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Appendix D: Socioeconomic Analysis October 21, 2010 

APPENDIX D 

SOCIOECONOMIC IMPACT ANALYSIS FOR 

REVISED PROPOSED AMENDMENTS TO RULE 4570 

(CONFINED ANIMAL FACILITIES) 

October 21, 2010 

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Appendix D: Socioeconomic Analysis October 21, 2010 

Due to revisions from the June 17, 2010 proposed rule, the cost of compliance has 

been reevaluated as described in Appendix C of this Staff Report. The revised costs for 

compliance in 2012 are shown in Table 1A below. 

Table 1A – Revised Costs 

CAF Type Annual Cost ($/yr) 

Large Dairy CAF $29,843,565 

Medium Dairy CAF $31,468,645 

Total for all Dairy CAFs $61,312,210 

Poultry CAF $274,000 

Total Annual Costs $61,586,210 

Since the revised costs are similar to those which were calculated in the report posted 

on September 21, 2010, the revised impact to industry has been calculated and 

reflected in the attached Socioeconomic Impact Analysis by Applied Development 

Economics.

 D-3 Final Staff Report with Appendices For 

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SOCIOECONOMIC IMPACT ANALYSIS PROPOSED 

AMENDMENTS TO RULE 4570 (CONFINED 

ANIMAL FACILITIES) 

FINAL DRAFT 

OCTOBER 1, 2010 

 

Prepared for 

San Joaquin Valley Air Pollution Control District 

Prepared by 

Applied Development Economics 

100 Pringle Avenue, Suite 560  Walnut Creek, California 94596  (925) 934-8712 

2150 River Plaza Drive, Suite 168  Sacramento, CA 95833  (916) 923-1562 

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

Appendix D: Socioeconomic Analysis October 21, 2010 

TABLE OF CONTENTS 

Executive Summary................................................................................................................................7

1. Introduction........................................................................................................................................9

2. Description of Proposed Amendments to Rule 4570 (Confined Animal Facilities)................11

3. Methodology.......................................................................................................................................13

4. Impacted Industries Subject to Proposed Amendments to Rule 4570 (Confined 

Animal Facilities)................................................................................................................................15

4.1 Regional Demographic and Economic Trends................................................................15

4.2 Description of Affected Industries....................................................................................19

5. Socioeconomic Impact Analysis of Proposed Amendments to Rule 4570 

(Confined Animal Facilities).............................................................................................................23

5.1 Annual Compliance Cost Estimates..................................................................................23

5.2 Business reponses to Compliance Costs...........................................................................23

5.3 Impacts on Affected Industries..........................................................................................24

Appendix 1.Approaches To Estimating Net Profits.........................................................................28

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Appendix D: Socioeconomic Analysis October 21, 2010 

EXECUTIVE SUMMARY 

The San Joaquin Valley Pollution Control District (“District”) is considering amending Rule 

4570 (Confined Animal Facilities) against a backdrop of steep economic decline particularly 

for the dairy industry. Latest available data in the San Joaquin valley region show a 

precipitous decline in dairy employment between third quarter 2008 and third quarter 2009. 

Dairy employment dropped from 15,212 to 14,534 jobs, a loss of 678 jobs that represents an 

annual decline of 4.5 percent. Over the same period, poultry dropped by 0.1 percent, 

whereas cattle increased by 0.5 percent. 

The value of dairy production in the San Joaquin Valley region on a per unit basis decreased 

annually from $16.78 per hundredweight to $16.60 per hundredweight, for an annual decline 

of 0.3 percent. This downward trend accelerated even more in 2008 and through 2009. 

Although official data on aggregate value is not yet available, the California Department of 

Food and Agriculture reports that the annual average for 2009 price in hundredweight was 

32 percent below the 2008 average, or $11.29 for the San Joaquin Valley region. Thus, 

aggregate value in 2009 is an estimated $3,704,700,000, which amounts to a reduction in $2.1 

billion in value between 2008 and 2009. 

The socioeconomic impact analysis concludes by saying that, while poultry is not 

significantly impacted by the proposed amendments, a portion of the dairy industry is 

affected significantly. For dairies with 500 to 999 milk cows, total annual costs stemming 

from the proposed amendments to Rule 4570 represent 88.9 percent of affected sources 

aggregate net profits, or $31,468,645 in aggregate annual compliance costs versus 

$35,400,605 in aggregate annual net profits. Dairies with over 1,000 cows are also 

significantly affected by the proposed amendments to Rule 4507. As the report shows, 

annual costs stemming from the new measure amount to 20.9 percent of net profits. The 

report also shows that affected establishments in the poultry category are not significantly 

impacted by the proposed amendments. 

