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D-1

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APPENDIX D

SOCIOECONOMIC IMPACT ANALYSIS FOR

RULE 4565 (BIOSOLIDS, ANIMAL MANURE, AND POULTRY LITTER 

OPERATIONS)

March 30, 2007
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Final Staff Report for Rule 4565

SOCIOECONOMIC ANALYSIS

PROPOSED AMENDMENTS TO RULE 4565:

BIOSOLIDS, ANIMAL MANURE AND 

POULTRY LITTER

30 March 2007

Prepared for

San Joaquin Valley Unified Air Pollution Control District

1990 E. Gettysburg Avenue

Fresno, CA 93726

Prepared by

Applied Development Economics

2029 University Avenue • Berkeley, California 94704 • (510) 548-5912

1029 J Street, Suite 310 • Sacramento, California 95814 • (916) 441-0323

www.adeusa.com
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Socioeconomic Impact Analysis March 30, 2007

Final Staff Report for Rule 4565

CONTENTS

1. Executive Summary........................................................................ 1

2. Introduction .................................................................................... 3

3. Description of Draft New Rule 4565.......................................... 4

4. Methodology ................................................................................... 6

5. Impacted Industries Subject to New Rule 4612 ........................ 8

5.1 Regional Demographic and Economic Trends.................. 8

Regional Demographic Trends........................................ 8

Regional Economic Trends.............................................. 9

5.2 Description of Affected Industries .................................... 11

6. Socioeconomic Impacts............................................................... 17

6.1 Compliance Cost Estimates................................................. 17

6.2 Business Responses to Compliance Costs......................... 18

6.3 Impacts on Affected Industries........................................... 18

6.4 Impacts on Small Businesses............................................... 20

Definition Of A Small Business.................................... 20

FIGURE

FIGURE 1 San Joaquin Valley Unified Air Pollution Control 

District (SJVUAPCD) Air Basin ......................................................3

TABLES 

Table 1: Population Growth: San Joaquin Valley Region, 

1995-2005.............................................................................................9

Table 2: Sectoral Employment Trends: San Joaquin Valley 

Region 2000-2005.............................................................................11

Table 3: List of Industries That Affected Sources Are a Part 

of .........................................................................................................12
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Table 4: Employment Trends of Industries That 29 Directly 

Affected Sources Are a Part of.......................................................13

Table 5: Profile of Industries That 29 Directly Affected 

Sources Are a Part of .......................................................................14

Table 6: Economic Profile of 29 Sources Operating BioSolid, Animal Manure and Poultry Litter Facilities......................15

Table 7: Annual Compliance Cost: Draft New Rule 4565 .........16

Table 8: Socioeconomic Impact Analysis: Annual Cost in 

Relation to Affected Sources’ Net Profits.....................................18

Table 9: Potential Cost Recovery Solution for Four Affected 

Sources ...............................................................................................19
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Final Staff Report for Rule 4565

1. EXECUTIVE SUMMARY

The San Joaquin Valley Unified Air Pollution Control District 

(“District”) seeks to adopt Draft New Rule 4565 (Bio-solids, 

Animal Manure and Poultry Litter) to control volatile organic 

compound (VOC) emissions from facilities that handle biosolids, animal manure or poultry litter.

There are 29 composting establishments in 16 different 

industries in the District’s permits database that would be 

subject to the rule. Of these, eight establishments will be 

directly affected by the new draft rule. These establishments 

handle more than 100,000 wet tons per year of composting 

materials that include bio-solids, animal manure and or 

poultry litter, and, as such, are the largest operators in the San 

Joaquin Valley Air Basin. These establishments employ an 

estimated 1,533 workers and generate over $3 billion in 

revenues, from which $145 million in net profits are 

accumulated. A few of the bio-solid establishments are part 

of larger corporations whose respective revenues comes from 

food manufacturing and crops-livestock production.

Generally speaking, the 16 industries that the 29 affected 

establishments are a part of have been declining in terms of 

employment, and have declined at rates faster than declines 

experienced by similar industries in the state as whole. 

However, there is strong indication that the 29 affected 

establishment are growing. For example, the departmental 

budget of a public sector facility has increased by 14 percent 

per year for the past two years, largely on the strength of fees 

paid by growing number of users. The agency is looking for 

another site because of strong demand.

There are two cost scenarios in this socioeconomic analysis. 

