimated as the square root of th e square footage of the work area times 32 (4 eight foot tall walls). (12) HEPA vacuum clothes Hours Estimat ed as ten minutes (small events only).

(13) Wet wipe, flat su rfaces (cleaning) S.F. Estimated as the likelihood of uncarpeted floors multiplied by the square footage of the work area, plus 10% (or 25% for kitchens and bathrooms) of the square footage of the work area multiplied plus the number of windows times 2/3 of a s quare foot (the size of a window sill). Verification
(14) Wet wipe, flat surfa ces (verification) S.F. Estimated as 31.8 percent (sum of first and second failure rates) multiplied by (13). (15) Electrostatic cloth sweeper Ea. Estimated as 1.

(16) Disposable wet cloth S.F. Estimated as 131.8% multiplied by {the square footage of the work area, multiplied by the likelihood of uncarpeted floors plus the number of windows multiplied by 2/3 of a square foot (the size of a window sill)}.

(17) Disposable dry cloth S.F. Estimated as 1.8% (second failure rate), multiplied by the square footage of the work area, multiplied by the likelihood of uncarpeted floors. Abbreviations: S.F. = Squa re Feet; Ea. = Each Item Source: RS Means 2005; U.S. Bure au of Labor Statistics 2005b.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-43 1

4.3.5 Baseline Frequency of Prohibited Practice and Costs of Alternatives 2 Several paint preparation and rem ova l practices are prohibited or restricted in renovations that require 3 lead-safe work practices under the existing rule. A telephone questionnaire was administered to nine 4 respondents to gather information on the baseline use of certain paint removal practices. The respondents 5 included six painting firms and three historic home restoration firms. The six painting firms were 6 randomly drawn from the online sales lead provider, Sal esgenie.com. The historic home restoration firms 7 were drawn randomly from the Old House Journal’s online restoration directory. 8 These firms were asked how often they used the foll owing four paint removal techniques on the interior 9 and exterior of pre-1978 buildings: 10
1. Open flame burning or torching of paint; 11 2. Using a heat gun above 1,100o F; 12 3. Power sanding, grinding, or abrasive blasting except when done with HEPA exhaust control; and 13 4. Dry scraping of lead based-paint. 14 If the firms reported that they did not use the method, they were asked why they did not use it and what 15 alternatives they used instead. They were also asked how much they thought costs would increase if the 16 specific removal technique was prohibited and if there were any situations where use of the method could 17 not be avoided. When responding firms could not precisely state what percentage of the time they used a 18 certain work practice they were prompted with never, rarely, sometimes, often or nearly always. These 19 prompted answers are assumed to corre spond with the following percentages: 20 Table 4-26: Number of Units Required for RRP Exterior Activities (2005$) Cost Type Units Number of Units Required Containment (1) Sign Ea. Two signs are assumed to be required. (2) Ground: Cover surfaces with polyethylene sheeting, each layer, 6 mil, incl. glue & tape S.F. Estimated as the perimeter times 10 feet plus an extra 314 square feet for the corners. (3) Doors: Cover surfaces with polyethylene sheeting, each layer, 6 mil, incl. glue & tape S.F. Estimated as the number of doors multiplied by 40 square feet, less 20 square feet. (4) Roll down polyethylene sheeting S.F. Estimated as the sum of (2) and (3). Abbreviations: S.F. = Squa re Feet; Ea. = Each Item Source: RS Means 2005; U.S. Bure au of Labor Statistics 2005b.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-44 1 Table 4-27: Response Categories and Corresponding Percentages Never 1.5% Rarely 16% Sometimes 50% Often 84% Nearly Always 99% 2 Table 4-28 shows the minimum, maximum and averag e work practice frequencies, by interior and 3 exterior work events: 4
5 Table 4-28: Summary Statistics for Frequency of Work Practices Included in Telephone Questionnaire Interior Exterior Prohibited Practice Min Max Average Min Max Average Heat Gun (High Temp) 1.5% 16% 5% 1.5% 16% 5% Open Flame Burning 1.5% 16% 3% 1.5% 16% 3% Power Sanding 1.5% 99% 40% 1.5% 99% 47% Dry Scraping 1.5% 99% 43% 1.5% 84% 30% 6 Based on these estimates it was estimated that interior and exterior painting jobs use various paint 7 removal techniques with the frequencies presented in Table 4-29. Since several respondents indicated 8 that the y typically used heat guns at lower temp eratures that are allowed under the LRRP rule (under 9 1100 °F), it was assumed that 20 percent of paint removal was performed with low temperature heat guns. 10 The remaining 80 percent of paint removal practi ces were assumed to occu r proportionally to the 11 frequencies in the telephone questionnaire responses so that the sum of the frequencies for the five paint 12 removal practices equals 100 percent. 13
14 Table 4-29: Summary Statistics for Frequency of Paint Removal Work Practice Use Paint Removal Practice Practice Interior Exterior Heat Gun (Low Temp) 20% 20% Heat Gun (High Temp) 7% 4% Open Flame Burning n.a. 3% Power Sanding 35% 44% Dry Scraping 38% 29% Interior open flame burning is combined with interior high temperature heat gun usage (EPA 2008). 15EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-45 4.3.5.1 Estimating the Incremental Costs of Alternatives to Prohibited Work Practices 1 Power Sanding without attachment to HEPA Vacuum 2 It is assumed that if power sanding, grinding, or ab rasive blasting is prohibited in opt-out housing for 3 renovations requiring lead-safe work practices under the rule, except when done with HEPA exhaust 4 control, renovators would use power tools with HEPA exhaust controls. 5 The costs of requiring that power sanders be attached to vacuums with HEPA filters includes: (1) the cost 6 of a sander capable of being attached to a HEPA vacu um, and (2) the cost of additional HEPA filters that 7 will be required because of the increased vacuum use. The cost of a HEPA vacuum is not included as an 8 incremental cost of this requirement since HEPA v acuum costs are already accounted for in the estimated 9 costs of complying with the cleaning requirements under the rule. 10 To estimate the cost of the HEPA vacuum compa tible power sanders, quotes for 27 power sanders were 11 found through online queries; the average cost for such sanders was $209. It is assumed that each sander 12 can be used for at least 200 jobs. Most power sanders have one-year warranties, thus 200 jobs represents 13 the minimum lifespan. Therefore, the per-job cost of a new sander is $1.05 [$209/200]. 14
The cost of extra HEPA filters was based on the cost of re-useable HEPA filters. Internet queries found 15 that re-useable filters cost between $30 and $38 each, w ith an average price of about $35. It is assumed 16 that each is good for the life of the sander (200 jobs), resulting in a cost per job of $.18 [$35/200]. 17
18 Table 4-30: Per Job Equipment Costs as a Result of Prohibition on Power Sanding (Unless Done with HEPA Attachment) Product Average Cost Expected Lifespan (# of Jobs) Per Job Cost

Power Sander $209 200 $1.05 HEPA Filter $35 200 $0.18 Sum of Sander and Filter $1.23 19
High Temperature Heat Guns and Open Flame Burning or Torching of Paint 20 It is assumed that if the use of high temperature heat guns (over 1,100 degrees F) and open flame burning 21 or torching of paint is prohibited for renovations in opt-out housing requiring lead-safe work practices 22 under the rule, renovators will use low temperature h eat guns (under 1,100 degrees F) instead. The cost 23 of switching to low temperature heat guns is described below for typical interior and exterior painting 24 events where they may be used. 25
High Temperature Heat Guns and Open Flame Burning– Interior 26 An average interior heat gun event was assumed to in volve paint removal from 144 sq. ft. of a 10’ x 10’ 27 room. This calculation includes 3” molding around th e ceiling, 6” baseboard, 1 doorway, and two 3’ x 5’ 28 windows. It was estimated that this would take 1.05 hours using a high temperature heat gun and 1.36 29 hours using a low temperature heat gun. 20 Thus, switching to a low temperature heat gun would require 30

20 According to Hunt (2006), a high temperature heat gun can remove the same amount of paint as dry scraping in 64 percent of the time required for dry scraping. It was estimated that dry scraping can be performed at a rate of 35-100 square feet per-hour, or 68 square feet per-hour on average (the rate of 35-100 square feet per-hour is from Painting and Decorating Contractors of America, 2003). Based on personal communications with industry sources, low-temperature heat gun pain t removal takes 30 percent longer than high-temperature heat gun paint removal.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-46 an additional 0.31 hours per job. At an hourly rate of $18/hr plus 60% overhead, the additional cost of 1 using a low temperature heat gun rather than a high temperature heat gun is $8.93 (PDCA 2003). 2
High Temperature Heat Guns and Open Flame Burning – Exterior 3 Assuming exterior paint removal from 2 doorways a nd 10 windows, the average event would include 4 paint removal from 243 sq. ft. It was estimated that this would take 1.77 hours using a high temperature 5 heat gun and 2.3 hours using a low temperature heat gun. 21 Thus, switching to a low temperature heat 6 gun would require an additional 0.53 hours per job. At an hourly rate of $18/hr plus 60% overhead, the 7 incremental cost of using a low temperature heat gun is $15.26 per job. The cost of switching from using 8 open flame burning or torching of paint to a low te mperature heat gun is assumed to be the same as for 9 switching from a high temperature heat gun to a low temperature heat gun. 10
11 Table 4-31: Time and Cost Associated with Using High and Low Temperature Heat Guns Interior Job Exterior Job

Method Hours Per Job Cost Incremental Per Job Cost Hours Per Job Cost Incremental Per Job

Cost High Temp 1.05 $30.24 - 1.77 $50.98 - Low Temp 1.36 $39.17 $8.93 2.3 $66.24 $15.26 An average interior heat gun event was assumed to involve paint removal from 144 sq. ft. of a 10’ x 10’ room. This calculation includes 3” molding around the ceiling, 6” baseboard, 1 doorway, and two 3’ x 5’ windows. An average exterior heat gun event was assumed to involve paint removal from 243 sq. ft., involving 2 doorways and 10 windows. 12
Estimating Average Costs Per Interior Painting and Exterior Painting Job 13 The sections above described how the average costs pe r event using a prohibited or restricted practice 14 were estimated. For cost estimating purposes an av erage cost across all jobs was estimated– including 15 those without prohibited practices. Table 4-32 presents these estimates. 16

21 See footnote 20.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-47 1 Table 4-32: Average Additional Cost of Alternativ es to Prohibited or Restricted Practices Over All Interior and Exterior Painting Jobs* Average Interior Painting Job Average Exterior Painting Job Prohibited Method Incremental Per Job Cost Frequency as % of All Jobs Avera g e Cost Per Job Incremental Per Job Cost Frequency as % of All Jobs Avera g e Cost Per Job High Temp $8.93 7% $0.63 $15.26 4% $0.61 Open Flame n.a. n.a. n.a. $15.26 3% $0.46 Power Sanding $1.23 35% $0.43 $1.23 44% $0.54 All Prohibited Methods $1.06 $1.61 *The average additional cost is a weighted average across all interior and exterior painting jobs, including those where prohibited practices are not used (and additional costs are not incurred). Interior open flame burning is combined with interior high temperature heat gun jobs (EPA 2008). Low temperature heat guns are assume d to be the alternative to high temperature heat guns and open flame burning. The alternative to power sanding not attach ed to a HEPA vacuum is assumed to be power sanding attached to a HEPA vacuum. 2

4.3.6 Frequency and Cost of Vertical Containment for Exterior Events 3 In certain situations, the renovation firm m ust take extra precautions in containing the work area for opt4 out housing to ensure that dust and debris from an exterior renovation does not contaminate other 5 buildings or other areas of the property or migrate to adjacent properties. These situations include work 6 areas in close proximity to other buildings, work areas that abut a property line, and work in windy 7 conditions. In some cases, it may be necessary to erect a system of vertical containment to prevent paint 8 dust and debris from contaminating the ground or an y object beyond the work area. Such vertical 9 containment could take a number of forms such as att aching plastic sheeting to a fence or other support at 10 the property line, attaching the plastic to a building or a frame attached to the building, or attaching the 11 plastic to scaffolding erected next to the building. 12 This section presents the calculations used to determ ine the total and incremental vertical containment 13 costs for events occurring along one side of a building or all four sides (referred to as 1 and 4-wall events) 14 in target housing units. The hanging of disposable reinforced plastic sheeting constitutes the largest 15 component of the vertical containment costs, so the av erage height of the buildings must be calculated to 16 determine the surface area of the sheeting. 17 Information from the 2005 American Housing Survey ( AHS) was used to calculate the average height of 18 residential housing units. The AHS includes information on the number of stories in the buildings where 19 housing units are located. The average heights of owner occupied units and renter occupied units are just 20 under two stories and two-and-a-half stories, respectively. 21 In order to apply the average number of stories to th e cost estimates, separate height estimates are needed 22 for: single-family owner occupied, single-family re ntal, and multi-family units. Data from the U.S. 23 Census Bureau’s American Factfinder was used to determine which average height values from Table 4- 24 33 to apply to these three categories of residential hou sing units using information on the percent of units 25 that are in single-family or multi-family buildings. 26EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-48 Table 4-33: Average Height of Building for Owner and Renter Occupied Units, Total Housing Stock Owner Occupied Units Renter Occupied Units Stories in Structure Total Occupied Units 1 26,278,000 8,537,000 2 24,026,000 12,257,000 3 16,375,000 7,340,000 4 to 6 2,248,000 2,880,000 7 or more 488,000 1,504,000 Total 69,415,000 32,518,000 Average 1.99 2.46 Sources: U.S. Census Bureau 2006. Note: To calculate the average, “4 to 6” was given a value of 5, and “7 or more” was given a value of 7 1 Table 4-34 presents the number of owner-occupied housing units by the num ber of units in the structure. 2 It also shows what percentage of the housing units are single-family homes and multi-family. 3
4 Table 4-34: Number of Housing Units, by Units in Structure Owner-occupied housing units Units in Structure Number Percentage 1, detached or a ttached 56,255,657 1, attached 3,819,810 86%
2 1,164,675 3 or 4 651,003 5 or more 1,989,511 Mobile home 5,850,241 Boat, RV, Van, etc. 85,616 14%

Total 69,816,513 100% Sources: U.S. Census Bureau 2000 5 As shown in Table 4-34, the majority of owner-occupied ho using units are in one-unit buildings. Thus 6 the average height of owner-occupied housing (2.0 st ories) is used to characterize all single-family 7 housing and the average height of rental housing (2.5 stories) is used to characterize the height of multi8 family housing. 9 Table 4-35 summarizes the physical characteristics of the various building ty pes. It assumes that the 10 average height of a “story” is 12 feet. 11EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-49 Table 4-35: Physical Characteristics of Various Building, by Type

Building Type Estimated Sq. ft. per floor Estimated Perimeter (ft) Estimated Front to Side Ratio Estimated Width of Front (ft) Estimated Width of Side (ft) Average Number of

Stories Assumed hei g ht per story (ft) Estimated Height of Building (ft) Single-family owner occupied home 1,390 152 2 to 3 30.4 45.6 1.99 12 24Multi-family owneroccupied housing structure 4,182 264 2 to 3 52.8 79.2 2.46 12 30 Source: EPA Calculations using U.S. DOE 2003. 1 Table 4-36 presents the total and incremental costs of a vertical containment eve nt involving either one or 2 four walls in the various residential housing units. 22 It is assumed that vertical containment is used for 2% 3 of exterior painting events. To cal culate the necessary amount of disposab le reinforced plastic sheeting, it 4 was assumed that the workers would hang the shee ting not on the perimeter of the house but on the 5 perimeter of the laid polyethylene sh eeting. Furthermore, it is assumed th at for those jobs using vertical 6 containment, 50% of the events in residential units will not need scaffolding b ecause they will use plastic 7 at the fence line or attached to th e building, and that 50% of those ev ents that do need scaffolding for 8 vertical containment are already using it for other reasons, and only incur incremental costs related to 9 plastic sheeting. Therefore only 25% of the residential units that undertake vertical containment will incur 10 incremental costs for scaffolding. 11

22 The analysis only considered one and four wall exterior events to capture the range of containment that might be required for exterior painting events. Two or three wall events are also possible and would result in containment costs between those estimated for the one and four wall events.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-50 Table 4-36: Total and Incremental Costs of Vertical Containment Events Involving One and Four Walls in Residential Housing Units, by Type of Housing and Number of Walls Single Family Owner Occupied Multi Family Owner Occupied 1 Wall Event 4 Wall Event 1 Wall Event 4 Wall Event Cost Type Cost Per Sq. Ft # of sq. ft. Cost # of sq. ft. Cost # of sq. ft. Cost # of sq. ft. Cost Scaffolding, steel tubular, regular, labor only to erect and dismantle, bldg ext, wall face, 6'-4"x5' frames a $1.82 1088.7 $495.4 3629.1 $1,651.2 2338.1 $1,063.8 7793.7 $3,546.2 Scaffolding, steel tubular, regular for complete system for face of walls, 6'-4"x5' frames a $0.38 1088.7 $5.1 3629.1 $68. 0 2338.1 $11.0 7793.7 $146.1 Disposable reinforced plastic sheet b $.23 d 1088.7 $250.4 5921.2 $1,361.9 2338.1 $537.8 10627.8 $2,444.4 Plastic tape c $0.02 18.1 $0.4 79.6 $1. 6 39.0 $0.8 153.5 $3.1 Roll down polyethylene sheeting $0.01 1088.7 $11.2 5921. 2 $61.0 2338.1 $24.1 10627.8 $109.6 Total $762.5 $3,143.8 $1,637.5 $6,249.3 Average (2% of Total) e $15.25 $62.88 $32.75 $124.79 Sources: EPA calculations us ing RS Means 2005 a. The scaffolding costs take into account the assumption that only 25% of residential housing uni ts with vertical containment will need

incur incremental costs for scaffolding. It is assumed that the scaffolding is needed for one day per wall. b. Based on a web search, which show ed that reinforced plastic sheeting costs $.07 per square foot. c. Based on a web search, which showed that duct tape costs $0.02 per square foot a nd 6 mil. polyethylene sheeting costs $0.06 per square foot. d. This includes both material and labor costs. e. The average presented is the average across all exterior pain ting jobs, including the 98% of exterior painting jobs where ve rtical

containment is not assumed to be used.

1 Table 4-36 shows that the costs range in value from just over $760 for a one wall event in a single-fa mily 2 renter occupied unit, to just under $6,250 for a four wall event in a multi-family housing unit. On average, 3 59% of the total cost is due to the labor involved with erecting and dismantling the scaffolding. 4

4.3.7 Baseline Work Practices 5 Some of the containm ent and cleaning practice standard s specified by EPA under the rule are currently in 6 use by certain renovation contractors. The costs of wo rk practices already in use are not incremental costs 7 of the rule and are subtracted out of the cost estimat es. In order to determine how often the required work 8 practices are used in the absence of regulation, a telephone questionnaire was administered to 9 9 contractors in 2007 to collect information on baselin e industry practices. A series of questions were 10 asked to determine if the listed work practices were cu rrently in use and if they were, the frequency with 11 which they occur. 12 The questionnaire’s objective was to collect responses to two sets of questions. One set of questions dealt 13 with current interior RRP work practices. The othe r dealt with exterior work practices. The list of 14 contractors to contact was generated from Salesgenie.com, an online service that contains contact 15 information for over 14 million U.S. businesses. The se rvice permitted companies to be selected based on 16 their SIC Codes. The universe of potential res pondents was generated by randomly selecting businesses 17 with the following SIC Codes: 172101 (Painting Contractors), 1521 (General Contractors - Single-Family 18 Houses), and 1522 (General Contractors - Residen tial Buildings Other Than Single-Family). The 19EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-51 responding companies were comprised of four painting fi rms and five general contracting firms. All nine 1 of the painting and general contrac ting firms answered both the interior and exterior surveys. The 2 instrument used to administer the questionnaire is presented below ( Figure 4-1 and Figure 4-2). 3
4 Figure 4-1: Questions Regarding Work Practices – Interior RRP

Question # Practice Percent of Time Use d 1 • How often do you post signs warning residents to remain outside the work area? 2 • While the work is being performed, how often do you keep all windows and doors within the workarea closed, or covered with sheeting? 3 • How often do you cover the floor with in the work area with taped down sheeting? 4 If > 0%, When you cover the floor with sheeting, do you dispose of the sheeting afterwards or do you reuse the sheeting for other jobs? 5 If > 0%, When you cover the floor with disposable plastic sheeting how often do you, your crew or your subcontractors mist the sheeting, fold it dirty side inward, and tape it shut to seal or seal in heavy duty plastic bags before removing from the work area? 6 • To prevent tracking dust outside the work area, how often do you place a tackpad outside the work area to catch dust on your shoes? 7 • To prevent tracking dust outside th e work area, how often do you wear disposable shoe covers? 8 • To prevent tracking dust outside the work area, how often do you vacuum your clothes, tools, and other items each time you leave the work area? 9 • After completing the job, ho w often do you vacuum any surfaces in the work area 10 If >0%, How often was a HEPA vacuum used for vacuuming floors? 11 If >0%, How often do you vacuum the walls? 12 • After completing the job, ho w often do you wipe all sm ooth surfaces with a damp cloth? 13 • After completing a job where the floor is not carpeted, how often do you wet mop? 14 If >0%, How often do you use a two-bucket mopping system? (Two-bucket mopping means using one bucket and mop with wash water and another bucket and mop with rinse water) 15 • After completing a job where the floor is not carpeted, how often do you sweep with an electrostatic cloth sw eeper (for example a Swiffer ® )? 5EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-52 1 Figure 4-2: Questions Regarding Work Practices – Exterior Painting

Practice Percent of Time Practice

Used (1) How often do you post signs warning residents to remain outside the work area? (2) While the work is being performed, how often do you keep all windows and doors within 20 feet of the work area closed, or covered with sheeting? (3) How often do you cover the ground with sheeting in order to collect falling paint debris? 2 Table 4-37 presents the individual results of the surv ey s as well as overall statistics for across the surveys. 3 The data are broken down by firm type (painting or general contracting), and survey type (interior or 4 exterior questions). 5

6 Table 4-37: Summary of Baseline Work Practice Survey Results Painting Firms General Cont ractors Descriptive Statistics

P1 P2 P3 P4 G1 G2 G3 G4 G5 Min Max Average 1 0% 5% 100% 0% 100% 100% 0% 0% 0% 0% 100% 34% 2 80% 100% 75% 0% 100% 75% 100% 100% 50% 0% 100% 76% 3 100% 100% 100% 100% 16% 100% 100% 25% 50% 16% 100% 77% 4 Reuse Reuse Reuse Reuse Dispose Dispose Reuse - Dispose - 5 100% - 100% 100% 16% 100% 0% 0% 100% 0% 100% 77% 6 16% 0% 45% 0% 0% 100% 100% 0% 0% 0% 100% 29% 7 0% 0% 0% 0% 0% 25% 100% 50% 0% 0% 100% 19% 8 0% 0% 0% 0% 50% 50% 100% 50% 10% 0% 100% 29% 9 100% 100% 25% 75% 100% 100% 100% 75% 50% 25% 100% 81% 10 0% 0% 0% 100% ? 100% 100% 0% 0% 0% 100% 38% 11 0% 0% 0% 0% 100% 100% 0% 75% 0% 0% 100% 31% 12 100% 100% 15% 50% 100% 100% 100% 75% 90% 15% 100% 81% 13 100% 50% 10% 0% 16% 100% 0% 75% 100% 0% 100% 50% 14 0% 100% 100% 0% 0% 100% 0% 16% 0% 0% 100% 35% Interior

15 0% 60% 0% 0% 16% 0% 0% 0% 0% 0% 60% 8% 1 0% 5% 100% 10% 100% 100% 0% 0% 0% 0% 100% 35% 2 100% 100% 75% 100% 100% 100% 100% 75% 100% 75% 100% 94% Exterior 3 0% 100% 100% 0% 100% 100% 100% 100% 0% 0% 100% 67% N otes: When respondents gave a range of values for the percent of time they used a certain work practice, the midpoint of the range was used in calculating the av erage. When the respondent was unable to give a response, a question mark is presented and the value is excluded from the calculation. 7 Table 4-38 describes how the incremental cost adjustme nt is estimated to account for the use of required 8 work practices in the baseline. These calculations are based on the questionnaire responses and adjusted 9 to account for the assumption in this analysis that th ere will be 75 percent compliance with the rule. For 10 example, based on the average questionnaire response, si gns are posted 34 percent of the time. Since it is 11 assumed that signs will be posted 75 percent of the ti me after the rule, 45 percent (45% = 34%/75%) of 12 the post-rule sign-posting costs are al ready incurred in the baseline. Thus, since it is estimated that 13EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-53 posting a sign costs $0.11 per-event, the incremental im pact of the rule’s sign posting requirement is 1 $0.07 ($0.11 * (1-45%)) after adjusting for baseline sign posting 2
3EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-54 1 Table 4-38: Description of Calculatio ns for Baseline Work Practice Factors

Work Practice Question Number(s) Description of Calculation Unadjusted Percentage Complianceadjusted Percentage a Sign 1 Simple average of responses 34% 45% Floors: Cover surfaces with polyethylene sheeting (labor) 3 Simple average of responses 77% 100%

Floors: Cover surfaces with polyethylene sheeting (materials) 3,4 An average was calculated; those who stated that they reused the sheeting were coded as zeroes; the values given in question three were used for those who disposed of the sheeting. 21% 28% Walls: Cover surfaces with polyethylene sheeting 2 Simple average of responses 76% 100% Tack pad 6 Simple average of responses 29% 39% Pair of disposable shoe covers 7 Simple average of responses 19% 26% Roll down polyethylene sheeting 3,5 Product of 3 and 5 69% 92% Bag polyethylene sheeting 3,5 0% if Reuse, Product of 3 and 5 if Dispose. 19% 25%

HEPA vacuum for work area (the actual vacuum) 10 An average was calculated; those who responded that they used a HEPA vacuum were coded a one, and those who stated that they didn't were coded a zero. 38% 50%

HEPA vacuum use 10,11 An average of the res ponses to questions 10 and 11. 34% 45% vacuum use (floors) 9 Simple average of responses 81% 100% vacuum use (walls) 11 Simple average of responses 31% 41% HEPA vacuum clothes 8 Simple average of responses 29% 39% Wet wipe, flat surfaces 12 Simple average of responses 81% 100% Wet wipe, flat surfaces (verification) Assume zero, this is the extra verification cleaning. 0% 0%

Electrostatic cloth sweeper

15 An average was calculated; those who responded that they us ed an electorstatic cloth sweeper were coded as ones; those who responded that they didn't were coded as zeroes. 22% 30% Disposable wet cloth Assume zero, this is the cleaning verification. 0% 0% Interior

Disposable dry cloth Assume zero, this is the cleaning verification. 0% 0% Sign 1 Simple average of responses 35% 47% Ground: Cover surfaces with polyethylene sheeting, each layer, 6 mil, incl. glue & tape 3 Simple average of responses 67% 89% Doors: Cover surfaces with polyethylene sheeting, each layer, 6 mil, incl. glue & tape 2 Simple average of responses 94% 100% Exterior

Roll down polyethylene sheeting e 3, interior 5 Product of 3 and interior 5 40% 53%

a. The compliance-adjusted work practice fact or inflates the unadjusted value by in corporating an assumed 75% non-compliance rate and cannot be greater than 100%.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-55 4.3.8 Summary of Incremental Work Practice Costs Per Event in Target Housing 1 Table 4-39 summarizes the incremental work practice costs associ ated with containment, cleaning, and 2 verification in target housing. The methodology behind these estimates is described in the preceding 3 sections and more detailed data is presented in Appendix 4A of the Economic Analysis of the 2008 LRRP 4 rule (EPA 2008). Table 4-40 shows the average expected cost s per -compliant event, accounting for the 5 relative number of small and large events. These are average expected costs so some individual events 6 will be above the average and some will be below it. 7
8 Table 4-39: Average Incremental Work Practice Costs in Residences (Adjusted for Baseline Work Practices, Assumes 75 Percent Compliance Rate) Single-Family Owner-Occupied Multi-Family Owner-Occupied Interior Cont. Clean. Verif. Tot.

Bath $11 $7 $4 $22 $10 $7 $4 $22 Kit $21 $15 $14 $49 $14 $10 $7 $30 Ad-S $5 $9 $2 $16 $5 $9 $2 $16 Ad-M $21 $13 $7 $41 $14 $9 $4 $26 Ad-L $26 $15 $10 $51 $19 $12 $6 $36 Wl-S $5 $9 $2 $16 $5 $9 $2 $16 Wl-M $21 $13 $7 $41 $14 $9 $4 $26 Wl-L $26 $15 $10 $51 $19 $12 $6 $36 WD-S $6 $10 $3 $19 $5 $9 $2 $15 WD-M $21 $13 $7 $41 $14 $9 $4 $26 WD-L $66 $29 $29 $124 $38 $19 $15 $72 IP-S $11 $11 $5 $27 $8 $9 $4 $22 IP-M $33 $19 $14 $67 $22 $14 $8 $46 IP-L $51 $25 $23 $101 $31 $18 $13 $63 Exterior Cont. Proh. V.C. Tot. Cont. Proh. V.C. Tot.

EP $16 $2 $39 $57 $25 $2 $79 $106 C Ext $10 - $10 $10 $10 W Ext $25 $25 $41 $41 Notes: The sum of the containment, cleaning and verification costs may not equal the total per-event cost due to rounding. The costs associated with using prohibite d practice alternatives ar e only included in the Total Per-Event Cost column. The prohibited practice alternat ives costs are $1.06 for the interior painting events and $1.61 for exterior painting events.

Abbreviations: Cont. = Per Event Containment Costs (does not include vertical containment); Clean = Per Event Cleaning Costs; Verif. = Per Event Verificatio n Costs; Tot. = Total Per-Event Costs, including costs for prohibited practice alternatives and vertical c ontainment; Proh. = prohibited practice co sts; V.C. = vertical containment costs; Kit = Kitchen Event; Bath = Bathroom Even t; Ad-S = Small Addition; Ad-M = Medium Addition; Ad-L = Large Addition; Wl-S = Small Wall-Disturbing Event; Wl-M = Medium Wall-Disturbing Event; WlL = Large Wall-Disturbing Event; WD-S = Small Window or Door Replacement Event; WD-M = Medium Window or Door Replacement Event; WD-L = Large Window or Door Re placement Event; IP-S = Small Interior Painting; IP-M = Medium Inte rior Painting; IP-L = Large Interior Painting; EP = Exterior Painting; C Ext = Contained Exterior Event; W Ext = Whole Exterior Event. 9

4.3.9 Total Work Practice Costs Resulting from Removing Opt-Out Provisions 10 Table 4-40 through Table 4-43 present the total work practi ce cost s associated with target housing 11 regulated under the revised rule (i.e., owner occupied housing that may no longer opt out of the LRRP 12EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-56 program requirements) for the first and second years after the revisions rule goes into effect. For 1 individual options the costs vary between the first and the second year for two primary reasons: (1) for 2 some options, the scope of the regulated universe e xpands between the first and the second year, and (2) 3 the improved test kits are assumed to become available by January 2011, which is the second year of the 4 rule for Options A through C. Increasing the scope of the regulated universe tends to increase costs and 5 the availability of the improved test kits tends to decrease the costs (since improved test kits will lower 6 the number of instances where LSWP costs are incurred when lead-based paint is not disturbed). After 7 the second year, estimated work practice costs declin e proportionally to the assumed decline in the stock 8 of regulated buildings (a 0.41 percent decline per year ). Note that the removal of the opt-out provision 9 would not begin until the second year under Option C. 10
11 Table 4-40: Option A: First Year Target Housing Work Practice Costs Events (thousands) Unit Costs Total Costs (thousands) LSWP LSWP LSWP All SF-O Multi-O Spot Test SF-O Multi-O Spot Test SF-O Multi-O Total Costs Bath 269 179 13 $10 $22 $22 $2,695 $3,930 $284 $6,909 Kit 277 186 16 $10 $49 $30 $2,774 $9,098 $488 $12,360 Ad-S 55 42 1 $10 $16 $16 $548 $677 $8 $1,234 Ad-M 21 16 0 $10 $41 $26 $207 $669 $0 $877 Ad-L 84 65 1 $10 $51 $36 $844 $3,334 $32 $4,210 Wl-S 885 571 31 $10 $16 $16 $8,853 $9,140 $496 $18,489 Wl-M 51 34 2 $10 $41 $26 $506 $1,392 $63 $1,961 Wl-L 0 0 0 $10 $51 $36 $0 $0 $0 $0 WD-S 228 168 6 $10 $19 $15 $2,282 $3,187 $84 $5,553 WD-M 267 195 8 $10 $41 $26 $2,666 $8,011 $215 $10,892 WD-L 358 261 13 $10 $124 $72 $3,579 $32,424 $972 $36,975 IP-S 612 441 30 $10 $27 $22 $6,117 $11,906 $666 $18,690 IP-M 345 248 18 $10 $67 $46 $3,453 $16,603 $820 $20,876 IP-L 292 209 16 $10 $101 $63 $2,921 $21,112 $979 $25,013 EP 2,828 2,029 110 $10 $57 $106 $28,281 $115,670 $11,674 $155,625 C Ext 347 249 0 $10 $10 $10 $3,470 $2,487 $0 $5,956 W Ext 352 256 12 $10 $25 $41 $3,518 $6,394 $484 $10,396 Total 7,272 5,150 277 $72,716 $246,034 $17,265 $336,014 See Table 4-1 for options descriptions. Abbreviations: S F-O = Single-Family Owner-O ccupied Unit; Multi-O = Multi-Family Owner-Occupied Unit; Kit = Kitchen Event; Bath = Bathroom Event; Ad-S = Small Addition; Ad-M = Medium Addition; Ad-L = Large Addition; Wl-S = Small Wall-Disturbing Event; Wl-M = Medium Wall-Disturbing Event; Wl-L = Large Wall-Disturbing Event; WD-S = Small Window or Door Replacement Event; WD-M = Medium Window or Door Replacement Event; WD-L = Large Window or Door Replacement Event; IP-S = Small Interior Painting; IP-M = Medium Interior Painting; IP-L = Large Interior Painting; EP = Exterior Painting; C Ext = Contained Exterior Event; W Ext = Whole Exterior Event. 12EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-57 1 Table 4-41: Option B: First Year Target Housing Work Practice Costs Events (thousands) Unit Costs Total Costs (thousands) LSWP LSWP LSWP All SF-O Multi-O Spot Test SF-O Multi-O Spot Test SF-O Multi-O Total Costs Bath 135 89 6 $10 $22 $22 $1,347 $1,965 $142 $3,454 Kit 139 93 8 $10 $49 $30 $1,387 $4,549 $244 $6,180 Ad-S 27 21 0 $10 $16 $16 $274 $339 $4 $617 Ad-M 10 8 0 $10 $41 $26 $104 $335 $0 $438 Ad-L 42 33 0 $10 $51 $36 $422 $1,667 $16 $2,105 Wl-S 443 286 16 $10 $16 $16 $4,426 $4,570 $248 $9,244 Wl-M 25 17 1 $10 $41 $26 $253 $696 $31 $980 Wl-L 0 0 0 $10 $51 $36 $0 $0 $0 $0 WD-S 114 84 3 $10 $19 $15 $1,141 $1,594 $42 $2,777 WD-M 133 98 4 $10 $41 $26 $1,333 $4,005 $107 $5,446 WD-L 179 131 7 $10 $124 $72 $1,790 $16,212 $486 $18,488 IP-S 306 220 15 $10 $27 $22 $3,059 $5,953 $333 $9,345 IP-M 173 124 9 $10 $67 $46 $1,727 $8,301 $410 $10,438 IP-L 146 105 8 $10 $101 $63 $1,461 $10,556 $490 $12,506 EP 1,414 1,015 55 $10 $57 $106 $14,141 $57,835 $5,837 $77,812 C Ext 173 124 0 $10 $10 $10 $1,735 $1,243 $0 $2,978 W Ext 176 128 6 $10 $25 $41 $1,759 $3,197 $242 $5,198 Total 3,636 2,575 138 $36,358 $123,017 $8,632 $168,007 See Table 4-1 for options descriptions. Abbreviations: S F-O = Single-Family Owner-O ccupied Unit; Multi-O = Multi-Family Owner-Occupied Unit; Kit = Kitchen Event; Bath = Bathroom Event; Ad-S = Small Addition; Ad-M = Medium Addition; Ad-L = Large Addition; Wl-S = Small Wall-Disturbing Event; Wl-M = Medium Wall-Disturbing Event; Wl-L = Large Wall-Disturbing Event; WD-S = Small Window or Door Replacement Event; WD-M = Medium Window or Door Replacement Event; WD-L = Large Window or Door Replacement Event; IP-S = Small Interior Painting; IP-M = Medium Interior Painting; IP-L = Large Interior Painting; EP = Exterior Painting; C Ext = Contained Exterior Event; W Ext = Whole Exterior Event.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-58 1 Table 4-42: Option D: First Year Target Housing Work Practice Costs Events (thousands) Unit Costs Total Costs (thousands) LSWP LSWP LSWP All SF-O Multi-O Spot Test SF-O Multi-O Spot Test SF-O Multi-O Total Costs Bath 119 87 6 $10 $22 $22 $1,191 $1,903 $133 $3,227 Kit 124 93 7 $10 $49 $30 $1,241 $4,556 $216 $6,012 Ad-S 25 22 1 $10 $16 $16 $252 $346 $8 $606 Ad-M 11 10 0 $10 $41 $26 $110 $390 $0 $500 Ad-L 41 36 0 $10 $51 $36 $414 $1,842 $0 $2,256 Wl-S 436 296 16 $10 $16 $16 $4,356 $4,742 $251 $9,349 Wl-M 31 21 2 $10 $41 $26 $308 $875 $56 $1,240 Wl-L 0 0 0 $10 $51 $36 $0 $0 $0 $0 WD-S 113 92 3 $10 $19 $15 $1,128 $1,745 $52 $2,924 WD-M 137 111 5 $10 $41 $26 $1,371 $4,539 $138 $6,049 WD-L 190 152 9 $10 $124 $72 $1,898 $18,821 $666 $21,386 IP-S 379 294 20 $10 $27 $22 $3,786 $7,926 $437 $12,149 IP-M 212 164 11 $10 $67 $46 $2,121 $10,995 $521 $13,637 IP-L 180 138 10 $10 $101 $63 $1,795 $13,982 $621 $16,399 EP 1,457 1,161 60 $10 $57 $106 $14,568 $66,152 $6,343 $87,062 C Ext 178 137 0 $10 $10 $10 $1,780 $1,366 $0 $3,145 W Ext 189 150 9 $10 $25 $41 $1,886 $3,740 $349 $5,975 Total 3,821 2,962 159 $38,205 $143,921 $9,790 $191,916 See Table 4-1 for options descriptions. Abbreviations: S F-O = Single-Family Owner-O ccupied Unit; Multi-O = Multi-Family Owner-Occupied Unit; Kit = Kitchen Event; Bath = Bathroom Event; Ad-S = Small Addition; Ad-M = Medium Addition; Ad-L = Large Addition; Wl-S = Small Wall-Disturbing Event; Wl-M = Medium Wall-Disturbing Event; Wl-L = Large Wall-Disturbing Event; WD-S = Small Window or Door Replacement Event; WD-M = Medium Window or Door Replacement Event; WD-L = Large Window or Door Replacement Event; IP-S = Small Interior Painting; IP-M = Medium Interior Painting; IP-L = Large Interior Painting; EP = Exterior Painting; C Ext = Contained Exterior Event; W Ext = Whole Exterior Event. 2EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-59 1 Table 4-43: Options A, B, C, and D: Second Year Target Housing Work Practice Costs Events (thousands) Unit Costs Total Costs (thousands) LSWP LSWP LSWP All SF-O Multi-O Spot Test SF-O Multi-O Spot Test SF-O Multi-O Total Costs Bath 268 78 6 $10 $22 $22 $2,684 $1,726 $132 $4,541 Kit 276 92 8 $10 $49 $30 $2,763 $4,487 $237 $7,487 Ad-S 55 27 0 $10 $16 $16 $546 $431 $7 $985 Ad-M 21 11 0 $10 $41 $26 $207 $438 $0 $644 Ad-L 84 43 0 $10 $51 $36 $841 $2,174 $13 $3,028 Wl-S 882 195 11 $10 $16 $16 $8,816 $3,115 $181 $12,112 Wl-M 50 16 1 $10 $41 $26 $504 $639 $37 $1,179 Wl-L 0 0 0 $10 $51 $36 $0 $0 $0 $0 WD-S 227 97 4 $10 $19 $15 $2,272 $1,852 $54 $4,178 WD-M 266 116 5 $10 $41 $26 $2,655 $4,737 $141 $7,533 WD-L 356 157 9 $10 $124 $72 $3,565 $19,513 $662 $23,740 IP-S 609 269 19 $10 $27 $22 $6,092 $7,260 $423 $13,775 IP-M 344 150 11 $10 $67 $46 $3,439 $10,069 $519 $14,027 IP-L 291 127 10 $10 $101 $63 $2,909 $12,787 $611 $16,308 EP 2,817 1,165 63 $10 $57 $106 $28,165 $66,406 $6,668 $101,238 C Ext 346 114 0 $10 $10 $10 $3,455 $1,141 $0 $4,596 W Ext 350 149 8 $10 $25 $41 $3,504 $3,716 $321 $7,540 Total 7,242 2,804 157 $72,417 $140,490 $10,004 $222,912 See Table 4-1 for options descriptions. Abbreviations: S F-O = Single-Family Owner-O ccupied Unit; Multi-O = Multi-Family Owner-Occupied Unit; Kit = Kitchen Event; Bath = Bathroom Event; Ad-S = Small Addition; Ad-M = Medium Addition; Ad-L = Large Addition; Wl-S = Small Wall-Disturbing Event; Wl-M = Medium Wall-Disturbing Event; Wl-L = Large Wall-Disturbing Event; WD-S = Small Window or Door Replacement Event; WD-M = Medium Window or Door Replacement Event; WD-L = Large Window or Door Replacement Event; IP-S = Small Interior Painting; IP-M = Medium Interior Painting; IP-L = Large Interior Painting; EP = Exterior Painting; C Ext = Contained Exterior Event; W Ext = Whole Exterior Event. 2


### 4.4 Estimating the Number of Firms and Personnel Obtaining Training and 3 

### Certification to Meet the Demand for Lead-Safe RRP Services 4 The rule requires all entities that conduct RRP activ ities for compensation in regulated structures to 5 become certified under the rule. This analysis refe rs to these certified entities as firms. The regulations 6 also require firms to ensure that all persons pe rforming renovation activities on behalf of the firm are 7 either certified renovators that have received formal training or have received informal training from a 8 certified renovator. Hereafter, “renovator” refers to an individual who has successfully completed a 9 renovator course accredited by EPA or an EPA-authorized State or Tribal program, and “worker” refers to 10 an individual who has received on-the-job training in the work practices from a certified renovator. It is 11 expected that two types of construction businesses will perform regulated RRP work – businesses with 12 employees and non-employer, or self-emp loyed, contractors. In addition, rental companies are likely to 13 perform some of the RRP work on the properties they manage rather than hire an outside contractor. 14 Likewise, schools and daycare centers are likely to perform some or all of their RRP work with their own 15 staff. The regulation requires that a certified renovator be physically present when warning signs are 16 being posted, the work site is being contained, and when the post-renovation cleaning is being done. The 17 certified renovator must be available, either on-site or by telephone, at all other times when regulated 18 renovation activities are being performed. In add ition, only a certified renovator may perform the 19 cleaning verification step required by the rule. As such, each certified firm with employees will need to 20EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-60 have at least one certified renovator on staff. A ll self-employed contractors performing regulated RRP 1 work will need to be trained as re novators and upon satisfying the traini ng requirements, will need to be 2 certified as firms. 3

4.4.1 Residential Activities: Estimating the Number of Firms and Personnel Obtaining 4 Training and Certification to Meet the Demand for Lead-Safe RRP Services 5 This section describes how the analy sis estimates the number of (1) firms obtaining certification, (2) 6 renovators obtaining formal training, and (3) workers obtaining informal on-the-job training in order to 7 meet the demand for lead-safe RRP services in reside ntial settings. The general approach was to obtain 8 Census estimates of the total number of establishments and employees in affected industries and adjust 9 these estimates to account for the fact that not all work performed in these industries is affected by the 10 rule. Note that Census data are only available for establishments and not firms, and these data are used as 11 the basis for estimating the number of firms that will obtain certification. The total numbers of 12 establishments and employees are adjusted in two ways : (1) according to the shar e of their revenues that 13 come from residential work, and (2) to reflect the shar e of the housing stock that is affected by the LRRP 14 revisions rule. 23 These adjustments imply that there will be some degree of specialization in regulated 15 work. They do not, however, imply full specializatio n in regulated work. In addition, the adjustments do 16 not fully reflect the share of RRP work that does not disturb any painted surfaces, or the disproportionate 17 amount of residential work that is related to new construction. Adjusting for these two factors would 18 result in a lower estimate of the number of affected firms and personnel. 19

4.4.1.1 Estimating the Stock of Certified Firms Nece ssa ry to Meet Demand for Residential RRP 20 The numbers of firms seeking certification under the rule are estimated in three segments: (1) residential 21 construction establishments with employees, (2) non- employer residential construction establishments 22 (i.e., self-employed contractors), and (3) Residentia l Property Managers and Lessors. Residential 23 Property Managers and Lessors would not be affected by the remova l of the opt-out provision (because 24 rental units were not eligible for the opt-out provision under the 2008 LRRP rule) but they would be 25 affected by the additional recor dkeeping checklist requirement. 26

23 With respect to the second adjustment, it implies that by expanding the scope of the LRRP program (by removing the opt-out provisions), the LRRP revisions will proportionately increase the number of certified firms and trained renovators and workers, and thus the total training and certification costs for residential contractors. To the extent that firms are less specialized than assumed here, more renov ators and firms than originally predicte d may become trained and renovated as a result of the 2008 LRRP rule. In that case, the incremental trai ning and certification cost of the LRRP revisions rule may be less than this analysis estimates.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-61 Estimating the Number of Residential Construction Establishments with Employees 1 The LRRP revisions rule requires firms that conduct RRP activities in housing previously eligible for the 2 opt-out provision to become certified under the LRRP program rule. Because the majority of firms 3 involved in construction work are likely to be sm all, single establishment businesses, this analysis 4 assumes that firms will seek certification at the establis hment level. As demonstrated in Chapter 2, the 5 eleven potentially affected construction sectors (R esidential Remodelers and ten specialty contractor 6 sectors: Plumbing and HVAC, Tile and Terrazzo, Pain ting and Wall Covering, Finish Carpentry, Glass 7 and Glazing, Drywall and Insulation, Siding, Other Building Equipment, Other Building Finishing, and 8 Electrical contractors) include over 357,000 establishments with employees. Because these 9 establishments are involved in a variety of construc tion and non-construction ac tivities, in all likelihood 10 only some of them will seek certification under the LRRP program rule. For example, only 54 percent of 11 Residential Remodeling establishments specialize in resi dential work (i.e. derive at least 51 percent of 12 their revenues from residential work). In additio n, only 56 percent of the revenues of Residential 13 Remodelers come from residential RRP activities. Establishments may choose to incur the cost of 14 certification and of training their employees only if they derive a substantia l portion of their revenues 15 from residential Renovation, Repair, and Painting in hous ing affected by the regulations. Businesses that 16 derive the majority of their revenues from new cons truction or from RRP activities in non-target housing 17 may decide not to invest in certification. 18 Unfortunately, the U.S. Economic Census does not pr ovide data on the number of establishments that 19 specialize in residential RRP. The number of establis hments estimated to specialize in residential RRP 20 was estimated by multiplying the total number of establishments by each industry sector’s ratio of RRP 21 residential revenues to total construction revenues (See Table 4-44). 22
23EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-62 1
Estimating the Number of Non-Employer Residential Construction Firms 2 The number of self-employed (non-employer) firms in each of the eleven affected industry sectors is 3 presented in Table 4-45. It was assumed that these firms w ill specialize in resid ential work with the same 4 frequency as employer establishments in the same industry. In other words, to estimate the number of 5 self-employed contractors specializing in residential work, the estimated number of non-employer 6 establishments in each industry was multiplied by that industry’s ratio of residential RRP revenues to total 7 construction revenues (see Table 4-45). 8 Table 4-44: Employer Construction Establis hments, Total and Number Specializing in Residential RRP