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Appendix D: Socioeconomic Analysis October 21, 2010 

1. INTRODUCTION 

This socioeconomic report describes the socioeconomic impacts of the proposed 

amendments to Rule 4570 (Confined Animal Facilities). Following this introduction, the 

socioeconomic report summarizes the proposed amendments (Section 2) and describes the 

methodology for the socioeconomic analysis (Section 3). In Section 4, the socioeconomic 

report describes the economic characteristics of specific industries affected by the proposed 

amendments to Rule 4570. The sixth section analyzes the socioeconomic impacts of 

compliance costs on the affected sources and the regional economy. Figure 1 below 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 

MAP OF SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

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2. DESCRIPTION OF PROPOSED AMENDMENTS TO 

RULE 4570 (CONFINED ANIMAL FACILITIES) 

Confined animal facilities (CAF) are used in the raising of livestock for the purpose of 

providing dairy products, meat, and eggs. Due to the different methods of confinement and 

associated manure management, there is no typical CAF. The design and operation of a CAF 

varies depending on animal type, regional climatic conditions, business practices, and 

preferences of the operators. 

Rule 4570 limits VOC emissions from large CAFs through management practices. This rule 

covers each aspect of CAF operations – from food to housing to manure management to 

land application. Operators must choose a certain number of management practices from a 

limited menu of control measures for each operation.1 When Rule 4570 was adopted in 

2006, the limited research available at the time pointed to solid/liquid manure handling as 

being the highest largest source of VOC emissions at a dairy. District staff has recently 

reviewed available dairy emission studies. In contrast to earlier research, the current 

information indicates that silage piles and placing feed in the feed bunkers are a larger 

portion of the total dairy emissions than solid/liquid manure handling. The District is in the 

process of finalizing a revised dairy emission factor to reflect the new information.2 

In addition to dairies, the proposed amendments to Rule 4570 will affect beef feedlots, other 

cattle facilities, poultry facilities, and swine facilities. For purposes of the socioeconomic 

analysis, the District has determined that dairies and poultry facilities will be affected 

significantly enough to warrant a socioeconomic impact analysis. For more detail on the 

proposed amendments to Rule 4570, see the District staff report. 

 

1The current rule can be accessed on-line at http://www.valleyair.org/rules/currntrules/r4570.pdf 2 The draft emission factor and supporting staff report are available on the District’s website 

www.valleyair.org./workshops/public_workshops_idx.htm

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3. 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 Rule 4570. 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 2007 Agricultural Census and the State of California’s Agricultural Commissioners’ 

Annual Reports. In addition, the report relies on data from Employment Development 

Department (EDD) Labor Market Information Division, as well as publications from the 

California Department of Food and Agriculture. For purposes of estimating profits, ADE 

reviewed industry-specific financial ratios issued by the Dun and Bradstreet and RMA. 

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

affected by the proposed amendments to Rule 4570. 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. With respect to calculating 

revenues and net profits specifically for purposes of comparing profits against costs, the 

socioeconomic impact analysis focuses only on revenues and net profits generated by entities 

affected by the proposed amendments, not revenues and net profits generated by all 

establishments in affected industries. 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 stemming from the proposed amendments 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 the recommendations for specific crop 

categories, 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 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 

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Appendix D: Socioeconomic Analysis October 21, 2010 

impacts. When analyzing the degree to which its rules are significant or insignificant, ARB 

employs a threshold of significance that ADE follows. For more information, see Appendix 

1. 

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Appendix D: Socioeconomic Analysis October 21, 2010 

4. IMPACTED INDUSTRIES SUBJECT TO PROPOSED 

AMENDMENTS TO RULE 4570 

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 2000 and 

2008. Starting with sub-section 5.2, the second part of this section narrows the focus of the 

socioeconomic analysis to industries affected by the proposed amendments. The second part 

of this section describes the economic characteristics of potentially impacted industries that 

might be subject to proposed amendments to Rule 4570. 

4.1 REGIONAL DEMOGRAPHIC AND ECONOMIC TRENDS 

REGIONAL DEMOGRAPHIC TRENDS

The eight-county San Joaquin Valley region’s population increased by 19.7 percent between 

2000 and 2008, or approximately 2.3 percent annually, from 3.3 million in 2000 to 3.6 

million in 2008. In the last four years, the region grew at a slower rate of 1.6 percent per year 

between 2004 and 2008. While the State of California’s population increased by 12 percent 

(or approximately 1.5 percent annually) between 2000 and 2008, all the counties in the region 

experienced faster rates of growth than California over the same period, as Table 1 shows. 