In the “low end” scenario, the eight impacted establishments 

will bear $5.8 million in annual costs. In the “high end” 

scenario, affected sources will bear slightly over $3 million in 

annual costs. While the report notes the “high end impacts”, 

the report concludes that most affected sources won’t 

implement measures associated with this scenario given the 

high construction costs involved. The analysis also 

determines that, at $5.8 million per year, the cost of “low 
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Final Staff Report for Rule 4565

end” scenario is less than significant. In addition, small 

businesses are not disproportionately impacted by Draft New 

Rule 4565.
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Final Staff Report for Rule 4565

2. INTRODUCTION

This report describes the socioeconomic impacts of Draft 

New Rule 4565 (Bio-solids, Animal Manure, and Poultry 

Litter). 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 

Draft New Rule 4565. 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 Draft New Rule 4565 that was published in 

January 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 report can 

assist District staff in understanding the socioeconomic 

impacts of Draft New Rule 4565, 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 on 

February 26, 2007. 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.

FIGURE 1

San Joaquin Valley Unified Air Pollution Control District (SJVUAPCD) Air Basin
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

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Final Staff Report for Rule 4565

3. DESCRIPTION OF DRAFT NEW RULE 4565

Through Draft New Rule 4565, the San Joaquin Valley 

Unified Air Pollution Control District (“District”) seeks to 

control volatile organic compound (VOC) emissions from 

facilities that handle bio-solids, animal manure or poultry 

litter. Bio-solids, animal manure, and poultry litter are 

managed in one of three ways: buried in landfill, applied to 

land to enrich the soil, or composted either alone or with 

other materials to make a soil amendment, which is then 

land-applied. When these are composted with other materials 

like green waste or bedding, this process is called cocomposting. Draft New Rule 4565 would address VOC 

emissions from landfill, land application, composting, and cocomposting facilities. For specific policies, see pages 5 

through 8 of the document called “Draft Staff Report: Draft 

New Rule 4565 (Bio-solids, Animal Manure, and Poultry 

Litter).” Below is a summary of the draft new rule.

Draft New Rule 4565 would require operators who land fill 

or land apply bio-solids, animal manure, or poultry litter to 

adopt management practices to reduce VOC emissions. For 

landfill operations, District staff expects that no compliance

costs will be associated with rule provisions, since bio-solids 

are not currently used as alternative daily cover, the only 

landfill operation affected by rule requirements. Operators 

who land apply bio-solids, animal manure, or poultry litter 

would also have no costs, since implementation of the 

control measures would only require that the operator 

schedule the material to arrive at the facility at an appropriate 

time.

Composting/co-composting facilities would be required to 

implement a certain number of what are called “Class One” 

mitigation measures, with operators at larger facilities 

required to adopt more measures than operators at smaller 

facilities. Large operators with at least 100,000 wet tons per 

year (tpy) throughput would also be required to control 

emissions from active composting, utilizing either an aerated 

static pile or in-vessel composting, in addition to the Class 

One mitigation measures. District staff estimates that the 
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Final Staff Report for Rule 4565

total annualized costs to these eight large facilities range from 

$5.8 million per year to $25 million per year. Based on 595 

tons per year of VOC emission reductions, the cost 

effectiveness for these largest compost facilities ranges from 

about $10,000 to $41,000 per ton VOC reduced.
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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 

provisions of Draft New Rule 4565. The approach is briefly 

described below. 

Applied Development Economics (ADE) began the analysis 

by preparing 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 the 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, United States Internal Revenues Service, 

and CCH, Incorporated.

With the above information, ADE was able to estimate net 

after tax profit ratios for sources affected by the draft rule. 

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 estimated 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 Required 
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Final Staff Report for Rule 4565

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.” 
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5. IMPACTED INDUSTRIES SUBJECT TO NEW 

RULE 4612

This section of the socioeconomic 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 

economic changes that occurred within the San Joaquin 

Valley region between 1995 and 2005. Starting with subsection 5.2, the second part of this section narrows the focus 

of the socioeconomic analysis to industries affected by Draft 

New Rule 4565. The second part of this section describes the 

economic characteristics of potentially impacted industries 

that might be subject to Rule 4565.

