SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact Analysis Report September 20, 2007

D

- 1 Final Staff Report with Appendices for Proposed Amendments and Revised Proposed Amendments

to the Solvent Cleaning Portion of Eleven District Rules 

# APPENDIX D

SOCIOECONOMIC IMPACT ANALYSIS REPORT

SEPTEMBER 20, 2007SAN JOAQUI N VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPENDIX D: Socioeconomic Impact Analysis Report September 20, 2007



## FINAL DRAFT SOCIOECO NOMIC ANALYSIS

PROPOSED AMENDMENTS TO THE ORGANIC

SOLVENT CLEANING SEC TIONS OF VARIOUS

RULES

September 20, 2007

Prepared for

San Joaquin Va lley Unified Air Pollution Control District

1990 E. Gettysburg Avenue

Fresno, CA 93726SAN JOAQUI N VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPENDIX D: Socioeconomic Impact Analysis Report September 20, 2007

Prepared by

Applied Development Economics 2029 University Avenue • Berkeley, California 94704 • (510) 548

- 5912 1029 J Street, Suite 310 • Sacramento, California 958 14 • (916) 441

- 0323
www.adeusa.comSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007



## CONTENTS

1. Executive summary

................................ ................................ ........ 1

2. Introduction

................................ ................................ .................... 2

3. Description of Proposed Amendments

................................ ...... 3

3. Description of Proposed Amendments

................................ ...... 4

4. Methodology

................................ ................................ ................... 6

5. Impacted Industries Subject to Proposed Amendments

.......... 8

5.1 regional demographic and economic trends

....................... 8

Regional Demographic Trends

................................ .............. 8

Regional Economic Trends

................................ .................... 9

5.2 Description of affected indust ries

................................ ...... 11

Profile of Industries Affected by Changes to VOC Content Limits for Printing/Gra phic Arts Cleaning Operations

................................ ................................ ...... 12

Profile of Industries Affected by Removal of the Exemption for Cleaning of Architectural Coating Equipment

................................ ................................ .... 16

6. Socioeconomic Impacts

................................ ............................... 18

6.1 Compliance Cost Estimates

................................ ................ 18

6.2 Business Responses to Compliance Costs

........................ 18

6.3 Impacts on Affected Industries

................................ .......... 19

Socio

- Economic Analysis: Industries Affected by Changes to VOC Content Limits for Printing/Graphic Arts Cleaning Operations

............ 19

Socioeconomic Impact Analysis: Industries Affected by Removal of the Exemption for Cleaning of Architectural Coating Eq uipment

................................ . 20

6.4 IMPACT ON SMALL BUSINESSES

.............................. 20

Definition Of A Small Business

................................ .......... 21

Small Business Disproportionate Impact Analysis: Industries Affected by Changes to VOC Content Limits for Printing/Graphic Arts Cleaning operations

................................ ................................ ...... 22SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Small Business D isproportionate Impact Analysis: Industries Affected by Removal of the Exemption for Cleaning of Architectural Coating Equipment

... 22SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 1 

## 1. EXECUTIVE SUMMARY

The San Joaquin Valley Unified Air Pollution Control District (―District‖) seeks to adopt the proposed amendments to

revise the solvent

- cleaning requirements of various rules to

obtain as much VOC emission reductions as is expeditiously practicable, technologically feasible, and economically reasonable, as determined by the District’s Governing Board.

This report shows that there are 42 businesses that operate 67 facilities that will be affected by the proposed amendme nts, particularly the portion of the amendments having to do with cleaning of ink application equipment. These businesses generate an estimated $805 million in revenues, off of which is generated $4.7 million in net profits. Annual compliance

costs as a proportion of net profits amount to 2.4 percent, which is below the ten percent threshold of significance.

In addition to the 42 businesses, approximately 1,140

businesses in NAICS Codes 325

- 335 may be subject to the amendments, particularly to proposed re moval of the exemption for cleaning of architectural coating equipment. These 1,140 businesses will bear annual compliance costs ranging from $422,490 (low end scenario) to $3.6 million (high end scenario). As a percent of estimated net profits, the

annu al compliance costs amount to less than one percent of net profits in either scenario.

The report also examines whether small businesses are disproportionately impacted by the rule. While businesses in

NAICS 325

- 335 that employ less than five workers warr ant close scrutiny, the report concludes that small businesses are not disproportionately impacted by the proposed

amendments.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 2 

## 2. INTRODUCTION

This report describes the socioeconomic impacts of proposed amendments to revise the organic solvent

- cleani ng requirements of various rules listed below in Table 1, which the San Joaquin Valley Unified Air Pollution Control District (―District‖) seeks to implement to obtain as much VOC emission reductions as is expeditiously practicable, technologically feasibl e, and economically reasonable, as determined by the District’s Governing Board. Following this introduction, the report summarizes the proposed amendments and describes the methodology for the socioeconomic analysis. In Section 5, the report describes the economic characteristics of sources affected by the proposed amendments. The sixth section analyzes the socioeconomic impacts of compliance costs on the affected sources and the regional economy. This report is based on the version of

amendments that were published in April 2007.