While, by many standards, Madera County continues to be a small county– at 150,887 

residents according to the Department of Finance–it still experienced an annual growth rate 

of 2.6 percent between 2000 and 2008. Between 2004 and 2008, this county continued to 

grow annually but at a slightly lesser rate of 1.8 percent. In the same four-year 2004-2008 

period, Kern, Merced, and San Joaquin Counties experienced rapid growth, growing annually 

by2.1 percent, 1.6 percent, and 1.3 percent respectively, as Table 1 below shows. As 

demonstrated in the following section on regional economic trends, the demographic 

changes that occurred in the San Joaquin Valley region during the 1990s and into the new 

century significantly influenced the economy of this eight-county region. 

TABLE 1 

SAN JOAQUIN VALLEY REGION POPULATION TRENDS, 2000-2008 

2000 2004 2008 00-04 04-08 00-08 

State 33,873,086 36,676,931 38,049,462 2.0% 0.9% 1.5% 

Region 3,302,800 3,718,660 3,956,003 3.0% 1.6% 2.3% 

Fresno 799,407 881,324 931,098 2.5% 1.4% 1.9% 

Kern 661,653 753,698 817,517 3.3% 2.1% 2.7% 

Kings 129,461 145,426 154,434 2.9% 1.5% 2.2% 

Madera 123,109 140,297 150,887 3.3% 1.8% 2.6% 

Merced 210,554 239,659 255,250 3.3% 1.6% 2.4% 

San Joaquin 563,598 652,248 685,660 3.7% 1.3% 2.5% 

Stanislaus 446,997 503,157 525,903 3.0% 1.1% 2.1% 

Tulare 368,021 402,851 435,254 2.3% 2.0% 2.1% 

Source: ADE, Inc., based on California Department of Finance 

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Appendix D: Socioeconomic Analysis October 21, 2010 

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, mineralsresource 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 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. Slightly less 

than 14 percent of all workers in the region are employed by industries within agriculture, as 

Table 2 shows. In 2000, approximately 17 percent of all workers worked in agriculture. In 

other words, in relative terms, agriculture as a share of total employment dropped between 

2000 and 2008, pointing to a trend in diversification of the region’s economy. To be sure, 

agriculture is still the sector with the most workers, at 178,522 in 2008, and many jobs in 

other industries such as manufacturing, wholesale, and warehouse transportation depend on 

agriculture. Underscoring the importance of this sector, agricultural employment grew in 

absolute terms between 2004 and 2008, from 169,556 to 178,522, an annual rate of growth 

of 1.3 percent between 2004 and 2008. 

Between 2004 and 2008, 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. Service-rendering industries comprise 67 

percent of all jobs, including public sector positions. In other words, 887,415 jobs out of a 

total of 1,317,365 jobs are in service-rendering industries. Excluding the public sector, 

service-rendering jobs account for 49 percent of all jobs in 2006. In 2000, service-rendering 

industries (excluding the public sector) represented 46 percent of all jobs, indicating that the 

transition toward a services economy has been accelerating since the year 2000. 

Employment increases in service-rendering industries are consistent with regional population 

growth. In the region, local support industries of public/private education and health 

services increased annually by 2.3 percent and 3.4 percent between 2004 and 2008. 

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Construction and financial services are two other local support industries that grew in 

accordance with the region’s population surge; however, with the downturn in the national 

economy, these industries’ rates of growth have lowered dramatically. Employment in 

construction grew by a 1.2 percent per year between 2000 and 2004. Between 2004 and 

2008, construction continued to grow but by a slower rate of 0.9 percent per year. Likewise, 

financial services grew annually by 4.4 percent between 2000 and 2004, but grew annually by 

a lesser rate of 1.2 percent between 2004 and 2008. 