5.1 REGIONAL DEMOGRAPHIC AND 

ECONOMIC TRENDS

REGIONAL DEMOGRAPHIC TRENDS

The San Joaquin Valley region experienced tremendous 

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 million 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 percent 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 Valley 
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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 

% Chng 

95-00

Annual 

% Chng 

00-05

Annual 

% Chng 

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 18% 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

REGIONAL ECONOMIC TRENDS

Economic development 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 draw 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 

industries” 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 healthcare–increases, as does 
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demand for basic retail items like groceries, gas for 

commuting, or clothing at the local apparel shops.

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. Servicerendering 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 percent, 3.4 

percent, and 2.5 percent respectively between 2000 and 2005. 
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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 38,700 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 percent 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 AFFECTED INDUSTRIES

Draft New Rule 4656 controls volatile organic compound 

(VOC) emissions from facilities that handle bio-solids, animal 

manure or poultry litter. Bio-solids are sewage sludge that 

has been treated to meet standards for land application under 

Part 503 of the Clean Water Act. Sewage sludge is treated in 

the wastewater process, generally through aerobic or 

anaerobic microbial activity for a specified time at a specified 

temperature. Sewage sludge requires treatment to ensure that 

its release into the environment is protective of human health 

and the environment as required by the Clean Water Act.
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There are approximately 29 establishments in various 

industries in the San Joaquin Valley Air Basin that are 

potentially subject to the rule, as these businesses operate biosolid, animal manure or poultry litter composting facilities. 

Table 3 lists the names of industries that the 29 

establishments are a part of. The twenty-nine are spread 

across 16 industries, of which, 12 are agriculture-related. 

Some are actual providers of composting or co-composting 

services, while others do this as side activities for businesses 

whose main line of work is something else, such as growing 

crops or producing livestock. Given the breadth of 

industries, the socioeconomic analysis aggregates economic

trends and findings.

TABLE 3

List of Industries That Affected Sources 

Are a Part of

SIC Code Industry Description

0119 Cash grains, nec

0161 Vegetables and melons

0173 Tree nuts

0175 Deciduous trees

0191 General Crops

0211 Beef cattle feedlots

0251 Broilers, fryers, roaster chickens

0254 Poultry hatcheries

0711 Soil preparation services

2084 Wineries

2875 Fertilizers, mixing only

4952 Sewerage systems

4953 Refuse systems

5191 Farm supplies

8999 Servcies, nec

9532 Administration, community development planning

Below, Table 4 tracks employment trends of industries that 

the 29 composting businesses are a part of. Tables 4 and 5 

are presented to establish the broader economic context in 

which the draft new rule is being promulgated. As Table 4 

indicates, employment in the region decreased by 8,212 

workers between 2000 and 2005, or by almost two percent 

per year. Over the ten-year period stretching from 1995 to 
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2005, regional employment in industries that the 29 

composting businesses are a part of also decreased by almost 

two percent annually. Employment also declined at the state 

level, although not as precipitously as in the region. 

TABLE 4 

Employment Trends of Industries That 29 Affected Sources Are a Part 

Of: San Joaquin Valley Region, 1995 - 2005

1995 2000 2005

Change 

00-05

Annual 

% Chng 

95-00

Annual 

% Chng 

00-05

Annual 

% Chng 

95-05

California 157,717 159,472 150,113 -7,604 0.2% -1.2% -0.5%

SJV Region 48,462 44,265 40,249 -8,212 -1.8% -1.9% -1.8%

Source: Applied Development Economics, based on California EDD LMID

Table 5 compares regional and statewide trends in greater 

detail. The 29 establishments are part of a set of industries 

that, in the eight-county region, consists of 2,746 

establishments in 16 different industries. The 2,746 

establishments employ 40,249 workers, for an average of 14 

workers per site. In the state as a whole, there are 10,144 

establishments in comparable industries. In other words, 27 

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 industries in the 

state. Thus, relative to the state as a whole, the eight-county 

region has a greater concentration of industries that the 29 

establishments are a part of. 

[This section is blank on purpose]
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TABLE 5 

Profile of Industries That 29 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 Establishments Employment Avg. Ann Wage

Region 2,746 40,249 $27,796 89,594 1,124,557 $31,497 

California 10,144 150,113 $40,920 1,221,897 14,650,300 $46,211 

Region as percent of California 27% 27% 68% 7% 8% 68%

Source: Applied Development Economics, based on California EDD LMID

Table 5 also shows that the annual average wage in the region 

in the industries of interest is 68 percent of the average wage 

paid in the state as a whole for similar industries, or $27,796 

versus $40,920. Both wages lag significantly behind average 

wage for all industries for the state as a whole, or $46,211. 