NAICS Description Number of Employer Estab. in Industry Residential Adjustment Factor: Residential Revenues as a Percent of Total Value of Construction Number of Employer Estab. in Industry, Adjusted by Residential Adjustment Factor

236118 Residential remodelers 82,747 56% 46,338 238170 Siding contractors 6,632 50% 3,316

238350 Finish carpentry
contractors 35,087 50% 17,544

238290 Other building equipment
contractors 6,087 33% 2,009

238390 Other building finishing
contractors 3,729 30% 1,119

238340 Tile and terrazzo
contractors 8,950 28% 2,506

238220 Plumbing and HVAC
contractors 87,501 27% 23,625

238150 Glass and glazing
contractors 5,294 26% 1,376

238320 Painting and wall covering
contractors 38,943 25% 9,736 238210 Electrical contract ors 62,586 23% 14,395

238310 Drywall and insulation
contractors 19,598 21% 4,116
Total 357,154 35% 126,080 Source: U.S. Census Bureau 2003; U.S. Census Bureau 2005d,f; U.S. Small Business Administration 2005; EPA CalculationsEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-63 1
Estimating the Number of Property Managers and Lessors that Perform Residential RRP 2 Instead of hiring an outside contractor for RRP wo rk on properties under their management, Residential 3 Property Managers (NAICS 531311) and Lessors of Residential Buildings and Dwellings (NAICS 4 531110) may choose to do the renovation work with th eir own staff. Since all firms performing RRP 5 work in regulated housing must be certified, establis hments that choose to perform their own RRP work 6 will seek certifications under the regulations. The estimated numbers of these establishments are 7 presented in Table 4-46. Note that rental units and theref ore Reside ntial Property Managers and Lessors 8 of Residential Buildings and Dwellings are not affected by the opt-out provision, but would be subject to 9 the additional recordkeeping checklist requirement. 10 The U.S. Economic Census does not present any data on the amount of RRP work performed by 11 Residential Property Managers on their own properties. Due to this lack of data, this analysis assumes 12 that all Residential Property Management and Lessors of Residential Buildings and Dwellings 13 establishments that have paid employees and manage housing regulated by the rule will seek certification 14 and train their employees as certified renovators or workers. Although this assumption is likely to 15 overestimate the number of establishments and perso nnel seeking certification and training, it is not 16 unreasonable since performing minor renovation or main tenance work in-house is often less expensive 17 than hiring an outside contractor. The vast majority of establishments that manage regulated housing may 18 Table 4-45: Non-Employer Construction Establishments, Total and Number Specializing in Residential RRP

NAICS Description Number of Non-Employer Estab. in Industry Residential Adjustment Factor: Residential Revenues as a Percent of Total Value of Construction Number of NonEmployer Estab. in Industry, Adjusted by Residential Adjustment Factor 236118 Residential remodelers 194,182 56% 108,742 238170 Siding contractors 15,939 50% 7,970

238350 Finish carpentry
contractors 185,118 50% 92,559

238290 Other building equipment
contractors 9,710 33% 3,204

238390 Other building finishing
contractors 19,674 30% 5,902

238340 Tile and terrazzo
contractors 47,220 28% 13,222

238220 Plumbing and HVAC
contractors 110,183 27% 29,749

238150 Glass and glazing
contractors 12,723 26% 3,308

238320 Painting and wall covering
contractors 205,462 25% 51,366 238210 Electrical contractors 102,219 23% 23,510

238310 Drywall and insulation
contractors 103,398 21% 21,714
Total 1,005,828 36% 361,246 Source: U.S. Census Bureau 2003; U.S. Census Bureau 2005d,f; U.S. Small Business Administration 2005; EPA CalculationsEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-64 thus find certification worthwhile. Note that only establishments w ith employees are expected to seek 1 certification; non-employers are unlikely to have the time or manpower to perform renovations 2 themselves and are more likely to hire an outside contr actor for work that disturbs more than 6 square feet 3 per room of a painted surface for interior renovati ons or 20 square feet for exterior renovations. 4
5 Table 4-46: Property Managers and Lessor Establishments Performing RRP NAICS Description Number of Establishment in Industry
531311 Residential Property Managers 26,223 531110 Lessors or Residential Buildings and Dwellings 61,787 Total 88,010 Source: U.S. Census Bureau 2003; U.S. Census Bureau 2005d,f; U.S. Small Business Administration 2005; EPA Calculations 6
Summary of the Additional Number of Establishm ents Needed to Perform Residential RRP After 7 the Removal of the Opt-Out Provision 8 Table 4-47 presents a summary of the estimated numb er of establish ments specializing in residential 9 RRP. The estimated number of residential RRP establi shments was further reduced to account for the fact 10 that only some of these entities will perform RRP work in target housing. The latter adjustment was 11 made based on data obtained from th e American Housing Survey that 65 percent of U.S. households 12 reside in target housing. 13
14 Table 4-47: Total Number of Establishmen ts Performing Residential RRP in Target Housing Type of Establishment

Number Performing Residential RRP Estimated Number of Establishments Performing Residential RRP in Pre-1978 Housing Non-Employer Construction Establishments 361,246 234,810 Employer Construction Establishments 126,080 81,952 Property Manager and Lessor Establishments 88,010 57,207 Total 575,336 373,968 Source: U.S. Census Bureau 2003; U.S. Census Bureau 2005d,f; U.S. Small Business Administration 2005; EPA Calculations 15 The estimate that 373,968 firms perform residential RR P in pre-1978 housing represents the total stock of 16 firms that would be required to meet the potential demand for RRP using LSWP in all target housing. To 17 estimate the stock of certified firms under the various options, 373,968 is adjusted by 75 percent to 18 account for the 75 percent rate of compliance assumed in this analysis. In addition, the compliance19 adjusted estimate is adjusted to reflect the scope of each regulatory option, based on the percentage of all 20 target housing RRP events regulated under each option. The removal of the opt-out provision from the 21 final LRRP rule would affect entities performing RRP work in owner-occupied target housing units that 22 are not COFs and where no child under the age of six or a pregnant woman resides. The estimated stock 23 of firms needed to meet the demand for RRP under the 2008 LRRP rule as well as the increase in the 24EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-65 stock of certified firms that would be needed after the removal of the opt-out provision is presented in 1 Table 4-48. 2
3
Table 4-48: Estimated Stock of Firms Certified to Perform RRP Under the 2008 LLRP Rule and the Opt-Out Revision, by Option and Year Additional Number Estimated due to LRRP Revisions 2008 LRRP Rule Option A Option B Option C Option D

Year 1 211,721 111,426 55,713 0 58,544 Year 2 210,853 110,969 110,969 110,969 110,969 Year 3 209,989 110,514 110,514 110,514 110,514
See Table 4-1 for options descriptions. Source: EPA Calculations. 4
Estimating the Stock of Trained Construction Workers Necessary to Meet Demand for Residential 5 RRP 6 The rule requires certified firms to ensure that renova tion activities covered by the rule are performed by 7 certified renovators, or by renovation workers who receive on-the-job training in the work practices from 8 a certified renovator. The regulation requires that a certified renovator be physically present when 9 warning signs are being posted, the work site is being contained, and during post-renovation cleaning. 10 The certified renovator must be available, either on-site or by telephone, at all other times when regulated 11 renovation activities are being performed. In add ition, only a certified renovator may perform the 12 cleaning verification step required by the rule. As such, each certified establishment with employees will 13 need to have at least one certified renovator on sta ff. All self-employed contractors performing regulated 14 RRP work will need to be trained as renovators and upon satisfying the training requirements, will need 15 to be certified as firms. 16
Estimating the Number of Residential Cons truction Employees (e xcluding self-employed) 17 To estimate the number of construction employees that will train to become certified renovators, this 18 analysis looked at the average number of constructio n employees in establishments performing residential 19 RRP jobs. The average employment size was calculated by dividing the number of construction 20 employees seeking training by the number of est ablishments certified in each industry (See Table 4-49). 21 This analy sis also assumed that establishments will employ one certified renovator per every five 22 construction employees. In other words, establishmen ts that have one to fi ve construction workers on 23 staff will employ one renovator, establishments with more than five and fewer than 10 construction 24 workers on staff will employ two renovators, and tho se with 10 or more construction workers on staff will 25 employ three renovators. The average number of construction workers per establishment was no higher 26 than 15 in any affected sector. 27 To estimate the number of construction employees th at would be trained as renovators, the estimated 28 number of establishments seeking certification in each sector was multiplied by the expected number of 29 renovators per establishment for that sector (see Table 4-49 and Table 4-50). Four of the affected sectors 30 (Other Building Eq uipment Contractors, Other Building Finishing Contractors, Electrical Contractors and 31 Drywall and Insulation Contractors) had, on aver age, between 10 and 15 construction employees per 32 establishment and were assumed to have three renova tors on staff each. The number of construction 33 employees in each sector that will need to receive worker training was estimated by subtracting the 34EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-66 number of people receiving renovator certification fro m the total number of people seeking training (see 1 Table 4-50). 2
3

4 The num ber of employee establishment personnel expect ed to seek training as either certified renovators 5 or workers was estimated by applying the same a pproach used for the estimation of the number of 6 establishments that will seek certification under the regulations (note: employee establishment personnel 7 does not include the self-employed). It was assumed th at the number of people who perform RRP work in 8 each of the affected industries is proportional to the ratio of residential RRP revenues to the total 9 construction revenues in that sector. In other words, it was assumed that since 28 percent of construction 10 revenues in the Tile and Terrazzo contractor industry come from residential RRP, then 28 percent of the 11 construction employees perform residential RRP work. The number of employees estimated to specialize 12 in residential RRP was estimated by multiplying the total number of employees by each industry sector’s 13 ratio of RRP residential revenues to total construction revenues (See Table 4-50). 14 Table 4-49: Employer Construction Employees: Construction Workers in Supervisory Roles

NAICS Description Number of Employer Estab. in Industry Number of Construction

Workers Employed by

Employer Establishments Employees Per Establishment Estimated Number of Renovators Per Establishment* 236118 Residential remodelers 82,747 207,633 2.5 1 238170 Siding contractors 6,632 30,284 4.6 1

238350 Finish carpentry
contractors 35,087 129,888 3.7 1

238290 Other building equipment
contractors 6,087 90,504 14.9 3

238390 Other building finishing
contractors 3,729 37,353 10.0 3

238340 Tile and terrazzo
contractors 8,950 44,729 5.0 1

238220 Plumbing and HVAC
contractors 87,501 712,452 8.1 2

238150 Glass and glazing
contractors 5,294 34,086 6.4 2

238320 Painting and wall covering
contractors 38,943 184,328 4.7 1 238210 Electrical contractors 62,586 606,403 9.7 2

238310 Drywall and insulation
contractors 19,598 261,239 13.3 3
Total 357,154 2,338,899 6.5 2 *It is assumed that establishments with 5 or fewe r employees will have one construction worker in a supervisory role; establishments with more than 5 an d fewer than 10 employees will have two construction workers in supervisory roles; establishments with 10 or more employees will have three construction workers in supervisory roles. Source: U.S. Census Bureau 2003; U.S. Census Bureau 2005d,f; U.S. Small Business Administration 2005; EPA CalculationsEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-67 1

2
Estimating the Number of Property Managers an d Lessors Employees that Perform Residential 3 RRP 4 Based on 2002 U.S. Census Data, establishments in the Residential Property Manager industry employ 5 about eleven people on average. It was estimated that each establishment will have two certified 6 renovators on staff; the remainder of the employees w ill be trained as workers. This estimate is based on 7 the fact that Residential Property Manager establishm ents are involved in a variety of non-construction 8 activities; it is thus unlikely that these businesses will have more than one ten-person construction crew 9 on staff. Lessors of Residential Buildings and Dwellings establishments employ about five people on 10 T able 4-50: Employer Construction Renovators and Workers, Total and Number Specializing in Residential RRP

NAICS Description Estimated Number of Construction Renovators EstimatedNumber of NonSupervisory Construction

Workers Residential Adjustment

Factor: Residential Revenues as a Percent of Total Value of Construction Estimated Number of Residential Construction Renovators EstimatedNumber of NonSupervisory Residential Construction

Workers

236118 Residential remodelers 82,747 124,886 56% 46,338 69,936 238170 Siding contractors 6,632 23,652 50% 3,316 11,826

238350 Finish carpentry
contractors 35,087 94,801 50% 17,544 47,400

238290 Other building equipment
contractors 18,261 72,243 33% 6,027 23,839

238390 Other building finishing
contractors 11,187 26,166 30% 3,357 7,849

238340 Tile and terrazzo
contractors 8,950 35,779 28% 2,506 10,018

238220 Plumbing and HVAC contractors 175,002 537,450 27% 47,250 145,112

238150 Glass and glazing contractors 10,588 23,498 26% 2,752 6,110

238320 Painting and wall covering contractors 38,943 145,385 25% 9,736 36,346

238210 Electrical
contractors 125,172 481,231 23% 28,790 110,683

238310 Drywall and insulation
contractors 58,794 202,445 21% 12,348 42,512
Total 571,363 1,767,536 36% 179,964 511,631 Source: U.S. Census Bureau 2003; U.S. Census Bure au 2005d,f; U.S. Small Business Administration 2005; EPA CalculationsEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-68 average, and will thus each have one certified renovator on staff. The remaining employees involved in 1 RRP projects will be trained as workers. Table 4-51 presents the estimated number of employees in the 2 residential propert y managers and lessors of resi dential buildings and dw ellings industries seeking 3 training. 4
5 Table 4-51: Property Managers and Lessor Establishments Performing RRP

NAICS Description Number of Establishments in Industry Number of RRP Work Renovators Number of RRPWorkers (NonSupervisors) 531311 Residential Property Managers 26,223 52,446 237,424 531110 Lessors or Residential Buildings and Dwellings 61,787 61,787 230,618 Total 88,010 114,233 468,042 Source: U.S. Census Bureau 2003; U.S. Census Bure au 2005d,f; U.S. Small Business Administration 2005; EPA Calculations 6

4.4.1.2 Estimating the Increase in the Number of Firms and Personnel Seeking Certification and 7 Training Each Year After the Removal of the Opt-Out Provision 8 The number of renovators and firms that seek training and certification in the first few years is estimated 9 slightly differently for the option with a phase-in period (Option D) as it is for those that do not phase-in 10 regulated structures in the second year (Options A a nd C). Further, Option B, which would implement 11 the revised rule midway through the first year, is cal culated similarly to an option with a phase-in period. 12 The methodology employed to estimate the stock of renovators and firms required to meet the demand for 13 lead-safe RRP services is described above and the results are summarized in Table 4-48. The number of 14 fir ms and individuals seeking training and certification in any given year is estimated from the stock of 15 firms and individuals necessary to meet demand for lead-safe RRP services. (Because training and 16 certification are valid for five years, the annual numbe r trained and certified each year after the first year 17 is a fraction of the total stock of trained individuals and certified firms.) The differences in the number of 18 renovators and firms seeking training and certificati on across the options are proportional to the number 19 of RRP events regulated by each option.. 20 Note that many of the additional firms and renovators that expected to become certified and trained 21 because of the removal of the opt-out provision are li kely to seek certification and training before the 22 removal of the opt-out provision goes into effect. (So, for example, under Option C, it is unlikely that 23 there would actually be zero firms certified or renovators trained in the first year after promulgation of the 24 rule.) However, this analysis utilizes the simplif ying assumption that any additional initial certification 25 and training takes place over a 12 month period starting from the date of the expansion of the regulated 26 universe. 27
Options Without Phase-In (Options A and C) 28 In the first year, it is assumed that the increase in the number of renovators and firms that seek initial 29 training and certification is equal to the number thatis necessary to meet the increase in demand for lead30 safe RRP services in that first year. Thus, under op tions A and C, the number of initial trainings and 31 certifications in the year the opt-out provision is re moved is equal to the stock of renovators and firms 32 required to meet the increase in demand for lead- safe RRP services associated with all owner-occupied 33 target housing units where no child under age six or pr egnant woman resides. After the first year, it is 34 assumed that one-fifth of the necessary stock of indivi duals and firms will obtain training and certification 35EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-69 each year (since refresher-training and re-certification is required every five years). In addition, the 1 number of individuals trained is assumed to decline by 0.41 percent annually to account for the decline in 2 the size of the pre-1978 housing stock over time, and thus the decline in demand for lead-safe renovation 3 services. The entire stock of workers is assu med to receive informal training each year. 4
Options With Phase-In (Option D): 5 In the first year, it is assumed that the increase in the number of renovators and firms that seek initial 6 training and certification is equal to the number th at is necessary to meet the demand for lead-safe RRP 7 services in that first year. Under Option D, the number of initial trainings and certifications in the first 8 year is equal to the stock of renovators and firms required to meet the increase in demand for lead-safe 9 RRP services associated with all owner-occupied pre- 1960 housing units where no child under age six or 10 pregnant woman resides. In the second year, this an alysis makes the simplifying assumption that one-fifth 11 of the number who were trained and cer tified in the first year will seek in itial- or re-certification (adjusted 12 by 0.41 percent annually to reflect the decline in the stock of pre-1978 buildings), and that the stock of 13 individuals and firms required to meet the a dditional demand in the newly regulated 1960 to 1978 14 structures will obtain initial training and certification. In later years, it is assumed that one-fifth of the 15 necessary stock of individuals and firms will obtain tr aining and certification each year (since refresher16 training and re-certification is required every five years). The entire stock of workers is assumed to 17 receive informal training each year. 18
Options With Partial-Year Implementation (Option B): 19 In the first year, it is assumed that the increase in the number of renovators and firms that seek initial 20 training and certification is equal to the number thatis necessary to meet the increased demand for lead21 safe RRP services in that first year. Under Option B, the rule does not become effective until halfway 22 through the first year. Thus, under Option B, the stoc k of renovators and firms seeking initial training and 23 certification in the first year is half as large as that required to meet the increase in demand for lead-safe 24 RRP services in all pre-1978 structures during a full y ear. In the second year, this analysis makes the 25 simplifying assumption that one-fifth of the number who were trained and certified in the first year will 26 seek initial- or re-certification (adjus ted by 0.41 percent annually to reflectthe decline in the stock of pre27 1978 buildings). In addition, the stock of individua ls and firms required to meet the additional demand 28 for a full year’s renovations (rather than the six mont hs in the first year) will obtain initial training and 29 certification. In later years, it is assumed that one-fifth of the necessary stock of individuals and firms 30 will obtain training and certification each year (since refresher-training and re- certification is required 31 every five years). The entire stock of workers is assumed to receive informal training each year. 32
Training and Certification after the Initial Years 33 As indicated above, this analysis assumes a steady an nual number of firm and individual certifications 34 after the second year of regulation with an annual decline of 0.41 percent. If all the individuals and firms 35 needed to meet the demand for lead-safe RRP were trained and certified in the first and second years, one 36 might expect a drop in the level of training and certifi cation in the third year, fo llowed by a spike in the 37 next year. That is, one might expect a cyclical patte rn of training and certification to emerge. However, 38 it is difficult to predict how cyclical the training and certification demand might be or how this cyclicality 39 might diminish over time. Therefore, this analysis assumes that a typical amount of training and 40 certification occurs each year after the first two year s. Modeling a cyclical component would add little to 41 the analysis without being able to estimate th e extent of any cyclicality more precisely. 42 The analysis does account for certified firms and trained individuals that exit the industry each year and 43 are replaced by new entrants. This analysis acc ounts for turnover in the regulated RRP industry by 44 assuming a certain percentage of certifications each y ear are initial certifications. Specifically, after the 45EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-70 first year, 52 percent of the renovators seeking training and certification are assumed to be seeking their 1 initial certification. This percentage is based on the relative number of Abatement Supervisors applying 2 for initial certifications according to the Federal L ead-Based Paint Program (FLPP) database (EPA 2005). 3 Similarly, 54 percent of firms seeking certificati on are assumed to be seeking their initial certification 4 based on the relative frequency of initial certifications observed for abatement firms in the FLPP 5 database. 6
Summary of Number of Individuals Traine d to Perform Residential RRP using LSWP 7 Table 4-52 presents a summary of the estimated nu mber of construction renovators and workers 8 specializing in residential RRP. The estimated numb er of residential RRP renovators and workers was 9 further reduced to account for the fact that only so me of these individuals will perform RRP work in 10 target housing. The latter adjustment was made based on data obtained from the American Housing 11 Survey that 65 percent of U.S. households reside in target housing. 12
13 Table 4-52: Total Number of Renovators and Workers Performing Residential RRP in Target Housing Type of Establishment Number of Renovators Performing Residential RRP Number of Renovators Performing Residential RRP in Pre-1978 Housing Number of NonSupervisors Performing Residential RRP Number of NonSupervisors Performing Residential RRP in Pre-1978 Housing Non-Employer Construction Establishments 361,245 234,809 0 0 Employer Construction Establishments 179,964 116,977 511,631 332,560 Property Manager and Lessor Establishments 114,233 74,251 468,042 304,227 Total 655,442 426,038 979,673 636,787 Source: U.S. Census Bureau 2003; U.S. Census Bureau 2005d,f; U.S. Small Business Administration 2005; EPA Calculations 14 The estimated number of renovators and workers that perform residential RRP in pre-1978 housing, 15 426,038 and 636,787, respec tively, represents the estimated stock of renovators and workers that would 16 be required to meet the demand for RRP in target housing (This includes renovations covered by the 2008 17 LRRP rule as well as the LRRP revisions rule). To estimate the stock of trained individuals under the 18 various options, these estimates are adjusted by 75 percent to account for the 75 percent rate of 19 compliance assumed in this analysis. In addition, th e compliance-adjusted estimat e is further adjusted to 20 reflect the scope of each regulatory option based on the percentage of all target housing RRP events 21 regulated under each option. For example, the increas e in the stock of trained renovators under Option A 22 (126,940) is estimated by multiplying the estimated stoc k of renovators that would be required to meet the 23 demand for RRP in all target housing (426,038) by the compliance rate (75 percent) and the percentage of 24 target housing RRP events regulated under Option A ( 35 percent). The removal of the opt-out provision 25 from the 2008 LRRP rule would require that RRP is performed by trained renovators and workers in 26 owner-occupied target housing units that are not CO Fs and where no child under the age of six or a 27 pregnant woman resides. The estimated increase in the stock of renovators and workers that would be 28EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-71 required after the removal of the opt-out provision is presented in Table 4-53, and compared to the prior 1 esti mates for the 2008 LRRP rule (EPA 2008). 2
3 Table 4-53: Estimated Stock of Trained Individuals to Perform RRP in Regulated Target Housing Under the 2008 LRRP Rule and Opt-out Revision, by Option and Year Additional Number Estimated due to LRRP Revisions 2008 LRRP Rule Option A Option B Option C Option D Renovators Year 1 235,916 126,940 63,470 0 66,695 Year 2 234,949 126,420 126,420 126,420 126,420 Year 3 233,985 125,901 125,901 125,901 125,901 Workers Year 1 337,887 189,734 94,867 0 99,688 Year 2 336,502 188,956 188,956 188,956 188,956 Year 3 335,122 188,181 188,181 188,181 188,181
See Table 4-1 for options descriptions. Source: EPA Calculations. 4 Table 4-54 presents a summary of the estimated incr ease in the num ber of establishments that will seek 5 firm certification each year as a result of the removal of the opt-out provision, as well as the increase in 6 the estimated number of employees that will need to be trained as renovators and workers in years 1 7 through 3, and compares this to prior estimates for the 2008 LRRP rule (EPA 2008). 8EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-72 1 Table 4-54: Target Housing Activities: Es timated Number of Establishments Seeking Certification and Workers and Renovators Seeking Training Under the 2008 LRRP Rule and the Opt-out Revision Additional Number Estimated due to LRRP Revisions 2008 LRRP Rule Option A Option B Option C Option D

Year 1 Total Number of Establishments (with Employees and without) Seeking Certification 211,721 111,426 55,713 0 58,544 Total Number of Renovators Seeking Training 235,916 126,940 63,470 0 66,695 Total Number of Workers Seeking Training 337,887 189,734 94,867 0 99,688 Year 2 Total Number of Establishments (with Employees and without) Seeking Certification 70,284 22,194 66,581 110,969 64,326 Total Number of Renovators Seeking Training 78,316 21,913 74,166 126,420 71,511 Total Number of Workers Seeking Training 336,502 188,956 188,956 188,956 188,956 Year 3 Total Number of Establishments (with Employees and without) Seeking Certification 69,996 22,103 22,103 22,103 22,103 Total Number of Renovators Seeking Training 77,995 21,823 21,823 21,823 21,823 Total Number of Workers Seeking Training 335,122 188,181 188,181 188,181 188,181 Note: Components may not add up to totals due to rounding. The number of firms and individuals certified and trained, respectively, are assumed to decline by 0.41 percen t annually to account for the decline in the size of the regulated housing stock over time, and thus the demand fo r lead-safe renovation services . This table presents the numbers of renovators and firms seeking training and certific ation in a given year; therefore the numbers in years 2 and 3 differ from those presented in Table 4-48, which presents the stock of traine d renovators and certified firms. Because training and certification are valid for five years, the stock of certified firms and trained individuals exceeds the annual number trained and certified each year after Year 1. Workers receive training each year. See Table 4-1 for options descriptions. Source: EPA Calculations. 2 

### 4.5 Training Costs 3 Training costs include the cost of the time spent on training activities as well as the associated travel and 4 tuition costs. Note that tuition costs are assumed to include the costs associated with training provider 5 accreditation. In other words, it is assumed th at accredited training providers pass along their 6 accreditation fees and other administrative costs thro ugh their tuition. These accreditation fees and other 7 administrative costs are estimated in the paperwork burden analysis but are only implicitly accounted for 8 (as part of tuition costs) in the estimates of the total cost of the rule. 9

4.5.1 Training Burden Per Individual 10 To estim ate the incremental burden of training, several cost components are calculated, including tuition 11 rates, wage rates, and travel and expense costs. Each certified renovator will participate in 8 hours of 12 formal initial training. Refresher renovator certification training is required every five years; the refresher 13 course is only four hours. Workers receive informal, on-the-job training; it is assumed that, on average, 14 three workers are trained at a time by a cer tified renovator and the training requires one hour. 15 Tuition for the initial certified renovator training cl ass is estimated to be $186; the corresponding 16 refresher course tuition is estimated to be $93 (EPA 2006). This estimate relies on the assumption that 17 the average hourly tuition is equal to the observed ra tes for the accredited lead abatement and evaluation 18EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-73 courses ($23.26/hr). 24 Additional travel and meal costs associated with training are assumed to be $121 1 (EPA 2006). 25 Digital photos of each certified renovator are also added into the additional costs. The 2 total cost for a one-time use digital camera that ta kes 25 pictures is $14 ($0.56 per picture taken). The 3 total time allotted to taking and processing these photos is estimated at 3 minutes ($1.20). A total cost of 4 $1.76 (rounded to $2 in the total cost estimates) is therefore estimated. For a class size of 10 students, 3 5 minutes per student is equivalent to a total time of 30 minutes to take the digital photos, associate them 6 with the appropriate students, and insert th e photos onto the training certificates. 7
The value of the time for certified renovators to receive formal initial training is $253 (8 hours at a loaded 8 wage rate of $31.64/hour); the refresher training is half this amount, or $127 (EPA 2006). Certified 9 renovators may be self-employed or might be employed by a larger company. Therefore, the value of 10 time is likely to represent a mix of lost wages and additional overhead to firms. Assuming one certified 11 renovator trains three workers at a time and this info rmal training requires an hour, informal training is 12 estimated to cost $27 per worker trained, based on th e renovator wage rate and an average loaded wage 13 rate for workers of $16.94/hour (EPA 2006). Thus, as shown in Table 4-55, the aggregated incremental 14 cost of training is $560 for initial certified renovato r training, $341 for refresher certified renovator 15 training and $27 for informal worker training (EPA 2006). 16
17 Table 4-55: Incremental Training Costs (2005$)

Tuition Value of Time Travel and Meals Digital Photo Total Initial Training Certified Renovator $186 $253 $121 $2 $562 Worker $0 $27 $0 $0 $27 Refresher Training Certified Renovator $93 $127 $121 $0 $341 Source: EPA Calculations. 18

4.5.2 Total Training Costs 19 Table 4-56 through Table 4-58 present the total training costs of the rule for the first three years. The 20 number of renovators and workers seeking training is described in Section 4.4.1.2, the value of training 21 time for renovators and workers is described in Section 4.5.1. The average training cost per renovator 22 varies in the initial years of the regulation accordi ng to the relative number of initial and refresher 23 trainings. After the second year, 52 percent of cont ractors and public or commercial building renovators 24 receive initial training (due to turnover in the industry) and the rest obtain refresher training. Note that an 25 individual who received initial training and let their certification expire must retake the initial training. 26 The stock of regulated structures declines by 0. 41 percent annually which also reduces the demand for 27 lead-safe renovation services, and thus the number of renovators and workers seeking training and the 28 undiscounted total training costs. 29
30

24 The average of the hourly tuition rate s are used rather than picking a sing le similar course because no single course is similar enough to the renovator course. For example, the initial courses are the only courses with hands-on training, but they are also lo nger than the renovator course. The refresher courses are more similar in length, but have no hands on requirements.

25 Travel costs include 2 hours of travel time ($63), meals ($9), and mileag e costs (50 miles, $49).EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-74

Table 4-56: Total Training Costs for Renovat ors and Workers: First Year of Regulation Number of Renovators

Seeking Training Average Cost of Training Total Renovator Training Cost Total Worker Training Cost ($27 Per Worker) Total Training Costs (2005$, before discounting) Year 1 Initial Training Renovators Option A 126,940 $562 $71,340,280 $5,122,818 $76,463,098 Option B 63,470 $562 $35,670,140 $2,561,409 $38,231,549 Option C 0 $562 $0 $0 $0 Option D 66,695 $562 $37,482,590 $2,691,576 $40,174,166
See Table 4-1 for options descriptions. Source: EPA Calculations. 1 Table 4-57: Total Training Costs for Renovators and Workers: Second Year of Regulation Number of Renovators

Seeking Training Average Cost of Training Total Renovator Training Cost Total Worker Training Cost ($27 Per Worker) Total Training Costs (2005$, before discounting) Year 2 Initial Training Renovators O p tion A 21
, 913 $562 $12
, 314
, 949 $5
, 101
, 814 $17
, 416
, 764 O p tion B 74
, 166 $562 $41
, 681
, 367 $5
, 101
, 814 $46
, 783
, 182 O p tion C 126
, 420 $562 $71
, 047
, 785 $5
, 101
, 814 $76
, 149
, 599 O p tion D 71
, 511 $562 $40
, 189
, 218 $5
, 101
, 814 $45
, 291
, 033 Refresher Training Renovators O p tion A 3
, 371 $341 $1
, 149
, 575 n/a $1
, 149
, 575 O p tion B 1
, 686 $341 $574
, 788 n/a $574
, 788 O p tion C 0 $341 $0 n/a $0 O p tion D 1
, 771 $341 $603
, 993 n/a $603
, 993 See Table 4-1 for options descriptions. Source: EPA Calculations. 2 Table 4-58: Total Training Costs for Renovators and Workers: Third Year of Regulation Number of Renovators

Seeking Training Average Cost of Training Total Renovator Training Cost Total Worker Training Cost ($27 Per Worker) Total Training Costs (2005$, before discounting) Year 3 Initial Training Renovators O p tion A 21
, 823 $562 $12
, 264
, 458 $5
, 080
, 897 $17
, 345
, 355 O p tion B 21
, 823 $562 $12
, 264
, 458 $5
, 080
, 897 $17
, 345
, 355 O p tion C 21
, 823 $562 $12
, 264
, 458 $5
, 080
, 897 $17
, 345
, 355 O p tion D 21
, 823 $562 $12
, 264
, 458 $5
, 080
, 897 $17
, 345
, 355 Refresher Training Renovators O p tion A 3
, 357 $341 $1
, 144
, 862 n/a $1
, 144
, 862 O p tion B 3
, 357 $341 $1
, 144
, 862 n/a $1
, 144
, 862 O p tion C 3
, 357 $341 $1
, 144
, 862 n/a $1
, 144
, 862 O p tion D 3
, 357 $341 $1
, 144
, 862 n/a $1
, 144
, 862 See Table 4-1 for options descriptions. Source: EPA Calculations. 3EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-75 

### 4.6 Certification Costs: Firm Paperwork Burden and EPA Administrative and 1 

### Enforcement Costs 2 Under this rule, states are given the option of ad ministering the regulations as long as the state 3 implementation plan is approved by EPA. EPA will directly administer programs in states that do not 4 have an approved implementation plan . This section of the analysis estimates costs that EPA expects to 5 incur while administrating and enforcing the LRRP rule under the assumption that EPA administers the 6 program everywhere. States that choose to implement the rule themselves are expected to incur similar 7 costs in lieu of EPA. Firm paperwork costs associated with certification are also presented in this section. 8 EPA will perform three tasks as part of administering the LRRP rule: accrediting training providers, 9 certifying firms, and processing training provider notifi cations. In addition to administrative costs, EPA 10 will also incur costs to enforce the LRRP rule. To reduce the burden on the regulated community, EPA 11 has decided not to require formal certif ication for renovators and workers. 12 In the economic analysis of the 2008 LRRP rule, EPA estimated enforcement costs independently from 13 firm certification costs. However, for this analysis, EPA adopted firm certification fees set forth in a 14 separate rulemaking. Under this fee schedule, enforc ement costs are assumed to be variable and captured 15 by the certification fees paid by firms. 16 Accreditation/certification cost estimates are based on the 2009 rule that set fees for accreditation of 17 training programs and certification of lead-based pa int activities and renovation contractors (EPA 2009). 18 This analysis utilizes the $300 per firm fees set for initial certification and re-certification. Note that there 19 are also administrative and enforcement costs relate d to accrediting training providers but these costs are 20 also assumed to be recovered through tuition charg es and are therefore accounted for through the tuition 21
costs. 22

4.6.1 Administrative and Enforcement Costs: Contribution to Total Costs 23 The fees that firms and training providers pay to become certified and accredited, respectively, are 24 designed to recover EPA’s administrative and enforcem ent costs. These fees were set in a separate 25 rulemaking (74 Federal Register 11863, March 20, 2009, codified at 40 CFR ' 745.92). Simply adding 26 these costs to the other cost components, however, w ill result in some double counting. This analysis 27 assumes that training providers will recover thei r accreditation fees (which in turn cover EPA’s 28 administrative and enforcement costs of training provi der accreditation) through the tuition they charge to 29 renovators. Those costs have alr eady been accounted for in Section 4.5 Thus, the additional social cost 30 of EPA’ s administrative and enforcement activities can be calculated based on the fees firms pay to 31 become certified. The EPA costs that will be recove red from RRP firms in a given year are calculated as 32 follows: 33
34 35 36 37 38

4.6.2 Firm Paperwork Burden 39 It is esti mated that firms will spend a total of three hours to familiarize themselves with the LRRP rule’s 40 requirements and a half an hour to fill out and mail the one-page application for renovator certification. 41 In addition, each year time is spent keeping record s that demonstrate compliance with the LRRP training 42 and work-practice requirements. Additional costs ar e minor and include: one application printout, one 43 photocopy for personal records, an envelope, and a stam p. As shown in Table 4-60, it is estimated that 44 EPA Administrative and Enforcement Costs that will be recovered from Firms Year X = $300 * # of Firms Certified Year XEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-76 paperwork costs are $263 in initial certification years, $168 in re-certification years and $152 in other 1 years. 2
3 Table 4-59: Costs to Firms Associated with Information Collection (2005$) First Year/Initial Certification Year Re-Certification Year Non-Certification Years Rule Familiarization (3 hours) $94.93 $0 $0 Certification Form (half hour) $15.82 $15.82 $0 Recordkeeping (4.8 hours per firm) $151.89 $151.89 $151.89 2 photocopies $0.16 $0.16 $0 1 envelope $0.02 $0.02 $0 1 Stamp $0.37 $0.37 $0 Total a $263 $168 $152

a Rounded to nearest dollar. Source: EPA Calculations and U.S. Bureau of Labor Statistics 2005a. 4

4.6.3 Total Certification Costs: Increase in Firm Paperwork and EPA Administrative and 5 Enforceme nt Costs Associated with the Removal of the Opt-Out Provision 6 Table 4-60 shows the total certification costs for the LRRP rule revision in the first y ear. Table 4-61 and 7 Table 4-62 show the total certification costs by initial certification firm s, refresher certification firms, and 8 firms not seeking certification for the LRRP rule revision in the second and third years, respectively. The 9 certification costs decline by 0.41 percent each year after the third year, accounting for the expected 10 decline in regulated universe as older housing units ar e replaced with newer structures. Total costs per11 firm are the sum of EPA’s administrative costs per firm and the firm’s costs for paperwork and 12 recordkeeping. This cost per firm is multiplied by the additional number of establishments estimated to 13 provide lead-safe RRP services as a result of the removal of the opt-out provision (see Section 4.4.1.1). 14
In the first year, all the firms listed in the number of establishments’ column in Table 4-60 are presumed 15 to seek initial certification, pay ing their share of EPA’s administrative and enforcement costs ($300 per 16 firm, see Section 4.6.1). In addition, they incur a cost fo r paperwork and recordkeeping. The t ables 17 reflect only those additional firms that are expected to become certified as a result of the removal of the 18 opt-out provision. 19
20 Table 4-60: Firm Annual Certification Costs: Firm Paperwork and Fees in the First Year of Regulation (including EPA Administ rative and Enforcement Costs) EPA Administrative / Enforcement Costs Paperwork Costs Number of Establishments Total Certification Costs (2005$, before discounting) Year 1 Initial Certification Firms Option A $300 $263 111,426 $62,732,838 Option B $300 $263 55,713 $31,366,419 Option C $300 $263 0 $0 Option D $300 $263 58,544 $32,960,272
See Table 4-1 for options descriptions. Source: U.S. EPA 2009 21EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-77 In subsequent years, the increase in EPA administra tive costs per-firm and the firm paperwork costs are 1 estimated based on the costs presented in Table 4-61 and Table 4-62 and the relative number of firms 2 seeking initial-certification , re-certification, and not seeking certification. Section 4.4.1.1 describes and 3 presents these esti mates. The increase in the number of establishments is shown for firms seeking initial 4 certification, recertification, and not seeking certification. 5

6

7 Table 4-61: Firm Annual Certification Costs: Firm Paperwork and Fees in the Second Year of Regulation (including EPA Administ rative and Enforcement Costs)

EPA Administrative / Enforcement Costs Paperwork Costs Number of Establishments Total Certification Costs (2005$, before discounting) Year 2 Initial Certification Firms Option A $300 $263 19,974 $11,245,614 Option B $300 $263 65,472 $36,860,624 Option C $300 $263 110,969 $62,475,633 Option D $300 $263 63,160 $35,559,023 Re-Certification Firms Option A $300 $168 2,219 $1,038,671 Option B $300 $168 1,110 $519,336 Option C $300 $168 0 $0 Option D $300 $168 1,166 $545,725 Non-Certification Year Firms Option A n/a $152 88,775 $13,493,849 Option B n/a $152 44,388 $6,746,925 Option C n/a $152 0 $0 Option D n/a $152 46,643 $7,089,763 See Table 4-1 for options descriptions. Source: EPA Calculations; U.S. EPA 2009EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-78 1


### 4.7 Recordkeeping Checklist Provision Costs 2

4.7.1 Recordkeeping Checklist Provision Requirements 3 The revision t o the 2008 LRRP rule would require all renovation firms to provide a copy of the records 4 demonstrating compliance with the training and work practice requirements of the RRP rule to the owner 5 and, if different, the occupant of the building be ing renovated or the operator of the child-occupied 6 facility. Renovation firms would have to provide this information to ow ners and occupants when the final 7 invoice for the renovation is delivered, or within thir ty days of the completion of work, whichever is 8 earlier. It is expected that renovators will furnish this information by providing a copy of the short 9 checklist or other form that is used for compliance pur poses, and thus it is referred to here as a checklist. 10 If dust clearance is performed in lieu of cleaning veri fication, the renovation firm must also provide a 11 copy of the dust wipe sampling report(s). For reno vations occurring in common areas of target housing or 12 child-occupied facilities, the renovation firm can pos t instructions to tenants on how to obtain the 13 information. 14 The checklist or form must include documentation that a certified renovator was assigned to the project, 15 that the certified renovator provided on-the-job training for workers used on the project, that the certified 16 renovator performed or directed workers who performed the tasks required by this final rule, and that the 17 certified renovator performed the post-renovation cleani ng verification. It must also include the 18 identifying information on the manufact urer and model of the test kits used, if any; a description of the 19 components that were tested including their locations; and the test kit results. This documentation must 20 include a certification by the certified renovator that the work practices were followed with descriptions 21 as applicable (see Figure 4-3 for a sample recordkeeping checklist). 22 Table 4-62: Firm Annual Certification Costs: Fi rm Paperwork and Fees in the Third Year of Regulation (including EPA Administ rative and Enforcement Costs)

EPA Administrative / Enforcement Costs Paperwork Costs Number of Establishments Total Certification Costs (2005$, before discounting) Year 3 Initial Certification Firms Option A $300 $263 19,893 $11,199,507 Option B $300 $263 19,893 $11,199,507 Option C $300 $263 19,893 $11,199,507 Option D $300 $263 19,893 $11,199,507 Re-Certification Firms Option A $300 $168 2,210 $1,034,413 Option B $300 $168 2,210 $1,034,413 Option C $300 $168 2,210 $1,034,413 Option D $300 $168 2,210 $1,034,413 Non-Certification Year Firms Option A n/a $152 88,411 $13,438,524 Option B n/a $152 88,411 $13,438,524 Option C n/a $152 88,411 $13,438,524 Option D n/a $152 88,411 $13,438,524 See Table 4-1 for options descriptions. Source: EPA Calculations; U.S. EPA 2009EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-79 1 Figure 4-3: Sample Recordkeeping Checklist

2EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-80 4.7.2 Recordkeeping Checklist Unit Costs 1

4.7.2.1 Labor Costs 2 Under the requirements of the 2008 LRRP rule, renovation firms must complete and retain a copy of the 3 information described above for enforcement purposes. Therefore, the LRRP revisions rule would only 4 result in renovation firms incurring the incremental labor costs of photocopying and distributing the 5 checklist to the owners and/or occupants. The burde n will be minimal, since the renovator will typically 6 be delivering the checklist along with an invoice or other job-relate paperwork. EPA assumed that 7 photocopying and distributing the checklist would take an average of three minutes of a renovator’s time 8 at a loaded wage rate of $31.64 per hour, for an average cost of $1.58. 9

4.7.2.2 Material Costs 10 The checklist provision requires renovation firms to s upply a copy of the checklist to the owner of the 11 affected building, or if different, the occupant of the affected target housing unit or operator of the child12 occupied facility, and to post the checklist in a common area. Therefore, renovation firms performing 13 work in target housing or public or commercial buildings would incur an incremental cost of photocopy 14 materials. 15 Table 4-63 shows the estimated average costs per eve nt of the checklist provision requirements. 16
17

18

19

4.7.3 Number of Events Affected by the Checklist Provision 20 The recordkeeping checkli st provision would apply to both firms affected by the 2008 LRRP rule and to 21 firms that would be covered by the elimination of th e opt-out provision. Under Option A, the entire stock 22 of firms necessary to meet demand, including those working in target housing, and public or commercial 23 building COFs, would incur checklist costs in the fi rst year. However, under Options B and C, which 24 have delayed implementation, and Option D, which h as a phase-in period, only some of the incremental 25 stock of firms ultimately affected by the removal of the opt-out provision would incur costs in the first 26 year. That is, there would be no delay in providing the checklist for events covered by the 2008 LRRP 27 rule; for options with a delayed effective date or phase-in, the checklist provision requirement would take 28 effect at the same time as the LRRP work practice requirements. From the second year onward, the entire 29 stock of firms would incur checklist provision costs. 30 As mentioned above, firms performing work in ow ner-occupied target housing would be required to 31 distribute one copy of the checklist while firms perfo rming work in renter-occupied target housing would 32 be required to provide a copy to the owner and occ upant. If the work occurs in the common area of an 33 Table 4-63: Cost of the Checklist Provision per Event Target Housing Events Public or Commercial Building Events

Owner Renter In-house / Landlord b Contractor – Owner c Contractor – Renter d Labor Cost a $1.58 $1.58 $1.58 $1.58 $1.58 Material Cost $0.08 $0.16 $0.08 $0.16 $0.24 Total Cost $1.66 $1.74 $1.66 $1.74 $1.82

a Based on a burden of 3 minutes, at a wage rate of $31.64.
b RRP is performed by the owner of a public or commercial building.

c RRP is performed by a contractor in an owner-occupied public or commercial building.
d RRP is performed by a contractor in a re nter-occupied public or commercial building. Source: EPA Calculations.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-81 apartment building, the checklist, or information on ho w to obtain the checklist, can be posted on a sign in 1 the common area. 2 The checklist provision also applies to firms perform ing work in public or commercial building COFs. 3 Child-occupied facilities that perform work themselves must post the checklist, or information on how to 4 obtain the checklist, on a sign that is accessible to parents or guardians of the children. Similarly, 5 landlords that perform work would have to supply one copy of the checklist attached to a sign in the area 6 where the work is being performed. Contractors who perform work in owner-occupied COFs must 7 provide two copies of the checklist: one copy to the owner of the COF and one copy to be posted on a 8 sign in the COF. In addition to the two copies requi red in owner-occupied events, contractors working in 9 renter-occupied COFs must also provide the operato r of the COF with a third copy of the checklist. 10 Table 4-64 presents the number of events affected by the checklist provision in t he first and second years 11 of the rule’s implementation by event type and compares the number of events affected under each option 12 with the number that would be affected without the elimination of the opt-out provision (events regulated 13 under the 2008 LRRP rule). 14
15

16 Table 4-64: Number of Events Affected by the Checklist Provision by Option and Event Type Target Housing Events Public or Commercial Building COF Events

Option All Events Owner Renter In-house / Landlord b Contractor – Owner c Contractor – Renter d Year 1 2008 LRRP Rule Events 11,412,621 1,459,940 9,572,191 100,057 267,533 12,900 Option A 18,684,176 8,731,495 9,572,191 100,057 267,533 12,900 Option B 15,048,399 5,095,718 9,572,191 100,057 267,533 12,900 Option C 11,412,621 1,459,940 9,572,191 100,057 267,533 12,900 Option D 15,233,155 5,280,474 9,572,191 100,057 267,533 12,900 Year 2 a 2008 LRRP Rule Events 11,365,829 1,453,954 9,532,945 99,647 266,436 12,847 Option A 18,607,571 8,695,696 9,532,945 99,647 266,436 12,847 Option B 18,607,571 8,695,696 9,532,945 99,647 266,436 12,847 Option C 18,607,571 8,695,696 9,532,945 99,647 266,436 12,847 Option D 18,607,571 8,695,696 9,532,945 99,647 266,436 12,847 “2008 LRRP Rule Events” represents the number of events affected by the checklist requirement if the opt-out provision is not removed. The number of even ts for each regulatory option represents the total number of events affected by the checklist requirement if the opt-out is removed, including the 2008 LRRP Rule Events. The number of events affected the opt-out removal can be calculated by subtracting the 2008 LRRP Rule Events from the number of ev ents for each regulatory option.

a Assumed to decline by 0.41 percent each year after the fi rst year, accounting for the decline in the stock of pre1978 structures.
b RRP is performed by the owner of a public or commercial building.