Close examination of Table 2 shows that the region experienced modest growth in 

manufacturing, as employment in this sector grew annually by 1.2 percent between 2004 and 

2008, reversing an annual rate of decline of one percent between 2000 and 2004. What was a 

regional bright spot between 2000 and 2004, transportation and warehousing experienced 

negative 1.1 percent declines between 2004 and 2008, as compared to the 1.7 percent annual 

growth in the previous four-year 2000-2004 period.
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Appendix D: Socioeconomic Analysis 

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TABLE 2 

ECONOMIC TRENDS: SAN JOAQUIN VALLEY, 2000-2008 

2000 2004 2008 

NAICS Estab. Employment Average Pay Estab. Employment Average Pay Estab. Employment Average Pay 

ALL 82,742 1,200,118 $33,712 92,231 1,209,849 $40,577 100,414 1,317,365 $39,543 1Ag, Natural Resources 11 10,339 199,370 18,834 8,646 169,556 $23,354 7,371 178,522 $21,714 Utilities 21 212 8,862 63,494 213 8,340 $81,309 185 10,512 $82,627 Mining 22 133 4,048 69,897 179 5,071 $86,065 169 5,618 $81,296 Construction 23 5,752 58,116 40,459 6,074 69,065 $46,870 6,705 72,312 $44,716 Manufacturing 31-33 2,780 114,746 41,033 2,779 110,002 $48,735 2,662 115,153 $43,352 Wholesale 42 2,745 35,884 47,151 2,722 37,124 $53,053 3,027 45,299 $46,510 Retail 44-45 8,937 127,050 27,375 8,941 132,956 $31,349 8,882 143,910 $25,892 Transport Warehousing 48-49 2,240 36,075 38,483 2,237 38,554 $44,962 1,957 36,514 $40,166 Information 51 633 15,361 46,827 692 14,257 $53,695 625 15,328 $47,417 Finance and Insurance 52 2,795 28,443 48,042 3,046 30,690 $59,530 3,373 32,027 $50,112 Real Estate 53 2,483 14,390 26,408 2,607 15,932 $34,144 2,784 15,897 $32,633 Prof Technical Services 54 4,079 27,757 44,648 4,501 31,812 $52,467 4,839 36,411 $46,773 Mgmt. of Companies 55 326 19,056 54,827 316 13,988 $60,045 288 10,551 $55,323 Admn and Waste Services 56 2,703 51,264 23,704 2,768 48,182 $28,986 2,947 58,761 $27,165 Private Educational Serv. 61 423 7,429 25,553 480 9,298 $29,532 497 10,781 $27,407 Health Services 62 6,015 98,992 38,526 6,526 110,647 $47,867 6,983 126,598 $44,058 Arts, Entertainment, Rec 71 562 11,742 18,413 621 10,244 $20,192 641 11,172 $17,305 Food & Accommodations 72 4,799 74,938 12,969 4,942 78,805 $15,831 5,312 90,404 $14,020 Other Services 81 21,522 41,294 22,356 30,390 47,370 $25,731 35,629 52,505 $21,606 Unclassified 99 85 199 $38,033 1,769 2,534 $26,836 Local Govt. 584 69,870 44,808 437 60,768 $56,307 477 68,469 $51,051 Local Govt., Education 1,228 101,258 41,338 1,487 109,087 $48,304 1,792 118,716 $78,718 State, ALL 1,106 25,712 48,278 1,166 28,463 $56,515 1,078 31,639 $51,222 Federal, ALL 346 28,461 56,290 376 29,439 $66,395 424 27,732 $58,945 Source: ADE, Inc., based on California Employment Development Department, LMID 
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Appendix D: Socioeconomic Analysis October 21, 2010 

4.2 DESCRIPTION OF AFFECTED INDUSTRIES 

Whereas the previous section described the larger economic context within which the 

District is contemplating the impacts of the proposed amendments to Rule 4570, this section 

analyzes trends of industries directly affected by the proposed amendments. The 

amendments affect a narrow set of industries, all of which fall under the broad agricultural 

industry category of “animal production.” 

Table 3 below presents data on select agricultural livestock industries in the San Joaquin 

Valley region. These are dairy cattle and milk production, and poultry and eggs. 

Employment increased by five percent a year in cattle between 2004 and 2008, and by 4.5 

percent a year in dairies over the same period. Poultry declined by over five percent a year 

between 2004 and 2008. 

TABLE 3. SELECT LIVESTOCK TRENDS: SAN JOAQUIN VALLEY, 2000-2008 

  

 2000 2004 2008 

Employment 

Annual Percent 

Change 

 NAICS Estab. Emp. 

Avg. 

Wage Estab. Emp. 

Avg. 

Wage Estab. Emp. 

Avg. 