The report is prepared pursuant to the provisions of AB2051 (Section 40728.5 of the California Health and Safety Code), which requires an assessment of socioeconomic impacts of proposed air quality rules. The findings in this repo rt can assist District staff in understanding the socioeconomic impacts of the proposed amendments, and can assist staff in preparing a refined version of the rule. A draft report will be presented at a meeting conducted by District staff in early

summer 2 007. Figure 1 is a map of the eight

- county region that comprises the San Joaquin Valley Air Basin. As indicated in the map, Kern County is not completely in the District.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 3 FIGURE 1 San Joaquin Valley Unified Air Pollution Control District (SJVUAPCD) Air Ba sinSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 4 

## 3. DESCRIPTION OF PR OPOSED AMENDMENTS

Through the proposed amendments, the San Joaquin Valley Unified Air Pollution Control District (―District‖) seeks to revise the organic solvent

- cleaning requirements of various existing rules. The organic solvent cleaning portions of the rules incorporate three different types of emission control standards: performance standards, equipment standards, and work practice standards.

Performance Standards The federal Clean Air Act’s definition of ―performance

standards ‖ refers to an allowable emission limit, meaning a limit on quantity of pollutant emitted over a specified period of time or a percent reduction. In all of the rules listed in Table 1 above, the allowable volatile organic compound (―VOC‖) content of the so lvent used for solvent cleaning is specified.

Equipment Standards Equipment standards specify the design, use, and operation of a particular piece of equipment. This standard is used in several rules for detailing add

- on VOC emission control equipment requ irements.

Work Practice Standards Work practices refer to the management plans and procedures that would be undertaken to reduce emissions. Requiring that containers be covered except when adding or removing material from the container is one example of a work practice standard. Each rule in this rule project identifies at least one work practice

standard to limit VOC emissions.

Proposed amendments that are the subject of this socio

economic analysis are based on South Coast Air Quality Management District (SCAQMD) Rule 1171 (Solvent Cleaning Operations). In October 1999, SCAQMD Rule

1171 established a two

- tiered approach to lowering the VOC content limits for all solvent cleaning activities. Tier I was implemented in December 2001. The Tier II VOC limits ha d an original implementation date of July 1, 2005, but was subject to completion of technology assessments toSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 5 determine feasibility of VOC content limits. For all categories except the cleaning of ink application equipment used for lithography/letterpress, screen

- printing, and ultraviolet/electron beam inks (UV/EB), the technology assessment was completed in August 2003. The technology

assessment concluded that the Tier II VOC content limits were feasible for these source categories. For cleaning of ink

app lication equipment used for lithography/letterpress,

screen

- printing, and UV/EB inks, an interim VOC content limit of 500 grams per liter was established. The technology assessment for the remaining source categories was completed in August 2006. SCAQMD st aff recommended that the implementation date for the Tier II limits for the remaining source categories be extended by 18 months

– until January 1, 2008.

Based on SCAQMD’s technology assessment, District staff is proposing similar VOC content limits for so lvents used for solvent cleaning with a similar timeline. Operators would have 12 months to come into compliance with the new VOC content limit. Based on the current rule project schedule, the compliance date would be August 2008 for all of the rules

excep t Rule 4612 (Motor Vehicle and Mobile Equipment Coating Operations

– Phase II). Since Rule 4612 does not become effective until January 1, 2009, District staff is proposing that the solvent cleaning VOC content limits

become effective on the same date. The solvent

- cleaning portions of Rule 4602, the Phase I version of Rule 4612, will remain in place until Rule 4612 becomes effective.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 6 

## 4. METHODOLOGY

The socioeconomic analysis involves the use of information provided directly by affected sources, as well as secondary data used to describe the industries affected by the proposed amendments to the organic solvent cleaning sections of various existing rules. The approach is briefly described

below.

Applied Development Economics (ADE) began the analysis by prepa ring a statistical description of the industry groups of which the affected sources are a part, analyzing data on the number of jobs, sales levels, the typical profit ratios and other economic indicators for each industry.

This report relies heavily on th e most current data available from a variety of sources, such as the 2002 Economic Census, 1997 Economic Census, US Bureau of Labor Statistics County Business Patterns, Minnesota IMPLAN Group, and the State of California’s Employment Development Department (EDD) Labor Market Information Division. For purposes of estimating profits, ADE relied on

Dun and Bradstreet.

With the above information, ADE was able to estimate net after tax profit ratios for sources affected by the proposed

amendments. ADE calculated ratios of profit per dollar of

revenue for affected industries. The result of the socioeconomic analysis shows what proportion of profits the compliance costs represent. Based on assumed thresholds of significance, ADE discusses in the report whether the affected sources are likely to reduce jobs as a means of recouping the cost of rule compliance or as a result of reducing business operations. To the extent that such job losses appear likely, the indirect multiplier effects of the jobs

losses are estimate d using a regional IMPLAN input

- output
model.