c RRP is performed by a contractor in an owner-occupied public or commercial building.
d RRP is performed by a contractor in a re nter-occupied public or commercial building. See Table 4-1 for options descriptions.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-82 4.7.4 Total Costs of the Recordkeeping Checklist Provision 1 Table 4-65 presents the total costs imposed on firms as a re sult of the recordkeep ing checklist provision in 2 the first and second years of the rule’s implementation under each option with the costs that would be 3 incurred without the elimination of the opt-out provision (costs of events regulated under the 2008 LRRP 4 rule). EPA estimated total costs by multiplying unit costs in Table 4-63 with the corresponding number 5 of events in Table 4-64. 6
7

8 

### 4.8 Total Costs 9 This section presents the total costs of the revisions to the LRRP program. Total costs are estimated for 10 the first, second, and third years of regulation. Total 50-year costs and 50-year annualized costs are also 11 calculated. Out year costs are estimated using discount rates of both 3 and 7 percent. 12

4.8.1 Total Costs in the First Year of Regulation 13 Table 4-66 presents the total first year costs associated with the LRRP rule. Total containme nt, cleaning, 14 and verification costs are calculated by adding the cost of testing using the LBP test kits to the costs of 15 containment, cleaning, and verification. The total costs of containment, cleaning, and verification are 16 calculated by multiplying the number of events requiring work practices (Section 4.2) by the 17 correspondin g incremental unit costs (Section 4.3). The total cost of conducting LBP tests using test kits 18 Table 4-65: Total Cost of the Recordkeeping Checklist Provision by Option and Event Type Target Housing Events Public or Commercial Building Events

Option All Events Owner Renter In-house / Landlord b Contractor – Owner c Contractor – Renter d Year 1 2008 LRRP Rule Events $19,757,018 $2,426,420 $16,674,757 $166,295 $466,042 $23,504 Option A $31,842,342 $14,511,745 $16,674,757 $166,295 $466,042 $23,504 Option B $25,799,680 $8,469,082 $16,674,757 $166,295 $466,042 $23,504 Option C $19,757,018 $2,426,420 $16,674,757 $166,295 $466,042 $23,504 Option D $26,106,746 $8,776,148 $16,674,757 $166,295 $466,042 $23,504 Year 2 a 2008 LRRP Rule Events $19,676,014 $2,416,472 $16,606,390 $165,613 $464,131 $23,408 Option A $31,711,789 $14,452,247 $16,606,390 $165,613 $464,132 $23,407 Option B $31,711,789 $14,452,247 $16,606,390 $165,613 $464,132 $23,407 Option C $31,711,789 $14,452,247 $16,606,390 $165,613 $464,132 $23,407 Option D $31,711,789 $14,452,247 $16,606,390 $165,613 $464,132 $23,407 “2008 LRRP Rule Events” represents the cost of the checklist requirement if the opt-out provision is not removed. The cost for each regulatory option represents th e total cost of the checklist requirement if the opt-out is removed, including the checklist cost for the 2008 LRRP Rule Events. The cost fo r events affected by the optout removal can be calculated by subtracting the cost fo r the 2008 LRRP Rule Even ts from the cost for each regulatory option.

a Assumed to decline by 0.41 percent each year after the fi rst year, accounting for the decline in the stock of pre1978 structures.
b RRP is performed by the owner of a public or commercial building.

c RRP is performed by a contractor in an owner-occupied public or commercial building.
d RRP is performed by a contractor in a re nter-occupied public or commercial building. See Table 4-1 for options descriptions.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-83 is estimated as the number of events (Section 4.2) multiplied by the cost of conducting the test (see 1 Section 4.3.1). Total training costs are calculated by multiplying the number of trained individuals 2 (Section 4.4) by the corresponding incremental training costs (Section 4.5.1). Total certification costs are 3 calculated by multiplying the number of firms (Section 4.4) by the corresponding incremental firm costs 4 (Section 4.6). The recordkeeping checklist provision cost s are calculated by multiplying the number of 5 events where a recordkeeping checklist must be provided (Section 4.7.3) by the corresponding unit cost of 6 providi ng the recordkeeping checklist (Section 4.7.2). 7 The total costs are higher in the first year for the options that regulate more RRP events. First year costs 8 are highest under Option A ($507 million), which fully eliminates the opt-out provision immediately. 9 First year costs are second highest under Option D ($291 million), which fully eliminates the opt-out 10 provision for pre-1960 housing as soon as the rule is implemented. The costs under Option B ($263 11 million), which fully eliminates the opt-out provision midway through the first year, are slightly lower 12 compared to Option D. Option C first year total costs ($20 million) only include recordkeeping checklist 13 provision costs for events covered by the 2008 LRRP rule in the first year. 14
15

Table 4-66: Total First Year Incrementa l Costs of the Rule (millions 2005$)
Cost Type Option A Option B Option C Option D Work Practice $336 $168 $0 $192 Training $76 $38 $0 $40 Certification $63 $31 $0 $33 TH Checklist a $31 $25 $19 $25 COF Checklist b $1 $1 $1 $1 Total $507 $263 $20 $291

a. Target Housing (TH) b. Public or Commercial Building (COF) See Table 4-1 for options descriptions. 16

4.8.2 Total Costs in the Second and Third Years of Regulation 17 Table 4-67 and Table 4-68 show that total costs differ across option s in the second year but are the same 18 across all options by the third year. Despite the second year expansion of the number of regulated events 19 under Option D, the total work practice costs are only sli ghtly higher than in the first year. This modest 20 increase results from the improved effectiveness of th e test kit (decrease in false positive rate of 63 21 percent to 10 percent), which offsets a portion of the cost increase associated with the larger universe of 22 regulated events. 23 In the second year, the training and certification costs are highest under Option C and are relatively higher 24 under Option B and Option D compared to Option A. This ranking reflects the delayed start-up costs 25 associated with training and certifying the additional individuals and firms needed to meet the demand 26 increase that corresponds to the expansion in the regu lated universe in the second year. From the third 27 year forward, training and certification costs are the same under all options. 28EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-84 1 Table 4-67: Total Second Year Incremental Costs of the Rule (millions 2005$) 3 Percent Discount Rate Cost Type Option A Option B Option C Option D Work Practice $216 $216 $216 $216 Training $18 $46 $74 $45 Certification $25 $43 $61 $42 TH Checklist a $30 $30 $30 $30 COF Checklist b $1 $1 $1 $1 Total $290 $336 $382 $334 7 Percent Discount Rate Cost Type Option A Option B Option C Option D Work Practice $208 $208 $208 $208 Training $17 $44 $71 $43 Certification $24 $41 $58 $40 TH Checklist a $29 $29 $29 $29 COF Checklist b $1 $1 $1 $1 Total $279 $323 $368 $321 a. Target Housing (TH) b. Public or Commercial Building (COF) See Table 4-1 for options descriptions. 2 Table 4-68: Total Third Year Incrementa l Costs of the Rule (millions 2005$) 3 Percent Discount Rate Cost Type Option A Option B Option C Option D Work Practice $209 $209 $209 $209 Training $17 $17 $17 $17 Certification $24 $24 $24 $24 TH Checklist a $29 $29 $29 $29 COF Checklist b $1 $1 $1 $1 Total $281 $281 $281 $281 7 Percent Discount Rate Cost Type Option A Option B Option C Option D Work Practice $194 $194 $194 $194 Training $16 $16 $16 $16 Certification $22 $22 $22 $22 TH Checklist a $27 $27 $27 $27 COF Checklist b $1 $1 $1 $1 Total $260 $260 $260 $260 a. Target Housing (TH) b. Public or Commercial Building (COF) See Table 4-1 for options descriptions. 3

4.8.3 Total 50-Year and 50-Year Annualized Costs 4 The total costs are also calculated discou nted over a 50-year period. Discounting refers to the economic 5 conversion of future costs (and benefits) to their pr esent values, accounting for the fact that society tends 6 to value future costs or benefits less than compar able near-term costs or benefits. Discounting is 7EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-85 important when the values of costs or benefits occu r over a multiple year period and may vary from year 1 to year. Discounting enables the accumulation of the cost and benefit values from multiple years at a 2 single point in time, accounting for the difference in how society values those costs and benefits 3 depending on the year in which th e values are estimated to occur. 4 The 50-year costs were estimated by developing a pr ofile of the compliance costs associated with each 5 option over a 50-year period. (The 50-year period was c hosen to be consistent with the economic analysis 6 done for the TSCA Section 403 Lead-Based Paint Hazard Standards.) The profile of costs over time was 7 developed by estimating an annual decline in pr e-1978 housing stock of 0.41 percent per-year and 8 assuming that the regulated universe would decrease by th at rate every year. That rate was calculated 9 using the average annual compound rate of change in the pre-1980 housing stock using data from the 10 1990 and 2000 Decennial Census (U.S . Census Bureau 1990 a nd 2000c). This rate affects costs because 11 it decreases the number of events and number of workers trained every year. 12 As discussed above, first year training and certification costs account for the training and certification of 13 all renovators and firms to meet the demand for lead -safe RRP services in the first year. For Option B 14 and Option D, it is assumed that the additional indivi duals and firms will obtain training and certification 15 in the second year to meet the increase in demand asso ciated with the larger number of regulated RRP 16 events in the second year. In subsequent years, it is assumed that one fifth of the necessary stock of 17 individuals and firms will obtain training and certification each year (since refresher-training and re18 certification is required every five years). 19 In fact, if all the individuals and firms needed to meet the demand for lead-safe RRP are trained and 20 certified in the first and second years, one might expect a drop in the level of training and certification in 21 the third year followed by a spike in the future years. That is, one might expect a cyclical pattern of 22 training and certification to emerge. This analysis assumes a typical amount of training and certification 23 occurs each year because modeling such a trend woul d add little to the analysis without being able to 24 precisely estimate the extent of any cyclicality. 25 The total 50-year costs and the 50-year annualized cost s are discounted using rates of 3 and 7 percent. 26 These discount rate values reflect guidance from th e Office of Management and Budget regulatory 27 analysis guidance document, Circular A-4 (OMB, 2003). 28 The following formula was used to calculate the present value (PV) of the time stream of costs: 29
30



### PV = )1( , 

### )1( −



### + t tx


### r Cost 31

32 where: 33 Cost t = Costs in year t; 34 r = Discount rate (3 percent and 7 percent); and 35 t = Year in which cost is incurred. 36 37 This analysis also presents the 50-year annualized cost s of the rule. Conceptually, the 50-year annualized 38 cost is the level annual payment that one would have to make to pay off a debt equal to the present value 39 total 50-year cost for a given interest rate (the discount rate). 40 The following formula is used to cal culate the 50-year annualized cost. 41
42EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-86 

### 1)1( )1(
)50( 50



### −+ +× ×= r rr PVAC
r 1

2 where: 3 AC = Annualized 50-Year Costs; 4 PV r = Present Value Total 50-Year Costs assuming a discount rate of r; and 5 r = Discount rate (3 percent and 7 percent) 6 7 Table 4-69 shows the present value of the total 50-year costs, and Table 4-70 shows the annualized 50- 8 y ear costs for the options considered. Because the test k its available for the first year (i.e., starting in June 9 2010) have a high false positive rate, including the ne wer housing units in the regulated universe before 10 improved test kits are available is relatively costly. This is because the high rate of false positives will 11 require many units without LBP to use the more costly work practices. 12
13 Table 4-69: Total Present Value 50 Year Incremental Costs of the Revisions to the Renovation, Repair, and Painting Rule (millions 2005$) 3 Percent Discount Rate Cost Type Option A Option B Option C Option D Work Practice $5,617 $5,449 $5,281 $5,473 Training $516 $506 $496 $507 Certification $673 $660 $646 $661 TH Checklist a $767 $761 $755 $761 COF Checklist b $16 $16 $16 $16 Total $7,590 $7,392 $7,194 $7,418 7 Percent Discount Rate Cost Type Option A Option B Option C Option D Work Practice $3,255 $3,087 $2,919 $3,111 Training $320 $308 $297 $309 Certification $400 $386 $372 $387 TH Checklist a $438 $432 $426 $432 COF Checklist b $9 $9 $9 $9 Total $4,422 $4,222 $4,023 $4,248 a. Target Housing (TH) b. Public or Commercial Building (COF) See Table 4-1 for options descriptions. 14EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-87 Table 4-70: Annualized 50 Year Incremental Cost s of the Revisions to the Renovation, Repair, and Painting Rule (millions 2005$) 3 Percent Discount Rate Cost Type Option A Option B Option C Option D Work Practice $218 $212 $205 $213 Training $20 $20 $19 $20 Certification $26 $26 $25 $26 TH Checklist a $30 $30 $29 $30 COF Checklist b $1 $1 $1 $1 Total $295 $287 $280 $288 7 Percent Discount Rate Cost Type Option A Option B Option C Option D Work Practice $236 $224 $212 $225 Training $23 $22 $22 $22 Certification $29 $28 $27 $28 TH Checklist a $32 $31 $31 $31 COF Checklist b $1 $1 $1 $1 Total $320 $306 $291 $308 a. Target Housing (TH) b. Public or Commercial Building (COF) See Table 4-1 for options descriptions. 1 

### 4.9 Alternative Regulatory Options: Options E1 – E4 2 Options A through D differ only in the timing of how the regulated universe is covered. This section 3 presents cost estimates for various work practice altern atives to Option A, including: (1) requiring interior 4 containment without any cleaning or verification requirements, (2) requiring interior cleaning without any 5 containment or verification requirements, (3) requiring interior cleaning and verification without any 6 interior containment requirements, and (4) no ban on prohibited practices and no exterior vertical 7 containment requirements. Like Option A, these optio ns would become effectiv e June 2010, and would 8 be applied to all pre-1978 housing eligible for the opt-out provision under the 2008 LRRP rule. In 9 addition, the requirement for the renovator to prov ide the recordkeeping checklist to the owners and 10 occupants would apply in both the renovations cove red by the 2008 LRRP rule and those formerly 11 eligible for the opt-out provision. Options E1 to E4 cover the same number of renovation events as 12 Option A, and result in the same number of renovators being trained and firms certified. Thus, Options 13 E1 to E4 have the same training, certification, and ch ecklist costs as Option A, but the work practice costs 14 differ from Option A. 15

4.9.1 Alternative Interior Containment, Cleaning, and Verification Requirements 16 Section 4.3 presents the work practice unit costs for the following three components: (1) containment, (2) 17 cleaning, and (3) verification. Under the alternative regulatory options presented in Table 4-71, not all of 18 these work practice components are required and theref ore compliance costs are lower. Not requiring any 19 interior cleaning or verification, but requiring rule co ntainment, lowers the total annualized costs by about 20 12 percent compared to Option A. Requiring rule-style interior cleaning and verification, but not 21 requiring interior containment also lowers the annualized total costs of the rule by 12 percent compared to 22 Option A. Not requiring any interior containment or verification, but requiring rule-style cleaning, results 23 in the largest decline in total annualized costs of about 17 percent compared to Option A. 24
25EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-88 Table 4-71: Options E1-E3: Alternative Interior Containment, Cleaning, and Verification requirements 3 Percent Discount Rate 7 Percent Discount Rate

Option Annualized Costs Percent Change from

Option A Annualized Costs Percent Change from

Option A

Option A $295 $320 Option E1: No Interior Cleaning or Verification Required $258 -12% $281 -12% Option E2: No Interior Containment Required $261 -12% $283 -12% Option E3: No Interior Containment or Verification Required $246 -17% $267 -17%

See Table 4-1 for options descriptions. 1

4.9.2 Regulatory Alternative without a Paint Removal Practice Prohibition 2 This alternative regulatory option has the same scope and work practice requirements as Option A, except 3 that there is no prohibition or restriction on open-fl ame burning or torching of LBP; operating a heat gun 4 on LBP at 1100° F or higher; or using machines th at remove LBP through high speed operation (such as 5 sanding, grinding, power planing, needle gun, abrasi ve blasting, or sandblasting) without HEPA exhaust 6 control. As shown in Table 4-72, if the rule allows these paint re moval practices to continue to be used, 7 total annualized costs for the option would be 1 percent lower than for Option A. 8
9 Table 4-72: Option E4: Alternative Containmen t, Cleaning, and Verification requirements 3 Percent Discount Rate 7 Percent Discount Rate

Option Annualized Costs Percent Change from

Option A Annualized Costs Percent Change from

Option A

Option A $295 $320 Option E4: No Prohibited Practice Ban $292 -1% $317 -1%

See Table 4-1 for options descriptions. 10 11EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-89 

## References 1 American School and University (ASU). 200 7. “Inside: Class Size.” Available at: 2 http://asumag.com/mag/university_inside_class_size/ (Accessed 3/15/2007). 3 Baker, Kermit. Joint Center for Housing St udies (JCHS) at Harvard University. Personal 4 Communication, August 2005 5 Buckshot, Kelly; 2006. Rollin’ Rollin’ Rollin’ Paint is Prime. Angie’s List Magazine. February 2006. 6 Center for the Child Care Workforce and Human Services Policy Center. 2002. "Estimating the Size and 7 Components of the U.S. Child Care Workforce and Caregiving Population: Key Findings from 8 the Child Care Workforce Estimate (Preliminary Report)," May 2002. 9 Gilkeya, David; Jacob Hautaluomaa, Taslim Ahmeda, Thomas Keefea, Robert Herrona, Philip Bigelowb. 10 2003. Construction Work Practices and Conditions Improved After 2- Years’ Participation in the 11 HomeSafe Pilot Program. American Industrial Hy giene Association Journal, May/June 2003. 12 Homestyles.com. 2002. Available at: http://www. store.homestyles.com/homestyles/plans/search. 13 (Accessed 2002). 14 Hunt, M.O., D.L. Cassens, Ron Zmyslo, and R.L. Leavitt. 2006. Paint Stripping Trials . September 19, 15 2006. http://www.agriculture.purdue.edu/fnr/faculty/hunt/paintstripping.pdf

. 16 Morbidity and Mortality Weekly Report (MMWR). 1997. Update: Blood Lead Levels – United States, 17 1991-1994. Center for Disease Control and Prevention. 46(07); 141-146. 18 Morbidity and Mortality Weekly Report (MMWR). 2003. Surveillance for Elevated Blood Lead Levels 19 Among Children – United States, 1997-2001. Center for Disease Control and Prevention. Sep 20
12. 21 National Center for Education Statistics (NCES). 2004. “The Status of Public and Private School Library 22
Media Centers in the United States: 199 9-2000.” http://nces.ed.gov /pubs2004/2004313.pdf. 23 (Downloaded: 3/7/2007). 24 National Center for Education Statistics (NCES). 2005 . “After-School Programs and Activities Survey of 25 the National Household Education Surveys Program (NHES).” 26 http://nces.ed.gov/pubs2006/afterschoo l/index.asp. (Downloaded 1/3/2007). 27 National Center for Education Statistics (NCES). 2006a. “Overview of Public Elementary and Secondary 28 Students, Staff, Schools, School Districts, Re venues, and Expenditures: School Year 2004-2005 29 and Fiscal Year 2004.” Available at: http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2007309

. 30 (Downloaded 12/22/2006). 31 National Center for Education Statistics (N CES). 2006b. Common Core of Data Public 32 Elementary/Secondary School Universe Survey Data, 2004-2005.” Available at: 33 http:///nces.ed.gov/gov /ccd/pubschuniv.asp . (Accessed 12/22/2006). 34 National Center for Education Statistics (NCES). 2006 c. Common Core of Data Local Education Agency 35 (School District) Universe Survey Data. Available at: http://nces/ed/gov/ccd/pubschuniv.asp

. 36 (Accessed 12/22/2006). 37EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-90 1 National Center for Education Statistics (NCES). 2006e. “Characteristics of Private Schools in the United 2 States: Results From the 2003-2004 Private Sc hool Universe Survey.” (Accessed 12/15/2006). 3 National Center for Education Statistics (NCES). 2006f. 2003-2004 Private School Universe Survey 4 Data. Received from Stephen Broughman (NCES) December 15, 2006. 5 National Center for Education Statistics (NCES). 2006g. “Calories In, Calories Out: Food and Exercise in 6 Public Elementary Schools.” http://nces.ed .gov/pubs2006/nutrition/i ndex.asp. (Downloaded 7 3/7/2007) 8 National Center for Education Statistics (NCES). 2007 . “Public School Principals Report on Their School 9 Facilities: Fall 2005.” http://nces.ed.gov/ pubs2007/2007007.pdf. (D ownloaded 3/7/2007). 10 New Hampshire Department of Education. 2006. “Avera ge Class Size by District in Public Elementary 11
Schools.” Available at: 12 http://www.ed.state.nh.us/education/data/Re portsandStatistics/Enrollment/Average%20Class%20 13 Size%20by%20District/A verage%20Class%20Size% 20by%20District%202005- 14 2006/Average%20Class%20Si ze%20by%20District%202005-2006.pd f (Accessed 3/15/2007). 15 New York State Office of the State Comptroller. 2005. “New York City Department of Education 16 Administration of the Early Grade Class Size Reduction Program.” 2005-n-3. Available at: 17 http://www.osc.state.ny.us/audits/allaud its/093006/05n3.pdf (Accessed 3/15/2007). 18 Painting and Decorating Contractors of America. 2003. What Every Painting and Decorating Contractor 19 Needs to Know About Costing & Estimating, Vol. 2: Rates and Tables 20 Personal communication with work group members and other industry experts. 1999. 21 ProDunkHoops. 2006. “Basketball Cour t Dimensions.” Available at: 22 http://www.produnkhoops.com/guides/court _dimensions.html (Accessed 3/12/2007). 23 RS Means, 2005, Means CostWorks Repair & Remodeling Cost Data 2005 CD-ROM , 7th Edition 24 http://www.rsmeans.com/bookstore/detail.asp?sku=65045 25 Texas Education Agency. 1999. School Size and Clas s Size in Texas Public Schools. Available at: 26 http://www.tea.state.tx.us/research/ pdfs/prr12.pdf (Accessed 3/15/2007). 27 U.S. Bureau of Economic Analysis (BEA). 2009. “T able 1.1.9. Implicit Price Deflators for Gross 28 Domestic Product.” Revised Aug. 17, 2009. Available at: http://www.bea.gov/national/ 29 (Downloaded 08/17/09) 30
U.S. Bureau of Labor Statistics. 2005a. Occupational Employment Statistics Series. 31 U.S. Bureau of Labor Statistics. 2005b. Consumer Price Index: All urban consumers; other goods and 32 services. Bureau of Labor Statistics, Washington, DC. 33 U.S. Bureau of Labor Statistics. 2006. "Current Population Survey: Basic Monthly Survey." January 34EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-91 2006. 1
U.S. Census Bureau. 1990. "H025. Year Structure Built - Universe: Housing units." American Fact 2 Finder. Available at: http://factfinder.census.gov/ (Downloaded 10/26/2005) 3 U.S. Census Bureau. 1995. Property Owners and Managers Survey (POMS) 4
U.S. Census Bureau. 1997. American Housing Survey (AHS)

. 5 U.S. Census Bureau. 2000c. "H34. Year Structure Built [10] - Universe: Housing Units." American Fact 6 Finder. Available at: http://factfinder.census.gov/ (Downloaded 10/26/2005) 7 U.S. Census Bureau. 2003. American Housing Survey (AHS)

. 8 U.S. Census Bureau. 2000. “Units in Structure, H ouseholder 65 Years and Over, and Householder Below 9 Poverty Level: 2000.” American FactFinder. 10 U.S. Census Bureau. 2005d. “Sector 23: Industry Seri es: Value of Construction for Establishments by 11 Type of Construction: 2002.” Am erican Fact Finder. Available at: 12 http://factfinder.census.gov/servlet/EconSector Servlet?caller=dataset& sv_name=*&_SectorId=23 13 &ds_name=EC0200A1&_lang=en&_ts= 141735361508 (Downloaded 6/30/2005) 14
U.S. Census Bureau. 2005f. 2002 Economic Census : Industry Series: Residential Remodelers EC02- 15 23I-236118 (RV). Available at: http://www. census.gov/prod/ec02/ec0223i236118.pdf (Accessed 16 8/3/2005). 17 U.S. Census Bureau. 2005g. American Housing Survey –Overview. Available at: 18 http://www.census.gov/hhes/www/housing/ahs/overview.html

. 19 U.S. Census Bureau. 2005h. Property Owners and Ma nagers Survey (POMS) – Overview. Available at: 20 http://www.census.gov/hhes/www/housing/poms/overview.html 21 U.S. Census Bureau. 2006. “American Housing Survey for the U.S. 2005.” Current Housing Reports

. 22 U.S. Department of Education; Institute of E ducation Sciences. 2004. "Full-day and Half-day 23 Kindergarten in the United States: Findings from the Early Childhood Longitudinal Study, 24 Kindergarten Class of 1998–99," June 2004; NCES 2004–078. 25 U.S. Department of Education; Institute of Educati on Sciences. 2003. " Prekindergarten in U.S. Public 26 Schools: 2000-2001," March 2003; NCES 2003-019. 27 U.S. Department of Energy (DOE). 2003. Commercia l Buildings Energy Consumption Survey (CBECS). 28 U.S. Department of Housing a nd Urban Development (HUD). 2001. National Survey of Lead and 29 Allergens in Housing. 30 U.S. Department of Housing and Urban Development (HUD). 2003. Firs t National Environmental Health 31 Survey of Child Care Centers. 32
U.S. EPA. 2000a. Model Renovation Training Course . EPA 747-B-00-005/6. Available at: 33 http://www.epa.gov/lead/pubs/rrmodel.htm

. 34 U.S. EPA. 2003. Lead-Based Paint Pre-Renovation Information Dissemination - TSCA Sec. 406(b). EPA 35 ICR No. 1669.04; OMB No. 2070-0158. 36
U.S. EPA. 2005. Federal Lead Based Paint Program (FLPP) Database. 37EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 4-92 U.S. EPA, 2005b. Disposable Cleaning Cloth (DCC) Lead Clearance Field Study . July. 1 U.S. EPA, 2005c. Estimates of Concentration of Lead in Paint by Age of Housing. October. 2 U.S. EPA. 2006. Economic Analysis for the Renovation, Repair, and Painting Program Proposed Rule. 3 February 2006. 4 U.S. EPA. 2007 Economic Analysis for the Supplem ental Proposed Rule on Child-Occupied Facilities 5 Under the TSCA Lead Renovation, Repair , and Painting Program. June 2007. 6 U.S. EPA 2008. Economic Analysis for the TSCA Lead Renovation, Repair, and Painting Program Final 7 Rule for Target Housing and Child -Occupied Facilities. April 2008. 8 U.S. EPA 2009. Lead; Fees for Accreditation of Training Programs and Certification of Lead-based Paint 9 Activities and Renovation Contractors. 74 FR 11863, March 20, 2009. 10 U.S. Office of Management and Budget. 2003. Circular A-4. 11 U.S. Small Business Administration. 2005. “Non-Employer Statistics.” Firm Size Data. 12 http://www.sba.gov/advo/research/data.html. (Downloaded 8/3/2005). 13 Whitestone Research. The Whitestone Building Main tenance and Repair Cost Reference 2006-2007. 14 11th Annual Edition. August 2006. 15 Wilder Research Center. 2005. "Family, Friend and Nei ghbor Caregivers: Results of the 2004 Minnesota 16 statewide household child care survey." December 2005. 17 Wilder Research Center. 2001. "Staff recruitment and retention in early childhood care and education and 18 school-age care." April 2001. 19
20EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-1 

## 5. Benefits of the Revisions to the LRRP Rule 1 This chapter presents a discussion of the benefits asso ciated with reducing lead exposure by revising the lead, renovation, repair and painting (LRRP) program regulations. The revisions to the LRRP program include: (1) the removal of the opt-out provision (cur rently available for owner-occupied target housing without either children under the age of 6 or a pre gnant woman in residence and where the housing is not a COF), and (2) an additional requirement that the renovator provide a copy of their recordkeeping checklist to owners and occupa nts of renovated structures. 2 3 4 5 6 7
8 9 10 11 12
13 14 15 16 17 18
19 20 21 22 23 24 25 26 27
28 29 30 31 32 33 34 35 36 37
38 39 40 41 42 43 44 An overview of the opt-out provision, as it applies to this benefits estimation, is provided in Section 5.1

. Section 5.2 presents calculated values meant to serve as a proxy for the magnitude of benefits under this action. Section 5.3 includes a discussion of the benefits of the additional recordkeeping checklist provision requirement. Finally, in Section 5.4 , the human health and ecological consequences of lead exposure are summarized. The work practices, training and certification require ments for the housing units previously eligible for the opt-out provision will reduce lead exposure by increasing the containment and cleanup of dust and debris generated by renovation, repair, and painting (RRP) activities. Additional reductions in lead exposure will be achieved by prohibiting the use of certain paint preparation and removal techniques in jobs that require lead-safe work practices. These reduc tions in exposure will in turn reduce the risks of adverse health and ecological effects in the vicinity of these activities. A great deal of information on the numerous adverse h ealth effects of lead is available from decades of medical observation and scientific research. Inhaled or ingested lead is distributed throughout the body and is toxic to many organ systems. As a result, its toxicity manifests itself in the form of impacts on several organ systems. A reduction in lead exposure resulting from the rule would lead to a reduction in these adverse health effects and the costs of treati ng them. Young children (from birth through age five) are particularly sensitive to lead, which impairs a child’s neuropsychological development (frequently measured by IQ change). EPA’s Air Quality Criteri a for Lead (EPA 2006b) provided a thorough review of the available science on lead-related health and ecological effects. An excerpt from the Executive Summary is provided in section 5.4 of this analysis. With regard to potential implications of lead effects on IQ, the Criteria Document recognizes the ‘‘critical’’ distinction between population and individual risk, identifying issues regarding declines in IQ for an individual and for the population. The Criteria Document further states that a ‘‘point estimate indicating a modest mean change on a health inde x at the individual level can have substantial implications at the population level’’ (CD, p. 8–77). A downward shift in the mean IQ value is associated with both substantial decreases in percentages achievi ng very high scores and substantial increases in the percentage of individuals achieving very low scores (AQCD, p. 8–81). For an individual functioning in the low IQ range due to the influence of developmenta l risk factors other than lead, a lead-associated IQ decline of several points might be sufficient to drop that individual into the range associated with increased risk of educational, vocational, and social failure (AQCD, p. 8–77). Other cognitive effects observed in studies of child ren have included effects on attention, executive functions, language, memory, learning and visuospatial processing (AQCD, sections 5.3.5, 6.2.5 and 8.4.2.1), with attention and executive function eff ects associated with lead exposures indexed by blood lead levels below 10 μ g/dL (AQCD, section 6.2.5 and pp. 8–30 to 8–31). The evidence for the role of lead in this suite of effects includes experimental anim al findings (discussed in AQCD, section 8.4.2.1; p. 8– 31), which provide strong biological plausibility of lead effects on learning ability, memory and attention (AQCD, section 5.3.5), as well as associated mechanistic findings.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-2 These cognitive and behavioral effects, discussed above , are strongly related to future productivity and expected earnings (Salkever 1995). Based on Salkever’s coefficients, the estimated value of an IQ point is $12,953 (2005 dollars). This IQ value is modeled as the present value of a loss in expected lifetime earnings due to a one point IQ drop. The present value is calculated assuming that children would be affected by lead at 3 years of age, the median of the range when children ar e most susceptible to lead hazards; that while most people start working at age 18, average income in the early adult years is reduced because some are still in school ; and that retirement occurs at the age of 67. This estimated value of an IQ point is limited to reduced income, and does not include other potential impacts such as additional education costs for special and remedial edu cation, and medical costs to treat very high levels of lead. 1 2 3 4 5 6 7 8 9 10
11 12 13 14
15 16 17 18 19 20 21 22
23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41

43 44 45 Both epidemiologic and toxicological studies have shown that environmentally relevant levels of lead affect many different organ systems (EPA 2006b, p.E-8). It appears that some of these effects, particularly changes in the levels of certain blood enzymes and in aspects of children's neurobehavioral development, may occur at blood-lead levels so lo w as to be essentially without a threshold (EPA 2004). Epidemiologic studies have consistently demonstrated associations between lead exposure and enhanced risk of deleterious cardiovascular outcomes, including increased blood pressure and increased hypertension (EPA 2006b). Neurotoxic effects in children and cardiovascular effects in adults are among those best substantiated as occurring at blood-lead concentrations as low as 5 to 10 ug/dL (or possibly lower); and these categories of effects are currently cl early of greatest public health concern (EPA 2006b, p 8-60). Other newly demonstrated immune and renal system effects among general population groups are also emerging as low-level lead exposure effects of potential public health concern (EPA 2006b, p 8- 60). Some studies have examined the question of whethe r the neurological effects of exposures in early childhood are ameliorated when blood-lead levels decline. The data are mixed on this issue. In a study that treated lead-exposed children with a chelati ng agent, Ruff (1993) found that children whose bloodlead levels had the greatest decline showed the most improvement in cognitive scores. In contrast, Rogan (2001) found that treatment with a chelating agent lowered blood-lead levels in children but did not appear to improve neurological function. Liu (2002) also found that chelation therapy at age 2, while lowering blood-lead levels, did not improve neurological function in children at 5 years of age. While the study did detect a relationship between declining bl ood-lead and improved neurological function, this association was observed only in the untreated group, l eading the authors to speculate that some other factor besides declining lead levels from chelation th erapy (such as greater parental involvement), led to the neurological gains. Dietrich (2004) had similar findings in the same cohort of children at 7 years of age. One study cited in ATSDR (1999) showed impair ed motor and cognitive function at a current mean level of 2.9 μ g/dL, about 20 years after exposure when blood-lead levels were 40-50 μ g/dL (Stokes 1998). The negative impact of lead on IQ and other neur obehavioral outcomes persist in most recent studies following adjustment for numerous confounding factors including social class, quality of caregiving, and parental intelligence. Moreover, these effects appear to persist into adolescence and young adulthood in the absence of marked reductions in environmental e xposure to lead. (EPA 2006b, p. 6-76). This further supports the concern that early exposures to lead ma y lead to irreversible damage and supports the benefits of regulatory interventions to prevent and/or reduce lead exposure. 

### 5.1 Overview of Removal of Opt-Out Provis ion in Terms of Benefits Estimation 42 Under 40 CFR 745.82(c), the LRRP rule’s training requirements and work practice standards do not apply to renovations in target housing when the firm pe rforming the renovation has obtained a statement signed by the owner that the renovation will occur in the owne r's residence, no child under age 6 resides there, noEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-3 pregnant woman resides there, the housing is not a child-occupied facility, and the owner acknowledges that the renovation firm will not be required to use the work practices contained in EPA's renovation, repair, and painting rule. This is referred to as the “opt-out provision” of the LRRP rule. 1 2 3 4 5 6 7 8 9 10
11 12 13 14 15 16
17 18 19 20
21 22 23 24 25 26 27 28
29 30 31 32 33 34 35
36 37 38 39 40
41 42 43 44 45 After further consideration of the opt-out provision, th e Agency believes it is in the best interest of the public to remove the provision. EPA has decided it is important to require the LRRP work practices in target housing even if there is no child under age six or pregnant woman residing there and the housing is not a COF. The 2008 LRRP rule focused mainly on protecting young children and pregnant women from lead hazards. Lead exposure adversely affects older ch ildren and adults. Those effects most pertinent to adults at levels associated with individual blood lead levels in the range of 10 ug/dL and less include hematological, cardiovascular and renal effects. Epidemiologic studies have consistently demonstrated associations between lead exposure and enhanced risk of deleterious cardiovascular outcomes, in cluding increased blood pressure and incidence of hypertension. A meta-analysis of numerous studies estimates that a doubling of blood-lead level (e.g., from 5 to 10 μ g/dL) is associated with ~1.0 millimeter of mercury (mm Hg) increase in systolic blood pressure and ~0.6 mm Hg increase in diastolic pressure . The evidence for an association of lead with cardiovascular morbidity and mortality is li mited but supportive (EPA 2006b, p. E-10). The Criteria Document states ‘‘although an increase of a few mmHg in blood pressure might not be of concern for an individual’s well-being, the same incr ease in the population mean might be associated with substantial increases in the percentages of individuals with values that are suffici ently extreme that they exceed the criteria used to diagno se hypertension’’ (EPA 2006b, p. 8–77). Renovation activities that disturb lead-based paint crea te high dust-lead levels which are not removed through typical cleaning practices. EPA’s Dust Stu dy (EPA 2007) found that dust-lead levels created by renovation activities ranged from 422 to 32,633 μ g/ft 2 . While dry sweeping and the use of a regular shop vacuum resulted in a reduction in these levels, a significant amount of leaded dust remained. All residents of the household or occupants of the building can be exposed to this dust, regardless of age. EPA’s Exposure Factors Handbook (EPA 1997) contains recommended soil and dust ingestion estimates for adults, and EPA’s Child-Specific Exposur e Factors Handbook (EPA 2008a), which includes recommended soil and dust ingestion estimates fo r children between the ages of 6 and 21. By removing the opt-out provision the rule will go farther toward protecting older children and adult occupants of target housing where no child under six or pregnant woman resides. In addition, removal of the opt-out provision will provide additional protection for women who do not know they are pregnant at the time a renovation commences, women who become pregnant shortly after a renovation occurs, and women of child-bearing age in general. This is par ticularly important because the transplacental transfer of lead in humans is well documented, and infants are generally born with a lead body burden reflecting that of the mother. Removing the opt-out provision also protects children under the age of six who spend a limited amount of time in housing (such as a relative or caregiver’s ho use) where a renovation has been performed under the opt-out provision; children who move into such housing when their family purchases it after such a renovation has been performed; and children who live in a property adjacent or near to owner-occupied housing where renovation has been performed under the opt-out provision. Some locations where children under the age of six regul arly receive child care are eligible for the opt-out provision because of the way a child-occupied facility (COF) is defined. A COF is defined as ‘‘a building, or portion of a building, constructed prior to 1978, visited regularly by the same child, under the age of six, on at least 2 different days within any week (Sunday through Saturday period), provided that each day’s visit lasts at least 3 hours and the combined weekly visits last at least 6 hours, and theEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-4 combined annual visits last at least 60 hours.” Non-r esident children may regularly visit or receive child care in target housing that is eligible for the opt -out provision because the children do not spend enough time there for the building to meet the COF definitio n. These children may nevertheless receive a dose of lead from playing in dust-lead hazards created by renovations performed under the opt-out provision 1 2 3 4

5 6 7 8 9 10 11 12 13
14 15 16 17 18 19 20 21 22
23 24 25 26

28 29 30 31 32 33 34 35 36 37 38
39 Removing the opt-out provision will also result in fewer homes being purchased with pre-existing lead hazards. It is common for home owners to perform activities that disturb paint before selling a house. Under the RRP rule, the opt-out provision was lim ited to owner-occupied target housing and did not extend to rental housing because of the concern that future lessees could unknowingly move into a rental unit where dust-lead hazards created by the renovation are present. In the same way, dust-lead hazards created during renovations in an owner-occupied r esidence conducted prior to a sale will be present for the next occupants. Removing the opt-out provisi on decreases the likelihood of lead hazards being present when someone else (which may include a child under the age of six or a pregnant woman) moves into the home. Eliminating the opt-out provision will also protect individuals including pregnant women and families with young children residing adjacent to homes undergoing renovations. Under the 2008 LRRP rule, an owner occupant can take advantage of the opt-out pr ovision even if a child under 6 or pregnant woman lives in an adjacent home. Renovations on the exterior of a residence can spread leaded dust and debris some distance from the renovation activity, which is why, for regulated exterior renovations, EPA requires renovation firms to cover the ground with plastic sheeting or other impermeable material a distance of 10 feet from the renovation. If homeowners opt out of the LRRP program, renovations on the exterior of their homes are likely to contaminate neighboring yards and porches, resulting in exposure inside the neighboring houses as well as outside (because exterior dust is tracked into the home). Removing the opt-out provision will also provide protection to family pets living in owner-occupied housing where no children under age 6 or pregnant women reside. Lead poisoning resulting from renovations has been identified as a means of expos ure in both cats and dogs (Knight 2003, Kowalczyk 1976). This can result in both veterinary care costs a nd, in some instances, loss of a family pet.

5.1.1 Regulatory Options Under the Elimination of the Opt-Out Provision 27 This economic analysis considers several regulatory op tions related to removal of the opt-out provision (See Table 5-1 ). Options A through D all include containment, cleaning, and cleaning verification requirements, as well as restricting or prohibiting cer tain paint removal practices. Options A through D differ in terms of the effective date of the rule and the universe of structures affected in each year (phasing in of regulatory coverage). Options A and D both have effective dates of June 2010, but Option A does not phase in regulatory coverage while Option D is limited to pre-1960 structures during Phase 1 of the regulation and its scope is expanded to in clude structures built between 1960 and 1978 in Phase 2, which has an effective date of June 2011. Options B and D have effective dates of January 2011 and June 2011, respectively, and neither option phases in regulator y coverage. Options E1 to E4 cover the same target housing universe and have the same effective da te as Option A, but do not provide the same level of protection because they do not require all of the work practice standards under 40 CFR 734.85.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-5 Table 5-1: Effective Start Dates for Options Examined in Economic Analysis Effective Date For Opt-Out Elimination Option Target Housing June 2010 January 2011 June 2011

A All X

B All X

C All X

D Pre-1960
1960-1978 X

X

E1 to E4* All X

* Options E1 to E4 cover the same target housin g universe and have the same effective date as Option A, but do not provide the same level of protection because they do not require all of the work practice standard s under 40 CFR 734.85.
1

3 4 5 6 7 8 9
10 11 12 13 14 15 16 17 18 19 20 21
22 23 24 25 26 27 28 29 

### 5.2 Calculated Benefits of Eliminating the Opt-Out Provision

2 EPA has calculated crude benefits numbers for several groups of individuals protected by removing the opt-out provision. This has been done by estim ating the number of individuals in each group and combining this with the average benefit per indivi dual for a similar group from previous LRRP rule analyses. These averages do not replicate the scenarios used in the prev ious analyses, which included an array of factors such as age of child, type of renovation, size of job, and building vintage, so the calculations in this chapter do not reflect the methodol ogy that EPA previously had peer reviewed for the LRRP rule analysis. As a result of severe time constraints for the conduct of this analysis, the average benefits per individual from the previous analyses have not been modified to reflect any differences in exposure between populations protected by the 2008 rule and those protected by the removal of the opt-out provision. While these values can serve as a proxy to provide a sen se of the magnitude of benefits from this action, the amount of error in these values is unknown. The exposure scenarios differ between this rule and the 2008 rule, for example, in the length of time that individuals spend in renovated structures, and in the frequency, types, and sizes of renovations affected by the two rulemakings. Simple computational adjustments to the average benefits to try and addr ess the differences in the scenarios do not fully reflect the complex nature of the relationships being addressed. For example, there are two key relationships involved in calculating IQ change – going from lead exposure to blood lead, and from blood lead to IQ. Both of these relationships are non-linear, with the steep est slopes at lower levels, meaning that IQ effects are proportionately greater for lower exposures and blood lead levels. Moreover, because of the complex interactions between different components of the previous analysis for the 2008 rule, how the estimated benefits differ betw een scenarios is not always obvious. For example, children who receive childcare in a COF in target housing generally spend less time there than in their own residence. Yet as described later in this secti on, based on the 2008 analysis, preventing exposures to the children in target housing COFs yields an average benefit of $1,772 per child, which is larger than the average benefit of $1,384 per child for children residing in target housing. (This is due to differences in average background lead levels and the non-linear re lations that are being modeled.) This example demonstrates the pitfalls of making simplified assumpti ons such as calculating the benefits to one groupEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-6 of children by scaling the estimated benefits to a different group of children based on the amount of time spent at home or in childcare. In the example give n above, calculating the average benefits per child for children in target housing COFs by a linear scaling of the results for children residing in target housing would yield a lower average benefits value for the non-residential children, while the 2008 analysis indicates that the benefits are higher. 1 2 3 4 5
6 7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27 28 29 30 31 32
33 34 35 36 37

39 40
41 42 43 44 45 Estimating benefits from avoided lead exposure is not an issue that lends itself to simplified calculations. Thus, the benefits calculations used here should be viewed as crude indicators of the magnitude of benefits. In light of this, the analysis calculates benefits under two different scenarios. In one of the scenarios, aggregate benefits are based on averag e benefits per individual from previous analyses multiplied by an estimate of the number of people affect ed by the rule. In the second scenario, benefits are calculated by applying a simple linear adjustment factor to one of the components in the first scenario, in order to reflect the uncertainties created by relyi ng on the average benefit per individual from previous analyses as a basis for the calculation. It would not be accurate to characterize the average benefits per child calcu lated here as an upper bound estimate. The change in IQ may be larger for child ren with lower exposures, due to the non-linearities in the relationships. Because the previous LRRP rule analysis reflected a broad range of exposures and conditions, the IQ benefits in the earlier analysis may in clude flatter sections of the curves. To the extent that children protected by removing the opt-out prov ision are on steeper sections of the curves, the average benefit per child calculated from the 2008 anal ysis may underestimate the benefit of avoiding exposures by removing the opt-out provision. A limitation of this analysis is that the benefits calculations presented here are only based on some of the populations protected by the rule, and on some of th e health effects avoided due to the rule. The population groups discussed below do not reflect all of the individuals protected by removing the opt-out, but instead represent groups for which calculations can be readily made. For example, these calculations do not include individuals living in detached hou ses adjacent to houses renovated under the opt-out provision, or children who spend time in a friend or relative’s house renovated under the opt-out. Furthermore, the calculations do not include the benefits of avoiding other effects that can be caused by lead exposure such as neurobehavioral impacts in ch ildren (e.g., aggression, attention deficit problems, and hyperactivity), as well as various other health effe cts that can also occur in individuals of all ages (including renal effects, immune system effects, and reproductive and developmental effects). The benefits of avoiding these effects were not quantifie d in the previous LRRP analyses, and thus are not calculated here. Benefits are calculated in this chapter for several gr oups of individuals affected by the removal of the optout provision: those residing in housing renovated under the opt-out provision; those living contiguous to attached housing renovated under the opt-out provisio n; those moving in to housing renovated by the previous owner under the opt-out provision; and those receiving childcare in housing renovated under the opt-out provision.

5.2.1 Individuals Residing in Housing Units Renovated Under the Opt-out Provision 38 Lead can result in serious effects for adults at lo w blood lead levels. According to the Clean Air Scientific Advisory Committee (CASAC ) Lead Review Panel (CASAC 2007a): Lead’s effects extend beyond childhood. In adults, l ead exposure is a risk factor for some of the most prevalent diseases or conditions of industria lized society, including cardiovascular disease and renal disease (16–20). There is also compelli ng evidence that the risks for mortality from stroke and myocardial infarction are increased at PbB concentrations below 10 μ g/dl, which is considerably lower than those considered accep table for adults (19). Finally, although lessEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-7 definitive, there is also evidence that lead exposure during pregnancy is a risk factor for spontaneous abortion or miscarriage at PbB concentrations < 10 μ g/dl (21). 1 2
3
4 5 6 7 8 9 10 11 12 13
14 15 16 17 18 19 20

22 23 24 25 26 27 28 29 30 31 32 33 34
35 36 37 38
39 40 41 42 43 44 CASAC has advised EPA not to focus only on IQ changes in children (CASAC 2007b): While the CASAC agrees with the Agency’s c hoice of IQ alterations in young children as the priority health effect and population for the ri sk assessment, the Lead Panel cautions against focusing only on IQ loss (or gain). There are ra mifications of lead exposure on other endpoints that have societal and individual implications of great importance. Neurological developmental and functional effects in children exposed to Pb can lead to negative and disruptive behaviors well into teenage years. Moreover, while the a dult nervous system has long been recognized as a target of Pb toxicity, epidemiologic and experime ntal toxicology data are emerging that support the relationship between Pb exposure and increased adverse cardiovascular outcomes, including increased blood pressure, increased incidence of hypertension, and cardiovascular morbidity and mortality at lower and lower levels of exposure. Removing the opt-out provision will benefit adults by reducing their exposure to lead dust generated by RRP activities in housing eligible for the opt-out provisi on. The first step in calculating these benefits is to estimate the number of individuals that would be pr otected by eliminating the opt-out provision. This is done by estimating the number of affected housing un its. Next the number of occupants in the affected households must be estimated. Then the number of individuals protected is estimated as the number of individuals who reside where LBP is disturbed dur ing RRP. Finally, the number of individuals is multiplied by the average benefit per individual.