Wage 00-04 04-08 

Select Livestock 1,181 11,177 $27,362 1,267 14,510 $28,520 1,034 16,578 $29,683 6.7% 3.4% 

 Dairy Cattle and Milk 

Production 11212 1,028 9,539 $27,369 1,140 12,634 $28,550 920 15,087 $29,730 7.3% 4.5% 

 Poultry and Egg Production 1123 153 1,638 $25,930 127 1,876 $26,672 114 1,491 $27,710 3.4% -5.6% 

Source: ADE, Inc., based on California EDD LMID and Agricultural Bulletin 

While the table above indicates positive growth between 2004 and 2008 for dairy, this 

industry in particular has been hard-hit by the economic downturn that began in 2007 and 

accelerated even more in 2008. The table below shows that between first quarter 2008 and 

third quarter 2009, employment in the dairy industry dropped by 246 jobs, whereas 

employment in poultry increased over the same time. More interestingly, on a same quarter 

comparison, dairy employment declined precipitously between third quarter 2008 and third 

quarter 2009, from 15,212 to 14,534 jobs, a loss of 678 jobs that represents an annual decline 

of 4.5 percent. Over the same period, poultry dropped by 0.1 percent. 

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Appendix D: Socioeconomic Analysis October 21, 2010 

TABLE 4. QUARTERLY EMPLOYMENT TRENDS, 2007-

2008 

Dairy Poultry 

2008 Q1 - 2009 Q3 

Quarterly 

% 

Change -0.2% 4.0% 

Change -246 339 

2009 3rd Qtr 14,534 1,424 

2009 2nd Qtr 14,836 1,411 

2009 1st Qtr 14,604 1,377 

2008 4th Qtr 15,118 1,012 

2008 3rd Qtr 15,212 1,425 

2008 2nd Qtr 15,223 1,367 

2008 1st Qtr 14,780 1,085 

Source: ADE, Inc., based on CA EDD LMID 

The table below shows additional trends for industries affected by the proposed confined 

animal facilities measure. In aggregate, the value of dairy production in the San Joaquin 

Valley region increased annually by 4.3 percent between 2000 and 2008, from $4,902,777,600 

to $5,812,241,000. However, on a per unit basis, value actually decreased annually, from 

$16.78 per hundredweight to $16.60 per hundredweight, for an annual decline of 0.3 percent. 

This downward trend accelerated even more in 2008 and through 2009. Although official 

data on aggregate value is not yet available, the California Department of Food and 

Agriculture reports that the annual average for 2009 price in hundredweight was 32 percent 

below the 2008 average, or $11.29 for the San Joaquin Valley region. Thus, aggregate value 

in 2009 is an estimated $3,704,700,000, which represents a $2.1 billion reduction in value 

between 2008 and 2009. 

TABLE 5. TRENDS IN SELECT LIVESTOCK: SAN JOAQUIN VALLEY REGION, 

2000 – 2008 

2000 2004 2008 

Annual 

% Chg 

00-04 

Annual 

% Chg 

04-08 

Dairy Trends 

Value ($2008) $3,373,618,469 $4,902,777,635 $5,812,241,000 9.8% 4.3% 

Production (cwt) 236,129,817 292,249,472 350,151,264 5.5% 4.6% 

Value ($2008) per Cwt $14.29 $16.78 $16.60 4.1% -0.3% 

Chicken Broilers (Value $2008) $309,129,290 $476,469,500 $510,462,000 11.4% 1.7% 

Chicken eggs (Value $2008) $85,037,249 $175,406,244 $278,988,000 19.8% 12.3% 

Source: ADE, Inc., based on California Agricultural Commissioners' Annual Report 

The table above also shows regional poultry trends. Data in the table are only for chickens, 

particularly layers and broilers. Data for chickens are expressed in aggregate terms only. 

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Appendix D: Socioeconomic Analysis October 21, 2010 

While the aggregate value of broiler chickens increased by 11.4 percent annually between 

2000 and 2004, the rate of increase has slowed down dramatically over the 2004-2008 period, 

growing by a more tepid 1.7 percent per year. Overall, chicken broilers represent a 

$510,462,000 industry in the region, while eggs in aggregate are valued at $278,988,000. 

The two tables below profile each affected industry in greater detail. The table immediately 

below shows that there are 1,331 dairies in the San Joaquin Valley region, and in total, these 

dairies retain 2,271,484 cows, of which 1,574,300 are milk cows and the balance support 

stock.3 Milk cow data comes from the California Department of Food and Agriculture’s 

(CDFA) annual “Dairy Statistics” publication. Aggregate value in the table below is based 

on a five-year value per hundredweight average for the dairy industry. On average, the 

region’s dairy industry generates $4,914,390,500 in revenues a year, although it is important 

to note that the estimated amount for 2009 alone ($3,704,700,000) falls below this annual 

average, underscoring the difficulties faced by the industry in the recent downturn in the 

economy. 