When analyzing the socioeconomic impacts of proposed new rules and amendments, ADE works closely within the parameters of accepted methodologies discussed in a 1995 California Air Resources Board report called ―Development of a Methodology to Assess the Economic Impact RequiredSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 7 by SB513/AB969‖ (by Peter Berck, PhD, UC Berkeley Department of Agricultural and Resources Economics,

Contract No. 93

- 314, August, 1995). The author of this report reviewed a methodology to assess the impact that California Environmental Protection Agency proposed regulations would have on the ability of California businesses to compete. The California Air Resources Board (ARB) has incorporated the methodologies described in this report in its own assessment of socioeconomic impacts of rules generated by ARB. One methodology relates to determining a level

above or below which a rule and its associated costs is deemed to have significant impacts. When analyzing the degree to which its rules are significant or insignificant, ARB employs a threshold of significance that ADE follows. Berck reviewed the threshold in his analysis and wrote, ―The Air Resources Board’s (ARB) use of a 10 percent change in [Return on Equity] ROE (i.e. a change in ROE from 10 percent to a ROE of 9 percent) as a threshold for a finding of no significant, adverse impact on either competitiveness or jobs seems reasonable or even conservative.‖SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 8 

## 5. IMPACTED INDUSTRI ES SUBJECT TO PROPOS ED

AMENDMENTS

This section of the soc ioeconomic analysis describes demographic and economic trends in the San Joaquin Valley region. The first part of this section compares the San Joaquin Valley region against California as a whole, and provides a context for understanding demographic and

ec onomic changes that occurred within the San Joaquin Valley region between 1995 and 2005. Starting with sub

section 5.2, the second part of this section narrows the focus of the socioeconomic analysis to industries affected by Draft

New Rule 4565. The secon d part of this section describes the

economic characteristics of potentially impacted industries that might be subject to Rule 4565

.



### 5.1 REGIONAL DEMOGRA PHIC AND

ECONOMIC TRENDS

R EGIONAL 

### D EMOGRAPHIC 

### T RENDS
The San Joaquin Valley region experienced tremendo us population growth during the 1990s. Many came to this area because of affordable housing. As a result, population increased significantly. The eight

- county region’s population increased by 22 percent (or approximately 2.0 percent annually), from 3.0 mil lion in 1995 to 3.7 million in 2005. Population growth continued on its healthy pace, as regional population grew by 2.5 percent annually between 2000 and 2005. While the State of California’s population increased by 15 percent (or approximately 1.5 percen t annually) between 1995 and 2005, all the counties in the region experienced faster rates of growth than California, as Table 1 shows. While, by many standards, Madera County continues to be a small county

– at 140,747 residents according to the Department of Finance

–

it still experienced an annual growth rate of 2.6 percent between 1995 and 2005. Kings County also grew rapidly at 2.4 percent per year. As demonstrated in the following section on regional economic trends, the demographic changes that occurred in the San Joaquin ValleySAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 9 region during the 1990s and into the new century significantly influenced the economy of this eight

- county region.

TABLE 1 Population Growth: San Joaquin Valley Region, 1995

- 2005

1995 2000 2005 Distribution
2005 Annual %

Cha nge 95

- 00 Annual %

Change
00

- 05 Annual %

Change
95

- 05
California 31,617,000 33,871,648 36,728,196 1.4% 1.6% 1.5% SJV Region 3,064,700 3,302,792 3,741,225 1.5% 2.5% 2.0%

Fresno 748,400 799,407 883,650 24% 1.3% 2.0% 1.7%

Kern 615,600 661,645 757,882 20% 1.5% 2.8% 2.1% Kings 114,800 129,461 145,110 4% 2.4% 2.3% 2.4%
Madera 108,800 123,109 140,747 4% 2.5% 2.7% 2.6%
Merced 198,700 210,554 241,464 6% 1.2% 2.8% 2.0% San Joaquin 517,900 563,598 655,319 1 8% 1.7% 3.1% 2.4%
Stanislaus 413,000 446,997 505,352 14% 1.6% 2.5% 2.0%
Tulare 347,500 368,021 411,701 11% 1.2% 2.3% 1.7% Source: Applied Development Economics, based on California Department of Finance



### R EGIONAL 

### E CONOMIC 

### T RENDS

Economic deve lopment practitioners and planners have traditionally divided economies into two broad industrial categories

— the economic base and local support industries. Economic base industries are the drivers of local and regional

economies in that these industries d raw income into a local economy by selling products outside of the local economy, much like the export industries of a national economy. Accrued earnings then circulate throughout the local area in the form of wages and salaries; investments; purchases of fixed assets, goods, and services; and generation of more jobs

and wealth.