5.2.1.1 Estimating the Number of Individuals Residing in Housing Units Renovated Under the Opt21 out Provision The elimination of the opt-out provision would aff ect owner-occupied target housing units where no childunder the age of six or pregnant woman resides, and that do not meet the definition of a COF. Owneroccupied housing units where a child under the age of six or a pregnant woman resides can be identified in the 2003 American Housing Survey (AHS) data. (See Chapter 4 for a detailed discussion of the AHS data.) AHS respondents report information about the ages of householders, who are defined by the survey as persons who live or sleep there most of the time. Thus, child-occupied households are defined as those households with a householder under the age of six at the time of the RRP. Child-occupied households are estimated as households with a householder between the ages of one and seven at the time of the survey, since it is assumed that any RRP reported o ccurred a year earlier. (RRP performed up to two years earlier may be reported.) It follows that the number of households occupied by pregnant women can be estimated as the number of households with a woman of childbearing age and a child who is under the age of one in the household at the time of the survey. As described above, the AHS data can be used to id entify rental units and target housing units where no child under the age of six or pregnant woman reside s. However, to estimate the number of units that would be affected by the elimination of the opt-out provision, target housing units that are also COFs must also be identified so they can be excluded from the count of affected units. Note that COFs in target housing include family da ycare providers and the homes of family, friends, and neighbors who regularly care for someone else’s childre n. The estimates include care provided with and without compensation and rely primarily on estimates of the size of the childcare workforce (Center for the Child Care Workforce, 2002). The Center for th e Child Care Workforce (2002) report includes: (1) data on family child care providers caring for unrelate d children in their own homes, (2) paid relatives and non-relatives providing child care, and (3) unpaid re latives and non-relatives providing child care.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-8 The number of target housing COFs is projected based on estimates of the caregiver workforce in the Center for the Child Care Workforce (2002) report. Based on a Wilder Research Center report, it is assumed that 10 percent of family child care provide rs caring for unrelated children in their own homes employ 2 workers (Wilder Research Center 2001, p.16). For the remaining childcare providers, one worker is assumed per location. Based on 2003 AHS data for the general population of target housing, it is assumed that 65 percent of these hous ing units were built before 1978. 1 2 3 4 5 6
7 8 9 10 11 12 13
14
15 16 17
18
19 20 21 22
23
24 25
26
27 28 29 30 31 32 33
34
35 36

38 The number of target housing units is adjusted to account for units that are already included in the LRRP rule universe or do not qualify as COFs because: (1) care is provided in a child’s own home, or (2) less than six hours of care per week is provided. In addition, the number of target housing units where childcare is provided that are regulated under the 20 08 LRRP rule without qualifying as COFs must be estimated to avoid double counting. This includes: (1) units where the caregiver is pregnant or has a child under six living in the household, and (2) units where the caregiver lives in a rental unit. The basis for these adjustments is presented below.
3⁄4 Care Provided in Child’s Own Home

 It is assumed that 22 percent of relatives and non-relatives (paid or unpaid) provide care in the child’s home; this is based on a Wilder Res earch Center (2005, p.28) report on the results of the 2004 Minnesota Statewide Household Child Care Survey.
3⁄4 Less Than Six Hours of Care Per-Week is Provided

 Of those providing care in their own home, it is assumed that 27 percent of relatives and nonrelatives (paid or unpaid) provide care for less th an six hours a week (Wilder Research Center 2005, p.28). All family daycare providers caring for unrelated children in their own homes are assumed to care for at least one child for more than six hours a week.
3⁄4 Caregiver Lives in a Rental Unit

 It is assumed that family, friend, and neighbor caregivers have the same likelihood of living in a rental unit as the general population of target housing occupants (39 percent).
3⁄4 Caregiver has a Child Under Six Living With Them

 Based on the January 2006 Current Population Survey (U.S. Bureau of Labor Statistics 2006), 16 percent of Child Care Workers have children under six. Thus, it is assumed that 16 percent of in-home family daycare providers (formal care providers) caring for unrelated children in their own homes themselves have children under the age of six. Based on the Wilder Research Center (2005, p.19) report, 57.5 percent of family, friend, and neighbor caregivers (informal care providers) have children under the age of 12. Thus it is assumed that half as many, or 29 percent, have children under the age of six.
3⁄4 Caregiver is Pregnant

 It was estimated that 1.1% of owner-occupied h ouseholds with no child under the age of six were occupied by a pregnant woman using the 2003 AHS data.

5.2.1.2 Summary of Target Housing COF Units 37 Table 5-2 presents the estimated number of target hous ing units regulated under the 2008 LRRP rule.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-9 Table 5-2: Number of Owner-Occupied Pre-1978 Target Housing Units Regulated Under 2008 LRRP Rule (Excluding Rental Units and Units Where a Child Under 6 or Pregnant Woman Resides)

Type of Care a Number of Target Housing

COFs (thousands)
b In child’s own home Less than 6-hours per-week Post-78 In rental unit Child under 6 resides Pregnant

woman resides Total Adjustment c Total Regulated

Units (thousands) d

Paid In-Home Family Daycare 591 n.a. n.a. 35% n.a. 16% 1.1% 55% 319

Paid Relative Care 804 22% 27% 35% 39% 29% 1.1% 84% 128 Unpaid Relative and Non-Relative Care 2,354 22% 27% 35% 39% 29% 1.1% 84% 376

Total (Pre-78) 824 Total (Pre-60) e 424

a. Paid In-Home Family Daycare refers to formal licensed daycare located in the provider’s home. Paid relative care is when family members are paid to care for the ch ild in the family member’s home (unlicensed care). Unpaid relative and non-relative care refers to informal unpaid care provided at the homes of family, friends or neighbors (unlicensed care). b. Based on the size of the childcare workforce (Center for the Child Care Workforce 2002), assuming 1.1 workers per location for paid in-home family daycare and 1 worker per location for other types of care.

c. Calculated as one minus the product of one minus the adjustments. e.g., for the first row, 55% = 100% - (100%-35%)*(100%-16%)*(100%-1.1%). d. Components may not sum to totals due to rounding. Not adjusted for compliance rates.

e. Adjusted based on number of target housing units. Source: U.S. Census Bureau 1995, 1997, and 2003; EPA Calculations. 1 2 3 4 5

7

9
10

13 14 15 16 17 18 As described in Table 5-2 , there are about 824,000 target housing COFs where no child under the age of six or a pregnant woman resides. Thus, of the 47 ,080,000 owner occupied hous ing units (see Section 2.8 of Chapter 2):

3⁄4 A child under six resides or pregnant woman r esides in 6,370,000 units (see Section 2.8 of 6 Chapter 2)
3⁄4 About 824,000 units are COFs where no child under the age of six or pregnant woman resides 8 (see Table 5-2 ) Therefore, about 39,886,000 units would be aff ected by the elimination of the opt-out provision. 1

5.2.1.3 Number of Individuals Residing in Housing Un its Affected by the Elimination of the Opt11 Out Provision 12 Only individuals age six and greater reside in housing units that would be affected by the elimination of the opt-out provision. Using the methodology described in Section 4.2 of Chapter 4, it was estimated that about 5.7 percent of pre-1978 households disturb LBP during RRP annually. In pre-1960 households, which are more likely to contain LBP, 10.1 percen t households disturb LBP during RRP annually. The resulting estimates of the number of individuals who reside in these hous ing units where LBP is disturbed during RRP are presented in Table 5-3

.

1 39,886,000 = 47,080,000 – 6,370,000 – 824,000.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-10 Table 5-3: Annual Number of Individuals Age 6 and Older Residing in Opt-Out Eligible H ousing Where LBP is Disturbed During an RRP Event that are Protected by the Removal of the Opt-out Provision Number of Individuals Age 6 and Older Protected by the Rule Each Year a Option

First Year Second Year b

A 5,248,000 5,226,000 B 2,624,000 5,226,000 C 0 5,226,000 D 4,380,000 5,226,000 E1 to E4 c 5,248,000 5,226,000 a. Assumes a 75% compliance rate. b. The stock of target housing, and theref ore the number of individuals living in target housing, is assumed to decline by 0.41% per year (due to demolitions, conversions, etc,) based on Census data. c. Options E1 to E4 cover the same target housing universe and have the same effective date as Option A, but do not provide the same level of protection because they do not require all of the work practice standards under 40 CFR 734.85. 1
2 3 4 5 6 7 8 9 10 11 12 13

15 16 17 18 19 20 21 22 Since the opt-out provision is eliminated under Option A as soon as the rule becomes effective, all individuals residing in opt-out eligible housing perfo rming RRP that disturbs LBP are protected in the first year. Since the opt-out provision under Option B is eliminated six months later (halfway through the beginning of the first year the rule is in place), the number of individuals protected under Option B in the first year is half the number estimated for Option A. Under Option C, the opt-out provision is eliminated a year later. Under Option D the opt-out provision is eliminated as soon as the ru le becomes effective for housing built before 1960. Options E1 through E4 have the same effective dates and universe of regulated structures as Option A, but consider alternative work practice requirements. As indicated in the numbers presented in Table 5-3 , the majority of the individuals that would be protected by the elimination of the opt-out provision reside in housing built before 1960 because of the higher likelihood of LBP in these housing units. In the second year (starting June 2011), the opt-out provision would be eliminated under all options. 2

5.2.1.4 Calculated Benefits to Individuals Residing in Housing Units Renovated Under the Opt-out 14 Provision EPA’s Economic Analysis for the 2006 proposed LRRP ru le included estimates of benefits from avoided increases in blood pressure due to lead exposure and a ssociated incidences of hy pertension, heart attack, stroke, and death (EPA 2006b). The proposed ru le was estimated to protect around 4.5 million individuals age 6 and older, resulting in annualized adult benefit of $2.25 billion/year, which is equivalent to an average benefit of $523 per year per person. The 2006 proposed rule only estimated cardiovascular benefits for adults age 40 and older, but the number of such adults protected by the LRRP rule was not listed in the Economic Analysis report. Instead, the 2006 report provides information on the number of

2 The stock of target housing, and therefore the number of indivi duals living in target housing, is assumed to decline by 0.41% per year (due to demolitions, conversi ons, etc.) based on Census data.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-11 individuals age 6 and older. Dividing total estimated adult benefits from the 2006 LRRP analysis by the number of individuals 6 and older pr otected by the LRRP rule under estimates the average cardiovascular benefit per person for adults 40 and older. However, assuming that the ratio of the number of adults over age 40 protected to the number of all individuals over age 6 protected is similar for both the LRRP rule and the opt-out rule, multiplying the average benefit per individual age 6 and above by the number of individuals age 6 and above protected by the opt-out rule yields an estimate of the cardiovascular benefits of the opt-out rule to adults age 40 and older. 1 2 3 4 5 6 7
8 9 10 11 12 13
14 15 16 17 18 19
20 21 22
23 Table 5-4 combines that $523 average with the 5.2 million individuals age 6 and older living in opt-out housing to calculate cardiovascular benefits under Scenar io 2. Similar to the IQ change calculations discussed earlier, this is a crude indicator that does not account for differences in renovations or exposure between the LRRP rule and the opt-out proposal. This calculation is limited to cardiovascular effects and does not include the avoided incidence of other effects such as renal effects, immune system effects, and reproductive and developmental effects. Due to the uncretainty in calculating benefits usi ng the average benefit per individual from a previous LRRP analysis, Scenario 1 is calculated assuming that the average cardiovascular benefit per individual is a quarter of the Scenario 2 value, or an average of $130.86 per individual age 6 and older. This could reflect potential improvements in treatment of high blood pressure and cardiovascular disease since the 1970’s and 1980’s, when the data on which the Scenar io 2 benefits per indivi dual were based, were collected. These results are also shown in Table 5-4

. As discussed in the 2006 analysis (EPA 2006a, p. 5-42), EPA acknowledges that the dose-response functions noted in that analysis rely on older publishe d data and that not all of these data were included in the review presented in Appendix 5A of the 2006 document.

Table 5-4: Calculated Cardiovascular Benefi ts for Adults Who Reside in Housing where LBP is Disturbed in RRP Events Unde r the Opt-Out Provision (millions, 2005$) Adult Benefits (millions, 2005$)

Scenario Number Of Individuals
> 6* Average Cardiovascular

Benefit Per Individual > 6 (2005$) First Year Cardiovasc.

Benefits Annualized Cardiovasc.

Benefits (3 percent) Annualized Cardiovasc.

Benefits (7 percent) Scenario 1 5,247,590 $130.86 $687 $657 $699 Scenario 2 5,247,590 $523.44 $2,747 $2,626 $2,795 * Monetized benefit esti mate reflects the fraction of this population age 40 and older. Notes: 1. Assumes a 75% compliance rate. 2. Averag e benefit based only on avoide d cardiovascular effects. 24

26 27 28 29 30 31 32 33 34 Therefore, the individuals counted here represent a su bset of the number of neighbors potentially exposed 35 from RRP work on opt-out housing. 36 5.2.2 Number of Individuals Residing in Housing Attached to Opt-Out Housing 25 Another group that would benefit from the removal of the opt-out provision is neighbors living nearby. The Dust Study indicates that exterior renovations gene rate large quantities of lead dust that spreads from the renovation site. This lead dust can contaminate ne ighboring properties. This analysis calculates the benefits of removing the opt-out provision for resident s of neighboring properties, but the calculation is limited to a subset of such properties. The benefits calculation is based on the number of neighbors living in attached housing (such as townhouses) contiguous w ith housing renovated under the opt-out provision. In the Dust Study, testing samples taken 12 to 15 feet or more from the renovation work showed high dust lead levels. These distances are suffi cient to reach across the property li nes of attached houses. However, dust from RRP work can also contaminate non-cont iguous attached houses and detached houses.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-12 Based on American Housing Survey (AHS) data (U.S . Census 2003), there are approximately 3.4 million attached housing units built before 19 1 78, of which 1.9 million are owner-occupied. About 1.6 million of 2 3 4 5 6 7 8
9 alyses based on the number of 10 11 12 13 t 14

ce 15 16 17 18 19 20 21
22 sis of the 2008 LRRP final rule (EPA 2008b) for children under six residing in target 23 24 25
26 does not ad dress these factors. For example, calculating benefits 27 28 29 30 31 32 these units (or 48 percent of the 3.4 million pre-1978 att ached units) are eligible for the opt-out provision under the 2008 LRRP rule because there is no child u nder the age of 6 or pregnant woman in residence and the unit is not a COF. According to the AHS data, about 751 thousand children under the age of six and 7.7 million individuals age six and older reside in these 3.4 million pre-1978 attached housing units. These individuals are among those who may be exposed to lead dust generated from exterior RRP work performed on a nearby unit that is renovated under the opt-out provision. The number of exposed individuals in attached housing units contiguous to a unit renovated under the opt-out provision is calculated by extrapolating fr om the existing LRRP an exterior renovations that disturb lead-based paint. The number of attached opt -out housing units with exterior renovations that disturb lead-based paint and comply with the rule represent 3.2 percent of all compliant regulated single family housing units (assuming a 75 percent compliance rate). 3 Assuming each attached opt-out unit is attached to two other h ousing units (one on either side), the probability tha LBP is disturbed during exterior RRP in an adjacent unit is double the 3.2 percent, or 6.4 percent 4 . Sin about 48 percent of attached housing units are elig ible for the opt-out provision, 3.1 percent of all attached housing units will be attached to an opt-out eligible housing unit where LBP is disturbed during exterior RRP work (where 3.1 percent is the product of 48 percent and 6.4 percent). Thus, it is estimated that the removal of the opt-out provision w ould protect 23 thousand children and 238 thousand individuals aged 6 and older from exterior RRP work that disturbs LBP on a contiguous attached housing unit. The benefits to children in contiguous attached hous ing are calculated using the average benefit per child from the analy housing with exterior renovation jobs. That value was $689.32 per child, and is used to calculate benefits under both Scenario 1 and Scenario 2. 5 There are multiple factors that influence the benefits to individuals in these contiguous attached housing. Because of insufficient data, the analysis based on the average benefit for exterior RRP ev ents from the 2008 analysis may underestimate the benefits to children living in contiguous attached housing of removing the opt-out provision. The 2008 analysis of exterior target housing RRP events calculated a single average lead level for an entire yard, assumed to be 9,304 square feet in size. (The u se of a yard-wide average was based on the modeling assumption that a child is equally likely to spend time in any part of a yard.) The yard-wide lead level

3 3.2 percent is calculated as the sum of the exterior events wh ere test kits correctly identified the presence of LBP in single family owner-occupied housing (1,226 thous and, see Table 4-13) divided by the total number of single family owneroccupied housing un its, 38.1 million.

4 Some houses that are semi-attached (e.g., duplexes and end units) rather than townhous es were included in this analysis, and such units are attached to one other hous ing unit instead of two units. It shoul d be noted that semi-attached houses are typically placed on small lots . Thus, the distance betwee n the opt-out house and the non-contiguous adjacent house are typically relatively small. These non-c ontiguous adjacent houses are not included in this analysis, but the impact on residents of such housing may be simila r to residents of attached houses.

5 Numerous epidemiological studies have reported neurocognitive, neurobehavioral, sensory, and motor function effects in children with blood lead levels below 10 μ g/dL (CD, sections 6.2 and 8.4). [FN 7. Further, neurological effects in general include behavioral effects, such as delinquent behavior (CD, sections 6.2.6 and 8.4.2.2), se nsory effects, such as those related to hearing and vision (CD, sections 6.2.7 and 8.4.2.3) , and deficits in neuromotor function (CD, p. 8–36).] The benefits of avoiding other adverse effects ca used by lead exposure were not quantified in the previous analyses, and thus are not calculated here. See section 5.4 for a discussion of these health effects.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-13 was a weighted average calculated by combining the lead levels from three component areas – the dripline area, the nearby area, and the rest of the yard . The dripline area was between 4 feet and 12 feet from the house (depending on the Dust Study experiment being modeled) and the lead loading was on samples taken from the area covered by rule plastic in the Dust Study. The nearby area extended from 3 feet to 8 feet from the dripline area (again dependi ng on the Dust Study experiment being modeled), and the lead loading was based on samples taken from the area covered by containment plastic in the Dust Study. The lead level in the rest of the yard was an average soil level taken from HUD NSLAH data, and was significantly below the levels in the dripline an d nearby areas. Since th e yard-wide average lead level is the weighted average of these three areas, and the rest of the yard area was larger than the other areas, the yard-wide average lead level was well below th e levels in the dripline area and the nearby ar The yards for typical attached housing are likely to be smaller than those for detached housing. For some attached housing, the entire yard size is an area equi valent to the dripline area or the combined dripline 1 2 based 3 4 5 6 7 8 9

ea. 10
11 12 13 14 s (like 15 ed 16 17 18 hildren 19 20 21
22 and nearby areas. The lead levels in the yard s of both renovated attached opt-out housing and the contiguous attached housing may be underestimated by using yard-wide lead levels based on a 9,304 square feet yard. Other factors, such as neighboring housing not being subject to the work practice closing windows and using plastic to collect lead dus t) may affect the magnitude or exposure and relat benefits for children in neighboring attached housin g, compared to those for children in housing undergoing renovation. Because the net effect of such factors is unknown, the average benefit per child in Scenarios 1 and 2 are the same for this group of exposed children. Combining the number of c with the average benefit per child, Table 5-5 presents the calculated benefit of removing the opt-out provision in terms of the avoided IQ loss for ch ildren residing in contiguous attached housing units.

Table 5-5: Calculated IQ Benefits for Children Under 6 Residing in Attached Housing Contiguous to a Unit Where LBP is Disturbed During an Exterior RRP Event (millions, 2005$)

First Year IQ Benefits Annualized IQ Benefits (3 percent) Annualized IQ Benefits (7 percent) Option Number Of Children <6 Average IQ Benefit Per Child <6 for Target Housing

Exterior RRP (2005$) (m il lions, 2005$) Scenario 1 and Scenario 2 23,386 $689.32 $16.1 $15.4 $16.4 Notes a 75% compliance rate. 2. Average benefi t based only on avoided IQ loss. 3. Number of individuals : 1. Assumes d residents of detached housing or non-contiguous attached housing.

oes not include 23
Th eart attack, stroke, and death from 24 PA’s Economic Analysis for the 2006 proposed LRRP rule averaged $523 per person per year. 25 26 a unit 27 28
29 e estimated adult benefits from avoided incidences of hypertension, h E Combining the benefit per individual with the 238 thousand individuals age 6 and older, Table 5-6 presents the calculated benefits of avoided cardiovasc ular impacts attached housing contiguous to where lead-based paint is disturbed in an exterior RRP event.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-14

Table 5-6: Calculated Cardiovascular Benefits for Adults Residing in Attached Housing Contiguous to a Unit Where LBP is Disturbed During an Exterior RRP Event (millions, 2005$) Adult Benefits (millions, 2005$)

Scenario Number Of Individuals
> 6* Average Cardiovascular

Benefit Per Individual > 6 (2005$) First Year Cardiovasc.

Benefits Annualized Cardiovasc.

Benefits (3 percent) Annualized Cardiovasc.

Benefits (7 percent)
Scenario 1 and Scenario 2 238,359 $523.44 $125 $119 $127 * Monetized benefit esti mate reflects the fraction of this population age 40 and older. Notes: 1. Assumes a 75% compliance rate. 2. Average benefi t based only on avoided cardiovascular effects. 3. Number of individuals does not include residents of detach ed housing or non-contiguous attached housing. 1

3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22 23
24 25 26 27
28 29 30 31 5.2.3 Individuals Moving into Housing Units Renovated Under the Opt-Out Provision

2 Another group that would benefit from the removal of the opt-out provision is individuals who move into housing units that were recently renovated under th e opt-out provision. Owners typically perform painting and renovation work prior to selling a house, and baseline cleaning (i.e., not following the rule’s work practices) removes only visible dust, often leav ing behind lead dust hazards . Thus, individuals who move into a house where RRP work has been perform ed under the opt-out provision will be exposed to the lead dust that remains. Based on AHS data (U.S. Census 2003), there are about 2.8 million owner-occupied target housing units that are sold per year, and about 927 thousand child ren under the age of six and 6.5 million individuals ago six and above move into these units. About 85 pe rcent of these housing units were eligible for the opt-out provision under the previ ous owner, based on the overall per centage of owner-occupied target housing units that are eligible for the opt-out provisi on. Thus, each year about 785,000 children under the age of 6 and 5.5 million individuals age six and above m ove into units that were eligible for the opt-out provision. Overall, an average of about 35 percent of renovatio ns in opt-out housing disturb lead-based paint (see Table 4-13 in Chapter 4). Scenario 1 uses this 35 pe rcent and assumes that RRP work is performed in one quarter of these opt-out housing units before the units are sold. Thus, under Scenario 1, about 69 thousand children under the age of six and 481 thousa nd individuals age 6 and above move into housing units each year where LBP was disturbed during RRP . Assuming 75 percent compliance with the rule, eliminating the opt-out provision will protect about 52 thousand children under the age of six and 361 thousand individuals age six and above annually from RRP events where LBP was disturbed before they move in.
Scenario 2 assumes that RRP work that disturbs lead-b ased paint is performed in all opt-out housing units before the units are sold. Thus, under Scenario 2, assuming a 75 percent compliance rate, eliminating the opt-out provision will protect about 206 thousand childr en under the age of six and 1.4 million individuals age six and above annually from RRP events where LBP was disturbed before they move in. Benefits are calculated under this simplified scenar io assuming that homeowners disturb lead-based paint by painting or remodeling shortly before their house is sold, so that relatively few iterations of routine cleaning occur prior to the new occupants moving in. To the extent that there is an appreciable time period between when these RRP events occur and when new tenants move in, the lead levels in theseEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-15 housing units may be lower than the lead levels used in the 2008 analysis. However, since the health effects models are non-linear, the size of the impa ct on the benefits calculation is not known. 1 2
3 4 5 6
7 The average monetized benefit from the 2008 LRRP rule analysis for avoided IQ loss in children exposed in target housing where an RRP event was performed that disturbed lead-based paint is $1,384.07 (EPA 2008b). Table 5-7 presents the calculated benefits of avoi ded IQ loss for children residing in housing units where LBP is disturbed during a RRP event before they moved in.

Table 5-7: Calculated IQ Benefits for Childre n Under the Age of Six Who Move into Housing where LBP was Disturbed During an RRP Event that was Eligible for the Opt-Out Provision
First Year IQ Benefits Annualized IQ Benefits (3 percent) Annualized IQ Benefits (7 percent) Option Number Of Children <6 Average IQ Benefit Per Child <6 for Target Housing (2005$) (millions, 2005$) Scenario 1 51,538 $1,384.07 $71.3 $68.2 $72.6 Scenario 2 206,150 $1,384.07 $285.3 $272.7 $290.3 Notes: 1. Assumes a 75% compliance rate. 2. Average benefit based onl y on avoided IQ loss.

8 9 10 11 12 13 14 15 16 17 18 19 20
21 As shown in Table 5-8 , Scenarios 1 and 2 use the same av erage adult cardiovascular benefit per individual ($131 and $523, respectively) as Scenarios 1 and 2 in Section 5.2.1.4 . The calculations shown in this table are not included in the summary of the benefits calculations shown in Table 5-12 . Since the calculations for this scenario are based on the assumpti on that RRP work occurs shortly before the new occupants move in, the original owners are assumed to move out shortly after the RRP work is performed. Under this scenario, excluding the new residents from the total is equivalent to subtracting the individuals who move out from the number of individuals calculated in Table 5-4 . However, the adult benefit estimates in the 2006 analysis were based on a non-linear model, so benefits to avoiding exposure to two individuals (the home seller and the home buyer) for a shorter period of time may exceed the benefits of avoiding exposure to one individual for a longer time period. Under a different scenario (where there was assumed to be a non-trivial time delay between when RRP work was performed and when the house was sold), it would be appropriate to count benefits to both the old and new occupants in the total.

Table 5-8: Calculated Cardiovascular Benefits for Adults Who Move into Housing that was Eligible for the Opt-Out Provision When LBP was Disturbed During an RRP Event Adult Benefits (millions, 2005$)

Scenario Number Of Individuals

> 6* Average Cardiovascular

Benefit Per Individual > 6 (2005$) First Year Cardiovasc.

Benefits Annualized Cardiovasc.

Benefits (3 percent) Annualized Cardiovasc.

Benefits (7 percent) Scenario 1 360,680 $130.86 $47.2 $45.1 $48 Scenario 2 1,442,720 $523.44 $755 $722 $768 * Monetized benefit esti mate reflects the fraction of this population age 40 and older. Notes: 1. Assumes a 75% compliance rate. 2. Average benefit based only on avoided IQ loss. 22EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-16 5.2.4 Children Receiving Regular Care in Target Housing that is not a COF 1 A target housing unit where a child visits regularly , but spends fewer that 6 hours a week, is not considered a child-occupied facility. Therefore, these housing units, hereafter re ferred to as Regular Care Target Housing (RCTH) units, are eligible for th e opt-out provision under the existing LRRP rule providing that there is no child under the age of six or pregnant woman that resides in the unit. Thus, children visiting RCTH may benefit from the elimination of the opt-out provision by reducing their potential exposures to lead dust during these visits. 2 3 4 5 6 7
8 9 10 11 12

14 15 16 17 18 19 20 21 22 23 24 25 26
27 28 The methodology developed to estimate the number of children protected from potential lead exposures in RCTH units eligible for the opt-out provision under th e existing rule has three primary steps: (1) estimate the number of children who regularly visit RCTH units that are eligible for the opt-out provision, (2) estimate the frequency that LBP is disturbed duri ng RRP in these units, and (3) combine the results. These steps are described in more detail below.

5.2.4.1 Number of Children Visiting RCTH units 13 The total population of children under the age of si x and the estimated percentages of children in nonparental care arrangements utilized in this analysis is from Mulligan et al. (2005) and is presented in Table 5-9 . Following the methodology from the economic analysis of the 2008 LRRP rule (EPA 2008b), it is assumed that all paid non-relative care arrangements are in COFs (care for at least one child is provided for more than six hours a week) and therefor e would not be affected by the elimination of the opt-out provision. However, some unpaid non-re lative care arrangements and relative care arrangements (paid and unpaid) are expected to be for fewer than six hours a week and therefore may be in the RCTH units that would be affected by the elimination of th e opt-out provision. Of those providing care in their own home, it is assumed that 27 percent of relatives (paid and unpaid) and u npaid non-relatives provide care for less than six hours a week (Wilder Research Center 2005, p.28). In addition, the estimates are adjusted by 22 percent so that they only include children receiving care in homes that are (1) target housing, (2) owner occupied, (3) where no pregnant woman resides, (4) outside the child’s own home, and (5) where no child under the age of six resides. 6 The adjustment factors listed above are combined to estimate the number of children who regularly visit RCTH units that are eligible for the opt-out provision of the existing LRRP rule presented in Table 5-9

.

6 Based on 2003 AHS data it is estimated that 65 percent of hous ing units are target housing, 61 percent are owner-occupied, and 98.9 percent of housing units are not occupied by a pregnant woman. Based on the Wilder Research Center (2005, p.19) report, 57.5 percent of family, friend, and neighbor caregivers (informal care providers) have children under the age of 12. It is assumed that half as many, or 29 percent, have children under the age of six. Thus, 71 percent of RCTH units are not occupied by a child under the age of six. Based on a Wilder Research Center (2005, p.28) report on the results of the 2004 Minnesota St atewide Household Child Care Survey it is assumed that 78 percent of relatives and non-relatives (paid or unpaid ) provide care outside the child’s home. The product of the above adjustment factor s, 65%, 61%, 98.9%, 71%, and 78%, is 22%.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-17 Table 5-9: Number of Children Visiting RCTH Units Affected by the Opt-Out Elimination Regulatory Options

Age Total Population (thousands) Percent ReceivingUnpaid NonRelative Care Percent Receiving Relative

Care Percent Receiving Care < 6 Hours Per

Week Receiving Care in Owner-Occupied, Pre-78 Housing,Where no ChildUnder Six or Pregnant Woman Resides* Population ReceivingUnpaid NonRelative Care

(thousands) Population Receiving Relative

Care (thousands) Total Population in Affected Units (thousands) 0 3,868 1.4% 21.0% 27.0% 22.0% 3.3 48.5 51.9 1 3,902 2.1% 22.0% 27.0% 22.0% 4.8 51.3 56.1 2 3,931 1.9% 23.0% 27.0% 22.0% 4.5 54.0 58.5 3 3,795 1.6% 22.0% 27.0% 22.0% 3.7 49.9 53.5 4 3,861 1.6% 21.0% 27.0% 22.0% 3.7 48.4 52.1 5 896 1.7% 20.0% 27.0% 22.0% 0.9 10.7 11.6 0-5 20,253 21.0 262.9 283.9 *61% of TH units are owner-occupied; 65% of TH units are pre-1978, 78% of children receive care outside their own home, and 71% receive care where no other child under the ag e of six resides, and 98.9% receive care where no pregnant woman resides. The product of 61%, 65%, 78%, 71%, and 98.9% is 22%.

1

3 4 5 6 7 8 9 10
11 5.2.4.2 Number of Children Visiting RCTH Protected by the Opt-Out Provision Elimination

2 The second measure of the benefits for each of the re gulatory options consists of the number of children regularly visiting RCTH units where LBP is disturbed during RRP in housing eligible for the opt-out provision under the existing rule. Using the methodolog y described in Section 4.2 of Chapter 4, it was estimated that about 5.7 percent of Pre-1978 households perform RRP that disturbs lead-based paint (LBP) annually. In Pre-1960 households, which are mo re likely to contain LBP, 10.1 percent households perform RRP that disturbs lead-based paint (LBP) an nually. Combining the 5.7 percent of RRP events that disturb LBP with the 283,900 children receiving child care in RCTH units presented in Table 5-9 yields the estimate of 16,215 children presented in Table 5-10

.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-18 Table 5-10: Annual Number of Children Visiting Opt-Out Eligible RCTH Where LBP is Disturbed During an RRP Event that are Protected by the Removal of the Opt-out Provision Number of Children Under the Age of 6 Protected by the Rule each Year a Option

First Year Second Year b

A 16,215 16,149 B 8,108 16,149 C 0 16,149 D 13,597 16,149 E1 to E4 c 16,215 16,149 a. Assumes a 75% compliance rate. b. The stock of target housing, and ther efore the number of individuals living in target housing, is assumed to decline by 0.41% per year (due to demolitions, conversions, etc,) based on Census data. c. Options E1 to E4 cover the same target housing universe and have the same effective date as Option A, but do not provide the same level of protection because they do not require all of the work practice standards under 40 CFR 734.85.

1
2 3 4 5 6 7 8 9 10 11 12 13

14 15 16 17 18 19 Since the opt-out provision is eliminated under Option A as soon as the rule becomes effective, all children receiving care in opt-out eligible RCTH performing RRP that disturbs LBP are protected in the first year. Since the opt-out provision under Option B is eliminated six months later (halfway through the beginning of the first year the rule is in place), the number of individuals protected under Option B in the first year is half the number estimated for Option A. Under Option C, the opt-out provision is eliminated a year later. Under Option D the opt-out provision is eliminated as soon as the ru le becomes effective for housing built before 1960. Options E1 through E4 have the same effective dates and universe of regulated structures as Option A, but consider alternative work practice requirements. As indicated in the numbers presented in Table 5-10 , the majority of the children that would be protected by the elimination of the opt-out provision reside in housing built before 1960 because of the higher likelihood of LBP in these housing units. In the second year (starting June 2011), the opt-out provision would be eliminated under all options.
Calculated Benefits for Children in Opt-Out Eligible RCTH Under Scenario 2, the IQ benefit per child for child ren receiving care in RCTH units eligible for the optout provision is calculated using the average monetiz ed benefits due to IQ loss for children receiving childcare in target housing where LBP was distur bed during RRP work, taken from the Economic Analysis for the 2008 LRRP rule (EPA 2008b). The average calculated benefit due to IQ loss for these children $1,771.97 per child. 7

7 The benefits of avoiding other adverse e ffects caused by lead exposure (including su ch neurobehavioral impacts in children as aggression, attention deficit problems, and hyperactivity), as well as various other health effects that can also occur in olde r individuals (including renal effects, immune system effects, and reproductive and developmental effects), were not quantified in the previous analyses, and thus are not calculated here. See section 5.4 for a discussion of these health effect s.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-19 The average Scenario 2 benefit of $1,771.97 per child for children receiving childcare in target housing is higher than the $1,384.07 average benefit for children residing in target housing. (Both of these values are for target housing where an RRP event was performed that disturbed LBP.) At first glance this result seems counterintuitive, since children who reside in renovated target housing sp end more time there on average than children who attend childcare in renovated target housing. The result is due to differences in background levels for the two groups, and non-linearities in the benefits modeling. 1 2 3 4 5 6
7 8 9 10 11 12 13

14 15 16 17 18 19 20 21 22 23 24

25 26 27 28 29 30

31 32 33 34 35 36 37 38 39 40 41

42 43 44 In the 2008 analysis, vintage-specific background levels were used to estimate media concentrations at the site where the RRP activity was occurring. Howe ver, "overall" background levels were used to estimate media concentrations during time spent away from the site where the RRP activity was occurring. The "overall" background level was the average background level across all vintages – including post-1978 buildings. When the exposure scen ario was at a child's house, and he spent some time at daycare, his background exposure was lower fo r the time at daycare. When the exposure scenario was at a child's daycare, her background exposure was lower when she was at home. In the 2008 analysis, when a child started from a lo wer background level of exposure, the damage in terms of IQ loss from an exposure was greater. Th is "background" effect dominated the effect from spending less time at the exposure site. As described ear lier in this report, there are two key relationships involved in calculating IQ change – going from lead exposure to blood lead, and from blood lead to IQ. Both of these relationships are nonlinear, with the steep est slopes at lower levels, meaning that IQ effects are proportionately greater for lower exposures and bl ood lead levels. Thus, benefits from avoiding exposure are proportionately greater for children star ting from a lower background level of exposure. The children with the lowest average background exposur e level are those exposed at daycare in target housing – because these children include children living in post-1978 housing. The result is that children receiving childcare in target housing have a higher aver age benefit per child ($1,771.97 per child) under Scenario 2 than children exposed in all target housing units ($1,384.07 per child). According to data from the Department of Educa tion National Center for Education Statistics’s 2005 "Early Childhood Program Participation Survey", the average amount of time that children under the age of 6 spend in COFs in target housing varies by ag e of child, ranging from 25 to 30 hours per week. Because the 6 hours per week in childcare assumed for RCTH children is about one quarter of the average amount of time children spend in COFs, Scenario 1 assumes that the average benefit per child is one quarter that of Scenario 2, or $442.99 per child. To be classified as a COF, a pre-1978 building must be frequented by the same child at least two different days of the week, with each visit consisting of at least 3 hours each day, and the combined visits at least 6 hours per week. This can result in a situation where a facility is not classified as a COF even though a child receives more than 6 hours of care per week. For example, if a child is in a pre-1978 building 2 hours per day for 5 days a week, for a total of 10 hours per week, the building would not be classified as a COF. Similarly, if a child is in a pre-1978 building 8 hours one day a week and 2.75 hours the other 6 days a week, for a total of 24.5 hours per week, the bu ilding would also not be classified as a COF. There are of course other scenarios in which day-care would occur for more than 6 hou rs a week but where the building would not be considered to be a COF. Thus , although this analysis assumes that children spend an average of 6 hours per week in RCTH, this is not the upper bound for the time that children spend in RCTH.
Table 5-11 presents the calculated benefits under Option A from removing the opt-out provision for children under the age of six receiving childcare at an RCTH where LBP is disturbed during an RRP event.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-20 1
Table 5-11: Calculated IQ Benefits from Opt-Out Provision Removal for Children in Opt-Out Eligible RCTH Where LBP is Disturbed During an RRP Event

First Year Benefits Annualized Benefits (3 percent) Annualized Benefits (7 percent) Scenario Annual Number Of

Children <6 Average IQ Benefit Per Child <6 in Target

Housing Childcare

(2005$) (millions, 2005$) Scenario 1 16,215 $442.99 $7.2 $6.9 $7.3 Scenario 2 16,215 $1,771.97 $28.7 $27.5 $29.2 Notes: 1. Assumes a 75% compliance rate. 2. Average benefit based only on avoided IQ loss.

2

4 5 6
7 8 9
10 11 12 13 14 15 16 17 18 5.2.5 Summary of Calculated Benefits

3 Table 5-12 presents the Scenario 1 results and Table 5-13 presents the Scenario 2 results at 3 percent and 7 percent discount rates. Table 5-14 shows both scenarios using a 3 percent discount rate, and Table 5-15 shows similar information using a 7 percent discount rate. The results do not include other populations that will benefit from the rule, such as individuals other than those in contiguous attached housing who live near a house renovated under the opt-out provision; or those who spend time in a friend’s or relative’ s house renovated under the opt-out provision. The benefits calculations for children under the age of 6 are based on avoided losses in expected earnings due to IQ drop, and the calculations for adults are based on the avoided medical costs (or other proxies for willingness to pay) for hypertension, coronary heart di sease, stroke, and the resulting incidence of deaths. The quantified benefits to children do not include the avoided costs of other associated impacts of lead exposure such as aggression, attention deficit problems, hyperactivity, or other neurobehavioral impacts; additional education costs for special and remedial educa tion; or medical costs to treat very high levels of lead. Nor do any of the calculations include the bene fits of renal effects, immune system effects, reproductive and developmental effects, or various other health effects that can be caused by lead exposure. See Section 5.4 for a discussion of these health effects.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final RuleFebruary 19, 2010*** Deliberative – Do Not Cite, Quote or Release During the Review ***5-21Table 5-12: Summary of Benefits for Option A – Final Rule (millions, 2005$) – Scenario 1Children Under 6IQ BenefitsAdultCardiovascular BenefitsCombinedPopulationAnnualizedBenefits(3 percent)AnnualizedBenefits(7 percent)AnnualizedBenefits(3 percent)AnnualizedBenefits(7 percent)AnnualizedBenefits(3 percent)AnnualizedBenefits(7 percent)Calculated Benefits(1) Reside in housing renovated under opt-outprovisionNot applicable – childrenunder 6 do not reside inopt-out eligible housing$656.5$698.8$656.5$698.8(2) Live contiguous to attached house renovatedunder opt-out provision$15.4$16.4$119$127$134.4$143.4(3) Move into house renovated under opt-outprovision$68.2$72.6$45.1*$48*$68.2*$726*(4) Receive childcare in housing renovatedunder opt-out provision$6.9$7.3Not applicable$6.9$7.3Subtotal$90.5$96.3$775.5$825.8$866.0$920.1Uncalculated Benefits(5) Live near house renovated under opt-outprovision, other than contiguous attached houseNot estimatedNot estimatedNot estimated(6) Spend time in friend’s or relative’s houserenovated under opt-out provisionNot estimatedNot estimatedNot estimated(7) Health effects for all populations other thanIQ loss in children <6 and blood pressureeffects in older individualsNot estimatedNot estimatedNot estimatedTotalNot estimatedNot estimatedNot estimated* Not included in subtotal because these benefits are assumporated into row #on the exposure ass.ed to be incor1 above basedumptions usedNotes: 1. Assumes a 75% compliance rate.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final RuleFebruary 19, 2010*** Deliberative – Do Not Cite, Quote or Release During the Review ***5-22Table 5-13: Summary of Benefits for Option A – Final Rule (millions, 2005$) – Scenario 2Children Under 6IQ BenefitsAdultCardiovascular BenefitsCombinedPopulationAnnualizedBenefits(3 percent)AnnualizedBenefits(7 percent)AnnualizedBenefits(3 percent)AnnualizedBenefits(7 percent)AnnualizedBenefits(3 percent)AnnualizedBenefits(7 percent)Calculated Benefits(1) Reside in housing renovated under opt-outprovisionNot applicable – childrenunder 6 do not reside inopt-out eligible housing$2,626$2,795$2,626$2,795(2) Live contiguous to attached house renovatedunder opt-out provision$15.4$16.4$119$127$134.4$143.4(3) Move into house renovated under opt-outprovision$272.7$290.3$722*$768*$272.7*$290.3*(4) Receive childcare in housing renovatedunder opt-out provision$27.5$29.2Not applicable$27.5$29.2Subtotal$315.6$335.9$2,745$2,922$3,060.6$3,257.9Uncalculated Benefits(5) Live near house renovated under opt-outprovision, other than contiguous attached houseNot estimatedNot estimatedNot estimated(6) Spend time in friend’s or relative’s houserenovated under opt-out provisionNot estimatedNot estimatedNot estimated(7) Health effects for all populations other thanIQ loss in children <6 and blood pressureeffects in older individualsNot estimatedNot estimatedNot estimatedTotalNot estimatedNot estimatedNot estimated* Not included in subtotal because these benefits are assumporated into row #on the exposure ass.ed to be incor1 above basedumptions usedNotes: 1. Assumes a 75% compliance rate.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final RuleFebruary 19, 2010*** Deliberative – Do Not Cite, Quote or Release During the Review ***5-23Table 5-14: Summary of Benefits for Option A –Final Rule (millions of dollars, 3% discount rate)Children Under 6IQ BenefitsAdultCardiova enefitsscular BCombinedPopulationScenario 1Scenario 2Scenario 1Scenario 2Scenario 1Scenario 2(1) Reside in housing renovatedunder opt-out provisionNot applicable –childrenunder 6 do not reside inopt-out eligible housing$656.5$2,626$656.5$2,626(2) Live contiguous to attachedhouse renovated under opt-outprovision$15.4$15.4$119$119$134.4$134.4(3) Move into house renovatedunder opt-out provision$68.2$272.7$45*$722*$68.2*$272.7*(4) Receive childcare in housingrenovated under opt-outprovision$6.9$27.5Not applicable$6.9$27.5Subtotal$90.5$315.6$775.5$2,745$866.0$3,060.6Uncalculated Benefits(5) Live near house renovated under opt-out provision, other than contiguous attached house;(6) Spend time in friend’s or relative’s house renovated under opt-out provision;(7) Health effects for all populations other than IQ loss in children <6 and blood pressure effects in older individuals.* Adult component not included in subtotal because these benefits are assumed tobe incorporated into row #1 abovebased on theexposure assumptions used.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final RuleFebruary 19, 2010*** Deliberative – Do Not Cite, Quote or Release During the Review ***5-24Table 5-15: Summary of Benefits for Option A –Final Rule (millions of dollars, 7% discount rate)Children Under 6IQ BenefitsAdultCardiovascular BenefitsCombinedPopulationScenario 1Scenario 2Scenario 1Scenario 2Scenario 1Scenario 2(1) Reside in housing renovatedunder opt-out provisionNot applicable – childrenunder 6 do not reside inopt-out eligible housing$698.8$2,795$698.8$2,795(2) Live contiguous to attachedhouse renovated under opt-outprovision$16.4$16.4$127$127$143.4$151.6(3) Move into house renovatedunder opt-out provision$72.6$290.3$48*768*$72.6*$290.3*(4) Receive childcare inhousingrenovated under opt-outprovision$7.3$29.2Not applicable$7.3$29.2Subtotal$96.3$335.9$825.8$2,922$920.1$3,257.9Uncalculated Benefits(5) Live near house renovated under opt-out provision, other than contiguous attached house;(6) Spend time in friend’s or relative’s house renovated under opt-out provision;(7) Health effects for all populations other than IQ loss in children <6 and blood pressure effects in older individuals.* Adult component not included in subtotal because these benefits are assumed tobe incorporated into row #1 above based on theexposure assumptions used.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-25 

### 5.3 Benefits of Additional Recordkeeping Requirements 1 In promulgating the 2008 LRRP rule, EPA recognized the importance of education and outreach to teach consumers about lead-safe work practices and to en courage them to hire certified renovation firms. EPA’s work on the education and outreach campaign for the LRRP program has continued to highlight the importance of an informed public to the success of the LRRP program in minimizing exposures to lead-based paint hazards that may be created by renovations. 2 3 4 5 6
7 8 9 10 11 12 13 14 15 16 17 18 19 20

22 23 24
25 26 27 28 29
30
31
32
33
34

36 37 38
39 40 41 42 43 EPA has determined that if renovators are required to provide the owners a nd occupants of renovated buildings with copies of the records renovation firms must maintain to document compliance with the rule’s training and work practice requirements, it will serve to reinforce the information provided in EPA’s “Renovate Right” brochure on the potential hazards of renovations and on the LRRP requirements. These records will enable building owners and occupa nts to better understand what the renovation firm did to comply with the rule and how the rule’s prov isions affected their specific renovation. Educating the owners and occupants in this wa y is likely to help them to be better able to protect themselves from lead-based paint hazards that may have been created by the renovation and improve their ability to assist the EPA in monitoring compliance with the LRRP ru le. For example, the checklist may cause owners or occupants to question whether the containment used was sufficient, or whether cleaning verification was properly performed. Tenants may raise their concerns with their landlord, and owners may discuss their concerns with the renovation firm before making fi nal payment for the renovation. These improvements in education and monitoring will improve compliance w ith the rule, which will ultimately protect children and adults from exposure to lead h azards due to renovation activities. 