TABLE 6. PROFILE: SAN JOAQUIN VALLEY DAIRY INDUSTRY 

Size Categories Dairies 

Milk Cow 

Herd, plus 

support 

stock Value Est. Net Profit 

 1,331 2,271,484 $4,914,390,451 $186,255,398 

< 500 milk cows 423 146,623 $255,449,957 $9,681,553 

500 -999 milk cows 475 472,732 $925,321,184 $35,069,673 

1,000 to 2,499 319 751,076 $1,617,163,503 $61,290,497 

2,500 or more 114 901,053 $2,116,455,807 $80,213,675 

Source: ADE, Inc., based on US Agricultural Census 2007, California Department of Food and Agriculture 

(CDFA) and Dun & Bradstreet and Risk Management Association 

Tables 7 is similar to the table above, but is for poultry. Aggregate value data are based on 

2003-2008 averages from the California Agriculture Commissioners’ Annual reports. 

 

3It is worth noting that Table 3 identifies 920 dairies in the eight-county region. The discrepancy between the 

EDD-based Table 3 and CDFA-based Table 6 is due to the fact that the California Employment Development 

Department (EDD) and the US Bureau of Labor Statistics place a business in only one industrial category, also 

known as the “primary industry” in which a business is engaged. Thus, the CDFA is capturing a number of 

dairies that may also be engaged in other agricultural activities that the EDD/BLS is using for purposes of 

record keeping. The CDFA data is the appropriate data set for purposes of analyzing dairy industry trends. 

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Appendix D: Socioeconomic Analysis October 21, 2010 

TABLE 7. PROFILE: SAN JOAQUIN VALLEY POULTRY INDUSTRY 

Size categories Farms 

Number pf 

Layers & 

Broilers Value Net Profits 

 998 236,326,826 $1,114,287,555 $42,390,309 

< 100,000 chickens 864 1,085,876 $17,484,302 $332,925 

100,000 to 199,999 19 3,326,713 $38,398,086 $823,861 

200,000 to 399,999 16 5,722,128 $83,183,900 $1,685,110 

400,000 to 499,999 11 3,970,147 $13,749,790 $1,017,484 

500,000 to 650,000 14 6,341,214 $22,189,440 $1,642,019 

650,000 or more 35 196,934,663 $783,194,777 $52,392,083 

Source: ADE, Inc., based on US Agricultural Census 2007, California Agricultural Commissioners' Annual Report, and 

Dun & Bradstreet and Risk Management Association 

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Appendix D: Socioeconomic Analysis October 21, 2010 

5. SOCIOECONOMIC IMPACT ANALYSIS OF 

PROPOSED AMENDMENTS TO RULE 4570 

(CONFINED ANIMAL FACILITIES) 

This section of the report compares the economic characteristics of affected industries 

against compliance costs. The first part of this section discusses compliance costs. 

Compliance cost figures come from the District. Section 5.2 discusses general business 

responses to compliance costs. Section 5.3 analyzes the socioeconomic impacts of the 

proposed amendments to Rule 4570. 

5.1 ANNUAL COMPLIANCE COST ESTIMATES 

The table below identifies total annual compliance cost for industries affected by the 

proposed amendments to Rule 4570. Data come from the San Joaquin valley Unified Air 

Pollution Control District. Although the amendments affect “beef cattle feedlots” and 

“swine”, District staff has determined that these industries are not significantly affected and 

thus are not included in the socioeconomic impact analysis. 

TABLE 8. ANNUAL COSTS: SAN 

JOAQUIN VALLEY UNIFIED AIR 

POLLUTION CONTROL 

DISTRICT 

Dairy $61,312,210 

 Medium CAF $31,468,645 

 Large CAF $29,843,565 

Poultry $274,000 

Source: SJVUAPCD 

5.2 BUSINESS REPONSES TO COMPLIANCE COSTS 

Industry stakeholders and dairy operators in particular have expressed concern about their 

ability to afford costs stemming from the proposed amendments to Rule 4570. The 

downturn in the economy has affected the dairy industry in the San Joaquin Valley region. 