The economic base is typically comprised of industries within the manufacturing, minerals

- resource extraction, and agricultural sectors. There are also the ―local support

industrie s‖ such as retail or service sectors, the progress of which is a function of the economic base and demographic changes, and more so the latter than the former. As population increases in a given area, demand for services

– such as realtors, teachers, and hea lthcare

– increases, as does demand for basic retail items like groceries, gas for commuting, or clothing at the local apparel shops.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 10 Agriculture is the economic base of the San Joaquin Valley region by virtue of the amount of goods this sector produces

and exports throughout the nation and the globe. Fourteen percent of all workers in the region are employed by industries within agriculture, as Table 2 shows. However, in 2000 almost 18 percent of all workers worked in agriculture. In fact, over the five

- year period between 2000 and 2005, employment in agriculture declined by 3.4 percent per year, or by almost 16 percent over five years.

Between 2000 and 2005, local support industries gained in prominence within the San Joaquin Valley region. Service

rendering industries employed the most workers as a proportion of total employment in the region. As Table 2 shows, excluding wholesale, retail, and transportation,

service

- rendering industries comprise the largest employment sector in the region, at 582,400 or 52 percent of all jobs. With retail, transportation and wholesale, services accounting for almost 72 percent of all jobs. In 2000, service

- rendering industries represented 49 percent of all jobs, and when including retail, wholesale, and transportation in the mix, 68

percent.

Increases in employment in service

- rendering industries are consistent with regional population growth. In the region, local support industries of construction, education and health, and financial activities increased annually by 5.6 per cent, 3.4 percent, and 2.5 percent respectively between 2000 and 2005.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 11 TABLE 2 Employment Profile Of The San Joaquin Valley Region 2000

– 2005

MAJOR SECTORS San Joaquin Valley Region Employment
2000 San Joaquin Valley Region Employment
2005 San Joaquin

Valley Region Employment Distribution,
2005 Annual

Percent Change
2000 to 2005 California

Employment Distribution,
2005 Annual

Percent Change California
2000 to 2005 Agriculture 190,500 160,357 14%

- 3.4% 3%

- 1.7% Resources, Mining and Construction 38,7 00 50,700 5% 5.6% 6% 4.1% Manufacturing 111,600 108,800 10%

- 0.5% 10%

- 4.1%
Wholesale 35,200 40,500 4% 2.8% 5% 0.9%
Retail 123,200 137,300 12% 2.2% 11% 1.2% Transportation/Warehousing/Utilities 39,800 44,500 4% 2.3% 3%

- 1.2%
Information 15,300 14,800 1%

- 0.7% 3%

- 3.8%
Financial Activities 38,600 43,600 4% 2.5% 6% 3.1%
Professional and Business Services 95,000 98,800 9% 0.8% 15%

- 0.8%
Educational and Health Services 103,800 122,400 11% 3.4% 11% 2.5% Leisure, Hospitality and Other Srvs 81,500 92,900 8% 2.7% 10% 2.0%
Government 195,500 209,900 19% 1.4% 16% 0.8% Total Employment 1,068,700 1,124,557 100% 1.0% 100% 0.3% Source: Applied Development Economics, based on data from California Employment Development Department LMID

The emergence of local support industries in the San Joaquin Valley region mirrors and leads statewide trends, as Table 2 shows. In the region, construction and health

- education increased annually by 5.6 percent and 3.4 percent, whereas, statewide, these industries grew by 4.0 p ercent and 2.5 percent between 2000 and 2005. In short, while agriculture remains the leading edge of the economy, the San Joaquin Valley region’s economy has become more diverse, with the growth occurring within population

- driven local support

industries rather than the export

- focused economic base industries of manufacturing and agriculture.



### 5.2 DESCRIPTION OF AFFEC TED INDUSTRIES
The proposed amendments affect various existing rules’ respective limits VOC content for cleaning solvents. The

discussion belo w is divided into two parts. First, the discussion reviews economic trends for business directly affected by changes to VOC content limits for printing/graphic arts cleaning operations. Then, the

discussion reviews economic trends for industries affected by the removal of the exemption for cleaning of architectural coating equipment.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 12 Profile of Industries Affected by Changes to VOC
Content Limits for Printing/Graphic Arts
Cleaning Operations As Table 3 shows, there are approximately 24 industries

whose re spective businesses are potentially subject to the rule, particularly the amendments that change VOC content limits for printing/graphic arts cleaning operations. Within these 24 industries, there are 652 private and public sector entities that are subject to various rules the cleaning solvent portions of which the District seeks to amend. In particular, these 652 entities are potentially subject to proposed rule changes related to VOC content limits for printing/graphic arts cleaning operations.