The discussion above described the economic context under 

which Draft New Rule 4565 is being promulgated. Below, 

this report profiles the 29 entities that would potentially be 

affected by the rule provisions. 

Table 6 below includes information on gross sales and net 

profits of sources impacted by proposed Draft New Rule 

4565. In calculating revenues, the analysis considered the fact 

that some of the composting facilities are side activities of 

corporations whose primary activities and sources of revenue 

was related to wine, beef and or poultry. Other impacted 

sources are commercial composting sites whose respective 

revenues are based on tipping fees for handling bio-solids or 

animal manure and sale of the composted product. For a 

number of these sources, data was available from sources 

such as Dun and Bradstreet, which was checked for accuracy 

against a conservative tipping fee factor of approximately 

$45.00 per ton per year. A comparison of revenue 

information available via Dun and Bradstreet and other 

sources for several businesses directly affected by the 

proposed draft rule yields a tipping fee of approximately $41 

per ton per year. In all likelihood, this amount blends 

revenues from several related activities, not simply bio-solid 

composting. Two businesses indicated via phone interviews 

that they generate approximately $24 per ton in tipping fee 

for bio-solids only. 
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It is also important to note that, of the 29 impacted sources, 

six are public entities, such as disposal sites for bio-solids and 

other materials operated by cities and counties. The analysis 

examined departmental budgets of these six entities in 

determining their respective revenues, looking specifically at 

budget allocations and, if available, fund balance-reserves. 

The analysis does not calculate an “after-tax net profit” for 

the public entities but, for the purposes of conducting the 

socioeconomic analysis, compares annual costs attributable to 

Draft New Rule 4565 against typical budget allocations.

Table 6 shows that, on average, the seven impacted private 

establishments whose respective annual throughput exceeds 

100,000 TPY generate approximately $204.9 million in sales, 

for an overall gross sales of $1.4 billion. Controlling for one 

very large business, the average falls to approximately $25.7 

million, meaning these businesses are middle-size companies. 

The one public entity whose throughput exceeds 100,000 

TPY is Merced County’s “Highway 59 Research and 

Composting Operation” facility, which is an enterprise fund 

administered by Merced County’s Public Works Department. 

This enterprise’s annual budget allocation is approximately 

$10.2 million, on top of which is an annual reserve fund 

balance of $550,000. Table 6 also compiles data for five 

other public entities whose respective composting facilities 

generate less than 100,000 in TPY throughput. The revenues 

for these entities are based on annual departmental budget 

allocations.

TABLE 6 

Economic Profile of 29 Sources Operating Bio-Solid, Animal Manure or 

Poultry Litter Composting Facilities

Sector

Throughput 

Category Establishments Employment

Avg. Annual 

Wage

Gross 

Revenues Net Profits

Total 29 1,533 $32,239 $3,013,335,487 $145,566,759

Private Sector > 100,000 TPY 7 1,143 $31,130 $1,434,759,509 $95,203,838

< 100,000 TPY 16 243 $31,883 $1,463,711,512 $50,362,921

Public Sector > 100,000 TPY 1 108 $42,786 $10,165,000

< 100,000 TPY 5 40 $37,629 $104,699,467

Source: Applied Development Economics, based on California EDD LMID, US Economic Census 2002 and US IRS, CCH, Inc. 

and Dun and Bradstreet
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Final Staff Report for Rule 4565

As Table 6 shows, the seven private sector facilities 

generating more than 100,000 TPY typically generate 

approximately $95.2 billion in net profits off of $1.4 billion in 

gross revenues. The 16 private facilities generating less than 

100,000 TPY generate approximately $50.3 million in net 

profits. No profit amount is estimated for public sector 

agencies, although it is worth noting that the five entities 

generating less than 100,000 TPY maintain unrestricted fund 

balance reserves in the aggregate amount of $11.5 million, or 

10.9 percent of their combined budget allocations. The one 

public sector entity generating more than 100,000 in TPY 

throughput has a fund balance reserve of $550,000.
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Appendix D: Socioeconomic Impact Analysis March 30, 2007

Applied Development Economics 17

Final Staff Report for Rule 4565

6. SOCIOECONOMIC IMPACTS

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 Draft New Rule 4565.