Many indicate that, given the nature of regulatory framework governing milk prices, dairy 

operators cannot simply pass costs to retailers and consumers generally. The discussion 

below assumes that businesses significantly impacted by the proposed amendments will 

make up the annual compliance costs with a corresponding reduction in their respective 

workforce, which is consistent with the dairy employment trends data presented above. In 

particular, this section of the report analyzes estimated after tax net profits of affected 

industries against anticipated costs associated with implementation of proposed amendments 

to Rule 4570. 

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Appendix D: Socioeconomic Analysis October 21, 2010 

5.3 IMPACTS ON AFFECTED INDUSTRIES 

The table below shows that affected establishments in “poultry” categories are not 

significantly impacted by the proposed amendments. However, a portion of the dairy 

industry in the region will be significantly impacted. For dairies with 500 to 999 milk cows, 

total annual costs stemming from the proposed amendments to Rule 4570 represent almost 

90 percent of affected sources aggregate net profits, or $31,468,645 in aggregate annual 

compliance costs versus $35,400,605 in estimated aggregate annual net profits. Dairies with 

over 1,000 cows are also significantly affected by the proposed amendments to Rule 4507. 

As the table shows, annual costs stemming from the new measure amount to almost 21 

percent of net profits. 

TABLE 9. SOCIOECONOMIC IMPACT ANALYSIS 

Industry Farm Size Categories Aggregate Revenues Net Profits Costs 

Cost-toNet 

Profits 

Dairies 500 to 999 milk & support cows $934,052,890 $35,400,605 $31,468,645 88.9% 

> 1000 milk & support cows $3,764,135,343 $142,660,730 $29,843,565 20.9% 

Poultry 400,000 to 499,999 $13,749,790 $1,017,484 $76,140 7.5% 

500,000 to 650,000 $22,189,440 $1,642,019 $121,613 7.4% 

 650,000 or more $783,194,777 $52,392,083 $76,247 0.15% 

Source: ADE, Inc. (note: dairies’ revenues include $12.7 million in subsidies [source: Environmental Working Group]) 

The table above also shows that poultry facilities with anywhere between 400,000 and 

650,000 birds are not affected significantly by the rule. In total, there are 18 facilities in the 

region with this many broilers, and in aggregate they will bear $274,000 in annual costs 

(facilities with 400,000 to 499,999 birds will bear $76,100, while those with 500,000 to 

650,000 will bear $121,600). For these facilities, cost-to-net profit ratios are less than 

significant, at approximately seven percent respectively. 

Table 10 below shows the direct and indirect employment impacts stemming from the 

$61,312,210 in annual costs on dairies, where costs are significant. The annual costs 

translate into a direct loss of 330 jobs at dairy facilities impacted by the amendments to the 

rule. The loss of 330 dairy workers amounts to approximately two percent of total number 

of dairy workers in the eight-county region. 

As affected establishments bear $61,312,210 in annual costs, in addition to reducing their 

respective workforce, these establishment reduce purchases from local and regional 

suppliers. This reduction in local purchases is estimated at $23,820,360, resulting in an 

indirect loss of 194 workers. The 330 workers who were directly and the 194 who were 

indirectly affected by the proposed amendments, in turn, reduce their respective spending at 

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Appendix D: Socioeconomic Analysis October 21, 2010 

local retail and services establishments, inducing yet another round of job losses (80). In 

total, the proposed amendments to Rule 4507 result in the loss of 605 full-time jobs in the 

region. 

TABLE 10. DIRECT AND INDIRECT IMPACTS RESULTING FROM 

PROPOSED AMENDMENTS TO RULE 4507 

 

Direct 

Impacts 

Indirect/Induced 

Impacts 

Induced 

Impacts 

Total 

Impacts 

Industry Output $61,312,210 $23,820,360 $9,393,100 $94,525,670  

Employment 330 194 80 605

Source: ADE, Inc. 

In addition to analyzing the employment impacts of the proposed amendments to Rule 

4570, 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 to 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 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. 

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Appendix D: Socioeconomic Analysis October 21, 2010 

DEFINITION OF A SMALL BUSINESS

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 manner4. 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 

On average, dairies with 500 to 999 milk cows generate $1.9 million in revenues a year, 

meaning these businesses are more than likely small businesses. These dairies typically 

employ an estimated 12 workers a year. Thus, the proposed amendments to Rule 4570 

could disproportionately impact small business dairies with 500 to 999 milk cows. Dairies 

with 1,000 to 2,499 milk cows generate $5.1 million and employ, on average, 23 workers per 

facility. These, too, are small businesses. Dairies with more than 2,500 milk cows, on 

average, generate $18.6 million a year and thus are not small businesses.