### 5.4 Lead-Related Health Effects and Ecological Effects 21 Lead exposure can cause many adverse health and ecological effects. This section supplements the benefits chapter by providing a broader, qualitative discussion of lead-related effects (including adult effects and ecological effects), based on EPA’s Air Quality Criteria for Lead. The information provided in this section is an ex cerpt from the Executive Summary of the document Air Quality Criteria for Lead (United States Enviro nmental Protection Agency, October 2006, EPA/600/R5/144aF, this document is available at http://c fpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=158823). Specifically, the information provided in this secti on is directly from the following sections of the Executive Summary:

E.4 Health Effects Associated with Lead Exposure E.5 Human Population Groups at Special Ri sk and Potential Public Health Impacts
E.6 Environmental Effects of Lead

5.4.1 Background 35 The purpose of the 2006 Lead Air Quality Criteria document (AQCD) is to critically assess the latest scientific information on lead. The final version of the revised Lead AQCD mainly assesses pertinent literature published or accepted for p ublication through December 2005. The First External Review Draft (dated December 2005) of the revised Lead AQCD underwent public comment and was reviewed by the Clean Air Scientific Advisory Committee (CASAC) at a public meeting held in Durham, NC on February 28-Ma rch 1, 2006. The public comments and CASAC recommendations received were taken into account in making appropriate revisions and incorporating them into a Second External Review Draft (dated May, 2006) which was released for further publicEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-26 comment and CASAC review at a public meeting held June 28-29, 2006. In addition, still further revised drafts of the Integrative Synthesis chapter and th e Executive Summary were th en issued and discussed during an August 15, 2006 CASAC teleconference ca ll. Public comments and CASAC advice received on these latter materials, as well as Second External Re view Draft materials, were taken into account in making and incorporating further revisions into this final version of the Lead AQCD. 1 2 3 4 5

7 8 9 10 11 12 13 14 15

17 5.4.2 Health Effects Associated with Lead Exposure

6 Both epidemiologic and toxicological studies have shown that environmentally relevant levels of lead affect many different organ systems. Research completed since the 1986 AQCD/Addendum and 1990 Supplement indicates that lead eff ects occur at blood-lead levels ev en lower than those previously reported for many endpoints. Remarkable progress h as been made since the mid-1980s in understanding the Pb effects on health. Recent studies have focused on details of the associations, including the shapes of concentration-response relationships, especially at levels well within the ra nge of general population exposures, and on those biological and/or socio-envir onmental factors that eith er increase or decrease an individual’s risk. Key findings and conclusions regarding important outcomes of newly available toxicological and epidemiologic studies of Pb health effects are highlighted below.
5.4.2.1 Neurotoxic Effects 16

• Neurobehavioral effects of Pb-exposure early in development (during fetal, neonatal, and later postnatal periods) in young infants and children ( < 7 years old) have been observed with remarkable consistency across numerous studies involving varying study designs, different developmental assessment protocols, and di verse populations. Negative Pb impacts on neurocognitive ability and other ne urobehavioral outcomes are robust in most recent studies even after adjustment for numerous potentially confoundi ng factors (including quality of care giving, parental intelligence, and socioeconomic status). These effects generally appear to persist into adolescence and young adulthood. 18 19 20 21 22 23 24

25 26 27 28 29 30 31

32 33 34 35 36

37 38 39 40 41 42 43 44 • The overall weight of the available evidence pr ovides clear substantiation of neurocognitive decrements being associated in young children with blood-Pb concentrations in the range of 5-10 μ g/dL, and possibly somewhat lower. Some newly available analyses appear to show Pb effects on the intellectual attainment of preschool and sch ool age children at population mean concurrent blood-Pb levels ranging down to as low as 2 to 8 μ g/dL. A decline of 6.2 points in full scale IQ for an increase in concurrent blood Pb levels from 1 to 10 μ g/dL has been estimated, based on a pooled analysis of results derived from seven we ll-conducted prospective epidemiologic studies.

• In the limited literature examining the effects of environmental Pb exposure on adults, mixed evidence exists regarding associations between Pb and neurocognitive performance. No associations were observed between cognitiv e performance and blood Pb levels; however, significant associations were observed in relation to bone Pb concentrations, suggesting that longterm cumulative Pb exposure may contribut e to neurocognitive deficits in adults.

• Animal toxicology data indicate that developm ental Pb exposures creating steady-state blood-Pb concentrations of ~10 μ g/dL result in behavioral impairments that persist into adulthood in rats and monkeys. No evident threshold has yet been found; and Pb-induced deficits, for the most part, have been found to be very persistent, ev en with various chelation treatments. However, experimental studies indicate that environmenta l enrichment during development can partially mitigate the effects of Pb on cognitive function. In rats, neurobehavioral de ficits that persisted well into adulthood were observed with prenatal , preweaning, and postweaning Pb exposure. In monkeys, such neurobehavioral deficits were obser ved both with in utero-only exposure and withEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-27 early postnatal-only exposure when peak blood-Pb levels did not exceed 15 μ g/dL and steadystate levels were ~11 μ g/dL. 1 2

4 5 6 7

9 10

11 12

13 14

15 16 17 18 19 20

22 23 24 25 26 27 28 29

30 31 32 33 34 35 36 37

39 40 41 42 • Learning impairment has been observed in animal studies at blood levels as low as 10 μ g/dL,

3 with higher level learning showing greater im pairment than simple learning tasks. The mechanisms associated wi th these deficits include: response pr eservation; insensitivity to changes in reinforcement density or con tingencies; deficits in attention; reduced ability to inhibit inappropriate responding; impulsivity; and distractibility.

• Lead affects reactivity to the environment and social behavior in both rodents and nonhuman 8 primates at blood Pb levels of 15 to 40 μ g/dL. Rodent studies also show that Pb exposure potentiates the effects of stress in females.

• Auditory function has also been shown to be impaired at blood Pb levels of 33 μ g/dL, while visual functions are affected at 19 μ g/dL.

• Neurotoxicological studies in animals clearly demonstrated that Pb mimics calcium and affects neurotransmission and synaptic plasticity.

• Epidemiologic studies have identified genetic polymorphisms of two genes that may alter susceptibility to the neurodevelopmen tal consequences of Pb exposure in children. Variant alleles of the ALAD gene are associated with differences in absorption, retention, and toxicokinetics of Pb. Polymorphisms of the vitamin D receptor ge ne have been shown to affect the rate of resorption and excretion of Pb over time. These studies are only suggestive, and parallel animal studies have not been completed.
5.4.2.2 Cardiovascular Effects 21

• Epidemiologic studies have consistently demons trated associations between Pb exposure and enhanced risk of deleterious cardiovascular outcomes, including increased blood pressure and incidence of hypertension. A meta-analysis of numerous studies estimates that a doubling of blood-Pb level (e.g., from 5 to 10 μ g/dL) is associated with ~1.0 mm Hg increase in systolic blood pressure and ~0.6 mm Hg increase in diastolic pressure. Studies have also found that cumulative past Pb exposure (e.g., bone Pb) may be as important, if not more, than present Pb exposure in assessing cardiovascular effects. Th e evidence for an association of Pb with cardiovascular morbidity and mortality is limited but supportive.

• Experimental toxicology studies have confirme d Pb effects on cardiovascular functions. Most have shown that exposures creating blood-Pb levels of ~20 to 30 μ g/dL for long periods result in arterial hypertension that persists long after cessation of Pb exposure in genetically normal animals. One study reported blood pressure increases at blood-Pb levels as low as 2 μ g/dL in rats. A number of in vivo and in vitro studies provide compelling evidence for the role of oxidative stress in the pathogenesis of Pb-induced hypertensi on. However, experimental investigations of cardiovascular effects of Pb in animals are unclear as to why low, but not high, levels of Pb exposure cause hypertension in experimental animals.
5.4.2.3 Renal Effects 38

• In the general population, both circulating and cumulative Pb was found to be associated with longitudinal decline in renal function. Effects on creatine clearance have been reported in human adult hypertensives to be associated with gene ral population mean blood-Pb levels of only 4.2 μ g/dL. The public health significance of such e ffects is not clear, however, in view of moreEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-28 serious signs of kidney dysfunction being seen in occupationally exposed workers only at much higher blood-Pb levels (>30-40 μ g/dL). 1 2

4 5 6 7 8 9 10

11 12 13 14 15

17 18 19 20 21

22 23 24 25 26 27

29 30 31 32 33

34 35 36 37 38 39 40

41 42 43 44 • Experimental studies using laboratory animals demonstrated that the initial accumulation of

3 absorbed Pb occurs primarily in the kidneys. This takes place mainly through glomerular filtration and subsequent reabsorption, and, to a small extent, through direct absorption from the blood. Both low dose Pb-treated animals and high dose Pb-treated animals showed a “hyperfiltration” phenomenon during the first 3 months of Pb exposure. Investigations into biochemical alterations in Pb-induced renal toxi city suggested a role for oxidative stress and involvement of NO, with a significant increase in nitrotyrosine and substantial fall in urinary excretion of NOx.

• Iron deficiency increases intestinal absorption of Pb and the Pb content of soft tissues and bone. Aluminum decreases kidney Pb content and serum cr eatinine in Pb-intoxicated animals. Age also has an effect on Pb retention. There is higher Pb retention at a very young age and lower bone and kidney Pb at old age, attributed in part to increased bone resorption and decreased bone accretion and, also, kidney Pb.
5.4.2.4 Immune System Effects 16

• Findings from recent epidemiologic studies suggest that Pb exposure may be associated with effects on cellular and humoral immunity. These include changes in serum immunoglobulin levels. Studies of biomarkers of humoral immunity in children have consistently found significant associations between increasing blood-Pb concentra tions and serum IgE levels at blood-Pb levels <10 μ g/dL.

• Toxicologic studies have shown that Pb targets immune cells, causing suppression of delayed type hypersensitivity response, elevation of Ig E, and modulation of macrophages into a hyperinflammatory phenotype. These types of changes can cause increased risk of atopy, asthma, and some forms of autoimmunity and reduced resist ance to some infectious diseases. Lead exposure of embryos resulting in blood-Pb levels <10 μ g/dL can produce persistent later-life immunotoxicity.
5.4.2.5 Effects on Heme Synthesis 28

• Lead exposure has been associated with disruption of heme synthesis in both children and adults. A 10% probability of anemia (hematocrit <35%) is estimated to be associated with a blood-Pb level of ~20 μ g/dL at age 1 year. Increases in blood Pb concentration of about 20-30 μ g/dL are sufficient to halve erythrocyte ALAD activity an d sufficiently inhibit ferrochelatase to double erythrocyte protoporphyrin levels.

• Toxicological studies demonstrated that Pb in toxication interferes with red blood cell (RBC) survival and alters RBC mobility. Hematological parameters, such as mean corpuscular volume, mean corpuscular hemoglobin, and mean cor puscular hemoglobin concentration, are also significantly decreased upon exposure to Pb. These e ffects are due to internalization of Pb by RBC. The transport of Pb across the RBC membrane is energy-independent and carrier-mediated; and the uptake of Pb appears to be mediated by an anion exchanger through a vanadate-sensitive pathway.

• Erythrocyte ALAD activity ratio (ratio of activat ed/non activated enzyme activity) has been shown to be a sensitive, dose-re sponsive measure of Pb exposure, regardless of the mode of administration of Pb. Competitive enzyme kinetic analyses in RBCs from both humans and Cynomolgus monkeys indicated similar inhibition profiles by Pb.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-29 5.4.2.6 Effects on Bones and Teeth 1

• Experimental studies in animals demonstrate that Pb substitutes for calcium and is readily taken 2 up and stored in the bone and teeth of animal s, potentially allowing bone cell function to be compromised both directly and indirectly by exposure. Relatively short-term exposure of mature animals to Pb does not result in significant gr owth suppression. However, chronic Pb exposure during times of inadequate nutrition has been shown to adversely influence bone growth, including decreased bone density, decreased trabecular bone, and growth plates. 3 4 5 6 7

9 10

11 12 13 14

15 16 17

18 19 20 21

22 23 24

26 27 28 29 30 31

32 33 34 35 36 37 38

39 40 41 42 43 • Exposure of developing animals to Pb during g estation and the immediate postnatal period has

8 clearly been shown to significantly depress ear ly bone growth in a dose-dependent fashion, though this effect is not manifest below a certain threshold.

• Systemically, Pb has been shown to disrupt mi neralization of bone during growth, to alter calcium binding proteins, and to increase calcium and phosphorus concentration in the blood stream, in addition to potentially altering bone cell differentiation and function by altering plasma levels of growth hormone and calciotropic hormones such as vitamin D3 [1,25- (OH2)D3.

• Periods of extensive bone remodeling, such as o ccur during weight loss, advanced age, altered metabolic state, and pregnancy and lactation are all associated with mobilization of Pb stores from bone of animals.

• Numerous epidemiologic studies and, separately, animal studies (both post-eruptive Pb exposure and pre- and perinatal Pb expos ure studies) suggest that Pb is a caries-promoting element. However, whether Pb incorporation into th e enamel surface compromises the integrity and resistance of the surface to dissolution, and ultim ately increases risk of dental decay, is unclear.

• Increased risk of dental caries has been associated with Pb exposu re in children and adults. Lead effects on caries were observed in populations whose mean blood-Pb levels were less than 10 μ g/dL.
5.4.2.7 Reproductive and Developmental Effects 25

• Epidemiologic evidence suggests small associati ons between Pb exposur e and male reproductive outcomes, including perturbed semen quality and increased time to pregnancy. There are no adequate epidemiologic data to evaluate associ ations between Pb exposure and female fertility. Most studies have yielded no associations, or w eak associations, of Pb exposure with thyroid hormone status and male repr oductive endocrine status in highly exposed occupational populations.

• New toxicologic studies support earlier conclusions, presented in the 1986 Lead AQCD, that (a) Pb can produce both temporary and persisting e ffects on male and female reproductive function and development and (b) Pb disrupts endocrine function at multiple points along the hypothalamic-pituitary-gonadal axis. Although there is evidence for a common mode of action, consistent effects on circulating testosterone levels are not always observed in Pb-exposed animals. Inconsistencies in reports of circulati ng testosterone levels complicate derivation of a dose-response relationship for this endpoint.

• Lead-induced testicular damage (ultrastructural ch anges in testes of monkeys at blood-Pb >35 to 40 μ g/dL) and altered female sex hormone release, imprinting during early development, and altered female fertility all suggest Pb-induced reproductive effects. However, Pb exposure does not generally produce total sterility. Pre- and postnat al exposure to Pb has been demonstrated to result in fetal mortality and produce a variety of sublethal effects in the offspring. Many of theEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-30 Pb-induced sublethal developmental effects occur at maternal blood-Pb levels that do not result in clinical (overt) toxicity in the mothers. Terat ogenic effects resulting from Pb exposure reported in a few studies appear to be confounded by maternal toxicity. 1 2 3

6 7

9 10 11 12 13

14 15 16

17 18 19

20 21

22 23 24 25

26 27 28

29 30 31 32 33

34 35 36 37 38

40 41 42 5.4.2.8 Effects on Other Organ Systems

4

• Lead impacts the hypothalamic-pitu itary-adrenal axis, elevating cor ticosterone leve ls and altering 5 stress responsivity. This may be a potential m echanism contributing to Pb-induced hypertension, with further possible roles in the etiology of diabetes, obesity and other disorders.

• Studies of hepatic enzyme levels in serum suggest that liver injury may be present in Pb workers; 8 however, associations specifically with Pb e xposures are not evident. Children exposed to relatively high levels of Pb (blood Pb >30 μ g/dL) exhibit depressed levels of circulating 1,25- dihydroxy vitamin D (1,25-OH-D). However, associations between serum vitamin D status and blood Pb were not evident in a study of calci um-replete children who had average lifetime bloodPb concentrations <25 μ g/dL.

• Field studies that evaluated hepatic enzyme levels in serum suggest that liver injury may be present in Pb workers; however, associations speci fically with Pb exposures have not been well established.

• Simultaneous induction of the activities of phase II drug metabolizing enzymes and decreased phase I enzymes with a single exposure to Pb nitrat e in rat liver suggest that Pb is capable of causing biochemical phenotype similar to hepatic nodules.

• Newer studies examined the induction of GST-P at both transcriptional and translational levels using in vitro systems and indicated a role for Pb-nitrate and Pb-acetate in the induction process.

• Lead-induced alterations in cholesterol metabolis m appear to be mediated by the induction of several enzymes related to cholesterol metabolism and the decrease of 7 α -hydroxylase, a cholesterol-catabolizing enzyme. This regulati on of cholesterol homeostasis is modulated by changes in cytokine expression and related signaling.

• Newer experimental evidence suggests that Pb-i nduced alterations in liver heme metabolism involve perturbations in ALAD activity, porphyrin metabolism, alterations in Transferrin gene expression, and associated changes in iron metabolism.

• Gastrointestinal (GI) absorption of Pb is influen ced by a variety of factors, including chemical and physical forms of the element in ingested medi a, age at intake, and various nutritional factors. The degeneration of intestinal mucosal epithe lium leading to potential malabsorption and alterations in the jejunal ultrastructure (possibl y associated with distortion of glycocalyx layer) have been reported in the intestine of Pb-exposed rats.

• Nutritional studies that varied Pb, Ca, and vitami n D levels in the diet have demonstrated competition of Pb with Ca absorption. Supplementation with vitamin D has been reported to enhance intestinal absorption of Ca and Pb . Physiological amounts of vitamin D, when administered to vitamin D-deficient rats, resulted in elevated Pb and Ca levels. In the case of severe Ca deficiency, Pb ingestion results in a marked decrease in serum 1,25 hydroxy vitamin D.
5.4.2.9 Genotoxic and Carcinogenic Effects 39

• Epidemiologic studies of highly exposed occupati onal populations suggest a relationship between Pb and cancers of the lung and the stomach; how ever the evidence is limited by the presence of various potential confounders, including metal coex posures (e.g., to arsenic, cadmium), smoking,EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-31 and dietary habits. The 2003 NTP and 2004 IARC reviews concluded that Pb and Pb compounds were probable carcinogens, based on limited evidence in humans and sufficient evidence in animals. Similarly, Pb and Pb compounds would likely be classified as likely to be carcinogenic to humans according to the new 2005 EPA Cancer Assessment Guidelines for Carcinogen Risk Assessment, based on animal data even though the human data are inadequate. 1 2 3 4 5

7 8

10 11

12 13 14 15 16

18 19

20 21

22 23 24 25 26

27 28

30 31 32 33 34

35 36 37 38 39

40 41 42 • Studies of genotoxicity consistently find associ ations of Pb exposure with DNA damage and

6 micronuclei formation; however, the associations with the more established indicator of cancer risk, chromosomal aberrations, are inconsistent.

• Pb is an animal carcinogen and extends our unde rstanding of mechanisms involved to include a 9 role for metallothionein. Specifically, the recent da ta show that metallothionein may participate in Pb inclusion bodies and, thus, serves to prev ent or reduce Pb-induced tumorigenesis.

• In vitro cell culture studies that evaluated the pot ential for Pb to transform rodent cells are inconsistent, and careful study of a time course of exposure is necessary to determine whether Pb actually induces transformation in cultured rodent cells. There is increased evidence suggesting that Pb may be co-carcinogenic or promotes the carcinogenicity of other compounds. Cell culture studies do support a possible epigenetic m echanism or co-mutagenic effects.
5.4.2.10 Lead-Binding Proteins 17

• Proteins depending upon sulfur-containing side chai ns for maintaining conformity or activity are vulnerable to inactivation by Pb, due to its strong sulfur-binding affinity.

• The enzyme, ALAD, a 280 kDa protein, is inducible and is the major Pb-binding protein within the erythrocyte.

• The Pb-binding protein in rat kidney has been identified as a cleavage product of α -2- microglobulin. The low molecular weight Pb-binding proteins in human kidney have been identified as thymosin β 4 (molecular weight 5 kDa) and acyl-CoA binding protein (molecular weight 9 kDa). In human brain, Pb-binding proteins include thymosin β 4 and an unidentified protein of 23 kDa.

• Animal toxicology studies with metallothionein -null mice demonstrated a possible role for metallothionein as a renal Pb-binding protein.
5.4.2.11 Human Population Groups At Special Risk And Potential Public Health Impacts 29

• Children, in general and especially low SES (o ften including larger proportions of AfricanAmerican and Hispanic) children, have been we ll-documented as being at increased risk for Pb exposure and Pb-induced adverse health effects. This is due to several factors, including enhanced exposure to Pb via ingestion of soil- Pb and/or dust-Pb due to normal hand-to-mouth activity and/or pica.

• Even children with low Pb exposure levels (having blood Pb of 5-10 μ g/dL or, possibly, somewhat lower) are at notable risk, due to apparent non-linear dose -response relationships between blood Pb and neurodevelopmental outcomes. It is hypothesized that initial neurodevelopmental lesions occurring at blood-Pb levels <10 μ g/dL may disrupt different developmental processes in the nervous syst em than more severe high level exposures.

• Adults with idiosyncratic exposures to Pb th rough occupations, hobbies, make-up use, glazed pottery, native medicines, and other sources are at risk for Pb toxicity. Certain ethnic and racial groups are known to have cultural practices that involve ingestion of Pb-containing substances,EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-32 e.g., ingestion of foods or beverages stored in Pb-glazed pottery or imported canned food from countries that allow Pb-soldered cans. 1 2

4 5 6

8 9 10

11 12 13 14 15 16

17 18 19 20 21 22 23 24

25 26 27 28 29 30 31 32 33 34 35 36

39
40 41 42 43 • Cumulative past Pb exposure, measured by bone Pb, may be a better predictor of cardiovascular

3 effects than current blood-Pb levels. African-A mericans are known to have substantially higher baseline blood pressure than other ethnic groups, so Pb’s impact on an already higher baseline could indicate a greater susceptibility to Pb for this group.

• Effects on adults of low-level Pb exposures also in clude some renal effects (i.e., altered creatinine 7 clearance) at blood-Pb levels <5 ug/dL. Lead exposure combined with other risk factors, such as diabetes, hypertension, or chronic renal insufficien cy may result in clinically relevant effects in individuals with two or more other risk factors.

• At least two genetic polymorphisms, of the AL AD and the vitamin D receptor gene, have been suggested to play a role in susceptibility to Pb. In one study, African-American children were found to have a higher incidence of being homozyg ous for alleles of the vitamin D receptor gene thought to contribute to greater Pb blood levels. This work is preliminary and further studies will be necessary to determine implications of genetic differences that may make certain populations more susceptible to Pb exposure.

• What was considered “low” for Pb exposure levels in the 1980s is an order of magnitude higher than the current mean level in the U.S. populatio n, and current average blood-Pb levels in U.S. populations remain perhaps as much as two orde rs of magnitude above preindustrial “natural” levels in humans. There is no level of Pb exposure that has yet been identified, with confidence, as being clearly not being associated with possible ri sk of deleterious health effects. Some recent studies of Pb neurotoxicity in infants have observed effects at population average blood-Pb levels of only 1 or 2 μ g/dL; and some cardiovascular, renal, a nd immune outcomes have been reported at blood-Pb levels below 5 μ g/dL.

• Public health interventions have resulted in declin es, over the last 25 years, of more than 90% in the mean blood-Pb level within all age and gender subgroups of the U.S. population, substantially decreasing the numbers of individuals at likely risk for Pb-induced toxicities. Nevertheless, estimates of the magnitude of potential public hea lth impacts of Pb exposure can be substantial for the U.S. population. For example, in estimating the effect of Pb exposure on intelligence, it was projected that the fraction of individuals with an IQ >120 would decrease from ~9% with no Pb exposure to less than 3% at a blood-Pb level of 10 μ g/dL. Also, the fraction of individuals with an IQ >130 points was estimated as being likely to decrease from 2.25% to 0.5% with a blood-Pb level change from 0 to 10 μ g/dL. In addition, an estimate of hypertension-related risk for serious cardiovascular events (coronary disease, stroke, peripheral artery disease, cardiac failure) indicates that a decrease in blood Pb from 10 to 5 μ g/dL could result in an annual decrease of 27 events per 100,000 women and 39 events per 100,000 men.
5.4.3 Environmental Effects of Lead 37

5.4.3.1 Terrestrial Ecosystems 38 Methodologies Used in Terrestrial Ecosystem Research

• Electron probe microanalysis (EPMA) techniques provide the greatest information on metal speciation. Other techniques, such as EXAFS (e xtended X-ray absorption fine structure) and EXANES (extended X-ray absorption near edge sp ectroscopy), show great promise and will be important in solving key mechanistic questions.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-33 • In situ methodologies have been developed to lower soil-Pb relative bioavailability. These 1 amendments typically fall within the categori es of phosphate, biosolid, and Al/Fe/Mn-oxide amendments. Some of the drawbacks to soil amendm ent include phosphate toxicity to plants and increased arsenic mobility at high soil phosphate concentrations. The use of iron (III) phosphate seems to mitigate arsenic mobility, however incr eased concentrations of phosphate and iron limit their application when drinking water quality is a concern. 2 3 4 5 6

7

9 10 11 12

13 14 15

16 17 18

19 20 21 22 23 24 25

26 27 28

29 30

31 32 33 34 35

36 37 38 39 40 41 42 43 Distribution of Atmospherically Deli vered Lead in Terrestrial Ecosystems

• Total Pb deposition during the 20th century has been estimated at 1 to 3 g Pb m -2 , depending on 8 elevation and proximity to urban areas. Total cont emporary loadings to terrestrial ecosystems are ~1 to 2 mg m -2 year -1 . This is a relatively small annual flux of Pb compared to the reservoir of ~0.5 to 4 g m -2 of gasoline additive-derived Pb already deposited in surface soils over much of the United States.

• Dry deposition can account for 10% to >90% of total Pb deposition. Because Clean Air Act Legislation has preferentially reduced Pb associated with fine particles, relative contributions of dry deposition have changed in the last few decades.

• Although inputs of Pb to ecosystems are cu rrently low, Pb export from watersheds via groundwater and streams is substa ntially lower than inputs. Therefore, even at current input levels, watersheds are ac cumulating anthropogenic Pb.

• Species of Pb delivered to terrestrial ecosystems can be inferred by emission source. For example, Pb species emitted from automobile exhaust are dom inated by particulate Pb halides and double salts with ammonium halides (e.g., PbBrCl, PbBrCl 2 NH 4 Cl), while Pb emitted from smelters is dominated by Pb-sulfur species. Halides from automobile exhaust break down rapidly in the atmosphere, via redox reactions in the presence of atmospheric acids. Lead phases in the atmosphere, and presumably the compounds deliver ed to the surface of the earth (i.e., to vegetation and soils), are suspected to be in the form of PbSO4, PbS, and PbO.

• The importance of humic and fulvic acids and hy drous Mn- and Fe-oxides for scavenging Pb in soils was discussed in some detail in the 1986 Lead AQCD. The importance of these Pb binding substrates is reinforced by studies repor ted in the more contemporary literature.

• The amount of Pb that has leached into mineral soil appears to be on the order of 20 to 50% of the total anthropogenic Pb deposition.

• The vertical distribution and mobility of atmosphe ric Pb in soils was poorly documented prior to 1986. Techniques using radiogenic Pb isotopes have been developed to differentiate between gasoline-derived Pb and natural, geogenic (nativ e) Pb. These techniques provide more accurate determinations of the depth-distribution and pot ential migration velocities for atmospherically delivered Pb in soils.

• Selective chemical extractions have been used extensively over the past 20 years to quantify amounts of a particular metal phase in soil or sed iment rather than total metal concentration. However, some problems persist with the selective extraction technique: (a) extractions are rarely specific to a single phase; and (b) in addition to the nonselectivity of reagents, significant metal redistribution has been found to occur during sequential chemical extractions. Thus, although chemical extractions provide some useful info rmation on metal phases in soil or sediment, the results should be treated as “operationally defined,” e.g., “H 2 O 2 -liberated Pb” rather than “organic Pb.”EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-34 • Soil solution dissolved organic matter content a nd pH typically have very strong positive and 1 negative correlations, respectively, with th e concentration of dissolved Pb species. 2
3

5 6 7 8

10 11 12

13 14 15 16 17 18 19 20 21 22

23 24 25

26 27 28 29 30 31
32
33 34 35

36 37 38 39 40

41 42 43 Effects of Lead on Natural Terrestrial Ecosystems

• Atmospheric Pb pollution has resulted in the accumulation of Pb in terrestrial ecosystems 4 throughout the world. In the United States, anth ropogenically-derived Pb represents a significant fraction of the total Pb burden in soils, even in sites remote from smelte rs and other industrial plants. However, few significant effects of Pb pollu tion have been observed at sites that are not near point sources of Pb.

• Evidence from precipitation collection and sediment analyses indicates that atmospheric 9 deposition of Pb has declined dramatically (>95%) at sites unaffected by point sources of Pb, and there is little evidence that Pb accumulated in so ils at these sites represents a threat to ground water or surface water supplies.

• The effects of Pb and other chemical emissions on terrestrial ecosystems ne ar smelters and other industrial sites decrease downwind from the Pb source. Several studies using the soil burden as an indicator have shown that much of the contamina tion occurs within a radius of 20 to 50 km around the emission source. Elevated metal concentr ations around smelters have been found to persist despite significant reductions in emissions. The concentrations of Pb in soils, vegetation, and fauna at these sites can be two to three orde rs of magnitude higher th an in reference areas. Assessing the risks specifically associated with Pb is difficult, because th ese sites also experience elevated concentrations of other metals and because of effects related to SO2 emissions. The confounding effect of other pollutants makes the assessment of Pb-specific exposure-response relationships impossible at the whole ecosystem level.

• In the most extreme cases, near smelter sites, the death of vegetation causes a near-complete collapse of the detrital food web, creating a terr estrial ecosystem in which energy and nutrient flows are minimal.

• More commonly, stress in soil microorganisms and detritivores can cause reductions in the rate of decomposition of detrital organic matter. Although there is little evidence of significant bioaccumulation of Pb in natural terrestrial ecosy stems, reductions in microbial and detritivorous populations can affect the success of their predators. Thus, at present, industrial point sources represent the greatest Pb-related threat to the main tenance of sustainable, healthy, diverse, and high-functioning terrestrial ecosystems in the United States. Terrestrial Species Response/Mode of Action

• Plants take up Pb via their foliage and through their root systems. Surface deposition of Pb onto plants may represent a significant contribution to the total Pb in and on the plant, as has been observed for plants near smelters and along roadsides.

• There are two possible mechanisms (symplastic or apoplastic) by which Pb may enter the root of a plant. The symplastic route is through the cell membranes of root hairs; this is the mechanism of uptake for water and nutrients. The apoplastic r oute is an extracellular route between epidermal cells into the intercellular spaces of the root cortex. The symplastic route is considered the primary mechanism of Pb uptake in plants.

• Recent work supports previous conclusions that th e form of metal tested, and its speciation in soil, influence uptake and toxicity to plants and i nvertebrates. The oxide form of Pb is less toxic than the chloride or acetate forms, which are less toxic that the nitrate form of Pb. However, theseEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-35 results must be interpreted with caution, as the c ounter ion (e.g., the nitrate ion) may also be contributing to the observed toxicity. 1 2

4 5 6 7 8

10 11 12 13 14 15

16 17 18

19 20
21
22 23 24 25

26 27 28 29 30 31 32 33

34 35

37
38 39 40 41 42 • Lead may be detoxified in plants by deposition in root cell walls, and this may be influenced by 3 calcium concentrations. Other hypotheses put forward recently include the presence of sulfur ligands and the sequestration of Pb in ol d leaves as detoxification mechanisms. Lead detoxification has not been studied extensively in invertebrates. Glutathione detoxification enzymes were measured in two species of spid er. Lead may be stored in waste nodules in earthworms or as pyromorphite in the nematode.

• Lead effects on heme synthesis (as measured primarily by ALAD activity and protoporphyrin 9 concentration) were documented in the 1986 Lead AQCD and continue to be studied. However, researchers caution that changes in ALAD and othe r enzyme parameters are not always related to adverse effects, but may simply indicate exposure. Other effects on plasma enzymes, which may damage other organs, have been reported. Lead also may cause lipid peroxidation, which may be alleviated by vitamin E, although Pb poisoning may still result. Changes in fatty acid production have been reported, which may influence immune response and bone formation.

• Insectivorous mammals may be more exposed to Pb than herbivores, and higher trophic-level consumers may be less exposed than lower trophic- level organisms. Nutritionally deficient diets (including low calcium) cause increased uptake of Pb and greater toxicity in birds.

• Interactions of Pb with other metals are inc onsistent, depending on th e endpoint measured, the tissue analyzed, the animal speci es, and the metal combination. Exposure/Response of Terrestrial Species

• Recent critical advancements reported in the curre nt Lead AQCD in understanding toxicity levels relies heavily on the work completed by a multi-stak eholder group, consisti ng of federal, state, consulting, industry, and academ ic participants, led by the EPA to develop Ecological Soil Screening Levels (Eco-SSLs).

• Eco-SSLs are concentrations of contaminants in soils that would result in little or no measurable effect on ecological receptors. The Eco-SSLs are in tentionally conservative in order to provide confidence that contaminants that could present an unacceptable risk are not screened out early in the evaluation process. That is, at or below these levels, adverse effects are considered unlikely. Due to conservative modeling assumptions (e.g., me tal exists in most toxic form or highly bioavailable form, high food ingestion rate, high so il ingestion rate) that are common to screening processes, several Eco-SSLs are derived below the average background soil concentration for a particular contaminant.

• The Eco-SSLs for terrestrial plants, birds, mamma ls, and soil invertebrates are 120, 11, 56, and 1700 mg Pb/kg soil, respectively.
5.4.3.2 Aquatic Ecosystems 36 Methodologies Used in Aquatic Ecosystem Research

• Many of the terrestrial methods can also be applied to suspended solids and sediments collected from aquatic ecosystems. Just as in the terrestrial environment, the speciation of Pb and other trace metals in natural freshwaters and seawater plays a crucial role in determining their reactivity, mobility, bioavailability, and toxicity. Many of the same speciation techniques employed for the speciation of Pb in terrestrial ecosystems are applicable in aquatic ecosystems.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-36 • There is now a better understanding of the potentia l effects of sampling, sample handling, and 1 sample preparation on aqueous-phase metal speciation. Thus, a need has arisen for dynamic analytical techniques that are able to capture a metal's speciation, in-situ and in real time. 2 3

5 6 7

9 10 11

12 13 14 15 16 17
18
19 20

21 22 23

24 25 26 27 28 29 30 31 32

33 34 35 36 37

38 39 40 41
42 • With few exceptions, ambient water quality crite ria (AWQC) are derived based on data from

4 aquatic toxicity studies conducted in the laborat ory. In general, both acute (short term) and chronic (long term) AWQCs are developed. Depending on the species, the toxicity studies considered for developing acute criteri a range in length from 48 to 96 hours.

• Acceptable chronic toxicity studies should encomp ass the full life cycle of the test organism, 8 although for fish, early life stage or partial life cycle toxicity studies are considered acceptable. Acceptable endpoints include reproduction, growth and development, and survival, with the effect levels expressed as the chronic value.

• The biotic ligand model (BLM), which considers the binding of free metal ion to the site of toxic action and competition between metal species and ot her ions, has been developed to predict the toxicity of several metals under a variety of water quality conditions. However, there are limitations to this tool in deriving AWQC becau se, currently, limited work has been conducted in developing chronic BLMs (for any metals, let alone Pb) and the acute BLMs to date do not account for dietary metal exposures. Distribution of Lead in Aquatic Ecosystems

• Atmospheric Pb is delivered to aquatic ecosyste ms primarily through depos ition (wet and/or dry) or through erosional transport of soil particles.

• A significant portion of Pb in the aquatic environm ent exists in the undissolved form (i.e., bound to suspended particulate matter). The ratio of Pb in suspended solids to Pb in filtrate varies from 4:1 in rural streams to 27:1 in urban streams.

• The oxidation potential of Pb is high in slightly acidic solutions, and Pb 2+ binds with high affinity to sulfur-, oxygen-, and nitrogen-containing ligands . Therefore, speciation of Pb in the aquatic environment is controlled by many factors (e.g., pH, redox, dissolved organic carbon, sulfides). The primary form of Pb in aquatic environments is divalent (Pb 2+ ), while Pb 4+ exists only under extreme oxidizing conditions. Labile forms of Pb (e.g., Pb 2+ , PbOH + , PbCO 3 ) are a significant portion of the Pb inputs to aquatic systems from atmospheric washout. Lead is typically present in acidic aquatic environments as PbSO 4 , PbCl4, ionic Pb, cationic forms of Pb-hydroxide, and ordinary Pb-hydroxide (Pb(OH) 2 ). In alkaline waters, common species of Pb include anionic forms of Pb-carbonate (Pb(CO 3 )) and Pb(OH) 2 .

• Lead concentrations in lakes and oceans were generally found to be much lower than those measured in the lotic waters assessed by NAWQA . In open waters of the North Atlantic the decline of Pb concentrations has been associated with the phasing out of l eaded gasoline in North America and Western Europe. However, in estuari ne systems, it appears that similar declines following the phase-out of leaded g asoline are not necessarily as rapid.

• Based on a synthesis of NAWQA data from the United States, Pb concentrations in surface waters, sediments, and fish tissues (whole body) respectively range from: 0.04 to 30 μ g/L (mean = 0.66, median = 0.50, 95th %tile = 1.1); 0.5 to 12,000 mg/kg (mean = 120, median = 28, 95th %tile = 200); and 0.08 to 23 mg/kg (mean = 1.03, median = 0.59, 95th %tile = 3.24). Effects of Lead on Natural Aquatic EcosystemsEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-37 • Lead exposure may adversely affect organisms at di fferent levels of organization, i.e., individual 1 organisms, populations, communities, or ecosystem s. Generally, however, there is insufficient information available for single materials in controlled studies to permit evaluation of specific impacts on higher levels of organi zation (beyond the individual organism). Potential effects at the population level or higher are, of necessity, extrapolated from individual level studies. Available population, community, or ecosystem level studies are typically conducted at sites that have been contaminated or adversely affected by multiple stressors (several chemicals alone or combined with physical or biological stressors). Theref ore, the best-documented links between Pb and effects on the environment are with effects on individual organisms. 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16

17 18

19 20

21 22 23

24 25 26
27
28 29 30

31 32 33 34

35 36 37

38 39 40 41 42 • Natural systems frequently contain multiple me tals, making it difficult to attribute observed adverse effects to single metals. For example, ma cro invertebrate communities have been widely studied with respect to metals contamination and community composition and species richness. In these studies, multiple metals were evaluated a nd correlations between observed community level effects were ascertained. The results often indicate a correlation between the presence of one or more metals (or total metals) and the negative effects observed. While, correlation may imply a relationship between two variables, it does not imply causation of effects.

• In simulated microcosms or natural systems, e nvironmental exposure to Pb in water and sediment has been shown to affect energy flow and nutrient cycling and benthic community structure.

• In field studies, Pb contamination has been show n to significantly alter the aquatic environment through bioaccumulation and a lterations of community structure and function.

• Exposure to Pb in laboratory studies and simula ted ecosystems may alter species competitive behaviors, predator-prey inter actions, and contaminant avoidan ce behaviors. Alteration of these interactions may have negative effects on species abundance and community structure.

• In natural aquatic ecosystems, Pb is often found coexisting with other metals and other stressors. Thus, understanding the effects of Pb in natural systems is challenging given that observed effects may be due to cumulative toxicity from multiple stressors. Aquatic Species Response/Mode of Action

• Recent research has suggested that due to the low solubility of Pb in water, dietary Pb (i.e., Pb adsorbed to sediment, particulate matter, and fo od) may contribute substantially to exposure and toxicity in aquatic biota.

• Generally speaking, aquatic organisms exhibit three Pb accumulation strategies: (1) accumulation of significant Pb concentrations with a low rate of loss, (2) excretion of Pb roughly in balance with availability of metal in the environment, and (3) weak net accumulation due to very low metal uptake rate and no significant excretion.

• Protists and plants produce intracellular polypeptid es that form complexes with Pb. Macrophytes and wetland plants that thrive in Pb-contaminated regions have de veloped translocation strategies for tolerance and detoxification.

• Like aquatic plants and protists, aquatic animals detoxify Pb by preventing it from being metabolically available, though their mechanisms for doing so vary. Invertebrates use lysosomalvacuolar systems to sequester and process Pb within glandular cells. They also accumulate Pb as deposits on and within skeletal tissue, and some can efficiently excrete Pb. Fish scales and mucous chelate Pb in the water column, and potentially reduce visceral exposure.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-38 • Numerous studies have reported the effects of Pb exposure on blood chemistry in aquatic biota. 1 Plasma cholesterol, blood serum protein, albumin, and globulin concentrations were identified as bioindicators of Pb stress in fish. 2 3

5 6 7

9 10

11 12 13 14
15
16 17 18 19

20 21

22 23 24

25 26

27 28

30 31 32

33 34 35 36 37 38 39

40 41 42 • Nutrients affect Pb toxicity in aquatic organisms. Some nutrients seem capable of reducing

4 toxicity. Exposure to Pb has not been shown to reduce nutrient uptake ability, though it has been demonstrated that Pb exposure may lead to increased production and loss of organic material (e.g., mucus and other complex organic ligands).

• Avoidance responses are actions performed to evad e a perceived threat. Some aquatic organisms 8 have been shown to be quite adept at avoiding Pb in aquatic systems, while others seem incapable of detecting its presence.

• The two most commonly reported Pb-element in teractions are between Pb and calcium and between Pb and zinc. Both calcium and zinc are essential elements in organisms and the interaction of Pb with these ions can lead to adverse effects both by increased Pb uptake and by a decrease in Ca and Zn required for normal metabolic functions. Exposure/Response of Aquatic Species

• The 1986 Lead AQCD reviewed data in the contex t of sublethal effects of Pb exposure. The document focused on describing the types and rang es of Pb exposures in ecosystems likely to adversely impact domestic animals. As such, the 1986 AQCD did not provide a comprehensive analysis of the effects of Pb to most aquatic primary producers, consumers, and decomposers.

• Waterborne Pb is highly toxic to aquatic organisms, with toxicity varying with the species and life stage tested, duration of exposure, form of Pb tested, and water quality characteristics.

• Among the species tested, aquatic invertebrates, such as amphipods and water fleas, were the most sensitive to the effects of Pb, with adverse effects being reported at concentrations as low as 0.45 μ g/L (range: 0.45 to 8000 μ g/L).

• Freshwater fish demonstrated adverse effects at concentrations ranging from 10 to >5400 μ g/L, depending generally upon water quality parameters.

• Amphibians tend to be relatively Pb tolerant; however, they may exhibit decreased enzyme activity (e.g., ALAD reduction) and changes in behavior (e.g., hypoxia response behavior).
5.4.3.3 Critical Loads for Lead in Terrestrial and Aquatic Ecosystems 29

• Critical loads are defined as threshold deposition ra tes of air pollutants that current knowledge indicates will not cause long-term adverse effects to ecosystem structure and function. A critical load is related to an ecosystem's sensitivity to anthropogenic inputs of a specific chemical.

• The critical loads approach for sensitive ecosystem s from acidification has been in use throughout Europe for about 20 years. Its application to Pb and other heavy metals in Europe is more recent. European critical load values for Pb have been developed but are highly specific to the bedrock geology, soil types, vegetation, and historical deposition trends in each European country. To date, the critical loads framework has not been used for regulatory purposes in the United States for any chemical. Considerable research is necessary before critical load estimates can be formulated for ecosystems extant in the United States.