TABLE 3 List of Printing Press Operating Industries That Affected

Businesses Are a Part of

NAICS Code Industry Description

322121 Paper Mills (Except Newsprint)

322130 Paperboard Mills

322211 Corrugated and Solid Fiber Box Manufacturing

322213 Setup Paperboa rd Box Manufacturing

322215 Nonfolding Sanitary Food Container Manufacturing

322221 Coated and Laminated Packaging Paper Plastics Film

322222 Coated and Laminated Paper Manufacturing

322224 Uncoated Paper and Multiwall Bag Manufacturing

323110 Commerc ial Lithographic Printing

323111 Commercial Gravure Printing

323112 Commercial Flexographic Printing

323116 Manifold Business Forms Printing

323117 Books Printing

324122 Asphalt Shingle and Coating Materials Manufacturing

332439 Other Metal Container Manufacturing

333293 Printing Machinery and Equipment Manufacturing

333411 Air Purification Equipment Manufacturing

448210 Shoe Stores

511110 Newspaper, Periodical, Book, and Directory Publishers

541430 Graphic Design Services

811118 Other Auto Mech anical \ Electrical Repair Maintenance

922130 Legal Counsel and Prosecution

922140 Correctional Institutions

322121 Paper Mills (Except Newsprint)

322130 Paperboard Mills
Source: Applied Development EconomicsSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 13 Below, Table 4 tracks employment trends o f industries that the 652 businesses and public sector entities are a part of. Tables 4 and 5 are presented to establish the broader economic context in which the proposed amendments are being promulgated. As Table 4 indicates, employment in the region inc reased by 5,842 workers between 2000 and 2005, or by over six percent per year. Over the ten

- year period stretching from 1995 to 2005, regional employment in industries that the 652 establishments are a part of also increased, by almost four percent annual ly. In contrast, employment in similar industries declined by two percent annually at the state level between 2000 and 2005, and by a slight 0.4 percent annually between 1995 and 2005.

TABLE 4 Employment Trends of Printing and Printing

- Related Industrie s That Affected Sources Are a Part Of: San Joaquin Valley Region and California, 1995

- 2005

1995 2000 2005 Change
00

- 05 Annual %

Change
95

- 00 Annual %

Change
00

- 05 Annual %

Change
95

- 05
California 198,467 214,788 191,268

- 23,520 1.6%

- 2.3%

- 0.4% SJV Region 15,244 16,225 22,067 5,842 1.3% 6.3% 3.8% Source: Applied Development Economics, based on California EDD LMID

Table 5 compares regional and statewide trends in greater

detail. The 652 establishments in the District’s databa se are part of a set of industries that, in the eight

- county region, consists of 951 establishments that employ over 22,000 workers at an average annual wage of $42,800. In the state as a whole, there are 11,381 establishments in comparable

industries. In other words, eight percent of all establishments in the industries of interest are located in the eight

- county region. Overall, there are 89,594 establishments in all industries in the eight county region, or seven percent of all

establishments in all indu stries in the state. Thus, relative to the state as a whole, establishments in the industries of interest are concentrated in the region in a fashion similar to the way all businesses in all industries are concentrated in the region when compared to the st ate.

TABLE 5 Profile of Industries That Affected Sources Are a Part of: Regional and State Trends, 2005

------- Affected Industries Only, 2005

------- ----- All Private and Public Industries, 2005

----- Establishments Employment Avg. Ann Wage Establ ishments Employment Avg. Ann Wage
Region 951 22,067 $42,782 89,594 1,124,557 $31,497SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 14 California 11,381 188,145 $46,317 1,221,897 14,650,300 $46,211 Region as percent of California 8% 12% 92% 7% 8% 68% Source: Applied Development Economics, based on C alifornia EDD LMID

Table 5 also shows that the annual average wage in the region in the industries of interest is 92 percent of the average wage paid in the state as a whole for similar industries, or $46,782 versus $46,317. By comparison, regional wages in all industries ob average lag significantly behind statewide average wages for all industries, or $31,497 versus $46,211.

The discussion above described the economic context under which the proposed amendments are being promulgated.

Tables 4 and 5 sh owed that industries potentially subject to the proposed amendments are growing and pay wages that are comparable to statewide wages. Below, this report profiles establishments that are directly affected by the proposed amendments. While there are 652 bus inesses and public sector establishments in the industries of interest, not all of these establishments are affected by the proposed amendments. Many do not use cleaning solvents, although they are in the database for other (non

- solvent related)

reasons pe rtaining to various existing rules that the District is now amending.

Table 6 below identifies the number of businesses that are potentially subject to the proposed rule changes, as well as the number of businesses that will be directly affected by the

pro posed amendments. As Table 6 shows, there are three kinds of printing and printing

- related operations: flexographic, lexographic and gravure printing operations.