6.1 COMPLIANCE COST ESTIMATES

Table 7 summarizes the estimated annualized costs for large 

composting facilities. Data comes from the San Joaquin 

Valley Unified Air Pollution Control District. As noted in 

Section III of the District’s staff report (Appendix C), the 

costs were taken from published sources. District staff 

assumed a 250 dry tons per day composting facility as the 

model facility. The annualized cost for construction and 

maintenance of an un-aerated windrow composting facility 

was subtracted from the ASP or in-vessel costs, since 

operators would have to build such a facility in the absence of 

the draft rule provisions and the District’s Rule 2201 (New 

and Modified Source Review Rule). Given high construction 

costs and possible impacts to net profits, District staff does 

not believe any of the affected sources will pursue the High 

Cost Scenario. Annual cost per facility ranges are below, with 

Low End at $728,852 and the High End at $3,072,873.

TABLE 7. Annual Compliance Cost: Draft New Rule 4565

Lowest Cost Scenario: ASP & Biofilter Low End Highest Cost Scenario: In-Vessel and RTO High End

Total Capital Cost $7,775,000 Total Capital Cost $21,185,000

Total annualized capital cost (10% - 10 years) $1,265,345 Total annualized capital cost (10% - 10 years) $3,447,761

Total Annual O & M Cost $124,305 Total Annual O & M Cost $285,910

Total Annualized Cost ASP & Biofilter $1,389,650 Total Annualized Cost - In-Vessel & RTO $3,733,671

Windrow Annualized Cost -$660,798 Windrow Annualized Cost -$660,798

Net Low-End Annual Costs ($/yr/facility) $728,852 Net High-End Annual Costs ($/yr/facility) $3,072,873

Source: San Joaquin Valley Unified Air Pollution Control District
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Final Staff Report for Rule 4565

6.2 BUSINESS RESPONSES TO 

COMPLIANCE COSTS

Industries impacted by the draft rule may respond in a variety 

of ways when faced with new regulatory costs. These 

responses may range from simply 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 and 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. While 

there are 29 potentially affected composting facilities in the 

District, Draft New Rule 4565 would affect eight 

establishments whose respective throughput exceeds over 

100,000 TPY. Of the eight, seven are private sector facilities. 

For these seven, the annual cost of the new rule amounts to 

5.4 percent of net profits and 22.6 percent of net profits in 

the Low End and High End scenarios respectively. At 5.4 

percent, Draft New Rule 4565 does not significantly impact 

affected sources in a negative manner, as the impact is below 

the 10 percent significance threshold that is employed for the 

purposes of evaluating impacts. 

Of the eight impacted establishments, one is a public sector 

agency. Table 8 also shows that this entity is not significantly 

impacted with respect to its budget allocation. On average, 

this public entity is allocated annually $10.2 million, and the 

Low End annual cost as a share of this allocation amounts to 

7.2 percent. It is important to note that the analysis does not 

evaluate the 7.2 percent against the 10 percent cost-to-net 

profit threshold. Rather, the analysis evaluates the impact 

against budget allocation trends and future demand. Over 

the past two years, the budget allocation of this agency has 

grown by 12 to 14 percent per year, largely on the strength of 

fees paid by growing number of users of two sites maintained 
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Appendix D: Socioeconomic Impact Analysis March 30, 2007

Applied Development Economics 19

Final Staff Report for Rule 4565

by this agency. In fact, the agency is looking for another site 

as a result of strong demand. 

TABLE 8.

Socioeconomic Impact Analysis: Annual Cost In Relation to Affected 

Industry Net Profits

Sector

Throughput 

Category Establishments Net Profits

Annual Costs 

(Low)

Annual Costs 

(High)

Annual Costs 

as a 

Percentage of 

Net Profits* 

(Low)

Annual Costs 

as a 

Percentage of 

Net Profits* 

(High)

Total 29 $145,566,759 $5,830,818 $24,582,988

Private Sector > 100,000 TPY 7 $95,203,838 $5,101,966 $21,510,114 5.4% 22.6%

< 100,000 TPY 16 $50,362,921

Public Sector > 100,000 TPY 1 $728,852 $3,072,873 7.2% 30.2%

< 100,000 TPY 5

Source: Applied Development Economics, based on SJVAUPCD and Dun and Bradstreet (*note: for public 

sector entity, the annual cost is measured against typical departmental budget allocations)

It is also important to note that some of the impacted sources 

could seek to offset in part or whole annual costs associated 

with the new draft rule by increasing their respective tipping 

fees. Of the eight impacted facilities, four are compost 

service providers who take in raw materials and bio-solids 

and, for this service, are paid a tipping fee. Three are in the 

private sector and one is a public agency.