 

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

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

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Appendix D: Socioeconomic Analysis October 21, 2010 

APPENDIX 1. APPROACHES TO ESTIMATING NET 

PROFITS 

When conducting the socioeconomic impact analysis, we turn to a variety of sources for 

estimating an after-tax net profit rate, which we then apply against revenues generated by 

affected sources and industries, to estimate discrete after-tax net profits. The table below 

includes raw data on sales and equity generated by economic sectors. Sales and equity data 

below come from the US IRS.5 That source also has enough information to calculate 

industry-specific after-tax net profits. Comparing the after-tax net profit amount against sales 

results in a net profit rate, particularly a “return on sales” (“ROS”) rate. Comparing the aftertax net profit amount against industry equity results in a net profit rate expressed as a “return 

on equity” (“ROE”) rate. 

APPENDIX 1 

EXAMPLE OF A BASELINE SOURCE AND DATA FOR ESTIMATING ROE AND ROS RATES: 

US IRS STATEMENT OF INCOME TAX STATS 

US IRS 2006 Sales ('000) Equity ('000) 

After-Tax Net 

Profits ('000) ROS ROE 

Agriculture, forestry, fishing and hunting $127,728,942 $41,888,111 $7,665,137 6.0% 18.3% 

Mining $327,272,187 $301,618,194 $54,567,732 16.7% 18.1% 

Construction $1,582,459,140 $235,900,066 $80,733,939 5.1% 34.2% 

Manufacturing $6,939,924,620 $3,472,835,947 $449,209,101 6.5% 12.9% 

Wholesale trade $3,600,433,365 $792,110,967 $106,408,479 3.0% 13.4% 

Retail trade $3,486,005,061 $535,392,876 $100,322,818 2.9% 18.7% 

Transportation and warehousing $712,406,648 $169,869,060 $30,825,843 4.3% 18.1% 

Information $943,412,447 $1,398,529,600 $103,365,198 11.0% 7.4% 

Finance and insurance $1,893,916,912 $15,425,982,243 $598,760,121 31.6% 3.9% 

Real estate and rental and leasing $286,352,886 $234,491,052 $33,858,823 11.8% 14.4% 

Professional, scientific, and technical services $887,903,283 $241,059,087 $64,714,112 7.3% 26.8% 

Health care and social assistance $37,263,167 $9,292,323 $34,449,132 6.2% 64.5% 

Arts, entertainment, and recreation $558,081,916 $53,450,392 $7,580,583 8.8% 37.0% 

Accommodation and food services $85,789,078 $20,471,164 $23,867,654 5.7% 19.9% 

Other services $416,996,282 $119,639,851 $10,126,632 5.0% 30.8% 

Source: ADE, Inc. , based on US IRS, “SOI Tax Stats” 

When estimating amount of net profits generated by affected sources and industries in the 

region, we prefer to use the ROS method because while the US Census publishes equity data 

for industries at the national level, the Census publishes industry-specific revenue data at all 

levels, including county and region. While it is possible to estimate local and regional equity 

using the IRS’ national equity data, it is important to note that, relative to revenues, there is 

greater variability with respect to equity retained by establishments, even those in the same 

industries, as a number of factors contribute to equity. On the other hand, there is less 

variability when it comes to revenues, as similarly-sized establishments in similar industries in 

the same regions and/or across the nation, more or less, generate the same amount of 

revenues, with respect to firm-wide revenues and revenues on per unit bases (i.e. revenues 

 

5US IRS, SOI Tax Stats (//www.irs.gov/taxstats/article/0,,id=170542,00.html) 

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Appendix D: Socioeconomic Analysis October 21, 2010 

per worker). Thus, analysts can use national or state level revenue data when local and/or 

regional industry-specific revenue data are not available from the US Census. In a 

hypothetical situation, there could be two manufacturing plants in the same industries, both 

employing 20 workers, who, on average generate $200,000 per worker. Thus, each 

hypothetical site generates $4 million. However, one plant leases its site and equipment, 

while the other owns the property on which it operates, as well the equipment, resulting in 

the latter having more equity relative to the former even though each generates similar 

revenues. Thus, while extra caution is warranted when using national-level equity data to 

estimate local and regional industries’ equity, for the most part, such is not the case when 

using national or state revenue data to estimate local and regional revenues, when such data 

is not readily available from the US Census. In the end, the discrete amount of net profits 

generated by an industry or source affected by a rule should be the same whether one 

multiplies a ROS rate against revenues or a ROE rate against equity. 

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