The table shows that there are 35 individual businesses operating 37 facilities that utiliz e flexographic printers. Of the 35, only three operate facilities are in the District’s emission inventory database. These three businesses operate 24 out of the 37 facilities that utilize flexographic printers. The three businesses and their respective 37 facilities are subject to the proposed amendments.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 15 TABLE 6 Number of Printing Businesses Potentially and Actually Subject To Proposed Amendments To Organic Solvent Cleaning Sections of Various Existing Rules

Type of Pri nters Total Number

of Businesses in District
Database Total Number

of Facilities Operated By Total Number of Businesses Actual Number

of Affected Businesses Subject to Proposed
Amendments Affected

Facilities with Emissions Inventory

Flexography 35 37 3 24
Lithography 38 37 33 37

Public Sector 4 4 4 4

Gravure 2 2 2 2

79 80 42 67

Table 7 below includes information on gross sales and net profits of sources impacted by proposed amendments. Revenues are based on averages generated from the

Economic Census 2002 data for California and counties in the eig ht

- county region, which were then adjusted for inflation between 2002 and 2005. These averages were applied against the number of affected establishments.

Estimated after

- tax net profits are based on ten consecutive years worth of industry

- level net profit data collected by Dun and Bradstreet, ratios for which were then applied against estimated revenues. No profit is estimated for public sector entities; the analysis assumes annual compliance costs will be absorbed by general operating budgets. As it is, t he project annual compliance cost for public sector entities is relatively low, at $289 a year.

TABLE 7 Economic Profile of Establishments Subject To Proposed Amendments To Organic Solvent Cleaning Sections of Various Existing Rules

Type of Printers Affected Businesses Affected F acilities Estimated Revenues Est. Net Profits

Flexography 3 24 $25,631,005 $834,694

Lithography 33 37 $103,202,860 $3,674,199

Public Sector 4 4 $670,268,086 $0

Gravure 2 2 $5,929,274 $210,489

Total 42 67 $805,031,225 $4,719,382 Source: Applied De velopment Economics, based on California EDD LMID, US Economic Census 2002, SJVUAPCD, and Dun and BradstreetSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 16 Profile of Industries Affected by Removal of the
Exemption for Cleaning of Architectural Coating

Equipment In addition to lowering the VOC conten t limit for solvents used to clean printing presses, the draft changes also remove the exemption for cleaning architectural coating application equipment. Whereas proposed rule changes that lower VOC content limits for solvents used to clean printing pres ses affect a discrete number of businesses (i.e. 42 businesses operating 67 facilities) that are already in the database of the District, removing the architectural coatings exemption could affect a wide range of businesses across a number of manufacturing industries. Table 2 in the District’s staff report of April 2007 identified a number of manufacturing industries that could be potentially subject to the amendments. These industries include manufacturers of electrical apparatus components, electric comp onents, medical devices and pharmaceuticals, as well as tool, equipment and machinery

manufacturers. These industries are classified within NAICS codes 325 and 335. Table 7 lists specific manufacturing

industries between NAICS codes 325

- 335.

TABLE 7 List of Manufacturing Industries Potentially Affected By Removal of Architectural Coating Exemption

NAICS Code Industry Description

325 Chemical Manufacturing

326 Plastics and Rubber Manufacturing

327 Nonmetallic Mineral Products Manufacturing

331 Primar y Metal Manufacturing

332 Fabricated metal Products Manufacturing

333 Machinery Manufacturing

334 Computer & Electronic Products Mfg

335 Electrical Equipment & Appliance Components Mfg
Source: Applied Development Economics

Below, Table 8 tracks emp loyment trends of manufacturing

industries in NAICS code 325

- 335. As Table 8 shows, employment in the region decreased by 5,226 workers between 2000 and 2005, or by three percent per year. Over

the ten

- year period stretching from 1995 to 2005, regional

em ployment in NAICS 325

- 335 industries had decreased, by almost three percent annually. In contrast, employment inSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 17 similar industries declined by five percent annually at the state level between 2000 and 2005, and by one percent annually

between 1995 and 200 5.

TABLE 8 Employment Trends of Manufacturing Industries NAICS 325

- 335: San Joaquin Valley Region and California, 1995

- 2005

1995 2000 2005 Change
00

- 05 Annual %

Change
95

- 00 Annual %

Change
00

- 05 Annual %

Change
95

- 05
Califor nia 881,189 991,172 781,823

- 209,349 2%

- 5%

- 1% SJV Region 22,336 34,967 29,741

- 5,226 9%

- 3% 3% Source: Applied Development Economics, based on California EDD LMID

Table 9 shows that there are 1,140 establishments in the region in NAICS codes 325

- 335. These establishments generate an estimated $53.7 billion in revenues, off of which they earn an estimated $3.4 billion in net profits.

TABLE 9 Economic Profile of Other Manufacturing Industries Affected By Removal of Architectural Coatings Exemption

NAICS Industry Codes Potentia lly Affected
Establishments Employment Estimated Revenues Est. Net Profits

325

- 335 1,140 29,741 $53,731,529,573 $3,402,835,017

Source: Applied Development Economics, based on California EDD LMID, US Economic Census 2002, SJVUAPCD, and Dun and Bradstree tSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 18 

## 6. SOCIOECONOMIC IMP ACTS

This section of the report compares the economic characteristics of affected industries against the compliance costs. The first part of this section discusses annual compliance costs. Section 6.2 discusses general business responses to compliance costs. Section 6.3 analyzes the socioeconomic impacts of the proposed amendments to various existing rules, particularly section dealing with organic solvent cleaning.