1

 Typically, bio-solid 

fees are approximately $24. Given other related activities, it is 

not unusual to see revenues of all activities in the range $45 

and $50 per ton per year, and sometimes as high as $70. 

Table 10 summarizes the throughput capacity of and 

aggregate costs attributed to these four service providers, to 

arrive at a $1.96 annual cost per ton per year figure. Thus, 

these affected sources could conceivably recover in part or in 

 

1Major clients for two of the three private sector bio-solid services are local government entities, such as the 

City of Visalia and the Sanitation Districts of Los Angeles respectively. For the affected source serving the 

Visalia, the $728,850 annual cost translates into a monthly solid waste rate increase of $1.70. As it is, Visalia 

has one of the lowest residential refuse monthly rates in the region, at approximately $16.25 per month. Rates 

for Porterville, Fresno, Woodlake, Lindsey, Farmersville, Bakersfield, and Tulare County are approximately 

$17.25, $17.50, $17.75, $17.75, $18.00, $18.75, $20.00, and $22.00 respectively. For the affected source serving 

the Sanitation District of Los Angeles County, the $728,850 annual cost translates into a rate increase of $0.35, 

which could be added on top of the average annual bill of $105, for a net change of 0.3 percent. In short, these 

bio-solid facilities could pass costs onto their respective clients, who, in turn, could pass costs to rate payers 

with little significant impacts.
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Appendix D: Socioeconomic Impact Analysis March 30, 2007

Applied Development Economics 20

Final Staff Report for Rule 4565

full the annual cost associated with this rule by raising all fees 

by $1.96, or by 4.1 percent. A 4.1 percent price increase is 

reasonable as it falls within the typical change in prices for 

bio-solids. According to the Bureau of Labor Statistics, the 

price of “fertilizer materials of organic origin” increases 

typically by 4.5 percent per year.2 

TABLE 9.

Socioeconomic Impact Analysis: Potential Cost Recovery Solution for 

Four Affected Stakeholders

Facilities Throughput Ag Cost Cost/Ton Typical Fee Fee Change

4 1,483,750 $2,915,409 $1.96 $45 - $50 4.1%

Source: Applied Development Economics, based on SJVUPACD

6.4 IMPACT ON SMALL BUSINESSES

In addition to analyzing the employment impacts of Draft 

New Rule 4565, state legislation requires that the 

socioeconomic analysis assess whether small businesses are 

disproportionately affected by air quality rules. While the 

District has organized data by size categories that distinguish 

small facilities from large ones based on the throughput 

capacity factor of 100,000 tons per year, this section of the 

report analyzes impacts to small businesses from the vantage 

point of how the State of California defines small businesses. 

This section begins by briefly summarizing how the state 

government defines small businesses for the purposes 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 rules. 

DEFINITION OF A SMALL BUSINESS

For purposes of qualifying small businesses for bid 

preferences on state contracts and other benefits, the State of 

 

2 United States. Department of Labor. Bureau of Labor Statistics. “Producer Price Index-Commodities. Group: 

chemicals and allied products \ item: fertilizer materials of organic origin” (www.bls.gov)
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Appendix D: Socioeconomic Impact Analysis March 30, 2007

Applied Development Economics 21

Final Staff Report for Rule 4565

California defines small businesses in the following manner3. 

To be eligible for small business certification, 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

 Together 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 difficult to ascertain 

how many of the establishments are small businesses per 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 generated 

by affected establishments of a given size. 

Based on the information provided by the District and 

compiled in Tables 6 and 8, we conclude that the eight 

affected sources are not small businesses, and we base this 

decision largely on the amount of revenue generated by each 

business.

 

3 State of California. Department of General Services. “California Small Business Certification” (http: 

www.pd.dgs.ca.gov/smbus/sbcert.htm)