• Speciation strongly influences the toxicity of Pb in soil and water and partitioning between dissolved and solid phases determin es the concentration of Pb in soil drainage water, but it has not been taken into account in most of the critical load calculations for Pb performed to date.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-39 • Runoff of Pb from soil may be the major source of Pb into aquatic systems. However, little 1 attempt has been made to include this source in to critical load calculations for aquatic systems due to the complexity of including this source in the critical load models. 2 3
4 5 6 7 8 9 10 11 12 In summary, due to the deposition of Pb from past prac tices (e.g., leaded gasoline, ore smelting) and the long residence time of Pb in many aquatic and terr estrial ecosystems, a legacy of environmental Pb burden exists, over which is superimposed much lower contemporary Pb loadings. The potential for ecological effects of the combined legacy and cont emporary Pb burden to occur is a function of the bioavailability or bioaccessibility of the Pb, which, in turn, is highly depe ndent upon numerous site factors (e.g., soil organic carbon content, pH, wate r hardness). Moreover, while the more localized ecosystem impacts observed around smelters are often striking, these perturbations cannot be attributed solely to Pb. Many other stressors (e.g., other heavy metals, oxides of sulfur and nitrogen) can also act singly or in concert with Pb to cause such notable environmental impacts.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-40 

## References: 1

2 3 4

5 6 7
8 9 10 11
12 13 14 15
16 17
18 19 20 21
22 23
24 25 26
27 28
29 30 31
32 33
34 35
36 37
38 39
40 Agency for Toxic Substances and Disease Registry (ATSDR). 1999. Toxicological profile for lead. U.S. Department of Health and Human Services, Public Health Service. http://www.atsdr.cdc.gov/toxprofiles/tp13.html Center for the Child Care Workforce and Human Services Policy Center. 2002. "Estimating the Size and Components of the U.S. Child Care Workforce and Caregiving Population: Key Findings from the Child Care Workforce Estimate (Preliminary Report)," May 2002. Clean Air Scientific Advisory Committee (CASAC) L ead Review Panel. 2007a. Letter to Stephen Johnson. March 27, 2007. Available at: http://yosemite.epa.gov/sab/sabproduct.nsf/ 989B57DCD436111B852572AC0079DA8A/$File/casac07-003.pdf Clean Air Scientific Advisory Committee (CASAC) L ead Review Panel. 2007b. Letter to Stephen Johnson. September 27, 2007. Available at http://yosemite.epa.gov/sab/sabproduct.nsf/ 2DCD6EF49CDD37B285257364005F93E4/$File/casac07-007.pdf Dietrich, K. M., et al. 2004. Effect of Chela tion Therapy on the Neuropsychology and Behavioral Development of Lead-Exposed Children After School Entry. Pediatrics, 114(1): 19-26. Knight, TE, and Kumar, MS. 2003. Lead toxicosis in cats-a review. J Feline Med Surg. October 5, (5):249-55. Kowalczyk, DF. 1976. Lead poisoning in dogs at the University of Pennsylvania Veterinary Hospital. J Am Vet Med Assoc., March 1, 168(5):428-32. Liu, X., et al. 2002. Do Children with Falling Bl ood Lead Levels Have Impr oved Cognition? Pediatrics, 110(4): 787-791. Mulligan, G.M., Brimhall, D., and West, J. (2005). Child Care and Early Education Arrangements of Infants,Toddlers, and Preschoolers: 2001 (NC ES 2006-039). U.S. Department of Education, National Center for Education Statistics. Wash ington, DC: U.S. Government Printing Office. Needleman, H. L.; Riess, J. A.; Tobin, M. J.; Biesecke r, G. E.; Greenhouse, J. B. (1996) Bone Pb levels and delinquent behavior. JAMA J. Am. Med. Assoc. 275: 363-369. Rogan, W. J., et al. 2001. The effect of chelation therapy with succimer on neuropsychological development in children exposed to lead. Ne w England Journal of Medicine, 344(19): 1421- 1426. Ruff, H. A., et al. 1993. Declining blood lead levels and cognitive changes in moderately lead-poisoned children. The Journal of the American Medical Association, 269(13): 1641-1646. Salkever, D. S. 1995. Updated estimates of earnings benefits from reduced exposure of children to environmental lead. Environmental Research, 70(1): 1-6. Stokes, L., et al. 1998. Neurotoxicity in young adults 20 years after childhood exposure to lead: the Bunker Hill experience. Occupational Environmental Medicine, 55: 507-516. U.S. Bureau of Labor Statistics. 2006. "Current Population Survey: Basic Monthly Survey." January 2006. U.S. Census Bureau. 2003. American Housing Survey (AHS).EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 5-41 1 2 3 4

5 6 7
8 9 10
11 12
13 14 15
16 17 18 19 20 21
22 23 24
25 26
27 28
29 U.S. Department of Education. 2005. National Cent er for Education Statistics Early Childhood Program Participation Survey (NCES 2006-075). Washington, DC. (http://nces.ed.gov/nhes/dataproducts.asp#2005dp) U.S. Environmental Protection Agency (EPA). 1997. Exposure Factors Handbook. Office of Research and Development, National Center for Envir onmental Assessment. EPA/600/P-95/Fa, Fb, and Fc. U.S. Environmental Protection Agency (EPA). 2004. IRIS Database for Risk Assessment. Office of Research and Development, National Center for Environmental Assessment. Updated July 8, 2004. http://www.epa.gov/iriswebp/iris/index.html U.S. Environmental Protection Agency (EPA). 2006a . Economic Analysis for the Renovation, Repair, and Painting Program Proposed Rule, February 2006. U.S. Environmental Protection Agency (EPA). 200 6b. Air Quality Criteria for Lead (Final). EPA/600/R-5/144aF. Office of Research and Development. October. http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=158823 U.S. Environmental Protection Agency (EPA). 2007. Revised Final Report on Characterization of Dust Lead Levels after Renovation, Re pair, and Painting Activities. Prepared by Battelle (Columbus, OH) for the Office of Pollution Prevention and Toxics (Washington, D.C.). November 13, 2007. U.S. Environmental Protection Agency (EPA). 2008a. Child-Specific Exposure Factors Handbook. Office of Research and Development, National Centerfor Environmental Assessment. EPA/600/R0/096F. September 2008. U.S. Environmental Protection Agency (EPA). 2008b. Economic Analysis for the TSCA Lead Renovation, Repair, and Painting Program Final Rule for Target Housing and Child-Occupied Facilities. April 2008. Wilder Research Center. 2005. "Family, Friend and Nei ghbor Caregivers: Results of the 2004 Minnesota statewide household child care survey." December 2005. Wilder Research Center. 2001. "Staff recruitment and retention in early childhood care and education and school-age care." April 2001.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-1 

## 6. Estimated Impacts of the Lead, Renovation, Repair, and Painting 1 

## Rule Revisions 2 In addition to the cost and benefit analyses presented in Chapters 4 and 5, several other types of impacts 3 are important to consider in evaluating the effects of a regulation. This chapter presents the incremental 4 impact of the revisions to the Lead Renovation, Repair and Painting (LRRP) Rule on: 5

• paperwork burden, 6

• the financial condition of small entities, 7

• whether the regulation has a disproportionate e ffect on low-income and or minority persons, 8

• the environmental health risk or safety risk to children due to the regulation, 9

• State, local, and Tribal governments, and the private sector, 10

• federalism, 11

• the relationship between the Federal government a nd the Indian tribes, or on the distribution of 12 power and responsibilities between the Fe deral government and Indian tribes, 13

• energy effects, and 14

• whether voluntary consensus standards are used in its regulatory activities. 15 The demand for certified firms and renovators is predicted to increase as a result of the elimination of the 16 opt-out provision, and therefore more firms and renovators are expected to seek certification and training 17 as a result of the revisions. Separate impacts are est imated for these firms and individuals that are not 18 projected to have sought certification and training wi thout the elimination of the opt-out provision. 19 Hereafter these entities are referred to as “opt-out entities.” Likewise, those firms and individuals that 20 were estimated to have sought certif ication and training without the elimination of the opt-out provision 21 are referred to as “currently regulated entities.” The impacts of the revisions to the rule on the opt-out 22 entities include all the costs associated with the requirements of the revised LRRP rule. In contrast, the 23 only impacts of the rule on the currently regulated entities are those associated with the recordkeeping 24 checklist requirement. 25 

### 6.1 Paperwork Reduction Act 26 The Paperwork Reduction Act of 1995 (PRA) (supersed ing the PRA of 1980), as implemented by the 27 Office of Management and Budget (OMB), requires that agencies submit a supporting statement to OMB 28 for any information collection that solicits the same da ta from more than nine parties. The PRA seeks to 29 ensure that Federal agencies balance their need to collect informati on with the paperwork burden imposed 30 on the public by the collection. 31
The definition of “information collection” includ es activities required by regulations such as permit 32 development, monitoring, recordkeeping, and reporting. The term “burden” refers to the “time, effort, or 33 financial resources” the public expends to provide inform ation to or for a Federal agency, or to otherwise 34 fulfill statutory or regulatory requirements. PRA pa perwork burden is measured in terms of annual time 35 and financial resources the public devotes to meet one -time and recurring information requests (44 U.S.C. 36 3502(2); 5 C.F.R. 1320.3(b)). 37 Information collection activities may include: 38

• reviewing rule requirements; 39

• using technology to collect, process, and disclose information; 40EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-2 • adjusting existing practices to comply with requirements; 1

• searching data sources; 2

• completing and reviewing the response; and 3

• transmitting or disclosing information. 4 Agencies must provide information to OMB on the pa rties affected, the annual reporting burden, and the 5 annualized cost of responding to the information collection. 6

6.1.1 RRP Entity Paperwork Burden 7

6.1.1.1 Certification and Recordkeeping 8 LRRP contractors performing regulated RRP work are estimated to spend approximately half an hour to 9 fill out and mail the Application for Renovator Ce rtification when they are applying for initial 10 certification or re-certification (which occurs every five years). It is estimated that these entities will 11 spend an average of three hours to familiarize themselves with the RRP rule’s requirements when 12 becoming certified. Entities performing RRP tasks on target housing units will spend, on average, about 13 five hours annually for recordkeeping tasks. These activ ities add up to an average burden in the first year 14 of 7.8 hours per contractor. At a loaded wage rate of $31.64, the paperwork cost in the first year will 15 average $263 per firm (See Table 6-1). Additional costs are minor; these costs include an application 16 printout , one photocopy for personal records, an envel ope, and a stamp. The total first year information 17 collection cost is estimated to average $263 per contra ctor. Every five years entities must complete the 18 certification form to apply for re-certification as we ll as keep records that demonstrate compliance with 19 the RRP Rule. The total time required during a re-cer tification year is 5.3 hours at a cost of $168 per 20 contractor. In years when entities do not need to apply for certification or re-certification, contractors will 21 only incur the five-hour recordkeeping burden at a cost of $152. 22
23
Table 6-1: Costs to Firms Associated with Information Collection ($2005) Opt-Out Residential Contractors First Year/Initial Certification Year ReCertification Year Other Years

Rule familiarization (3 hours) $94.93 $0 $0

Certification form (0.5 hours) $15.82 $15.82 $0

Recordkeeping (4.8 hours per entity) $151.89 $151.89 $151.89

2 photocopies $0.16 $0.16 $0 1 envelope $0.02 $0.02 $0 1 stamp 1 $0.37 $0.37 $0 Total 2 $263 $168 $152 1. Costs have not been updated from 2005 dollars in order to facilitate comparison with previous information collection requests, which were also in 2005 dollars. Consistent with this, postage costs have not been updated to 2009. 2. Rounded to nearest dollar. Source: EPA Calculations and U.S. Bureau of Labor Statistics 2005. 24EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-3 6.1.1.2 Recordkeeping Checklist Provision Requirements 1 The revisions to the 2008 LRRP rule would require all renovation firms to provide a copy of the records 2 demonstrating compliance with the training and work practice requirements of the RRP rule to the owner 3 and, if different, the occupant of the building be ing renovated or the operator of the child-occupied 4 facility. Specifically, renovation firms would have to pr ovide this information to owners and occupants in 5 a short, easily-read checklist or other form within thir ty days of the completion of work. If optional dust 6 clearance is performed in lieu of cleaning verification, the renovation firm must provide a copy of the dust 7 wipe sampling report(s) to the owner of the building that was renovated as well as to the occupants, if 8 different. For renovations occurring in common areas of target housing or child-occupied facilities, the 9 renovation firm can post instructions to tena nts on how to obtain this information. 10

6.1.1.3 Recordkeeping Checklist Provision Unit Costs 11

Labor Costs 12 Under a separate requirement of th e 2008 LRRP rule, renovation firms must complete and retain a copy 13 of the checklist for enforcement purposes. Therefor e, renovation firms would only incur the incremental 14 labor costs of photocopying and distributing the checklist as a result of the additional recordkeeping 15 checklist provision requirement. EPA assumed this burde n to be three minutes at a loaded wage rate of 16 $31.64 per hour. 17

Material Costs 18 The recordkeeping checkli st provision would require renovation firms to supply a copy of the checklist to 19 the owner of the affected building, or if different, the occupant of the affected target housing unit or 20 operator of the child-occupied facility, and to post th e checklist in a common area. Therefore, renovation 21 firms performing work in target housing or public a nd commercial buildings would incur an incremental 22 cost of eight cents per page to photocopy materials. 23 Table 6-2 shows the costs per event of the checklist provision require ments. 24
25

26

6.1.1.4 Number of Events Affected by the Recordkeeping Checklist Provision 27 The recordkeeping checklist provision would apply to fi rms affected by the 2008 LRRP rule and to firms 28 predicted to seek certification as a result of the elimin ation of the opt-out provision. Under Option A, the 29 Table 6-2: Cost of the Recordkeeping Checklist Provision per Event Target Housing Events Public and Commercial Building Events

Owner Renter In-house / Landlord b Contractor – Owner c Contractor – Renter d Labor Cost a $1.58 $1.58 $1.58 $1.58 $1.58 Material Cost e $0.08 $0.16 $0.08 $0.16 $0.24 Total Cost $1.66 $1.74 $1.66 $1.74 $1.82

a Based on a burden of 3 minutes, at a wage rate of $31.64 , based on Bureau of Labor Statistics (SOC 47-1011) b RRP is performed by the owner of a public or commercial building.

c RRP is performed by a contractor in an owner-occupied public or commercial building.
d RRP is performed by a contractor in a re nter-occupied public or commercial building.

e The average price of a photo copy at Copy Cop, Kinko’s, Staples, and Office Max is eight cents; c the average cost of a business envelope at Staples, Office Max, and Office Depot Source: EPA Calculations.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-4 entire stock of firms necessary to meet demand, incl uding those working in target housing and public or 1 commercial building COFs, would incur recordkeeping checklist costs starting in the first year. Firms 2 performing work in owner-occupied target housing w ould be required to distribute one copy of the 3 checklist while firms performing work in renter-occ upied target housing would be required to provide 4 copies to the owner and occupant. If the work occurs in the common area of an apartment building, the 5 checklist, or information on how to obtain the checklist, can be posted on a sign in the common area. 6 The recordkeeping checklist provision also applies to firms performing work in public or commercial 7 building COFs. Child-occupied facilities that perform work with their own staff must post the checklist, 8 or information on how to obtain the checklist, on a sign that is accessible to parents or guardians of the 9 children. Similarly, landlords who perform work with their own staff would have to supply one copy of 10 the checklist attached to a sign in the area where the work is being pe rformed. Contractors who perform 11 work in owner-occupied COFs must provide two copies of the checklist: one copy to the operator of the 12 COF and one copy to be posted on a sign in the CO F. In addition to the two copies required in owner13 occupied events, contractors working in renter-occ upied COFs must also provide the owner of the 14 building with a third copy of the checklist. 15 Table 6-3 presents the number of events affected b y the checklist provision in the first and second years 16 of the revisions’ implementation by event type under Option A. 17
18

19

6.1.2 Training Provider Paperwork Burden 20 EPA has also estimated the information collection burden imposed on Training Providers. No Training 21 Providers are estimated to become accredited as a result of the revisions to the 2008 LRRP rule; therefore, 22 they would not incur an incremental paperwork bur den of accreditation and re-accreditation. However, 23 since the elimination of the opt-out provision implies an increase in training course demand, it is 24 estimated that training providers would incur an incremental paperwork burden related to course 25 notification. To comply with the 2008 LRRP rule, Training Providers must keep records on both the 26 courses they provide and the students they train. In addition, they must notify EPA before offering each 27 course (to facilitate EPA’s enforcement activities) an d after each course (so EPA has a record of the 28 individuals who have completed the course). 29 Table 6-3: Number of Events Affected by the Checklist Provision Under Option A by Event Type Target Housing Events Public and Commercial Building Events

All Events Owner Renter In-house / Landlord b Contractor – Owner c Contractor – Renter d Year 1 Option A 18,684,176 8,731,495 9,572,191 100,057 267,533 12,900 Year 2 a Option A 18,607,571 8,695,696 9,532,945 99,647 266,436 12,847

a Assumed to decline by 0.41 percent each year after the second year, accounting for th e decline in the stock of pre-1978 structures.
b RRP is performed by the owner of a public or commercial building.

c RRP is performed by a contractor in an owner-occupied public or commercial building.
d RRP is performed by a contractor in a re nter-occupied public or commercial building. See Table 4-1 for options descriptions.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-5 6.1.2.1 Burden Associated with Notification Requirements 1 It is assumed that the pre-notification for each class requires an average of 0.15 hours and that each post2 notification requires 1.54 hours. The post notifica tions are more time consuming because the Training 3 Provider must send records pertaining to each stude nt who attended the course. Approximately 12 4 percent of courses will also require a re-notification, which is also estimated to take 0.15 hours. These 5 activities add up to an average of 1.7 clerical hours per course. The number of courses offered per year 6 depends on the number of individuals who need to be trained. As the revisions to the 2008 LRRP rule 7 would eliminate the opt-out provision, more renovators are predicted to seek training. It is assumed that 8 under Option A, Training Providers would offer an ex tra 30 courses in the first year, or a total of 90 9 hours, for the added renovator demand. It is assume d that each notification requires one photocopy, one 10 envelope, and one stamp; thus approximately two of each of these items are required per course. Under 11 Option A, the incremental cost of notifications in the first year is approximately $2,772 per Training 12 Provider. There would be approximately 6 extra courses offered per Training Provider in the second and 13 third years, with a notification cost of about $550 per year. 14

6.1.2.2 Total Burden and Cost per Training Provider 15 As shown in Table 6-4, accredited training providers would incur a n incremental $2,772 of paperwork 16 costs in the first year due to added demand resulting from the elimination of the opt-out provision under 17 Option A. 18
19 Table 6-4: Incremental Costs to Training Providers Associated with Information Collection, Option A Notification Costs Year 1 of the RRP Rule (30 Courses) Year 2 of the RRP Rule (6 Courses) Year 3 of the RRP Rule (6 Courses) Notification Activities Burden Hours Cost Burden Hours Cost Burden Hours Cost

Clerical time burden a 90 $2,120 18 $424 18 $422 Photocopies b $5.13 $1.03 $1.02 Envelopes c $1.28 $0.26 $0.26 Stamps d $23.71 $4.74 $4.72 Digital Photos $621.85 $124.37 $123.86 Total $2,772 $554 $552 * Rounded to nearest dollar. Sources: a Wages: Bureau of Labor Statistics (Major Occ upational Group D: Administ rative Support Occupations, Including Clerical); b The average price of a photo copy at Copy Cop, Kinkos, Staples, and Office Max is eight cents;

c The average cost of a business envelope at Staples, Office Max, and Office Depot d U.S. Postal Service 20

6.1.3 Total Paperwork Burden on RRP Firms and Training Providers 21 Table 6-5 presents the total paperwork burden incurred b y all RRP firms and training providers in the first 22 and second years of the revisions’ implementation. For training providers, total notification burden was 23 estimated by multiplying the per-entity burden estimates in Table 6-4 by the number of training providers 24 in each y ear. For RRP firms, total certification a nd recordkeeping burden was estimated by multiplying 25 the per firm burden estimates in Table 6-1 by the number of firms undergoing certification or re26 certification, or not becoming certified in each year. For checklist costs, the number of events per firm 27 was first estimated by dividing the events shown in Table 6-3 by the total number of firms complying 28 with the checklist provision in each year. Second, this number was multiplied by the estimated checklist 29EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-6 labor burden of three minutes (0.05 hours) to produce hours per RRP firm. Finally, this number was 1 multiplied by the total number of firms, yielding the total checklist burden. 2
3 Table 6-5: Total Paperwork Burden Resulting from the Revisions to the 2008 LRRP Rule

Type of Entity Activity Burden Hours per Entity Number of entities Total Burden Hours Year 1 Training Providers Notification 90 168 15,127
Certification Year Firms 8.3 111,426 924,836
Re-Certification Firms 5.3 0 0
Non-Certification Firms 4.8 0 0 RRP Entities Certified as a Result of Eliminating the Opt-Out Provision

Checklist 3.3 111,426 363,578 RRP Entities Regulated under the 2008 LRRP Rule Checklist 2.7 211,721 570,631
Year 1 Total - All Firms and Training Providers 323,315 1,874,172 Year 2 Training Providers Notification 18 167 3,013
Certification Year Firms 8.3 19,974 165,788
Re-Certification Firms 5.3 2,219 11,763
Non-Certification Firms 4.8 88,775 426,122 RRP Entities Certified as a Result of Eliminating the Opt-Out Provision

Checklist 3.3 110,969 362,087 RRP Entities Regulated under the 2008 LRRP Rule Checklist 2.7 210,853 568,291
Year 2 Total – All Firms and Training Providers 321,990 1,537,064 Year 3 Training Providers Notification 18 167 3,001
Certification Year Firms 8.3 19,893 165,108
Re-Certification Firms 5.3 2,210 11,715
Non-Certification Firms 4.8 88,411 424,374 RRP Entities Certified as a Result of Eliminating the Opt-Out Provision

Checklist 3.3 110,514 360,603 RRP Entities Regulated under the 2008 LRRP Rule Checklist 2.7 209,989 565,961
Year 3 Total – All Firms and Training Providers 320,670 1,530,762 3 Year Average Training Providers Notification 42 168 7,047
Certification Year Firms 8.3 50,431 418,577
Re-Certification Firms 5.3 1,477 7,826
Non-Certification Firms 4.8 59,062 283,499 RRP Entities Certified as a Result of Eliminating the Opt-Out Provision

Checklist 3.3 110,970 362,089 RRP Entities Regulated under the 2008 LRRP Rule Checklist 2.7 210,855 568,295
3 Year Average Total – All Firms and Training Providers 321,992 1,647,332 4 

### 6.2 Regulatory Flexibility Act 5 The Regulatory Flexibility Act (RFA) of 1980, amen ded by the Small Business Regulatory Enforcement 6 Fairness Act (SBREFA) of 1996, requires regulators to assess the effects of regulations on small entities 7EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-7 including businesses, nonprofit organizations, and governme nts. In some instances, agencies are also 1 required to examine regulatory alternatives that may reduce adverse economic effects on significantly 2 impacted small entities. The RFA requires agencies to prepare an initial and final regulatory flexibility 3 analysis for each rule unless the Agency certifies that the rule will not have a significant economic impact 4 on a substantial number of small entities. The RFA, however, does not specifically define “a significant 5 economic impact on a substantial num ber” of small entities. Sections 603 and 604 of the RFA require 6 that regulatory flexibility analyses id entify the types and estimate the numbers of small entities to which 7 the rule will apply. It also requires a description of the rule requirements to which small entities will be 8 subject and any regulatory alternatives, including exem ptions and deferral, which would lessen the rule’s 9 burden on small entities. 10 The 2008 LRRP Rule requires that all entities that perform renovation, repair and painting work for 11 compensation in target housing or public and comme rcial buildings with COFs become certified by EPA, 12 ensure that their employees are trained as either re novators or workers, and use lead-safe work practices 13 when disturbing lead-based paint, other than events that qualify for the minor maintenance exception. 14 This analysis considers the incremental impacts of the revisions to the 2008 LRRP rule on small entities 15 in the affected construction, real estate, and child-o ccupied facility industry sectors. The revisions to the 16 2008 LRRP rule eliminates the opt-out provision fo r entities performing work in owner-occupied target 17 housing units that are not COFs and where no child under the age of 6 or pregnant woman resides. It is 18 predicted that this revision would result in add itional firms and renovators seeking certification and 19 training. Therefore, only those small entities that would not have otherwise obtained certification (“opt20 out entities”) would incur certification, training, work practice, and cleaning verification costs under the 21 revisions. 22 In addition, the revisions to the 2008 LRRP ru le include a new recordkeeping checklist provision 23 requirement. The checklist provision requires that re novation firms working in target housing provide the 24 owner and, if a rental unit, the occupant with a copy of the RRP compliance checklist. Firms working in 25 public or commercial building COFs must provide th e owner and, if necessary, the operator of the COF 26 with a copy of the checklist, as well as post the compliance information in a location visible to parents or 27 guardians. The requirements of the checklist provisi on apply both to firms affected by the 2008 LRRP 28 rule and to firms that would be affected by the elimination of the opt-out provision. 29 Therefore, the revisions to the 2008 LRRP rule affect small entities that provide childcare for 30 compensation including private sector firms (e.g. daycare centers and family daycare); small governments 31 (particularly school districts) and non-profit organizat ions; small construction-related contracting firms 32 that provide RRP services to residences or public or commercial buildings containing COFs; and property 33 managers and lessors who lease space to COFs and u se their own staff to conduct RRP work in their 34 buildings. 35 The impacts on training providers are not analyzed because the rul e will result in an increased demand for 36 their services. Therefore training providers will incur po sitive rather than negative impacts. Although the 37 rule may also result in additional costs for training providers (i.e. costs of additional recordkeeping and 38 submitting notifications), training providers are expected to recoup these costs via tuition fees. These 39 tuition fees are accounted for elsewhere in the analysis in the estimation of training costs that are incurred 40 by the other entities subject to the rule. 41

6.2.1 Definitions of Small Entity 42 The Regulatory Flexibility Act defines a small govern ment as a government of a city, county, town, 43 school district or special district with a population of less than 50,000. A small non-profit organization is 44 defined as any not-for-profit enterprise which is inde pendently owned and operated and is not dominant 45EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-8 in its field. The RFA relies on the definition of a “small business” found in the Small Business Act, 1 which authorizes the Small Business Administration (SBA) to develop definitions for “small business.” 2 For this analysis, EPA uses SBA’s definition of a small business for each industry. 3 For many industry sectors, the SBA definition of a small business is based on revenues, where revenue 4 standards vary by industry. In establishing revenue standards, SBA considers a number of economic and 5 market characteristics that may allow a firm to exercise dominance in an industry. These standards 6 represent the maximum revenue that a for-profit ente rprise may have and still qualify as a small business. 7
The twelve NAICS codes listed in Table 6-6 are the general and specialty contractors this rule will likely 8 i mpact. Their respective SBA thresholds are also lis ted. The twelve NAICS codes are followed with two 9 NAICS codes for residential real estate industries, two NAICS codes for nonresidential real estate 10 industries, and one NAICS code for child day care services that are also likely to be affected by the rule. 11
12
Table 6-6: SBA Revenue Thresholds for Small Business by NAICS Code

NAICS Industry Description SBA Revenue Threshold (Millions $) General and Specialty Contractor Industries 236118 Residential remodelers $33.5 236220 Commercial Building Construction $33.5 238170 Siding contractors $14 238350 Finish carpentry contractors $14 238290 Other building equipment contractors $14 238390 Other building finishing contractors $14 238340 Tile and terrazzo contractors $14 238220 Plumbing and HVAC contractors $14 238150 Glass and glazing contractors $14 238320 Painting and wall covering contractors $14 238210 Electrical contractors $14 238310 Drywall and insulation contractors $14 Property Owners and Managers 531120 Lessors of nonresidential buildings (except miniwarehouses) $7 531312 Nonresidential property managers $2 531311 Residential Property Managers $2 531110 Lessors of Residential Buildings and Dwellings $7 Providers of Day Care Services, Pre-Kindergarten and Kindergarten 624410 Child day care services $7 Source: U.S. Small Business Administration, 2008 13 The RFA classifies small entities as small businesses, small non-profit organizations, or small 14 governments. Property managers and lessors, and construction-related cont ractors, are all assumed to be 15 for profit operations. All daycare providers opera ting in individual homes (frequently referred to as 16 family daycare) are assumed to be for-profit operations . Daycare centers can be operated by for-profit or 17 non-profit organizations. Kindergartens and pre-kinder gartens refer to facilities in either public schools 18 (governmental) or in private schools (assumed to be non-profits). These classifications are summarized in 19 the following table. 20EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-9 1

6.2.2 General Assumptions and Approach 2 This analy sis measures the potential incremental impacts of the revisions to the 2008 LRRP Rule on small 3 businesses in terms of annual compliance costs as a percen tage of annual revenues, referred to as the cost 4 impact ratio. 1 This approach is based on the premise that the cost impact percentage is an appropriate 5 measure of an entity’s ability to afford the costs a ttributable to a regulatory change. For purposes of 6 determining small entity impacts, comparing annua l compliance costs to annual revenues provides a 7 reasonable indication of the magnitude of the regul atory burden relative to a commonly available and 8 objective measure of a company’s business volume. Where regulatory costs represent a very small 9 fraction of a typical establishment’s revenue, the impacts of a regulation are likely to be minimal. 10 This analysis considers eight different groups of enti ties: public school districts, private schools, daycare 11 centers, family daycare, construction contractors (resi dential and non-residential), and property lessors 12 and managers (residential and non-residential). The goal of this analysis is to evaluate the incremental 13 impacts of the revisions to the 2008 LRRP Rule on small entities in a typical year. In order to develop a 14 realistic portrayal of the long-term effects of the rule on small entities, annualized costs of the rule, rather 15 than first-year costs, are used to measure its im pacts. Furthermore, when presenting the number of 16 businesses affected, the analysis presents the annual av erage number of businesses, rather than first or 17 second year estimates of affected businesses. 18
The SBA size standards are measured at the firm or parent company level. Conceptually, the small entity 19 analysis would also be conducted at that level. Due to data limitations, this small entity analysis is 20 conducted at the establishment level rather than at th e firm or parent company level for most sectors. 21 Census information was available primarily at the es tablishment level, making a firm or parent company 22 analysis unfeasible. The only sectors where firm-lev el data are used are non-residential managers and 23 lessors, and public schools. Because establishments, and not organizations, are analyzed, an assumption 24 is made that none of the small establishments are s ubsidiaries of larger organizations. This assumption 25 leads to an overestimate of the number of small i ndependent establishments affected by the rule. 26 Furthermore, since organization-level revenu es of multi-establishment businesses are higher than 27 establishment revenues, the use of establishment data may result in higher cost-impact ratios than actually 28 exist. 29 The cost-impact ratios estimated fo r the residential and non-residential real estate industries (NAICS 30 531110, 531311, 531120, 53131 2) in this small entity analysis are based on employment and revenue data 31 for employer establishments only. It is assumed that the majority of non-residential property lessors and 32

1 For private schools, where adequate revenue data were no t available, costs are compared to annual expenditures. Table 6-7: Small Entity Classifications Type of Entity Business Non-Profit Governmental Day Care Centers X X --Kindergartens and PreKindergartens in Public Schools -- -- X

Kindergartens and PreKindergartens in Private Schools -- X --
Property Managers and Lessors X -- --

Construction-Related Contractors X -- --EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-10 managers are businesses with employees. Further, the analysis assumes that a self-employed lessor or 1 manager is likely to hire a contractor to perform wo rk on his property, particularly in a non-residential 2 building. 3

6.2.2.1 Costs Incurred by Small Establishments 4 This small entity analysis evaluates the incremental impacts of the revisions to the 2008 LRRP rule on 5 small entities under Option A, as it has the highest cost impact implications (see Section 4.1 for option 6 definitions). To estimate the costs incurred by the small entities subject to the requirements of the rule, 7 this analysis calculates the number of people trained, certifications sought, and events performed by each 8 of the small entities in a typical year under Option A. As explained at the beginning of this section, only 9 opt-out contractors would incur incremental costs for certification, training, work practices, and cleaning 10 verification under the revisions. However, all en tities, currently regulated and opt-out, would incur 11 recordkeeping checklist provision costs. Therefore, the following sections present costs for currently 12 regulated and opt-out entities separately. 13
Average Annualized Unit Cost Estimates 14 Unit training costs were calculated by annualizing th e total 50-year costs of training renovators and 15 workers performing RRP projects in opt-out housing under Option A, then dividing this total by the 16 average annual number of renovators and workers trained by these establishments. Similarly, the 17 annualized total costs of maintaining certification, complying with work practice standards, and 18 disseminating the checklist under Option A were divided by the average annual number of firms certified, 19 and events, respectively. This single set of average annualized unit costs was used to calculate total costs 20 to small entities working in opt-out housing. An nualized unit checklist costs for entities currently 21 regulated under the 2008 LRRP rule were similarly ca lculated. The use of annual numbers of firms, 22 individuals, and events in calculating average annuali zed costs takes into account the fact that the pre23 1978 housing and building stock is e xpected to decrease by 0.41 percent per year due to demolition of a 24 portion of the building stock. 25 The numbers of events, individuals, and firms were averaged over the 50 years covered in this analysis 26 using the following formula: 27
28 Annual Average = 29
Where: 30 A1 = First year number of events, individuals or firms 31 A2 = Second year number of events, individuals or firms 32 r = (1 – 0.41% demolition rate), or 0.9959 33 n = 50 years covered by the analysis 34
35 Table 6-8 presents these calculations and the resulting average annualized unit costs. 36
37 [ A1+(A2*(1-r n ))/(1-r)]
50EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-11 1

6.2.3 Residential Contractors and Real Estate Industries 2 Establish ments that perform RRP work in opt- out housing will incur the costs of training and 3 certification, as well as the cost of using lead-safe work practices during projects that disturb lead-based 4 paint. In order to distribute the total costs of the rule between small and large establishments, EPA 5 assumed that the compliance cost in curred by each establishment is a function of the number of regulated 6 renovation events that the establishment performs in a typical year. For each of eleven residential 7 contractor NAICS groups and two residential real estate NAICS groups, EPA calculated the average 8 annualized numbers of small opt-out entities seeking cer tification, workers being trained by small opt-out 9 entities, and events being performed by small opt-out entities. These averages we re calculated separately 10 for non-employer and employer firms. Using the average annualized unit costs, EPA calculated the 11 average annualized total costs to small opt-out entiti es affected by the revisions. The use of annualized 12 costs provides a more accurate representation of the long-term (typical year) impacts of the rule than 13 would be provided by first or second year costs. 14 The following six steps were used to calculate the cost-impact ratios fo r the target housing contractor and 15 residential real estate industries. To estimate the impacts of the revisions on small opt-out entities in the 16 affected industries, the following calculations were performed for each NAICS industry: 17 Step 1: Certified establishments were classified as either small or large businesses depending on their 18 revenues. Self-employed contractors were consid ered separately from small employer establishments, 19 and therefore there are two small business categories for each residential contractor NAICS group. 20 Step 2: Census data were used to characterize a “typical” small establishment (in terms of revenues and 21 number of employees) in each of the affected industry sectors. 22 Step 3: The average number of regulated events pe rformed by an establishmen t each year was estimated 23 by multiplying the ratio of regulated events to trained personnel by the establishment employment size. 24 Step 4: An average work prac tice compliance cost per event 2 , certification cost per firm, training cost per 25 renovator, certification per worker, and checklist cost per event were calculated for Option A using the 26

2 The work practice cost per event in cludes the cost to landlords and contractors of complying with the prerenovation education regulations. Table 6-8: Average Annualized Unit Cost Calculations under Option A Total Annualized 50- Year Cost 50-year Average Number of Individuals Trained, Entities Certified or Events Performed Average cost per individual, entit y , or event

Entities Certified/Events Performed as a Re sult of Eliminating the Opt-Out Provision Renovator training $15,170,737 114,987 individuals trained $132 per individual Worker training $4,896,824 171,867 individuals trained $28 per individual
Firm certification $26,174,511 100,933 entities certified $259 per entity Work practices a $218,315,631 6,586,819 events performed $33 per event
Checklist Costs $11,552,179 6,586,819 events performed $2 per event Entities/Events Regulated under the 2008 LRRP Rule
Checklist Costs $18,885,435 10,337,937 events performed $2 per event

a. Work practice costs include the cost of pos ting a project-specific sign and pamphlet.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-12 total annualized 50-year costs to entities working in owner-occupied, opt-out target housing and the 1 incremental 50-year average number of renovation even ts, renovators/workers trained, and firms certified 2 as a result of the revisions to the 2008 LRRP rule. For currently regulated entities, numbers were only 3 generated for checklist costs. 4 Step 5: For opt-out entities (i.e., those working in housing previously eligible for the opt-out provision), 5 total establishment compliance costs were calculated by multiplying the number of events performed, the 6 number of renovators trained, and the number of firms becoming certified by the corresponding average 7 annualized cost under Option A. For currently re gulated entities, numbers were only generated for 8 checklist costs. 9 Step 6: Cost-impact ratios were calculated for a typical small establishment in each industry sector by 10 dividing the total compliance costs incurred by the establishment (Step 5) by the establishment’s revenues 11 (Step 2). These cost impact ratios were calculate d both for non-employer and small employer NAICS 12 groups separately and combined. 13

6.2.3.1 Number of Small Residential Contractors and Real Estate Entities Affected by the 14 Revisions 15 The data used in this analysis were drawn primarily from the 2002 U.S. Economic Census. As discussed 16 in Chapter 2, Census data were used to estimate the number of non-employer establishments (self17 employed contractors) in the affected construction in dustries. The 2002 Census also provides data on the 18 number, revenue and employment of establishments with payroll by revenue bracket for each of the 19 eleven construction industry sectors affected by the rule . In Chapter 2, these data were used to classify 20 construction establishments into two main size classe s – establishments with annual revenues of less than 21 $10 million, and establishments with annual reve nues of $10 million or more. The percent of 22 establishments, employees, net value of construc tion and total value of business contributed by 23 establishments in each revenue bracket can be found in Chapter 2. 24
Because 2002 Census data on the number of establishm ents by revenue bracket was not available at the 25 time the estimates were developed, 1997 Census data was used to estimate the percent of establishments 26 in each industry that qualify for small business status . These percentages, as well as the percent of 27 industry revenues and employment contributed by small and large establishments, are presented in 28 Chapter 2. 29
The Small Business Administration revenue thresholds for establishments in the construction sectors are 30 currently set at $33.5 million for Residential Rem odelers and at $14 million for the ten specialty 31 contractor industries. However, in applying the U. S. Economic Census data to the SBA definition of 32 small business, it is not possible to estimate the ex act number of construction establishments that have 33 revenues below the SBA threshold because the U.S. Economic Census groups all establishments with 34 revenues of $10 million or more into one revenue br acket. Applying the U.S. Economic Census data 35 therefore requires either under or overestimating the number of small businesses affected by the rule. On 36 the one hand, using data for th e entire industry would overestimat e the number of small businesses 37 affected by the rule. It would also underestimate the rule’s impact on small businesses because the 38 impacts would be calculated using the revenues of la rge businesses in addition to small businesses. On 39 the other hand, applying the closest, albeit lower, re venue bracket would underestimate the number of 40 small businesses affected by the rule while at the sa me time overestimating the impacts. For example, 41 because the $10 million cut-off is below the SBA thres hold for the Residential Remodeler industry, using 42 the U.S. Economic Census data may lead to an underestimate of the number of small businesses in this 43EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-13 sector, although likely a small underestimate. 3 At the same time, using these data may lead to a slight 1 overestimate of the impacts of the rule, as the aver age revenues of small businesses will appear smaller 2 when larger establishments (those with revenues of $10 to $33.5 million) are left out. See Section 6.2.2 3 for a discussion of assum ptions that may result in an overestimation of the number of affected small 4 businesses. Moreover, using data on all businesses regardless of size would defeat the purpose of 5 estimating impacts on small business. EPA has chosen to be more conservative in estimating the cost 6 impacts of the rule on small businesses by using the $10 million threshold for construction industry 7
sectors. 8 As with the Residential Remodelers and the ten speci alty contractor industries discussed above, it is not 9 possible to estimate the exact number of small Reside ntial Property Manager establishments or Lessor of 10 Residential Buildings and Dwellings establishments because Census-defined revenue brackets group 11 establishments with revenues of $1 million to $5 milli on and $5 million to $10 million, respectively. For 12 the same reasons set forth above (the Agency had th e choice to either overestimate or underestimate the 13 impacts), the Agency has chosen to overestimate the impacts. Thus, EPA has applied the U.S. Economic 14 Census data for establishments with revenues of l ess than $1 million to Reside ntial Property Managers, 15 and the U.S. Census Economic data for establishments with revenues of less than $5 million to Lessor of 16 Residential Buildings. 4 17
In order to estimate the number of certified small esta blishments with paid employees, EPA assumed that 18 the number of certified small employers is proporti onal to the total number of small employer 19 establishments in the industry. The total number of certified establishments in each industry (calculated 20 in Chapter 4) was multiplied by the percentage of estab lishments in that industry with revenues below the 21 revenue thresholds described above. For the eleven residential construction industry sectors, the resulting 22 number of small employer establishments was added to the total number of certified self-employed 23 contractors to obtain the total number of small certified establishments. 24 Table 6-9 shows the 50-year average number of small businesses affected by the revisions. The number 25 of affected businesses is predicted to decrease proporti onall y to the number of regulated events, which in 26 turn decline at an annual rate of 0.41 percent (see Chapter 4 for discussion). 27
28

3 Because 99.7 percent of Residential Remodeler esta blishments earn less than $10 million per year, any underestimate of the number of establishments is likely to be minimal. 4 Approximately 85 percent of Residential Property Manager establishments earn less than $1 million per year, and about 99 percent of Lessor of Residential Buildings and Dwe llings establishments earn less than $5 million per year.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-14 1

6.2.3.2 Training and Certification Costs – Residential Contractors 2
Number of Firms Certified and Individuals Trained – Residential Contractors 3 As described above, the number of certified small establishments with paid employees was estimated 4 assuming that the number of certified small employer s is proportional to the total number of small 5 employer establishments in the industry. The tota l number of certified establishments in each industry 6 (calculated in Chapter 4) was multiplied by the per centage of establishments in that industry with 7 revenues below the revenue thres holds described above in section 6.2.3. The number of small employer 8 establish ments in each NAICS group estimated to obtain certification as a result of eliminating the opt-out 9 provision is presented in Table 6-10. 10
In order to est imate the number of renovators trained by each small employer establishment, the estimated 11 number of certified firms in each sector was multiplied by the expected number of renovators per 12 establishment for that sector. See Section 4.4.1.1 for a description of how the expected number of 13 renovators per establishment was estimated. 14 In order to estimate the number of employees of an average small establishment in each affected industry, 15 EPA used U.S. Economic Census data to determin e the portion of each industry’s employees that work 16 for small businesses. This percentage was applied to the estimated number of trained renovators and 17 workers in each sector to calculate the number of trained renovators and workers employed by small 18 certified establishments. For each of the constructi on industry sectors, the total number of employees 19 (including non-employers 5 who are trained as renovators) was di vided by the total number of small 20 establishments to calculate an aver age small business employment size. 21 Table 6-10 presents the 50-year average number of renova tors trained by small certified employer firms, 22 the percent of the workforce em ployed by small establishments, 6 and the estimated numbers of trained 23 workers employed by small certified establishments in each NAICS group under Option A. Only entities 24 that would seek certification as a result of the elimina tion of the opt-out provision would incur additional 25 certification and training costs. 26

5 Also referred to as “self-employed” individuals.

6 S ee Section 2.5.1 of Chapter 2 for discussion of these percentages. Table 6-9: 50-Year Average Number of Small Residential Contractors and Real Estate Establishments Affected, Option A Entities Certified as a Result of Eliminating the Opt-Out Provision N on-Employer Establishments a 74,821 Employer Establishments 25,841 Total Small Establishments 100,662 Entities Regulated under the 2008 LRRP Rule b
N on-Employer Establishments a 96,422 Employer Establishments 55,096 Total Small Establishments 151,517

a. Also referred to as “self-employed” individuals. b. These entities are currently regulated under the 2008 LRRP rule. Under the revisions, they only incur checklist costs. Source: EPA CalculationsEO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final RuleFebruary 19, 2010*** Deliberative – Do Not Cite, Quote or Release During the Review ***6-151Table 6-10: 50-Year Average Number of Firms Certified and Professionals Trained by Small Residential Contractor EmployerEstablishments, Option ANAICS DescriptionNumber ofSmallEmployerFirmsCertifiedNumber ofCertifiedRenovatorsPerEmployerFirmNumber ofRenovatorsTrained byEmployerFirmsWorkforceEmployed bySmall andLarge CertifiedFirms% WorkforceEmployed bySmallEmployersa,bNumber of WorkersTrained by SmallEmployer Firmsc236118 Residential remodelers9,571 1 9,571 38,097 95%26,624238170 Siding contractors684 1 684 4,563 90%3,437238350 Finish carpentry contractors3,619 1 3,61920,39286%13,901238290 Other building equipment contractors 395 3 1,1858,86660%4,175238390 Other building finishing contractors 228 3 6833,50381%2,153238340 Tile and terrazzo contractors516 1 5163,78191%2,912238220 Plumbing and HVAC contractors 4,791 2 9,58258,28870%31,332238150 Glass and glazing contractors280 2 5612,77382%1,726238320 Painting and wall covering contractors 2,011 1 2,01113,99692%10,827238210 Electrical contractors2,918 2 5,835 41,548 68%22,421238310 Drywall and insulation contractors828 3 2,48516,58864%8,138Total, Small Construction Establishments 25,84136,732 212,396127,646a.EPA applied U.S. Economic Census data regarding: entities with less than $10 million in revenues to establishments in the 11 construction sectors;entities with less than $1 million in revenues to Residential Property Manager establishments; and entities with less than $5 million in revenues toLessors of Residential Real Estate.b.Percentages shown for presentation purposes only. Calculations used unrounded ratio of small establishment data to industry data.c.Total number of trained employees working for small constructionestablishments is the sum of trained personnel working for small employers and thetotal number of certified self-employed contractors. The number of workers trained by small employer firms is calculated as theworkforce employedby small and large certified firms multiplied by the percentage of the workforce employed by small employers, less the number of renovators trainedby small employer establishments.Source: U.S. Census Bureau 2000d; U.S. Census Bureau 2004; U.S. CensusBureau 2005 b-e,g,h; U.S. Small Business Administration2005EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-16 Table 6-11 presents the 50-year average number of certified firms and renovators trained for non1 employer residential contractor establishments. Since non-employer establishments consist of single 2 individuals, each self-employed individual must obtain a firm certification and renovator training. 3

4 Table 6-11: 50-Year Average Number of Firms Certified and Renovators Trained by Small Residential Contractor Non-Employer Establishments, Option A

NAICS Description Number of Small Non-Employer Firms Certified and Renovators Trained 236118 Residential remodelers 22,522 238170 Siding contractors 1,651 238350 Finish carpentry contractors 19,170 238290 Other building equipment contractors 664 238390 Other building finishing contractors 1,222 238340 Tile and terrazzo contractors 2,739 238220 Plumbing and HVAC contractors 6,162 238150 Glass and glazing contractors 685 238320 Painting and wall covering contractors 10,639 238210 Electrical contractors 4,869 238310 Drywall and insulation contractors 4,497 Total, Small Construction Establishments 74,821 Source: U.S. Census Bureau 2000e, U.S. Small Business Administration 2005.