### 6.1 COMPLIANCE COST ESTIMATES

Table 10 summarizes the estimated annualized costs associated with proposed amendments to various existing

rules. Total a nnual cost of the rule ranges between $422,490 and $3,590,132.

TABLE 10 Total Annual Compliance Cost

Net Annual Cost ($/yr)

Low End High End

Remove exemption for architectural solvent cleaning $307,165 $3,474,807

Printing industry changes $115,325 $115,325 Flexography $3,235 $3,235 Lithography $110,249 $110,249

Gravure $1,841 $1,841
Other solvent cleaning changes $0 $0

Totals $422,490 $3,590,132

Source: San Joaquin Valley Unified Air Pollution Control District



### 6.2 BUSINESS RESPONS ES TO COMPLIANCE

COSTS

Industries impacted by the proposed amendments may respond in a variety of ways when faced with new regulatory costs. These responses may range from simp ly absorbing the costs and accepting a lower rate of return, to shutting down the affected business operation altogether and, where practical, shift from lower

- value to higher

- value product andSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 19 or service. Impacted industries might also seek to pass costs to users of services or purchasers of goods. Affected sources may also seek to renew efforts to increase productivity and reduce costs elsewhere in their operation in order to recoup the regulatory costs and maintain profit levels.



### 6.3 IMPACTS ON AFFECTED INDUSTRIES

This section of the report analyzes estimated after tax net profits of affected industries against anticipated costs associated with implementation of the draft new rule. Similar to the economic profile of businesses and industries that will

be affected by the proposed rule changes, the socioeconomic impact analysis below first analyzes the impacts associated with rule changes that affect printing presses. Then, the report analyzes socioeconomic impacts associated with the

removal of the archit ectural coatings exemption.

Socio

- Economic Analysis: Industries Affected by
Changes to VOC Content Limits for
Printing/Graphic Arts Cleaning Operations There are 42 impacted businesses operating 67 facilities with either lexographic, flexographic or gravu re printing presses. These businesses generate an estimated $805 million in revenues, off of which is earned an estimated $4.7 million in net profits. Excluding public sector entities subject to this rule, there are 38 businesses that generate $134.8 mill ion in

revenues.

As Table 10 shows, the annual cost of the rule is a small percentage of estimated net profits. The three establishments operating flexographic printers will experience an estimated $3,235 in annual costs, which is less than one percent of estimated net profits. Thirty

- three establishments employing lithographic printers will experience $109,960 in aggregate costs, which represents three percent of combined net profits. Overall annual compliance costs at $115,325 represents 2.4 percent of a nnual net profits, which is below

the ten

- percent threshold of significance. All of the cost

- to

net profit ratios in Table 10 are below the 10 percent threshold of significance.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 20 TABLE 10 Socioeconomic Impact Analysis: Annual Cost In Relation to Affect ed Industry Net Profits

Type of Printers Affected

Establishments Affected

Facilities Estimated

Revenues Est. Net Profits Annual Compliance
Cost Compliance

Cost As Percent of Net Profits

Flexography 3 24 $25,631,005 $834,694 $3,235 0.4%

Lithography 33 37 $103,202,860 $3,674,199 $109,960 3.0%

Public Sector 4 4 $670,268,086 $0 $289 0.0%

Gravure 2 2 $5,929,274 $210,489 $1,841 0.9%

Total 42 67 $805,031,225 $4,719,382 $115,325 2.4% Source: Applied Development Economics, based on California EDD LMID, US Economic Census 2002, SJVUAPCD, and
Dun and Bradstreet

Socioeconomic Impact Analysis: Industries
Affected by Removal of the Exemption for
Cleaning of Architectural Coating Equipment Table 11 compares annual compliance costs associated with removing the exemption on architectural cleaning solvents. The annual compliance costs range between $307,165 and $3,474,807. As the table shows, these costs represent between 0.01 percent and 0.10 percent of industry net profits, which is below the significance thres hold.

TABLE 11 Economic P rofile of Other Establishments Subject To Proposed Amendments To Organic Solvent Cleaning Sections of Various Existing Rules: Removal of Architectural Cleaning Solvents Exemption

NAICS Industry Codes Potentially

Affected Establishments Estimated

Revenues Est. Net Profits Annual Compliance
Cost: Low Annual

Compliance Cost: High Compliance

Cost As Percent of Net Profits:
Low Compliance

Cost As Percent of Net Profits: High

325

- 335 1,140 $53,731,529,573 $3,402,835,017 $307,165 $3,474,807 0.01% 0.10%



### 6.4 IMPACT ON SMALL BUSINESSES

In addition to analyzing the employment impacts of the proposed amendments of various existing rules, state legislation requires that the socioeconomic analysis assess whether small businesses are disproportionately affected by air quality rules. This section of the report analyzes impacts toSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 21 small businesses from the vantage point of how the State of California defines small businesses, beginning with a brief summary on how the state government defines small businesses for the p urposes of qualifying certain businesses for various programs. This section concludes with a

discussion as to whether the affected industries include small businesses, and assesses whether those small businesses are disproportionately impacted by the new r ules.



### D EFINITION 

### O F 

### A S MALL 

### B USINESS
For purposes of qualifying small businesses for bid preferences on state contracts and other benefits, the State of California defines small businesses in the following manner 1

. To be eligible for small business certif ication, a business:

Must be independently owned and operated;

Cannot be dominant in its field of operation;

Must have its principal office located in California

Must have its owners (or officers in the case of a corporation) domiciled in California; and

T ogether with its affiliates, be either:

A business with 100 or fewer employees, and an average gross receipts of $10 million or less over the previous tax years, or

A manufacturer with 100 or fewer employees

Due to limitations of the data set, it is diffic ult to ascertain how many of the establishments are small businesses per many of the features identified directly above. It is possible to estimate how many affected establishments employ more than 100 workers, as well as to estimate the average revenues

g enerated by affected establishments of a given size.

Similar to the economic profile of businesses and industries that will be affected by the proposed rule changes, the small business disproportionate impact analysis below first analyzes the impacts as sociated with rule changes that affect printing

1 State of California. Department of General Services. ―California Small Business Certification‖ (http: www.pd.dgs.ca.gov/smbus/sbcert.htm)SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 22 presses. Then, the report analyzes disproportionate impacts associated with the removal of the architectural coatings exemption.

Small Business Disproportionate Impact Analysis:
Industries Affected by Chan ges to VOC Content Limits for Printing/Graphic Arts Cleaning
Operations There are 42 impacted businesses operating 67 facilities with either lexographic, flexographic or gravure printing presses. In analyzing the socioeconomic impacts of the proposed rule changes, the consultants reviewed available data and calculated revenues and net profits on a business

- by

- business basis, concluding that that there are no significant impacts associated with the rule changes. Thus, this section

concludes that small busi nesses are not disproportionately impacted by the proposed rule changes.

Small Business Disproportionate Impact Analysis:
Industries Affected by Removal of the Exemption for Cleaning of Architectural Coating Equipment Since the socioeconomic analysis of i ndustries affected by removal of the exemption for cleaning of architectural coating equipment relied on summary data published by California Employment Development Department, which

was combined with data from the US Economic Census for purposes of estima ting revenues, additional analysis and data

are needed to determine if small businesses are disproportionately impacted by the proposed rule changes.

Table 12 below shows that, of the 1,140 establishments in the

325

- 335 NAICS codes, 1,063 employ less tha n 100 workers. This is based on data for the eight

- county region issued by the US Bureau of Labor Statistics County Business Patterns. On average, these establishments generate $26.8 million a year. From this vantage point, the typical establishment employ ing less than 100 workers is not a small business.

Further examination of the US BLS’ data set leads us to believe that the typical NAICS 325

- 335 establishment employing less than 100 workers actually generates slightly under $10 million, based on the esti mated median revenue. InSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

Applied Development Economics, Inc. 23 particular, establishments employing less than 5 workers may merit further scrutiny as these establishments generate on average $2.9 million in revenues. In other words, these

establishments fall within California’s small business criteria as they employ less than 100 workers and generate less than $10 million in annual sales. The typical establishment employing between 5 and 9 workers (and more) is not a small business per the State of California as it generate on average
$10 milli on.

TABLE 11 Socioeconomic Impact Analysis: Small Business Disproportionate Impact Analysis
Size Categories Establishments Employment Est. Revenues Average Revenues Median Revenues

< 100 workforce 1,063 19,305 $28,489,299,152 $26,795,237 $9,517,538

> 100 workforce 77 17,105 $25,242,230,421 $328,771,222 $147,970,588

Total 1,140 36,410 $53,731,529,573 $47,132,921 $10,204,819 Source: Applied Development Economics, based on US Bureau of Labor Statistics, ―County Business Patterns‖

While attention shou ld be paid to establishments affected by the proposed amendments that employ less than five workers, the report concludes that small businesses are not disproportionately impacted by the proposed amendments.

Small establishments in NAICS 325

- 335 that empl oy less than five workers will experience annual compliance costs in accordance to their size, meaning their share of the total annual compliance costs of either $307,165 and $3,474,807 when adjusted on a per worker basis will amount to less than

ten perce nt of their respective net profit estimates.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

APPPENDIX D: Socioeconomic Impact An alysis Report September 20, 2007

D

- 28 Final Staff Report with Appendices for Proposed Amendments and Revised Proposed Amendments

to the Solvent Cleaning Portion of Eleven District Rules This page intentionally blank.