5 Total Certification and Training Costs to Sm all Residential Contra ctor Establishments 6 To estimate small residential contractor training and certification costs, the numbers of individuals and 7 firms in Table 6-9 and Table 6-10 were multiplied by the average annualized costs of training a single 8 certified renovator and wor ker a nd maintaining certification from Table 6-8. The resulting average 9 annualized training and ce rtification costs are presented in Table 6-12. 10

11

6.2.3.3 Work Practice Costs – Small Residential Co n tractors and Real Estate Establishments 12 Number of Events Performed Annually by Sm all Residential Contractor and Real Estate 13 Establishments 14 As discussed in Section 6.2.2 and the beginning of this section, this analysis attributes the work practice 15 costs of the rule to establishments on a per-event basi s . In order to estimate the total number of events 16 performed by establishments in each of the affected industries and in order to distribute these events 17 between small and large establishments, EPA assume d that the number of events performed by each 18 establishment is proportional to the number of pe ople the establishment employs. Furthermore, EPA 19 Table 6-12: Average Annualized Training and Certification Costs for Small Residential Contractors and Real Estate Establishments, Option A

Regulatory Option Certified Renovator Training Cost a Worker Training

Cost a Certification Cost a Total Training/ Certification Cost a Average Training and Certification Cost/ Establishment Option A $14,717,780 $3,636,882 $26,104,233 $44,458,895 $442

a. Total costs are calculated using unrounded unit costs.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-17 assumed that the number of events performed by each trained employee will be the same across all 1 industries including Residential Property Managers and Lessors of R esidential Buildings and Dwellings. 2 If property managers and lessors perform fewer ev ents than estimated here, the impacts on these 3 establishments will be slightly smaller and the impacts on construction firms will be larger. 4 The number of events per small establishment in a particular industry was calculated as follows: 5

6
7 EPA estimated the 50-year average number of events per certified renovator or worker by calculating the 8 ratio of the total number of regulated RRP events to the total number of trained personnel (using the 50- 9 year averages). Because the number of people trained, as estimated in Chapter 4, was assumed to be 10 proportional to the regulated housing stock and the number of regulated events, the number of RRP 11 events per employee does not change over time a nd is approximately the same across options. 12 To estimate the average number of events performed by a small establishment in a given industry, the 13 establishment’s average employment size was multiplied by the average number of events per person. 14 Table 6-13 presents the 50-year average estimated num ber of events per small establishment. 15
16

17
Total Work Practice Compliance Costs – Residentia l Contractors and Real Estate Establishments 18 Table 6-8 presents the annualized average per event costs of the rul e. For opt-out entities, these costs 19 include the cost of using lead-safe work practi ces and complying with the recordkeeping checklist 20 provision requirements. For entities currently regulated under the 2008 LRRP rule, costs are limited to 21 meeting the checklist provision requirements. Multiply ing the average work practice and checklist cost 22 per small establishment by the total 50-year average number of small entities (see Section 6.2.3 for a 23 description of the derivation of this number) yields the total annualized work practice costs above and 24 beyond the 2008 LRRP rule. These costs are presented in Table 6-14. 25 Table 6-13: 50-Year Average Annual Number of Events performed by Small Residential Contractors and Real Estate Establishments, by Option

Regulatory Option Average Small Employment Size Average Number of Annual Events

Per Employee Total Number of Small Establishments Total Annual Number of Events Per Small

Establishment Entities Certified as a Result of Eliminating the Opt-Out Provision Option A 2.4 23.0 100,662 54.6 Entities Regulated under the 2008 LRRP Rule Option A 2.2 23.0 151,517 51.1 N umber of Events (Events/Employee) X (Estab lishment Employment Size) =EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-18

Table 6-14: Average Annualized Work Practice and Checklist Costs for Small Residential Contractors and Real Estate Establishments Regulatory Option Avg. Events per Small Estab. Annualized Average WPC

per Event b 50-year Avg. Number of Small Estab. Total Work Practice Costs a Avg. Work Practice Costs per Small Estab. Entities Certified as a Result of Eliminating the Opt-Out Provision Option A 55 $35 100,662 $191,680,462 $1,904 Entities Regulated under the 2008 LRRP rule c Option A 51 $2 151,517 $14,158,517 $93

a. Total costs are calculated using unrounded unit costs. b. Includes the cost of using lead-safe work practices and complying with the recordkeeping checklist provision requirements.

c. These entities are currently regulated under the 2008 LRRP rule. Under the revisions, they only incur checklist costs. 1

6.2.3.4 Residential Contractors and Real Estate Industry Revenues 2 Cost-impact ratio analysis compares the cost of a regul ation to a firm’s (in this case, establishment’s) total 3 revenues, not just to its revenues from the regulated activity. As such, for construction establishments, 4 the costs of the rule were compared to the total value of business done rather than just to the total value of 5 construction work. For real estate establishments, tota l revenues were used. Because no revenue data are 6 available specifically for establishments expected to seek certification under the regulations, EPA 7 assumed that average revenues of these businesses do not differ significantly from industry averages. 8 EPA calculated the revenues of a small certified construction business as a weighted average of small 9 employer and non-employer revenues. The 2002 U.S. Economic Census presents data on the number and 10 total value of business done by construction establishm ents with total annual revenues of $0 to $10 11 million and $10 million or more. To estimate the av erage revenues of small employers in each of the 12 affected construction sectors, the total value of busin ess done by establishments in the $0 to $10 million 13 bracket was divided by the total number of establishm ents in that bracket. Since the Census presents 14 revenue figures in year 2002 dollars, the resulting av erage revenues were inflated to 2005 dollars using 15 the Consumer Price Index. 7 Per-establishment revenues for non-employers were estimated for the cost 16 impact ratio analysis by dividing non-employer reve nues (inflated to 2005 dollars) by the number of non17 employer establishments in each industry. Averag e revenues of certified small establishments are 18 presented in Table 6-15. Because 2002 data on the number of est ablishments by revenue bracket was not 19 available at the time the estimates were developed, 1997 data was used to estimate the percent of 20 establishments in each industry that qualify for small business status. EPA also used 1997 Census data to 21 calculate the percent of industry revenues contribut ed by these establishments. These percentages were 22 then applied to the 2002 numbers of establishments and industry revenue figures to estimate the number 23 and revenues of small and large employers in each i ndustry. Average small and large employer revenues 24 (calculated by dividing the revenues of establishm ents in each industry and revenue bracket by the 25 corresponding number of establishments) were inflated to 2005 dollars using the Consumer Price Index. 8 26 The resulting estimates are presented in Table 6-15. 27

7 All items, US city average, Series Id: CUUR0000SA0. Used annual data for 2002 and half-year data for 2005.

8 All items, US city average. Series Id: CUUR0000SA0.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-19 Table 6-15: Average Revenues of Small Businesses Affected by the Revisions to the 2008 LRRP Rule

NAICS Industry Description Small Business Revenues

(2005$) 236118 Residential remodelers $182,932 238170 Siding contractors $201,569 238350 Finish carpentry contractors $100,713 238290 Other building equipment contractors $585,771 238390 Other building finishing contractors $231,442 238340 Tile and terrazzo contractors $130,097 238220 Plumbing and HVAC contractors $432,677 238150 Glass and glazing contractors $336,858 238320 Painting and wall covering contractors $86,839 238210 Electrical cont ractors $351,694 238310 Drywall and insulation contractors $240,488 Total Average, Construction Establishments $200,654 531311 Residential Property Managers $342,477 531110 Lessors of Residential Real Estate $821,350 Total Average, All Industries $270,621 Weighted average of employer and non-employer revenues. Source: EPA Calculations; U.S. Census Bureau 2005b,d,e; U.S. Small Business A dministration 2005; U.S. Census Bureau 2004; U.S. Census Bureau 2000d. 1

6.2.3.5 Impacts on Small Residential Contractor s a nd Real Estate Establishments 2 Impacts of the rule on small residential contractors and real estate industries are measured by comparing 3 the costs of the rule incurred by an establishment to the establishmen t’s revenues. The impacts on small 4 residential contractors and real estate establishments were estimated by first summing the total annualized 5 work practice, training, certification, and check list costs incurred by these entities under Option A and 6 dividing these total costs by the number of establishm ents. Average costs per establishment were then 7 divided by average revenues to calculate a cost-to -revenue ratio. These calcul ations, and the resulting 8 cost-to-revenue ratios, are presented in Table 6-16. 9
10
Table 6-16: Cost-to-Revenue Ratios for Sma ll Residential Contractors and Real Estate Industries Regulatory Option Total Re g ulated Small Entities Total Cost of Rule to Small Entities, Annualized Average Cost of Rule per Small Entity Estimated Avera g e Small Entity

Revenues Cost-toRevenue Ratio

Entities Certified as a Result of Eliminating the Opt-Out Provision Option A 100,662 $236,139,357 $2,346 $200,654 1.17% Entities Regulated under the 2008 LRRP rule Option A 151,517 $14,158,517 $93 $270,621 0.03%
11
Table 6-17 and Table 6-18 present the impacts of the rule on small residential contractors and real estate 12 industries, b y NAICS group, for non-employer and employer establishments both separately and 13 combined. Impact estimates for non-employers s hould be interpreted with caution, as some non- 14EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-20 employers may have issues related to under-reporting of income, which would tend to tend to exaggerate 1 the average impact ratio for this class of small en tities. According to GAO, many sole proprietors 2 underreport their income, with a small proportion accounting for the bulk of understatements (GAO 1994 3 and 2007). According to IRS estimates reported by GAO, sole proprietors underreported their net income 4 by 57 percent in 2001 (GAO 2007). The IRS estimates address net income (i.e., revenues minus 5 expenses), while the small entity analysis compares compliance costs to revenues. According to IRS 6 figures, underreporting of gross income makes up at least half of the misreporting of net income. A key 7 reason for this underreporting is that the income of the self-employed is not subject to withholding and 8 only a portion of that income is subject to information reporting by third parties (GAO 2007). The IRS 9 estimates that at least 61 percent of sole proprieto rs underreported their income, and the IRS recognizes 10 that these are underestimates because detecting underre ported income is difficult, especially cash receipts 11 (GAO 2007). Although at least 61 percent of sole pr oprietors had understated taxes, the amounts were 12 skewed with half of sole proprie tors understating less than $903. 13
14
15EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-21 1 Table 6-17: Cost-to-Revenue Ratios: Sm all Residential Opt-Out Contractors NAICS Industry Description Number of Small Entities Costs Revenues CostImpact Ratio Non-Employers 236118 Residential remodelers 22,522 $26,859,669 $770,756,554 3.48% 238170 Siding contractors 1,651 $1,968,998 $53,964,403 3.65% 238350 Finish carpentry contractors 19,170 $22,862,741 $584,426,239 3.91% 238290 Other building equipment contractors 664 $792,106 $26,185,272 3.03% 238390 Other building finishing contractors 1,222 $1,457,683 $93,180,896 1.56% 238340 Tile and terrazzo contractors 2,739 $3,266,353 $104,907,180 3.11% 238220 Plumbing and HVAC contractors 6,162 $7,348,212 $355,583,972 2.07% 238150 Glass and glazing contractors 685 $817,238 $41,699,973 1.96% 238320 Painting and wall covering contractors 10,639 $12,687,560 $268,203,516 4.73% 238210 Electrical contractors 4,869 $5,807,332 $196,163,184 2.96% 238310 Drywall and insulation contractors 4,497 $5,363,614 $411,012,261 1.30% Total, Small Construction Establishments 74,821 89,231,508 $2,906,083,450 3.07% Employers 236118 Residential remodelers 9,571 $33,508,732 $5,100,156,306 0.66% 238170 Siding contractors 684 $3,666,976 $416,601,038 0.88% 238350 Finish carpentry contractors 3,619 $15,851,721 $1,710,792,708 0.93% 238290 Other building equipment contractors 395 $4,672,804 $594,195,609 0.79% 238390 Other building finishing contractors 228 $2,483,098 $242,376,493 1.02% 238340 Tile and terrazzo contractors 516 $3,032,663 $318,585,066 0.95% 238220 Plumbing and HVAC contractors 4,791 $36,185,129 $4,383,307,838 0.83% 238150 Glass and glazing contractors 280 $2,027,869 $283,550,692 0.72% 238320 Painting and wall covering contractors 2,011 $11,382,881 $830,281,509 1.37% 238210 Electrical contractors 2,918 $24,808,785 $2,542,547,280 0.98% 238310 Drywall and insulation contractors 828 $9,287,190 $869,800,401 1.07% Total, Small Construction Establishments 25,841 $146,907,849 $17,292,194,938 0.85% Employers and Non-Employers Combined 236118 Residential remodelers 32,093 $60,368,402 $5,870,912,860 1.03% 238170 Siding contractors 2,335 $5,635,975 $470,565,440 1.20% 238350 Finish carpentry contractors 22,790 $38,714,462 $2,295,218,947 1.69% 238290 Other building equipment contractors 1,059 $5,464,910 $620,380,881 0.88% 238390 Other building finishing contractors 1,450 $3,940,781 $335,557,389 1.17% 238340 Tile and terrazzo contractors 3,255 $6,299,016 $423,492,246 1.49% 238220 Plumbing and HVAC contractors 10,953 $43,533,341 $4,738,891,810 0.92% 238150 Glass and glazing contractors 966 $2,845,108 $325,250,665 0.87% 238320 Painting and wall covering contractors 12,650 $24,070,441 $1,098,485,025 2.19% 238210 Electrical contractors 7,787 $30,616,117 $2,738,710,465 1.12% 238310 Drywall and insulation contractors 5,326 $14,650,805 $1,280,812,661 1.14% Total, Small Construction Establishments 100,662 $236,139,357 $20,198,278,388 1.17%EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-22 Table 6-18: Cost-to-Revenue Ratios: Small Reside ntial Currently Regulated Contractors and Real Estate Industries NAICS Industry Description Number of Small Entities Costs Revenues CostImpact Ratio Non-Employers 236118 Residential remodelers 29,024 $1,217,671 $993,273,413 0.12% 238170 Siding contractors 2,128 $89,264 $69,543,887 0.13% 238350 Finish carpentry contractors 24,705 $1,036,472 $753,149,670 0.14% 238290 Other building equipment contractors 856 $35,910 $33,744,941 0.11% 238390 Other building finishing contractors 1,575 $66,083 $120,082,153 0.06% 238340 Tile and terrazzo contractors 3,530 $148,079 $135,193,807 0.11% 238220 Plumbing and HVAC contractors 7,940 $333,128 $458,240,807 0.07% 238150 Glass and glazing contractors 883 $37,049 $53,738,725 0.07% 238320 Painting and wall covering contractors 13,710 $575,185 $345,633,677 0.17% 238210 Electrical contractors 6,275 $263,273 $252,795,354 0.10% 238310 Drywall and insulation contractors 5,796 $243,157 $529,671,202 0.05% 531311 Residential Property Managers 0 $0 $0 n.a. 531110 Lessors of Residential Real Estate 0 $0 $0 n.a. Total 96,422 $4,045,271 $3,745,067,637 0.11% Employers 236118 Residential remodelers 12,335 $1,392,431 $6,572,567,737 0.02% 238170 Siding contractors 881 $151,354 $536,873,456 0.03% 238350 Finish carpentry contractors 4,664 $642,342 $2,204,697,324 0.03% 238290 Other building equipment contractors 509 $197,176 $765,739,451 0.03% 238390 Other building finishing contractors 293 $106,696 $312,350,411 0.03% 238340 Tile and terrazzo contractors 665 $123,918 $410,560,343 0.03% 238220 Plumbing and HVAC contractors 6,174 $1,525,317 $5,648,765,636 0.03% 238150 Glass and glazing contractors 361 $86,568 $365,411,571 0.02% 238320 Painting and wall covering contractors 2,592 $465,307 $1,069,983,179 0.04% 238210 Electrical contractors 3,760 $1,039,851 $3,276,578,839 0.03% 238310 Drywall and insulation contractors 1,068 $390,767 $1,120,911,146 0.03% 531311 Residential Property Managers 5,824 $1,247,867 $1,994,528,285 0.06% 531110 Lessors of Residential Real Estate 15,970 $2,743,652 $13,117,019,660 0.02% Total 55,096 $10,113,246 $37,395,987,038 0.03% Employers and Non-Employers Combined 236118 Residential remodelers 41,359 $2,610,103 $7,565,841,150 0.03% 238170 Siding contractors 3,008 $240,617 $606,417,342 0.04% 238350 Finish carpentry contractors 29,369 $1,678,815 $2,957,846,994 0.06% 238290 Other building equipment contractors 1,365 $233,085 $799,484,392 0.03% 238390 Other building finishing contractors 1,868 $172,779 $432,432,564 0.04% 238340 Tile and terrazzo contractors 4,195 $271,997 $545,754,150 0.05% 238220 Plumbing and HVAC contractors 14,114 $1,858,444 $6,107,006,443 0.03% 238150 Glass and glazing contractors 1,244 $123,617 $419,150,296 0.03% 238320 Painting and wall covering contractors 16,302 $1,040,492 $1,415,616,856 0.07% 238210 Electrical contractors 10,035 $1,303,124 $3,529,374,192 0.04% 238310 Drywall and insulation contractors 6,863 $633,924 $1,650,582,349 0.04% 531311 Residential Property Managers 5,824 $1,247,867 $1,994,528,285 0.06% 531110 Lessors of Residential Real Estate 15,970 $2,743,652 $13,117,019,660 0.02% Total 151,517 $14,158,517 $41,141,054,675 0.03%EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-23 6.2.4 Non-Residential Contractors 1 Non-residential contractors (i.e., those working in public or commercial build ing COFs) are currently 2 regulated under the 2008 LRRP Rule and are not affected by the removal of the opt-out provision. 3 However, these entities would incur recordkeeping ch ecklist provision costs under the revisions to the 4 2008 LRRP rule. Since this analysis estimates th e incremental costs of the revisions, the following 5 sections present the potential cost impacts of the checklist provision only. 6 Jobs that are not performed in-house by public and private schools, non-residential property 7 managers/lessors, and daycare centers will be performed by general and specialty contractors including 8 painters, electricians, plumbers/HVAC specialists, an d non-residential building contractors. Under the 9 revisions to the 2008 LRRP rule, 3,223 establishments are expected to incur ch ecklist costs in the first 10 year as a result of the checklist provision for pr ojects in public or commercial building COFs. Because 11 different contractors are generally expected to work in public or commercial buildings and target housing, 12 this analysis considers impacts on th ese groups of establishments separately. 13 This analysis assumes that only contractors with em ployees will work on COFs in public or commercial 14 buildings. 9 Furthermore, the types of jobs performed in public or commercial building COFs are 15 generally less varied than those in target housing. Events in COFs are assumed to consist primarily of 16 painting, window/door replacement, and plumbing and electrical projects. As such, it is likely that most 17 of these projects will be performed by painting, pl umbing/HVAC, electrical and commercial contractors 18 (NAICS 236320, 238210, 238320 and 236220, respectively). 19

6.2.4.1 Number of Small Non-Resi dential Co ntractors Affected by the Revisions 20 To estimate the number of construction establishments working in public or commercial building COFs, 21 the percentage of newly trained workers and supervis ors that those establishments employ, the number of 22 jobs they perform and their average reve nues, the following assumptions are made: 23
3⁄4 The number of additional contractors obtaining training and certification in each sector is 24 proportional to the number of jobs likely to be performed by each type of contractor. For 25 example, since painting jobs are estimated to make up 5 percent of all jobs performed by 26 contractors in public or commercial building COFs, 5 percent of the 3,223 contractor 27 establishments estimated to incu r checklist costs are assumed to be painting contractors. Table 6- 28 19 presents the distribution of jobs by job type, describes the assumptions made to assign these 29 jobs to each type of contractor, and presents estim ates of the number of contractor establishments 30 incurring checklist costs in the first year under Option A. 31
3⁄4 These currently regulated contractors are only assumed to perform projects in public or 32 commercial building COFs. In reality, however, these additional contractors may perform some 33 residential work and some commercial work, while contractors with employees that were 34 included in the residential contractor section of this analysis may also do some of the non35 residential COF work. As such, to define the si ze and revenue of the average small firm working 36 in public or commercial building COFs, the numbe rs of certified non-residential contractors with 37 employees were added to the pool of pre-existing certified residential employer establishments in 38 the corresponding sectors. The percent of small es tablishments in each sector, percent of workers 39 employed (and thus jobs performed) by these est ablishments, and percent of total value of 40 business earned by these establishments were calcul ated using 2002 Economic Census data on the 41 number of small establishments and employees work ing for small establishments (U.S. Census 42

9 In contrast, the analysis of target housing contractor s assumes that both employer and non-employer (i.e., selfemployed) contractors will work on COFs in target housing.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-24 Bureau 2005a). Average revenues of small establis hments were estimated by dividing the total 1 value of business earned by establishments with revenues below $10 million in each sector by the 2 total number of establishments with revenues below $10 million in that sector. The results of 3 these calculations are presented for Option A in Table 6-20. Note that because only 4 establish ments with employees are assumed to wo rk in public or commercial building COFs, 5 average revenues of small establishments in Table 6-20 are higher than the average revenues of 6 residential construction establish ments, wh ich include self-employed contractors. 7
8

Table 6-19: Estimated Number of Non-R esidential Contractors by NAICS Sector

Type of Event Type of Contractor performing Event Number of Events Percent of all Contractor

Events Estimated first-year number of contractors

Painting N AICS 238320 - Painting Contractors 13,448 4.8% 155

Window/ Door N AICS 236220 - Commercial Building Contractors 6,943 2.5% 80
Unscheduled maintenance (Non-plumbing/ electrical) a N AICS 236220 - Commercial Building Contractors 2,192 0.8% 25

Plumbing (Routine and unscheduled) b N AICS 238210 - Plumbing/HVAC contractors 128,926 46.0% 1,482

Electrical (Routine and unscheduled) b N AICS 238220 - Electrical Contractors 128,926 46.0% 1,482

Total Jobs 280,434 3,223

a. The majority of unscheduled maintenance events are expected to be plumbing or electrical events, which must be performed by a specialized contractor. It is assumed, however, that every other year, one of the unscheduled maintenance events in each building will be a painting or window/door project (for example, a soccer ball may break a window that will then need to be replaced). b. To simplify the analysis, it is assumed that half of the scheduled plumbing and electrical projects and all other unscheduled maintenance projects will be performed by plumbers and the other half by electricians. 9
10EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-25 1

6.2.4.2 Recordkeeping Checklist Costs – Non-Residential Contractors 2 Number of Events Performed by Small Esta blishments – Non-Resi dential Contractors 3 On average, 98 percent of the 3,223 non-residential construction contractor establishments that will incur 4 checklist costs in the first year as a result of the revisions to the LRRP Rule under Option A are small 5 businesses. Since the number of jobs performed by an establishment is proportional to the number of 6 people that establishment employs, these small businesses are expected to perform 69 percent of the non7 residential COF contractor jobs as a result of the 2008 LRRP rule. Table 6-21 presents the total number 8 of small contractor establis hments incurring recordkeep ing checklist costs and the number of events in the 9 first year under Option A. 10
11
Table 6-21: First Year Number of Small Non-Residential Contractor Establishments and Jobs Performed Total, non-residential CO F contractor Small, non-residential COF contractor

Establishments Events Establishments Events Option A 3,223 280,434 3,164 193,957 12 To estimate typical annual small businesses impacts this analysis estimated the 50-year average number 13 of certified firms and regulated events given that the number of certified firms is expected to decrease 14 proportionally to the size of the regulated housing stock. These estimates are presented in Table 6-22. 15
16 Table 6-22: 50-Year Average Annual Numb er of Small Certified Establishments and Jobs Performed
Regulatory Option Number of Firms with Checklist Costs Number of Jobs Performed

Option A 2,300 175,693 17 Table 6-20: Estimated Numbers and Characteri stics of Small Non-R esidential Contractors

NAICS Contractor Description Estab., Residential Estab.,NonResidential Est., Total Percent Small Number Small Percent Workers at Small

Estab. Average Revenues of Small Estab. 238220 - Plumbing/ HVAC 11,200 1,482 12,681 97.9% 12,410 70.1% $850,881

238210 - Electrical
contractors 6,824 1,482 8,306 97.9% 8,132 67.9% $809,692

236220 - Commercial building contractors 0 105 105 88.1% 93 41.4% $1,750,332 238320 - Painting/ wall covering 4,615 155 4,770 99.7% 4,757 91.5% $380,165 Total/ Weighted Avg. Small Non-Residential Contractor Firm 22,639 3,223 25,862 98.2% 25,391 69.2% $752,783EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-26 Total Recordkeeping Checklist Costs 1 To estimate total checklist costs incurred by small non -residential construction establishments working in 2 public or commercial buildings housing COFs, the 50-Year average annual number of events performed 3 by these establishments (approximately 61 per firm) was multiplied by the sum of average annualized 4 recordkeeping checklist cost per event ($2; see Table 6-8). Table 6-23 presents the resulting annualized 5 total and average checklist costs to small non-residential construction establishments. 6
7 Table 6-23: Average Annualized Checklist Costs for Non-Residential Contractors

Regulatory Option Average Annual Events

Performed Annualized Avg. Checklist Cost per event Total Checklist Costs a Average Checklist Costs per Small Establishment Option A 175,693 $2 $320,957 $112 a. Total costs are calculated using unrounded unit costs. 8

6.2.4.3 Impacts of the Revisions on Non-Residential Contractors 9 Impacts of the rule on small non-residential contractor s are measured by comparing the costs of the rule 10 incurred by an establishment to the establishment’ s revenues. The impacts on small non-residential 11 contractors were estimated by first dividing the total checklist costs under Option A by the number of 12 establishments. Average costs per establishment were then divided by average revenues to calculate a 13 cost-to-revenue ratio. These calculations, and the resulting cost-to-revenue ratios, are presented in Table 14 6-24. 15
16

17

6.2.5 Non-Residential Property Lessors and Managers 18 Non-residential propert y lessors and managers are cu rrently regulated under the 2008 LRRP Rule and are 19 not affected by the removal of the opt-out provision . However, these entities would incur recordkeeping 20 checklist provision costs under the revisions to the 2008 LRRP rule. As this analysis estimates the 21 incremental costs of the revisions, the following sections present the potential cost impacts of the 22 checklist provision, only. 23 Lessors and managers of pre-1978 pub lic or commercial (non-residential) buildings that rent space to 24 daycare centers and perform regulated projects on their own properties will incur recordkeeping checklist 25 costs under the revision to the 2008 LRRP rule. As di scussed in Chapter 4, this analysis estimates that 26 13,279 daycare centers will rent space in pre-1978 non-r esidential buildings in the first year. On average 27 (over 50 years), 12,028 daycare centers are expected to rent space in pre-1978 buildings each year under 28 Option A. Because daycare centers are only one of many types of establishments renting non-residential 29 space and because the LRRP Rule applies only to cente rs in buildings constructed prior to 1978, the 30 analysis also assumes that each property manager or lessor firm owns only one non-residential building 31 containing a COF. As such, the number of affected lessor/manager firms is equivalent to the number of 32 Table 6-24: Cost-to-Revenue Ratios for Non-Residential Contractors

Regulatory

Option Total Small Contractor Establishments Total Cost of Rule to Small Contractor Establishments Average Cost of Rule per Small

Contractor Establishments Average Small Contractor Establishment Revenues Cost-toRevenue Ratio

Option A 2,866 $320,957 $112 $752,783 0.01%EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-27 affected daycare centers renting space or 12,028 firm s under Option A. Due to the lack of data on the 1 extent to which these firms perform renovation work in their own buildings, this analysis assumes that 2 they will behave similarly to the operators of other public or commercial buildings with child-occupied 3 facilities, namely that they will perform all of their own painting and window/door carpentry projects as 4 well as an average of one unscheduled main tenance project per building every year. 5

6.2.5.1 Number of Non-Residential Property Lessors and Managers Affected by the Revisions to 6 the 2008 LRRP Rule 7 Lessors and managers of non-residential properties fall under NAICS 531120 and 531312, respectively. 8 In order to estimate the number of regulated firms in each of these sectors, it is assumed that the percent 9 of regulated firms in each industry is equivalent to th e total percent of firms in that industry. In other 10 words, since Lessors of Non-Residential Bu ildings (NAICS 531120) make up 73 percent of 11 establishments in NACIS 531120 and 531312 combined, 73 percent of the 12,028 lessor/manager firms 12 affected by the rule under Option A are also assumed to fall in this sector, while the remaining 27 percent 13 are assumed to fall under NAICS 531312 (Calcula ted based on U.S. Census Bureau 2005f). 14 As discussed Section 2.4.2 of Chapter 2, 96 percent of Lessors of Non-Residential Real Estate, and 81 15 percent of Non-Residential Property Managers qualif y for small business status under the SBA definition 16 of a small business in these sectors (U.S. Census Bure au 2005f). This analysis assumes that the size 17 distribution of regulated firms mirrors the size dist ribution of the entire non-residential property lessor 18 and manager industry. Table 6-25 presents the resulting estimates of the num ber of small non-residential 19 property lessors and managers affected by the revi sions to the 2008 LRRP rule under Option A in a 20 typical year. 21
22

23

6.2.5.2 Recordkeeping Checklist Costs – Non-Residential Property Lessors and Managers 24 The estimation of checklist costs incurred by each pr operty lessor or manager is based on the average 25 number of events per building and the av erage checklist costs per event. 26
Total Checklist Compliance Costs – Non-Residential Property Lessors and Managers 27 The annual number of events performed by each of these firms is estimated to be 0.71 events per year. 28 This average number of events was multiplied by the 50-year average number of small lessor/manager 29 firms to estimate the number of regulated projects pe rformed by these businesses in a typical year. The 30 total number of regulated events, in turn, was multip lied by the annualized ch ecklist costs per event (see 31 Table 6-8) to calculate these firms’ total annualized checklist costs. Table 6-26 presents these estimates, 32 as well a s the average checklist costs per small firm. 33
34 Table 6-25: Average Annual Number of Small Non-Residential Property Lessors and Managers Option A A. Total number of firms leas ing to daycare centers 12,028 B. Number of firms in NAICS 531120 (73% of A) 8,782 C. Number of firms in NAICS 531312 (27% of A) 3,246 D. Number of firms in NAICS 531120 that are small (96% of B) 8,417 E. Number of firms in NAICS 531312 that are small (81% of C) 2,639 Total Number of Regulated Small Firms (D+E) 11,056 Regulated Small Firms as % of All Regulated Firms 92%EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-28 1

6.2.5.3 Impacts of the Revisions on Non-Residential Property Lessors and Managers 2 This small entity analysis measures the incremental impacts of the revision to the 2008 LRRP rule on 3 small non-residential property lessors and managers by comparing rule costs incurred by these firms to 4 the weighted average revenue of small firms in NAICS 531120 and 531312, calculated based on 2002 5 Census Data. The weighted average revenue figure of $111,460 was inflated to 2005 dollars using the 6 Consumer Price Index to obtain estimated revenues of $126,256. The impacts on small non-residential 7 property lessors and managers were estimated by fi rst dividing checklist costs incurred by these entities 8 under Option A by the number of establishments. Averag e costs per establishment were then divided by 9 average revenues to calculate a cost-to-revenue ratio. 10 The average annual numbers of businesses affected, av erage annualized per-business costs and revenues, 11 and the resulting cost-to-revenue ratio are presented in Table 6-27. 12
13

Table 6-27: Cost-to-Revenue Ratios for Non-Residential Property Managers and Lessors

Regulatory

Option Total Small Lessor/ Manager Firms Total Cost of Rule to Small Lessor/ Manager Firms Average Cost of Rule per Small Lessor/ Manager Firm Average Small Lessor/ Manager Firm Revenues Cost-toRevenue Ratio

Option A 11,056 $14,422 $1 $126,256 0.001%
14

6.2.6 Daycare Centers (Small Non-Profits) 15 Day care centers are currently regulated under the 2008 LRRP Rule and are not affected by the removal of 16 the opt-out provision. However, these entities would incur recordkeeping checklist provision costs under 17 the revisions to the 2008 LRRP rule. As this analys is estimates the incremental costs of the revisions, the 18 following sections present the potential cost impacts of the checklist provision, only. 19

6.2.6.1 Number of Small, Non-Pr ofit Da ycare Centers Affected by the Revisions to the 2008 LRRP 20 Rule 21 As discussed in Chapter 2, ther e are an estimated 87,840 daycare centers in the United States. These 22 daycare centers include facilities that provide day care outside of a residential home and outside of 23 schools. Assuming a 75% compliance rate, and adjusting the total number of centers for building age 24 using HUD data on the age of education buildings, an estimated 38,210 daycare centers will be affected 25 by the revisions to the 2008 LRRP Rule in the first year under Option A. 10 As discussed in Chapter 4, 26 because of their locations, for-profit daycare centers ar e expected to hire outside contractors to perform 27 their renovations and repairs or to have their landl ord handle these activities. The costs and impacts for 28 these events are accounted for in the sections of this chapter dealing with contractors and landlords. 29

10 Based on 2003 HUD data, 58 percent of all education buildings were constructed before 1978, and 55 percent of the pre-1978 buildings were constructed before 1960. Table 6-26: Checklist Costs of Non-Residential Property Lessors and Managers

Regulatory Option Total In-House Events Annualized Avg. Checklist Costs per event Total Checklist Costs a Average Checklist Costs per Small Firm Option A 7,895 $2 $14,422 $1 a. Total costs are calculated using unrounded unit costs.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-29 Daycare centers located in religious establishments such as churches or synagogues, however, frequently 1 use their own staff to perform some of their RRP events. According to th e HUD survey of child care 2 centers (HUD 2003), approximately 73 percent of day care centers located in churches and other religious 3 establishments use their own (or the religious organiza tion’s) staff to perform painting projects. This 4 analysis assumes that, similar to public school districts and private schools, these establishments will also 5 use their own staff to perform all window/door carpe ntry work as well as one unscheduled maintenance 6 project every year. 7 The number of daycare centers located in religious es tablishments was estimated with data from the HUD 8 survey of child care centers (HUD 2003). According to these data, 41 percent of all daycare centers are 9 situated in churches or other similar organizations. (In contrast, the US Census reports that about 35 10 percent of daycare centers located outside of school s are non-profits (U.S. Census Bureau 2005c).) The 11 other 59 percent of daycare centers are assumed to use outside contractors for their RRP work rather than 12 in-house staff. Because the estimate of centers that are in religious settings is relatively large and there is 13 no independent data on other non-profits , this analysis estimates that about 30 percent of daycare centers 14 (0.73*0.41=.299) will perform their own renovation work and thus incur direct work practice, training, 15 and certification costs. 11 Because all of these establishments are treated as though they are operated by 16 religious organizations, all daycare cen ters considered in the small entit y analysis are considered to be 17 non-profit organizations. As the RFA defines i ndependently owned and operated not-for-profit 18 enterprises that are not dominant in their field as “s mall organizations,” all the non-profit organizations 19 operating these day care centers are assumed to qualify as small entities. This assumption may 20 overestimate the number of impacted small non-profits , since some of these non-profit organizations may 21 not be small entities. 22 Table 6-28 presents the number of daycare centers re gulated under Option A in a typical year, the total 23 number of daycare centers operated by non-profit organizations (b ased on the number in religious 24 organizations), and the number expected to perform some renovation work in-house. The estimation of 25 annual average numbers of centers accounts for the fact that, after the first year, the number of regulated 26 daycare centers is expected to decrease by 0.41 percent per year due to building demolition. 27
28

29

6.2.6.2 Recordkeeping Checklist Costs – Non-Profit Daycare Centers 30 The estimation of work practice costs incurred by each daycare center is based on the average number of 31 events per-building performed in-house and the average work practice costs per event. 32

11 Given the small size of the HUD surv ey sample, and the difference between the HUD and Census figures, the estimate may include some non-profits operating daycare facilities that are not in religious settings but performtheir own repair work. Other non-profit daycare facilities may be hiring outside contractors, the same as forprofit daycare facilities are assumed to do. Table 6-28: Average Annual Number of Non-Profit Daycare Centers Performing their Own Work Regulatory Option (A) Total Number of Daycare

Centers (B) Number of Centers in Non-Profit Organizations (41% of A) (C) Number of CentersDoing RRP Work Inhouse (73% of B) Option A 34,612 14,339 10,481EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-30 Total Checklist Compliance Costs – Non-Profit Daycare Centers 1 Staff in non-profit daycare centers (such as those operated by religious establishments) are expected to 2 perform in-house all painting and window/door carpentry work in their building as well as one 3 unscheduled maintenance event every y ear. Center staff are expected to perform 0.71 events per year in4 house. 5
As discussed in 6.2.2, the average annualized checklist cost per event in COFs in public and commercial 6 buildings is $2 under Option A (see Table 6-8). Multiplying this av erage cost by the total 50-year 7 average annual number of events in daycare center s that perform their own work yields the total 8 annualized checklist costs incurred by these centers in an average year. The total annual number of 9 events is the product of 0.71 and the number of centers doing in-house RRP work from Table 6-28. 10 These costs, a nd average per-center checklist costs, are presented in Table 6-29. 11
12 Table 6-29: 50-Year Average Annualized Work Practice Costs for Non-Profit Daycare Centers

Regulatory Option Total In-House Events Annualized Avg. Checklist per event Total Checklist Costs a Average Checklist Costs per Small Center Option A 7,484 $2 $13,672 $1 a. Total costs are calculated using unrounded unit costs. 13

6.2.6.3 Non-Profit Daycare Center Expenditures 14 In analyzing impacts of the revisions to the 2008 LRRP rule on an entity, the analysis conceptually should 15 compare rule costs to the revenues or expenditures of an entire organization. As such, costs of the rule to 16 non-profit daycare centers should be compared to the revenues or expenditures of the parent organization 17 (such as the religious organization that operates them), ra ther than a single center. Due to a lack of data 18 both on the structure of these organizations and on th eir finances, such a comparison was not possible. 19 Instead, this analysis is based on daycare center revenues. Ten state childcare industry impact studies 20 were reviewed to obtain daycare center revenue data. 12 Nine of these studies did not differentiate 21 between revenues of non-profit and for-profit centers. The Virginia Economic Impact of the Child Care 22 Industry report (Voices of Virginia’s Children 2004), however, provided revenue data specific to 23 religiously affiliated daycare centers. The state re ported annual total revenues of $236 million for its 929 24 religious daycare facilities or average revenues (infla ted to 2005$) of $287,605 (U.S. Bureau of Labor 25 Statistics 2006). This figure was used to measure th e incremental impacts of the revisions to the 2008 26 LRRP rule on non-profit centers. 27

6.2.6.4 Impacts on Non-Profit Daycare Centers 28 The impacts on non-profit daycare centers were estimat ed by first dividing total annualized checklist costs 29 incurred by these entities under Option A by the number of centers. Average cost s per center were then 30 divided by average revenues to calculate a cost-to -revenue ratio. These calculations and the resulting 31 ratios are presented in Table 6-30. 32

12 Data were available for the following states: Oklahoma, New Jersey, Iowa, Hawaii, Ohio, Kansas, South Carolina, West Virginia, Louisiana, Virginia, New York, South Dakota, Indiana, Maine and Massachusetts.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-31 1

6.2.7 Public Schools (Small Governments) 2 The RFA defines a small governm ent jurisdiction as the government of a city, county, town, school 3 district or special district with a population of l ess than 50,000. This economic analysis relies on National 4 Center for Education Statistics (NCES) Common Core of Data (CCD) survey data to estimate the number 5 of school districts that have schools with pre-kinderg arten or kindergarten programs, the number of such 6 schools per district, and district revenues. 13 Furthermore, for most districts, a cross-reference system with 7 the 2000 Decennial Census provides a means for est imating the size of the population served by the 8 district. 9 Public schools are currently regulated under the 2008 LRRP Rule and would seek certification before the 10 removal of the opt-out provision. However, these entities would incur recordkeeping checklist provision 11 costs under the revisions to the 2008 LRRP rule. As th is analysis estimates the incremental costs of the 12 revisions, the following sections present only the pot ential cost impacts of the checklist provision. 13

6.2.7.1 Number of Small Public School Districts Affe cted by the Revisions to the 2008 LRRP Rule 14
Number of Small Public School Districts 15 As discussed in Chapter 2, there are approximately 18,000 public school districts in the United States. 16 Based on CCD data, 14,473 of these school districts have at least one school with a kindergarten or pre-K 17 program; in total, these districts have 52,129 su ch schools (NCES 2006b,c). Of the 14,473 school 18 districts, 13,330 serve a population of fewer than 50,000 people. These 13,330 districts have a total of 19 26,779 schools with kindergartens or pre-kindergartens (NCES 2006b,c,g). These counts are not limited 20 to pre-1978 schools. 21 Since the Regulatory Flexibility Analysis is only concerne d with the direct costs of regulation, this small 22 entity analysis only considers the costs that school districts will incur if they perform regulated 23 renovation, repair, or painting projects using their own maintenance staff instead of hiring a contractor. 24 Costs and impacts associated with work performed by a contractor are accounted for in the contractor 25 section of this analysis. 26 As discussed in Chapter 4, this analysis assumes that public schools will perform all painting and 27 carpentry events using in-house staff. In addition, they are assumed to perform one of the unscheduled 28 maintenance events in each buildin g using in-house staff each year. 14 Thus, all small school districts that 29 have at least one pre-1978 building will incur reco rdkeeping checklist costs under the revisions to the 30 2008 LRRP rule. 31

13 It is possible that government agencies also operate some of the childcare facilities included in the daycare center counts throughout this economic analysis. Due to insufficient data, it was not possible to estimate the number of such government-run facilities, or the number or size of the agencies that operate them. As such, this small government impact analysis is limited to public school districts.

14 The analysis assumes that all electrical, plumbing an d HVAC work, as well as the remaining unscheduled maintenance projects, are contracted out. Table 6-30: Cost-to-Revenue Ratios for Non-Profit Daycare Centers

Regulatory

Option Total Daycare Centers Doing Work Total Cost of Rule to Daycare

Centers Average Cost of Rule per Da y care Center Estimated Avera g e Daycare Center Revenues Cost-toRevenue Ratio Option A 10,481 $13,672 $1 $287,605 0.0005%EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-32 Number of Small Public Schools Affected by the Revisions to the 2008 LRRP Rule 1 The number of small school districts with at least one regulated building was estimated based on the 2 number of school buildings in the district and the likelihood that any one of the buildings is old enough to 3 be regulated. Using 2003 HUD data, 58 percent of sc hool buildings are estimated to have been built 4 before 1978, and 55 percent of the pre-1978 buildings are estimated to have built before 1960 (U.S. HUD 5 2003). Thus, for example, under Option A the probabi lity that any particular school building was built 6 after 1978 is 0.42 (1-0.58). The likelihood that a district has no pre-1978 buildings is a function of the 7 number of buildings and 0.42 as follows 15 : 8 (0.42)^X, where X is the number of schools with kindergarten or pre-kindergarten in the district 9 For example, a district with three buildings has a (0.42)*(0.42)*(0.42) = 0.074 probability of containing 10 no pre-1978 buildings. Using this approach, 92.6 percent of districts with three buildings are estimated to 11 have at least one building that is pre-1978. To estimate the average number of pre-1978 buildings in a 3- 12 building district with at least one pre-1978 building, the total number of buildings in 3-building districts 13 was multiplied by the percent of all schools construc ted before 1978 (58 percent) and divided by the 14 number of districts with at least one pre-1978 building. 15 Table 6-31 presents the 50-year average numbers of small school districts with at least one pre-1978 16 buildi ng and the average number of buildings in th ese districts under Option A. The use of 50-year 17 average, rather than first or second year numbers accounts for the fact that, after the first year, the 18 numbers of regulated districts and pre-1978 schools are expected to decrease by 0.41 percent per year due 19 to building demolition. 20
21

22

6.2.7.2 Recordkeeping Checklist Costs – Public Schools 23 The estimation of checklist costs incurred by each dist rict is based on the number of regulated buildings 24 in these districts, the average number of events per-building performed in-house, and the average 25 checklist costs per event. 26
Number of Events Performed Annually by Schools in Small Districts – Public Schools 27 Public and private schools (except for private schools w ith less than 100 students) are expected to perform 28 in-house all painting and window/door carpentry wo rk as well as an average of one unscheduled 29 maintenance event per building every year using thei r own staff. (Private schools with fewer than 100 30 students are assumed to contract out all of their RRP work instead of doing RRP work in-house.) School 31 maintenance staffs are expected to perform 2.9 maintenance events per building per year. 32

15 It is assumed that the age of each building is independent of the age of all other buildings in the district. This may somewhat overestimate the number of districts that have at least one pre-1978 buildings. But data are not available to calculate the joint probabilities. Table 6-31: Number of Regulated Small School Districts and Public School Buildings

Regulatory Option Number of Small School Districts with at Least 1

Regulated Building a Total Number of Regulated Buildings

in Small Districts Average Number of Regulated Buildings

per Small District Option A 6,492 10,552 1.6 a. A regulated building is defined as having a kindergarten or pre-kindergarten program.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-33 Table 6-32 presents the total and average numbers of events performed by public school districts in a 1 typical year under Option A. 2
3 Table 6-32: Average Annual Number of Events performed by Public School Staff

Regulatory Option Number of Small Districts Total Number of Buildings in Small Districts Average Inhouse Events per

Building Total In-House Events AverageNumber of Inhouse Events per District Option A 6,492 10,552 2.87 30,246 4.7 4
Total Checklist Compliance Costs 5 As discussed in 6.2.2, the average annualized checklist cost pe r event in COFs in public or commercial 6 buildings is $2 (see Table 6-8). Multiplying this average cost by the average annual number of events in 7 small school districts yields the total annualized ch ecklist costs incurred by small districts in a typical 8 year. These costs, and resulting checklist costs per district, are presented in Table 6-33. 9
10 Table 6-33: Average Annualized Checklist Costs for Public Schools

Regulatory Option Total In-House Events Annualized Avg. Checklist Cost per Event Total Checklist Costs a Average Checklist Costs per Small District Option A 30,246 $2 $55,254 $9 a. Total costs are calculated using unrounded unit costs. 11

6.2.7.3 Public School Revenues 12 The impact of the revisions to the 2008 LRRP rule on small government jurisdictions is estimated by 13 comparing the estimated incremental costs of the re visions to the annual government revenues of small 14 regulated jurisdictions. Revenue data for school districts is available from NCES’s Common Core of 15 Data “ Local Education Agency (School Di strict) Finance Survey (F-33)” dataset (NCES 2006d). Small 16 districts include local school boards, supervisory uni ons, regional education agencies, and other agencies, 17 which primarily include charter schools. Revenue data are available for the vast majority of districts. 18 Average revenues for all small districts were estima ted by a) calculating the average revenues of each 19 type of district based on available data, b) multiplying the average revenues by the total number of 20 districts of that type, then c) summing the resulting total revenues and dividing by the total number of 21 small districts. This approach presumes that there is no non-response bias among districts within each 22 category. 23 Table 6-34 presents small district reve nue calculations and resulting esti mates. 24
25EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-34 1

6.2.7.4 Impact of the Revisions to the 2008 LRRP Rule on Small Public School Districts 2 Table 6-33 presents the total annualized recordkeep ing checklist costs incurred by small publi c school 3 districts as well as the average annualized costs per sm all district. Average annualized costs are then 4 divided by annual district revenues, as calculated in Table 6-35, to obtain a cost-to-revenue ratio. 5

6

Table 6-35: Cost-to-Revenue Ratios for Small Public Schools

Regulatory Option Total Re g ulated Small Districts Total Cost of Rule to Small Districts Average Cost of Rule per Small District Estimated Avera g e Small District

Revenues (Million $) Cost-toRevenue Ratio

Option A 6,492 $55,254 $9 $15.5 0.0001%
7

6.2.8 Private Schools (Small Non-Profits) 8 Private schools are currently regulated u nder the 2008 LRRP Rule and are not affected by the removal of 9 the opt-out provision. However, these entities would incur recordkeeping checklist provision costs under 10 the revisions to the 2008 LRRP rule. As this analys is estimates the incremental costs of the revisions, the 11 following sections present the potential cost impacts of the checklist provision, only. 12

6.2.8.1 Number of Small Private Schools 13 As discussed in Chapter 2, according to the 2003-2004 NCES Private School Universe Survey Data, there 14 are a total of 26,531 private schools with kindergarten or pre-kindergarten programs in the United States 15 (NCES 2006e,f). Based on HUD data, 58 percent, or 15,387 of these schools we re constructed before 16 1978, and 55 percent of the pre-1978 buildings, or 8, 463 schools, were construc ted before 1960. Because 17 no data source providing the number of private schools at different revenue leve ls was identified, all 18 private schools are considered to be small entities. In other words, the analysis assumes that each private 19 school is independently run and is not part of a larger organization. As such, the analysis may 20 overestimate the number of affected non-profit organiza tions and the impacts of the rule on these entities. 21 Table 6-34: Estimated Annual Revenues for Small Public School Districts

District Type Total Small Districts Small Districts w/ Revenue Data Total Small District Revenues Reported (Million $) Average Reported Revenues (Million $) Estimated Total Revenues (Million $) Estimated Average Revenues (Million $) Local School District (A) a 10,930 10,868 $179,530 $16.5 $180,554 $16.5 Local School District (B) a 1,200 1,197 $13,926 $11.6 $13,961 $11.6 Supervisory Union 84 76 $1,186 $15.6 $1,311 $15.6 Regional Education Agency 167 158 $7,612 $48.2 $8,046 $48.2 Other (Charter School) 949 773 $2,074 $2.7 $2,546 $2.7 Total 13,330 13,072 $204,329 $15.6 $206,419 $15.5 a. There are two different types of local school districts in NCES data – independent districts and districts that are connected to a supervisory union of fice. These local school districts are combined in Chapters 2 and 4, but are treated separately in estimating weighted average revenues.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-35 Similar to public schools, private schools will only incur direct costs as a result of this rule if they use 1 their own maintenance staff to perform regulated RRP work. Schools that perform regulated jobs in2 house will incur recordkeeping checklist costs as a result of the revisions to the 2008 LRRP rule. This 3 analysis assumes that private schools with fewer than 100 students will contract out all of their renovation 4 and repair work because of their small size, and cost s and impacts associated with work performed by a 5 contractor are accounted for in the contractor section of this analysis. Private schools serving more than 6 100 students are assumed to use their own staff to perform all painting and window/door carpentry work 7 as well as perform an average of one unscheduled maintenance event every two years and to hire 8 contractors to perform all other renovation, addition, and alteration projects. 9 As discussed in detail in Chapter 2, based on NCES’s Private School Universe survey data, 41 percent of 10 private schools with a kindergarten and/or pre- kindergarten have fewer than 100 students. Table 6-36 11 presents the total num ber of private schools regulated under Option A in a typical year, the number of 12 schools with fewer than 100 students, and the number of schools with more than 100 students. The use of 13 average annual numbers accounts for the fact that afte r the first year, the numbers of pre-1978 schools are 14 expected to decrease by 0.41 percent pe r year due to building demolition. 15
16

17

6.2.8.2 Recordkeeping Checklist Costs – Private Schools 18 Schools are expected to perform an average of approximately 2.9 events in-house per year. Table 6-37 19 presents the total num ber of private schools regulated in the first year under Option A, the total number of 20 events performed in these schools, and the total annua lized checklist costs associ ated with these events. 21 Total checklist costs are estimated by multiplying th e average annual number of events by the average 22 annualized checklist cost per event ($2; see Table 6-8). Average annualized checklist costs per private 23 school are calculated b y dividing total checklist costs by the number of affected schools. 24
25

26

6.2.8.3 Impact of the Revisions to the 2008 LRRP Rule on Small Private Schools 27 Conceptually, impacts on non-profit establishments su ch as schools might be measured in terms of the 28 ratio of rule costs to annual operating expenses. Du e to the scarcity of data on private school operating 29 expenditures (schools are excluded from the U.S. Eco nomic Census, and NCES do es not have a financial 30 Table 6-36: Average Annual Number of Private Schools with Kindergarten or PreKindergarten

Regulatory Option Total Number of Private Schools with

Kindergarten or Pre-Kindergarten Percent of Private Schools with <100 Students Number of Private Schools with <100 Students Number of Private Schools with >100 Students Option A 10,454 41% 4,280 6,174

Table 6-37: Average Checklist Costs for Private Schools

Regulatory Option Number of Private Schools w>100 Students Total AnnualNumber of Inhouse Events Total Annualized Checklist Costs a Average Annualized Checklist Costs per School Option A 6,174 17,697 $32,329 $5 a. Total costs are calculated using unrounded unit costs.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-36 data set for private schools), annual private school expenditures are approximated based on estimated 1 operating expenses per student obtained from a 1995 study by NCES entitled Estimates of Expenditures 2 for Private K-12 Schools and information on the number of students enrolled at each school as reported in 3 NCES’s 2003-2004 Private School Universe Survey data set. 4 Based on NCES data (1995), this analysis estimates th at private school expenditures average about $3,377 5 (2005$) per child per year. Appendix 6A explains the derivation of this estimate in detail. 6 To estimate average private school expenditures for schools with over 100 students operating pre7 kindergarten or kindergarten programs, the average number of students per school meeting this criteria 8 was calculated based on 2003-2004 NCES survey data (NCES 2006f). Schools for which no total student 9 enrollment data was available were assumed to have the average enrollment at schools with more than 10 100 students where student data was provided. Us ing these assumptions, the average private school with 11 over 100 students was estimated to serve 283 students pe r year. As such, average expenditures for private 12 schools are estimated to be $3,377*283, or $956,697. 13 Impacts on private schools were estimated by dividing the total annualized checklist costs incurred by 14 these schools under Option A by the number of regulated schools. Average costs per school were then 15 divided by average expenditures to calculate a co st-to-expenditure ratio. These calculations and the 16 resulting ratio are presented in Table 6-38. 17
18

Table 6-38: Cost-to-Expense Ratios for Private Schools Regulatory

Option Total Regulated Private Schools with > 100 kids Total Cost of Rule to Private Schools Average Cost of Rule per Private school Estimated Avera g e Small School Expenditures Cost-toExpenditure Ratio Option A 6,174 $32,329 $5 $956,697 0.001% 19

6.2.9 Summary of the Revisions to the 2008 LRRP Rule Impacts on Small Governments, 20 Non-Profit Organizations, and Small For-Profit Businesses 21 The vast majority of entities in the industries affected by the revisions to the 2008 LRRP rule are small. 22 As a result of the revisions, approximately 289, 250 small entities would incur costs under Option A, 23 incremental to impacts associated with the 2008 L RRP rule. Of the total, 100,662 small residential 24 contractors would seek certification as a result of the re moval of the opt-out provision; therefore, they 25 would incur training, certification, work practice, and checklist costs. The remaining 188,588 small 26 entities, who are currently regulated by the 2008 LRRP rule, would only incur the incremental costs of the 27 recordkeeping checklist provisions. 28

6.2.9.1 Incremental Impacts of the Revisions – Opt-Out Entities 29 The average annualized incremental cost of the revisions to a typical small opt-out entity is estimated to 30 range from $1,700 to $5,200 under Option A, depe nding on the number of renovation, repair, and 31 painting events undertaken by a small opt-out entity in the industry sector involved. As shown in Table 32 6-39, under Option A, the incremental cost impact of the revisions to the 2008 LRRP rule on small opt33 out entities ranges from 0.87 percent to 2.19 percen t of revenues depending on the industry sector. 34
35EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-37 1 Table 6-40 presents the total number of small for-pro fit businesses and the average cost-to-revenue ratio 2 for that category. It is estimated that under Opti on A, a total of 100,662 small for profit businesses would 3 be affected by the program with average impacts of 1.17 percent. 4
5 Table 6-40: Aggregate Small Opt-Out Entity Impacts

Total Number of Small Entities Affected Average Impacts, All Small Entities Option A Small For-Profit Businesses 100,662 1.17% Total 100,662
6

6.2.9.2 Incremental Impacts of the Revisions – Currently Regulated Entities 7 The average annualized incremental cost of the revisi ons to a typical small currently regulated entity is 8 estimated to range from $1 to $214 under Option A depending on the number of renovation, repair, and 9 painting events undertaken by a small entity in the industry sector involved. As shown in Table 6-41, 10 under Optio n A, the incremental cost impact of the revisions to the 2008 LRRP rule on small currently 11 regulated entities ranges from about .0001 percent to .07 percent of revenues, depending on the industry 12
sector. 13
14 Table 6-39: Typical-Year Number of Small Opt-Out Entities with RRP Events and Associated Cost-Impact Ratio Option A

Entity Type Number of Small Entities Cost-Impact Ratio Residential Contractors (working in target housing) Residential remodelers Business 32,093 1.03% Siding contractors Business 2,335 1.20% Finish carpentry contractors Business 22,790 1.69% Other building equipment contractors Business 1,059 0.88% Other building finishing contractors Business 1,450 1.17% Tile and terrazzo contractors Business 3,255 1.49% Plumbing and HVAC contractors Business 10,953 0.92% Glass and glazing contractors Business 966 0.87% Painting and wall covering contractors Business 12,650 2.19% Electrical contractors Business 7,787 1.12% Drywall and insulation contractors Business 5,326 1.14% Total 100,662EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-38 1 Table 6-42 presents the total number of small, curre nt ly-regulated governments, non-profit organizations, 2 and small for-profit businesses, and th e average cost-to-revenue ratios for each category. It is estimated 3 that under Option A, a total of 188,588 small entities would be affected by the program, including 4 165,440 small businesses with average impacts of 0.03 pe rcent, 16,655 small non-profits with average 5 impacts less than 0.0005 percent, and 6,492 small governments with average impacts less than 0.001 6 percent. 7
8 Table 6-42: Aggregate Small Enti ty Impacts on Entities Currently Regulated Under the 2008 LRRP rule

Total Number of Small Entities Affected Average Impacts, All Small Entities Option A Small Governments 6,492 0.0001% N on-Profit Organizations 16,655 0.0005% Small For-Profit Businesses 165,440 0.03% Total 188,588 9 Table 6-41: Typical-Year Number of Small Entities with RRP Events Currently Regulated Under the 2008 LRRP Rule Option A Description Entity Type Number of Small Entities Cost-Impact Ratio

Public School Districts Government 6,492 0.0001% Private Schools Non-Profit 6,174 0.0005% Daycare Centers Non-Profit 10,481 0.0005% Non-Residential Landlords Business 11,056 0.0010% Non-Residential Contractors (working in public or commercial building COFs) Business 2,866 0.01% Residential Contractors (working in target housing) Residential remodelers Business 41,359 0.03% Siding contractors Business 3,008 0.04% Finish carpentry contractors Business 29,369 0.06% Other building equipment contractors Business 1,365 0.03% Other building finishing contractors Business 1,868 0.04% Tile and terrazzo contractors Business 4,195 0.05% Plumbing and HVAC contractors Business 14,114 0.03% Glass and glazing contractors Business 1,244 0.03% Painting and wall covering contractors Business 16,302 0.07% Electrical contractors Business 10,035 0.04% Drywall and insulation contractors Business 6,863 0.04% Residential Property Managers Business 5,824 0.06% Lessors of Residential Real Estate Business 15,970 0.02% Total 188,588EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-39 6.2.9.3 Incremental Impacts of the Revisions – All Small Entities 1 Table 6-43 presents the total number of small governme nts, non-pr ofit organizations, and small for-profit 2 businesses, and the average cost-to-reve nue ratios for each category. It is estimated that under Option A, 3 a total of 289,250 small entities would be affect ed by the program, including 266,102 small businesses 4 with average impacts of 0.39 percent, 16,655 sma ll non-profits with average impacts of about 0.0005 5 percent, and 6,492 small governments with average impacts of about 0.0001 percent. 6
7 Table 6-43: Aggregate Imp acts on All Small Entities

Total Number of Small Entities Affected Average Impacts, All Small Entities Option A Small Governments 6,492 0.0001% N on-Profit Organizations 16,655 0.0005% Small For-Profit Businesses 266,102 0.39% Total 289,250 8 

### 6.3 Unfunded Mandates Reform Act (UMRA) 9 Title II of the Unfunded Mandates Reform Act of 1995, Pub. L. 104-4, establishes requirements for 10 Federal agencies to assess the effects of their regulatory actions on State, local, and Tribal governments, 11 and the private sector. Under section 202 of the UMRA, EPA generally must prepare a written statement, 12 including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that might result in 13 expenditures by State, local, and Tribal governments, in the aggregate, or by the private sector, of $100 14 million or more (when adjusted annually for inflation) in any one year. 16 15 Before promulgating a regulation for which a writte n statement is needed, section 205 of the UMRA 16 generally requires EPA to identify and consider a r easonable number of regulatory alternatives and adopt 17 the least costly, most cost-effective, or least burde nsome alternative that achieves the objectives of the 18 rule. The provisions of section 205 do not apply wh en they are inconsistent with applicable law. 19 Moreover, section 205 allows EPA to a dopt an alternative other than the least costly, most cost-effective, 20 or least burdensome alternative if the Administrator publishes with the rule an explanation of why that 21 alternative was not adopted. Before EPA establishes any regulatory requirements that might significantly 22 or uniquely affect small governments, including Tr ibal governments, it must have developed under 23 section 203 of the UMRA a small government agency plan. The plan must provide for notifying 24 potentially affected small governments, enabling o fficials of affected small governments to have 25 meaningful and timely input in the development of EPA regulatory proposals with significant 26 intergovernmental mandates, and informing, edu cating, and advising small governments on compliance 27 with regulatory requirements. This section identifies the government entities that may be affected by the 28 revisions to the 2008 LRRP rule. 29

16 When the original $100 million UMRA threshold is adjusted for inflation from 1995 to 2005 dollars using an implicit price deflator for gross domestic product, the result is a threshold of $118 million.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-40 6.3.1 Affected Government Entities 1 The revisions to the 2008 LRRP rule will affect ac tivities in publicly owned child-occupied facilities, 2 specifically publicly owned housing and public schools. 17 As with the private sector, the recordkeeping 3 checklist provision will increase the cost of operating these facilities by requiring that a copy of the 4 recordkeeping checklist be posted in an area available to parents of students. Each school district that 5 uses its own in-house staff to perform RRP activities in regulated buildings is required to comply with the 6 checklist provision. Thus, state and local governments will incur incremental costs of photocopying and 7 posting the checklist during the renovation, repa ir, and painting of public school buildings. 8 While most of what is commonly referred to as pub lic housing is owned by state or local governments 9 and provided for the benefit of low-income and/or elderly households, other pu blic entities (such as public 10 colleges and universities) may provide housing regulated under the LRRP rule. As with the private 11 sector, the revisions to the LRRP regulations will in crease the cost of operating this housing by requiring 12 that the recordkeeping checklist be made available to occupants. However, this is a very small cost, 13 estimated to average $2 per renovation. 14

6.3.2 Expenditures by State, Local, and Tribal Governments – Public School Districts 15 State, local, a nd Tribal governments will incur the incremental costs imposed by the revisions to the 2008 16 LRRP rule when public school districts engage in certain RRP activities. 18 Based on available data and 17 the economic analysis presented in Chapter 4 and Section 6.2, Section 6.3 assumes that all public school 18 districts will perform all painting- and window/ door carpentry tasks themselves, as well as some 19 unscheduled maintenance and repairs. Public school s are assumed to hire third-party contractors to 20 perform the remainder of their RRP work. Since all p ublic school districts use their own staff to perform 21 some of their RRP activities, all public school distri cts would need to comply with the recordkeeping 22 checklist requirements outlined in Chapter 4. 19 Table 6-44 presents the estimated total annualized 23 increm ental costs of the revisions that would be incurred by public school districts under Option A. 24

17 It is possible that government agencies also operate some of the childcare facilities included in the daycare center counts throughout this economic analysis. Due to insufficient data, it was not possible to estimate the number of such government-run facilities, or the number or size of the agencies that operate them. As such, this Unfunded Mandates Reform Act is limited to public school districts.

18 As discussed in Chapter 4, states would be able to ap ply for, and receive authori zation to administer these requirements, but would be under no obligation to do so.

19 It is important to note that this analysis uses a 75 percent compliance rate. See Chapter 4 and the small entity analysis (Section 6.2) for a more comprehe nsive discussion of these cost estimates. Table 6-44: Total Annualized Incremental Cost s to All Public School Districts, Option A Average Annual Number of Districts Affected

a Average Annual Number of Buildings Affected a Total Average Annual Number of Events b Average Annualized Cost Per District

(2005$) Total Annualized Cost (2005$)

7,049 11,457 32,839 $9 $59,991

a. In the first year, the COF Rule is expected to affect 7,782 public school districts and 12,648 school buildings in these districts. Every year thereaft er, the number of affected districts and schools is expected to decrease by 0.41 percent as older buildings are demolished. The use of 50-year average numbers of districts and school s captures this annual decrease. b. Schools are expected to perform 2.87 events per year per building using their own maintenance staff (see Section 6.2 for more details).EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-41 1
The cost to revenue ratio for affected school districts is 0.00003 percent under Option A. These 2 calculations are summarized in Table 6-45. 3
4

Table 6-45: Cost-to-Revenue Rati os for Affected Public Schools

Regulatory

Option Average Annual Regulated Districts Total Annualized Cost of Rule to Districts Average Annualized Cost of Rule per

District Estimated Avera g e District Revenues (mil) Cost-toRevenue Ratio
Option A 7,049 $59,991 $9 $31.9 0.00003% 5 

### 6.4 Executive Order 13132 - Federalism 6 Executive Order 13132, entitled Federalism (64 FR 43255, August 10, 1999), directs federal agencies to 7 consider whether a rule has federalism implications (i.e. whether it has substantial direct effects on the 8 states, on the relationship between the national government and the states, or on the distribution of power 9 and responsibilities among the various levels of government, as specified in Executive Order 13132). 10 As discussed in Chapter 4, states would be able to apply for and receive authorization to administer these 11 requirements but would be under no obl igation to do so. In the absence of a state authorization, EPA will 12 administer these requirements. While the cost analys is assumes that EPA will administer and enforce the 13 program in all places, it also assumes that states would incur similar costs if they administer and enforce 14 the regulation. To the extent that they operate targ et housing or child-occupied facilities, states may incur 15 costs due to the requirement that the recordkeeping ch ecklist be made available to occupants. Given the 16 low cost per event of providing the checklist, this ru le is not expected to have a significant impact on 17
states. 18 

### 6.5 Executive Order 13175 - Tribal Implications 19 Executive Order 13175, entitled Consultation and Coordination with Indian Tribal Governments (59 FR 20 22951, November 6, 2000), directs federal agencies to c onsider whether a rule has tribal implications (i.e. 21 whether it has substantial direct effects on tribal governments, on the relationship between the Federal 22 government and the Indian tribes, or on the distribu tion of power and responsib ilities between the Federal 23 government and Indian tribes). 24 Under the revisions to the 2008 LRRP rule, Tribes would be able to apply for and receive authorization to 25 administer these requirements on Tribal lands, but Trib es would be under no obligation to do so. In the 26 absence of a Tribal authorization, EPA will administer these requirements. 27 To the extent that Tribes operate target housing or child-occupied facilities, they may incur costs due to 28 the requirement that the recordkeeping checklist be ma de available to occupants. The number of Tribal 29 authorities that conduct renovation work on regulated properties is not known. However, given the low 30 cost per event for providing the checklist, this rule is not expected to have a substantial direct effect on 31 Tribes. 32 

### 6.6 Protection of Children from Environm ental Health Risk and Safet y Risks 33 Under Executive Order 13045, a regulation must be re viewed if the regulatory action is economically 34 significant and concerns an environmental health risk or safety risk that may disproportionately affect 35 children. Since children are particularly susceptible to the IQ loss and adverse health effects caused by 36 exposure to lead dust, a significant objective of the revisions to the 2008 LRRP rule is the protection of 37EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-42 children’s health. Removing the opt-out provision protects children under the age of six who spend a 1 limited amount of time in housing (such as a relative or caregiver’s house) where a renovation has been 2 performed under the opt-out provision; children who move into such housing when their family purchases 3 it after such a renovation has been performed; and ch ildren who live in a property adjacent or near to 4 owner-occupied housing where renovation has been performed under the opt-out provision. This analysis 5 looks at the number of children in one of these gr oups – children who receive regular care in a house that 6 does not meet the definition of a child-occupied facility. 7

6.6.1 Target Housing Affected by the Elimination of the Opt-Out Provision 8 Children Receiving Regular Care in Ta rget Housing that is not a COF 9 A target housing unit where a child visits regularly , but spends fewer that 6 hours a week is not 10 considered a child-occupied facility. Therefore, these housing units, hereafter re ferred to as Regular Care 11 Target Housing (RCTH) units, are eligible for the opt-out provision under the 2008 LRRP rule providing 12 that there is no child under the age of six or pregnant woman that resides in the unit. Thus, children 13 visiting RCTH may benefit from the elimination of th e opt-out provision by reducing potential exposures 14 to lead dust during these visits. 15 Table 6-46 presents the annual number of children visiting opt -out eligible RCTH where LBP is disturbed 16 during RRP events that are protected by the removal of the opt-out provision. 17 Table 6-46: Annual Number of Children Visiting Opt-Out Eligible RCTH Where LBP is Disturbed During an RRP Event that are Protected by the Removal of the Opt-out Provision Number of Children Under the Age of 6 Protected by the Rule each Year a Option

First Year Second Year b

A 16,215 16,149 B 8,108 16,149 C 0 16,149 D 13,597 16,149 E1 to E4 c 16,215 16,149 a. Assumes a 75% compliance rate. b. The stock of target housing, and ther efore the number of individuals living in target housing, is assumed to decline by 0.41% per year (due to demolitions, conversions, etc,) based on Census data. c. Options E1 to E4 cover the same target housing universe and have the same effective date as Option A, but do not provide the same level of protection because they do not require all of the work practice standards under 40 CFR 734.85.

18 Since the opt-out provision is eliminated under Option A as soon as the rule becomes effective, all 19 children receiving care in opt-out eligible RCTH performing RRP that disturbs LBP are protected in the 20 first year. Since the opt-out provision under Option B is eliminated six months later (halfway through the 21 beginning of the first year the rule is in place), the number of individuals protected under Option B in the 22 first year is half the number estimated for Option A. Under Option C, the opt-out provision is eliminated a 23EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-43 year later. Under Option D the opt-out provision is eliminated as soon as the ru le becomes effective for 1 housing built before 1960. Options E1 through E4 have the same effective dates and universe of 2 regulated structures as Option A, but consider alternat ive work practice requirements. As indicated in 3 Table 6-46, the majority of the children that would be protected by the elimination of the opt-out 4 provision reside in housing built before 1960 becau se of the higher likelihood of LBP in these housing 5 units. Options E1 through E4 have the same effectiv e dates and universe of regulated structures as Option 6 A, but consider alternative work practice requirements. In the second year (starting June 2011), the opt7 out provision would be eliminated under all options. 8 

### 6.7 Executive Order 13211 - Energy Effects 9 Executive Order 13211, entitled Actions Concerning Regulations that Significantly Affect Energy Supply, 10 Distribution, or Use (66 FR 28355, May 22, 2001), directs fede ral agencies to identify actions that will 11 have a significant adverse energy effect. Adverse effects are defined as: 12

• Reductions in crude oil supply in excess of 10,000 barrels per day; 13

• Reductions in fuel production in excess of 4,000 barrels per day; 14

• Reductions in coal production in excess of 5 million tons per year; 15

• Reductions in natural gas production in excess of 25 million mcf per year; 16

• Reductions in electricity production in excess of 1 billion kilowatt-hours per year or in excess of 17 500 megawatts of installed capacity; 18

• Increases in energy use required by the regulatory ac tion that exceed any of the thresholds above; 19

• Increases in the cost of energy production in excess of one percent; 20

• Increases in the cost of energy dist ribution in excess of one percent; or 21

• Other similarly adverse outcomes. 22 The regulations under considerati on will not significantly reduce energy production nor significantly 23 increase energy costs. 24 

### 6.8 National Technology Transfer and Advancement Act 25 Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (“NTTAA”), Public 26 Law No. 104-113, 12(d) (15 U.S.C. 272 note) direct s federal agencies to u se voluntary consensus 27 standards in its regulatory activities unless to do so would be inconsistent with applicable law or 28 otherwise impractical. Voluntary consensus sta ndards are technical standards (e.g., materials 29 specifications, test methods, sampling procedures, a nd business practices) that are developed or adopted 30 by voluntary consensus standards bodies. The NTT AA directs federal agencies to provide Congress, 31 through OMB, explanations when the Agency decid es not to use available and applicable voluntary 32 consensus standards. 33 This rulemaking does not involve technical standards. Therefore, EPA is not considering the use of any 34 voluntary consensus standards. 35 

### 6.9 Executive Order 12898 – Environmental Justice 36 Under Executive Order 12898, when promulgating a regulation, EPA investigates whether there are 37 disproportionately high and adverse human health or environmental effects on minority and low-income 38 populations. The LRRP regulation requires that renovators, when undertaking renovation activities in 39 regulated facilities, reduce the risk of exposure to l ead by employing the use of safe work practices. In 40 addition, renovators are required to undertake clean ing verification at the end of each project. This 41 environmental justice analysis first summarizes a fe w important points to consider when viewing the 42 results. Next a summary of the impacts from the regulation on minority and low-income populations in 43EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-44 target housing units and child-occupied facilities is presented. Racial minorities and low-income 1 households stand to accrue benefits as a r esult of the revision to the LRRP rule. 2 Following the work practice, cleaning, and cleaning ve rification steps specified in the rule will increase 3 the costs for renovation, repair and painting activities that would be regulated as a result of the 4 elimination of the opt-out provision from the 2008 L RRP rule. These additional costs may lead some 5 lower income homeowners of properties in lower income neighborhoods to avoid using certified 6 renovators or recommended practices. The incremental costs of the rule’s work practices are typically 7 below $200, and for many jobs the cost is significantly below this figure. 20 These costs are likely to be a 8 small part of the total cost of the renovation, repair , and painting projects. EPA believes that these costs 9 are unlikely to result in significan t changes in consumer behavior. If however, the increased costs result 10 in more projects being undertaken by uncertified firms or by do-it-yourselfers, the risks in these instances 11 would be the same as in the baseline and would not constitute new risks resulting from the revisions. 12 EPA believes that the revisions would result in new ri sks only if the increased costs caused individuals to 13 delay work such as painting until lead-based paint be gan peeling and chipping, creating a lead hazard. 14 Such delays are expected to occur infrequent ly given the revisions’ low cost per event. 15 The revisions to the 2008 LRRP rule would only a dd recordkeeping checklist requirements for buildings 16 that are ineligible for the opt-out provision. Th e checklist requirements are not expected to have 17 disproportionately high and adverse human health or environmental effects on minority and low-income 18 populations. 19

6.9.1 Target Housing Currently Eligible for the Opt-Out Provision 20 This section evaluates the distribution of renovation ev ents in target housing units and the individuals 21 protected across three race and two income groups. A lthough it would be preferable to perform a joint 22 environmental justice analysis for the race and inco me groups, relevant data are not available to make 23 these population inferences. Therefore, the analysis was performed separately for the race and income 24 groups. 25

6.9.1.1 Low Income 26 EPA defines low income individuals as individuals w hose income are below the level set by the federal 27 government’s official poverty definition. Based on data from the 2000 Decennial Census , 12.4% of 28 individuals were living below the poverty level (U.S. Census Bureau 2000a). The analysis evaluates 29 whether the removal of the opt-out provision will have a disproportionately greater effect on low income 30 individuals. 31
The data in Table 6-47 presents the numbers of households below t he poverty level that own their home. 32 As a result of the elimination of the opt-out provi sion from the 2008 LRRP rule, more owner-occupied 33 target housing events would be performed using the work practices required by the 2008 LRRP rule. 34 Only households built prior to 1978 would potentially be affected by the revisions. About 4.5 percent of 35 pre-1980 owner-occupied housing units have residents below the poverty line. 36
37

20 This estimate is adjusted for baseline work practi ces and assumes a 75% compliance rate. See Chapter 4.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-45 Table 6-47: Number and Percentage of Householders Below Poverty by Year Housing Built by Tenure Owner Occupied Housing

Year Housing Built Total Below Poverty Percentage of All Owner Housing Below Poverty

Pre-2000 4,371,712 6.26%

Pre-1980 3,133,302 4.49%

Pre-1960 1,765,185 2.53%

Pre-1950 1,167,604 1.67%

Source: U.S. Census Bureau 2000b. 1

6.9.1.2 Race: 2 This section of the environmental justice analysis c onsiders the impacts of the revisions across three race 3 categories. The data in Table 6-48 compares the percentages of owners and renters for three categories of 4 race, “White Alone,” “Black/African American Al one,” and “Asian Alone.” The 2000 Census data 5 shows that Black/African American households and As ian households are almost as likely to reside in 6 owner housing as rental housing. Because no data were available for race by age of housing unit, this 7 analysis uses pre-2000 housing to provide a general idea of these proportions. 8
9

10

6.9.2 Conclusions 11 The revisions to the 2008 LRRP rule seeks to minimi ze the exposure of children and adults to lead-based 12 paint hazards created during renovation, repair, and painting activities in certain types of owner-occupied 13 target housing that are currently eligible for the opt -out provision. As such, EPA concludes that the 14 revisions to the rule will not lead to disproportionately high and adverse human health or environmental 15 effects on minority and low income populations in target housing units that would become regulated. 16 17 Table 6-48: Number and Percentage of Householders by Race by Tenure in 2000

Race Total Percentage Owner Percentage Renter

White Alone 83,715,168 71.27% 28.73%

Black/African American Alone 11,977,309 46.33% 53.67%

Asian Alone 3,117,356 53.24% 46.76%

Source: U.S. Census Bureau 2000c.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-46 

### APPENDIX 6A – Estimating average per-pupil expenditures of private schools 1 This appendix outlines the methodology used to estim ate total annual private school expenditures for the 2 small entity analysis. Total annual school expenditu res were estimated based on per-student operating 3 expense data and information on the number of st udents enrolled. This analysis used per-pupil 4 expenditure values for 1991-92, first calculated in a working paper published by the National Center for 5 Education Statistics (NCES) entitled “Estimates of Expenditures for Private K-12 Schools” (NCES 1995). 6 The two mean per-pupil expenditure values (one for elementary schools and one for combined schools) 7 presented were combined into one value - the privat e school per-pupil expenditure value - using selected 8 weights. Finally, this value was inflated to 2005 dolla rs using the CPI. The in flated value was used to 9 estimate the total expenditures of private schools with various sized student bodies. 10 The NCES working paper divided 1991-92 Private School Survey (PSS) data into 19 mutually exclusive 11 and exhaustive sectors of schools based on grade level (elementary, secondary, and combined elementary 12 and secondary), and religious or othe r affiliation. The paper relied on e xpenditure data collected by three 13 school associations (The National Catholic Education Association (NCEA), the Lutheran Church14 Missouri Synod (LCNS), and the National Association of Independent Schools (NAIS)) to calculate 15 average annual per-student expenditures for their associated schools. Data from the three surveyed school 16 associations accounted for 45% of the total privat e school as presented in the PSS (NCES 1995). For the 17 remaining schools, NCES estimated two sets of pe r-student expenditures using data obtained from 18 Catholic and Lutheran schools (referred to as the Cat holic and Lutheran School Models, respectively). 19 Table 6A-1 presents the number of schools and the annual per-student expenditures for the 19 sectors of 20 schools using the Lutheran school data to estimate missing expenditure values. 21EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-47 Table 6A-1: Estimated Per-pupil Expenditures of Private Schools by School Level and School Type (Based on the Lutheran Model)
School Level and School Type Number of Schools Estimated Mean Per Pupil Expenditures
Elementary Schools Catholic 7,645 $1,895 Lutheran 1,563 $2,003 NAIS Religious 124 $6,313 NAIS Non-Sectarian 325 $8,807 Other Religious 5,240 $2,003 Other Non-Sectarian 2,084 $2,003 Special Education 114 $8,807 All Schools 17,093 $2,125 Secondary Schools Catholic 1,244 $3,909 Lutheran 87 $4,527 NAIS Religious 91 $16,523 NAIS Non-Sectarian 208 $58,730 Other Religious 477 $4,527 Other Non-Sectarian 342 $4,527 Special Education 171 $17,261 All Schools 2,620 $5,510
Combined Schools NAIS Religious 95 $9,052 NAIS Non-Sectarian 346 $9,662 Other Religious 4,085 $4,527 Other Non-Sectarian 943 $4,527 Special Education 817 $9,662 All Schools 6,285 $5,766
Sources: NCES 1995

1 The per-student expenditure estimates presented are based on the Lutheran School Model rather than the 2 Catholic School Model because, based on the eviden ce presented in NCES’s study, Lutheran school data 3 are likely to be more accurate. Specifically, wh en assessing the quality of the data, the working paper 4 authors express concern over potential non-response bias and sampling error in the Catholic elementary 5 and secondary school data. In addition, a comparis on of the total operating expenses of private 6 elementary and secondary schools generated by each model with an alternate estimate calculated annually 7 by NCES indicated that while that both the Catholic and the Lutheran School Model estimates are below 8 the alternative NCES estimates, the Lutheran School Model is the closer of the two. 21 Therefore the 9 Lutheran School Model was used in this analysis. 10 To estimate per-student expenditures for schools likely to be affected by the revisions to the LRRP Rule, 11 the school sectors most likely to contain schools with pre-kindergarten and kindergarten programs were 12

21 The NCES estimate inflates private school data collected in the late 1970’s.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-48 identified in the NCES study. Table 6A-2 shows Table 6A-1 with an additional column indicating 1 whether or not the esti mated mean for that sector was included in the calculation for mean per-private2 school-pupil expenditure based on the assumptions made about the likelihood of that sector containing a 3 kindergarten or pre-kindergarten program. An “x” in dicates that the mean per-pupil expenditure value is 4 included in the calculation. 5

6 Table 6A-2: Estimated Per-pupil Expenditures of Private Schools by School Level, School Type, and Inclusion in the Calculation (Based on Lutheran School Model)

School Level and School Type Number of Schools Estimated Mean Perpupil Expenditures Included in the Calculation Elementary Schools Catholic 7,645 $1,895 Lutheran 1,563 $2,003 x NAIS Religious 124 $6,313 NAIS Non-Sectarian 325 $8,807 Other Religious 5,240 $2,003 x Other Non-Sectarian 2,084 $2,003 x Special Education 114 $8,807 All Schools 17,093 $2,125 Secondary Schools Catholic 1,244 $3,909 Lutheran 87 $4,527 NAIS Religious 91 $16,523 NAIS Non-Sectarian 208 $58,730 Other Religious 477 $4,527 Other Non-Sectarian 342 $4,527 Special Education 171 $17,261 All Schools 2,620 $5,510 Combined Schools NAIS Religious 95 $9,052 NAIS Non-Sectarian 346 $9,662 Other Religious 4,085 $4,527 x Other Non-Sectarian 943 $4,527 x Special Education 817 $9,662 All Schools 6,285 $5,766 Sources: NCES 1995 7 Of the 19 sectors, 6 are for secondary schools only. Since the working paper notes that secondary 8 schools 22 spend more than twice as much as elementary schools spend per pupil, and are the least likely, 9 by definition, to contain a COF, they are excluded from the calculation of the mean per-pupil expenditure 10 value. 11

22 Defined as having a highest grade less than or equal to 12 th and a lowest grade of greater than or equal to 6 th

.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-49 For elementary schools 23 , the $2,003 mean per-pupil expenditure co st was selected. This value represents 1 8,887 of the 17,093 (52%) elementary schools presente d in the working paper. Though Catholic schools 2 represent approximately 45 percent of all elementary schools, their associated mean per-pupil expenditure 3 estimate is not used due to the potential bias discusse d above. The remaining elementary school per-pupil 4 expenditure values are between 3 and 4 times larger than the chosen value; however these means 5 represent schools unlikely to be affected by the LRRP rule. For example, the mean per-pupil expenditure 6 values presented for NAIS schools (449 of the 561 remaining schools) are much higher since “a relatively 7 large proportion of NAIS schools are boarding schools and expenditures for dormitories are apparently 8 included in the total operating expend itures for these schools.” It is unlikely that a COF would be found in 9 a boarding school. The remaining 112 schools are speci al education elementary schools, which are more 10 costly because of their unique needs and are also l ess likely to contain a COF. Furthermore, as the 11 working paper notes, “preschool is probably less expens ive than other grades,” and therefore, it is likely 12 that the average across all elementary school s ($2,125) would overstate expenditures. 13 For combined schools, the $4,527 mean per-pupil expenditure cost is used. 24 This value represents 5,028 14 of the 6,285 (80%) combined schools presented in the working paper. The other mean per-pupil values 15 are roughly double this value, pulling the mean for all combined schools up to $5,766. This higher value 16 is not used as it most likely overstates the expenditur es given that boarding schools and special education 17 schools are again included in the calculation. 18 In order to obtain one private school per-pupil expe nditure value, the previously discussed elementary 19 school and combined school data were weighted. The weights were based on the current proportions of 20 elementary schools and combined schools with either a pre-kindergarten or kindergarten program. In 21 order to calculate the weights, this analysis used the data set underlying the National Center for Education 22 Statistics (NCES) report entitled “Characteristics of Pr ivate Schools in the United States: Results From 23 the 2003-2004 Private School Universe Survey.” Note that it was assumed that per-student expenditures 24 at K-terminal schools were the same as in elementary schools. 25 25 In 2003-2004, there were a total of 18,289 private elementary schools and 4,338 private combined schools 26 with pre-K or kindergarten programs. Thus, a weight of 0.81 (18,289/22,627) w as attached to the mean 27 per-pupil elementary school expenditure value and a we ight of 0.19 (4,338/22,627) was attached to the 28 mean per-pupil combined school expenditure value. This calculation yields a final private school per29 pupil expenditure value of $2,426. 30 Because the study is based on 1991-1992 PSS data, it was assumed that expenditure values were in 1992 31 dollars. Taking into account inflation, $2,426 in 1992 do llars is equivalent to $3 ,377 in 2006 dollars (U.S. 32 Bureau of Labor Statistics 2006). 33

23 Defined as having a highest grade of less than or equal to 8 th

.

24 A combined school is defined as having a highest grade less than or equal to 12 th and a lowest grade less than or equal to 5 th

.

25 A K-terminal school is defined as a school for which kindergarten is the highest grade. In the 2003-2004 PSS, Kterminals represented an estimated 22% of all private schools with either a kindergarten or pre-kindergarten program.EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-50 

### References 1
ASTM International. Standard Practice for Clear ance Examinations Following Lead Hazard Reduction 2 Activities in Single-Family Dwellings and Child-Occupied Facilities (E 2271-05). 3 4 ASTM International. Standard Guide for Evaluati on, Management, and Control of Lead Hazards in 5 Facilities (E 2052-99). 6 7 Division of Housing and Community Renewal (DHCRb). 2005. Public Housing. 8 http://www.dhcr.state.ny.us/ohm/progs/modern/ohmmod.htm. 9 10 Housing and Community Development Corporation of Hawaii (HCDCH). 2002. Annual Report, 2002. 11 http://www.hcdch.hawaii.gov/02annualrpt.pdf. 12 13 Indiana Child Care Fund. 2005. “The Economic Dimens ions of the Child Care Industry in Indiana: an 14 Invisible Industry.” 15 http://www.in.gov/isdh/programs/mch/sunny_ start/pdfs/Child_Care_Report_Findings.pdf

. 16 Downloaded 12/27/2006. 17 18 Iowa State University. Center for Family Policy. 2005. “Child Care, Parents, and Work: The Economic 19 Role of Child Care in Iowa. http://www.extension.iastate.edu/cd-dial/pdf/ChildCareParents.pdf

. 20 Downloaded 12/27/2006. 21 22 Louisiana Department of Social Services. 2005. “I nvesting in the Child Care Industry: An Economic 23 Development Strategy for Louisiana.” 24 http://www.dss.state.la.us/Documents/OFS/Investing_In_The_Chi1.pdf . Downloaded 25 12/28/2006. 26 27 Marshall University. Center for Business and Economic Research. 2005. “The Economic Impact of Early 28 Child Development Programs in West Virginia.” 29 http://www.marshall.edu/cber/research/ECDfinalreport.pdf . Downloaded 12/28/2006. 30 31 Mid-America Regional Council. 2003. “Investing in th e Child Care Industry: An Economic Development 32 Strategy for Kansas. http://nieer.org/docs/?DocID=77 . Downloaded 12/28/2006. 33 34 Mulligan, G.M., Brimhall, D., and West, J. (2005). Child Care and Early Education Arrangements of 35 Infants, Toddlers, and Preschoolers: 2001 (NC ES 2006-039). U.S. Department of Education, 36 National Center for Education Statistics. Wash ington, DC: U.S. Government Printing Office. 37 38 National Center for Education Statistics (NCES). 2006a. “Overview of Public Elementary and Secondary 39 Students, Staff, Schools, School Districts, Re venues, and Expenditures: School Year 2004-2005 40 and Fiscal Year 2004.” Available at: http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=2007309

. 41 (Downloaded 12/22/2006). 42 43 National Center for Education Statistics (N CES). 2006b. Common Core of Data Public 44 Elementary/Secondary School Universe Survey Data, 2004-2005.” Available at: 45 http:///nces.ed.gov/gov /ccd/pubschuniv.asp . (Accessed 12/22/2006). 46 47EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-51 National Center for Education Statistics (NCES). 2006 c. Common Core of Data Local Education Agency 1 (School District) Universe Survey Data. Available at: http://nces/ed/gov/ccd/pubschuniv.asp

. 2 (Accessed 12/22/2006). 3 4 National Center for Education Statistics (NCES). 2006 d. Common Core of Data Local Education Agency 5 (School District) Finance Survey (F-33) Data. Available at: http://nces.ed.gov/ccd/f33agency.asp

. 6 (Accessed 12/22/2006). 7 8 National Center for Education Statistics (NCES). 2006e. “Characteristics of Private Schools in the United 9 States: Results From the 2003-2004 Private Sc hool Universe Survey.” (Accessed 12/15/2006). 10 11 National Center for Education Statistics (NCES). 2006f. 2003-2004 Private School Universe Survey 12 Data. Received from Stephen Broughman (NCES) December 15, 2006. 13 14 National Center for Education Statistics (NC ES). 2006g. Crosswalk Between 2004-2005 Local 15 Education Agency Universe Survey Data and Year 2000 U.S. Census Population Data. Table 16 created at: http://www.nces.ed.gov/ccd/bat/index.asp (Accessed 12/15/2006). 17 18 National Center for Education Statistics (NCES). 1995. Estimates of Expenditures for Private K-12 19 Schools. Working Paper No. 95-17. Available at: 20 http://nces.ed.gov/pubsearch/pubsinfo.asp?pubid=9517 (Accessed 3/26/2007). 21 22 National Economic Development and Law Center. 2004a. “The Economic Im pact of the Child Care and 23 Early Education Industry in Massachusetts.” http://www.nedlc.org/index.htm . Downloaded 24 12/29/2006. 25 26 National Economic Development and Law Center. 2004b. “The Economic Im pact of the Early Care and 27 Education Industry in Ohio.” http://www.nedlc.org/index.htm . Downloaded 12/27/2006. 28 29 National Economic Development and Law Center. 2005. “The Economic Impact of the Early Care and 30 Education Industry in Hawaii.” http://www.nedlc.org/index.htm . Downloaded 12/27/2006. 31 32 New Jersey Child Care Economic Impact Council. 20 06. “Benefits for All: The Economic Impact of the 33 New Jersey Child Care Industry.” http://www.nedlc.org/index.htm . Downloaded 12/27/2006. 34 35 New York State Child Care Coordinating Council. 20 04. “Investing in New York: an Economic Analysis 36 of Early Care and Education Sector. “ http://www.childcareinc.org/pubs/Economic Impact Report 37 Website.pdf .” Downloaded 12/28/2006. 38 39 Oklahoma State University. College of Business Administration. 2004. “The Economic Impact of 40 Oklahoma’s Child Care Industry. http://economy.okstate.edu/papers/okchildcareimpact2003.pdf

. 41 Downloaded 12/27/2006. 42 43 Richland County Early Education Council. 2006. “The Economic Impacts of the Child Care Industry in 44 South Carolina.” www.rcfirststeps.org . Downloaded 12/28/2006. 45 46 Stainton, John; Regan, Charleen. Protecting the Commonwealth’s Investment: Securing the Future of 47 State-Aided Public Housing. 2001. Citizens’ Housing and Planning Association. 48EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-52 1 U.S. Bureau of Labor Statistics. 2005. Occupational Employment Statistics Series. 2 3 U.S. Bureau of Labor Statistics. 2006. Consumer Price Index: All urban consumers; other goods and 4 services. Bureau of Labor Statistics, Washington, DC (Accessed 1/5/2007). 5 6 U.S. Bureau of Labor Statistics. 2007. Consumer Price Index - All Urban Consumers; Childcare and 7 Nursery Schools. Bureau of Labor Statis tics, Washington DC (Accessed 5/30/2007). 8 9 U.S. Census Bureau. 2000a. “QT-P34. Poverty Status in 1999 of Individuals.” American Fact Finder. 10 Available at: http://factfinder.census.gov/servle t/QTTable?_bm =y&-geo_id=01000US&- 11 qr_name=DEC_2000_SF3_U_QTP34&-ds _name=DEC_2000_SF3_U&-_lang=en&- 12 _caller=geoselect&-state=qt&-fo rmat= (Downloaded 11/2/2005) 13 14 U.S. Census Bureau. 2000b. “HCT23. Tenure by Poverty Status in 1999 by Year Structure Built.” 15 American Fact Finder. Available at: 16 http://factfinder.census.gov/servlet/DTSubject ShowTablesServlet?_ lang=en&_ts=149707416170 17 (Downloaded 11/9/ 2005) 18 19 U.S. Census Bureau. 2000c. “H11. Tenure by Race of Householder.” American Fact Finder. Available at: 20 http://factfinder.census.gov/servlet/DTSubject ShowTablesServlet?_ lang=en&_ts=149707537374 21 (Downloaded 11/9/ 2005) 22 23 U.S. Census Bureau. 2000d. Establishment and Firm Size (Including Legal Form and Organization). 24 1997 Economic Census: Subject Series for Re al Estate and Rental and Leasing. Subject Series. 25 EC97F53S-SZ. Available at: http://www.census.gov/prod/ec97/97f53-sz.pdf 26 27 U.S. Census Bureau. 2000e. “QT-P19. School Enrollment.” American Fact Finder. Available at: 28 http://factfinder.census.gov/servle t/QTTable?_bm=y&-geo_id=01000US&- 29 qr_name=DEC_2000_SF3_U_QTP19&-ds _name=DEC_2000_SF3_U&-_lang=en&- 30 redoLog=false&-_sse=on (Downloaded 11/4/05) 31 32 U.S. Census Bureau. 2000f. “P37. Group Quarters Population by Group Quarters Type.” American Fact 33 Finder. Available at: http://factfinder.census. gov/servlet/DTTable?_bm=y&-geo_id=01000US&- 34 ds_name=DE (Downl oaded 10/20/2005). 35 36 U.S. Census Bureau. 2001. “Poverty Thresholds for 2001 by Size of Family and Number of Related 37 Children Under 1 (Dollars).” Available at: 38 http://www.census.gov/hhes/poverty/threshld /thresh01.htm l. Downloaded 1/23/2007

. 39 40 U.S. Census Bureau. 2004. “Sector 53: Industry Series: Summary Statistics for the US: 2002.” American 41 Fact Finder. Available at: 42 http://factfinder.census.gov/servlet/EconSectorServlet?caller=dataset&s v_name=*&_SectorId=53 43 &ds_name=EC0200A1&_lang=en&_ts=1417 36463723 (Downloaded 8/3/2005) 44 45 U.S. Census Bureau. 2005a. “Sector 23: Construc tion: Industry Series: Selected Statistics for 46 Establishments by Value of Business Done: 2002.” American Fact Finder . Available at: 47EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-53 http://factfinder.census.gov/servlet/IBQTa ble?_bm=y&-geo_id=&-ds_name=EC0223I06&- 1 _lang=en (Downloaded 11/13/2006). 2 3 U.S. Census Bureau. 2005b. “Sector 23: Industry Series: Selected Statistics for Establishments by Value 4 of Business Done: 2002.” American Fact Finder. Available at: 5 http://factfinder.census.gov/servlet/EconSectorServlet?caller=dataset&s v_name=*&_SectorId=23 6 &ds_name=EC0200A1&_lang=en&_ts=1417 35361508 (Downloaded 6/30/2005) 7 8 U.S. Census Bureau. 2005c. “Sector 62: Health Care and Social Assistance: Subject Series – Estab and 9 Firm Size: Employment Size of Establishments for the United States: 2002.” American Fact 10 Finder. Available at: http://factfinder.census.gov/servlet/IBQTable?_bm=y&-geo_id=&- 11 ds_name=EC0262SSSZ2&-_lang=en (Downloaded 11/14/2006). 12 13 U.S. Census Bureau. 2005d. 2002 Economic Cens us: Industry Series: Residential Remodelers EC02- 14 23I-236118 (RV). Available at: http://www. census.gov/prod/ec02/ec 0223i236118.pdf (Accessed 15 8/3/2005). 16 17 U.S. Census Bureau. 2005e. 2002 Economic Cens us: Construction: By Industry. Available at: 18 http://www.census.gov/econ/census02/data/us/US000_23.HTM (Accessed 8/3/2005). 19 20 U.S. Census Bureau. 2005f. “Sector 53: Real Estate and Rental and Leasing: Subject Series - Estab & 21 Firm Size: Revenue Size of Firms for the United States: 2002.” American Fact Finder. Available 22
at: http://factfinder.census.gov/servlet/IBQTabl e?_bm=y &-geo_id=&-fds_name=EC0200A1&- 23 _skip=100&-ds_name=E C0253SSSZ4&-_lang=en . (Downloaded 12/19/2006). 24 25 U.S. Census Bureau. 2005g. “Sector 23: Industry Seri es: Detailed Statistics for Establishments: 2002.” 26 American Fact Finder. Available at: 27 http://factfinder.census.gov/servlet/EconSectorServlet?caller=dataset&s v_name=*&_SectorId=23 28 &ds_name=EC0200A1&_lang=en&_ts=1417 35361508 (Downloaded 6/30/2005) 29 30 U.S. Census Bureau. 2005h. “Sector 23: Construc tion: Industry Series: Selected Statistics for 31 Establishments by Specialization in Types of Construction: 2002.” American Fact Finder. 32 Available at: 33 http://factfinder.census.gov/servlet/EconSectorServlet?caller=dataset&s v_name=*&_SectorId=23 34 &ds_name=EC0200A1&_lang=en&_ts=1417 35361508 (Downloaded 6/30/2005) 35 36 U.S. Department of Energy (DOE). 2003. Commercia l Buildings Energy Consumption Survey (CBECS). 37 38 U.S. Department of Health and Human Services. 2003. “The Economic Impact of the Child Care Industry 39 in Maine.” http://www.propeople.org/ExecSum2a.pdf . 12/28/2006. 40 41 U.S. Department of Housing and Urban Development (HUD). 2003. Firs t National Environmental Health 42 Survey of Child Care Centers. 43 44 U.S. EPA. 2006. Final Guidance for EPA Rulewriters: Regulat ory Flexibility Act as amended by the 45 Small Business Regulatory Enforcement Fairness Act. November 2006. 46 47EO 12866 Review Draft: Economic Analysis for the LRRP Opt-Out and Recordkeeping Final Rule

February 19, 2010 *** Deliberative – Do Not Cite, Quote or Release During the Review *** 6-54 U.S. EPA. 2007. Second Proposed Rule Related Addendum to Existing EPA ICR Entitled: TSCA § 1 402/404 Training and Certification, Accreditation, and Standards for Lead- Based Paint Activities 2 EPA ICR No. 1715.08; OMB 2070-0155. 3 4 U.S. EPA. 2008. Economic Analysis for the TSCA Lead Renovation, Repair, and Painting Program Final 5 Rule for Target Housing and Child-Occupied Facilities

. 6 7 U.S. General Accounting Office (GAO). 2004. “IRS Ca n Better Pursue Noncompliant Sole Proprietors.” 8 August 1994. GAO/GGD-94-175. Available at: http://archive.gao.gov/t2pbat2/152467.pdf. 9 (Downloaded 10/13/2009). 10 11 U.S. Government Accountability Office (GAO). 2007. “A Strategy for Reducing the Gap Should Include 12 Options for Addressing Sole Proprietor Noncompliance” July 2007. GAO-07-1014. Available 13 at: http://www.gao.gov/new.items/ d071014.pdf. (Downloa ded 10/13/2009). 14 15 U.S. Small Business Administration. 2005. “Non-Employer Statistics.” Firm Size Data . Available at: 16 http://www.sba.gov/advo/research/data.html. (Downloaded 8/3/2005). 17 18 U.S. Small B usiness Administration. 2008. “Table of Small Business Size Standards matched to North 19 American Industry Classification System.” Downloaded July 29, 2009. Available at: 20 http://www.sba.gov/idc/groups/public/documen ts/sba_homepage/serv_sstd_tablepdf.pdf 21 22 University of Connecticut. Connecticut Center for Economic Analysis. 2004. “T he Economic Impact and 23 Profile of Connecticut’s ECE Industry.” http://ccea.uconn.edu . Downloaded 12/28/2006. 24 25 University of South Dakota. 2004. “The Economic Imp act of the Child Care Industry in South Dakota.” 26 http://www.sdvoicesforchildren.org/CCMOview.pdf . Downloaded 12/29/2006. 27 28 Voices for Virginia’s Children. 2004. “Economic Im pact of the Child Care Industry in Virginia.” 29 http://www.vakids.org/pubs/economic_impact.pdf . Downloaded 12/28/2006. 30 31