# APPENDIX D

Socioeconomic Analysis for Amendments to

Rule 4308 (Boilers, Steam Generators, and Process H eaters -

0.075 MMBtu/hr to less than 2.0 MMBtu/hr)

December 17, 2009

### SAN JOAQUIN UNIFIED VALLEY AIR POLLUTION CONTROL DI STRICT

Appendix D: Socioeconomic Analysis for Rule 4308 December 17, 2009

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Appendix D: Socioeconomic Analysis for Rule 4308 December 17, 2009

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### The Socioeconomic Analysis in Appendix D was conduc ted on August 21, 2009 on a previous

version of the rule. The analysis assumes a forced replacement of the majority of units every 15

years, thus showing some levels of significance. A fter that initial analysis, revisions were made to the

cost estimates, showing even greater impact to vari ous different sectors of business such as dry

cleaners and limited service restaurants. There was also the potential for significant financial impac t

to businesses or locations with more than five unit s.

The socioeconomic impact was one of the reasons Dis trict staff decided that the amendments to the

rule should not include a forced replacement schedu le. The cost of compliance with this rule went

from an average of $4,000 - $60,000 per unit to $10 0 - $3,000 per unit. With the point of sale rule

and the proposed amendments for the December 17, 20 09 public hearing, the cost of the rule has

been significantly reduced and the socioeconomic im pacts for the affected groups are no longer

significant.

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# SOCIO-ECONOMIC IMPACT ANALYSIS

PROPOSED AMENDMENTS TO RULE 4308

(BOILERS, PROCESS HEATERS, STEAM GENERATORS:

0.075 MMBTU/HR TO LESS THAN 2.0 MMBTU/HR)



# DRAFT

AUGUST 21, 2009

Prepared for 

### San Joaquin Valley Unified Air Pollution Control Di strict

Prepared by 

### Applied Development Economics

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

2151 River Plaza Drive, Suite 150  Sacramento, CA 95833  (916) 923-1562

www.adeusa.com6 Final Staff Report with Appendices Final Staff Report with Appendices

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# CONTENTS

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

................................................... .........................................7

2. Introduction....................................

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

3. Description of Draft Amendments to Rule 4308 ....

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

4. Methodology.....................................

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

5. Impacted Industries Subject To Proposed Amendmen ts to Rule 4308 .................................... 13

6. Socio-economic Impacts..........................

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# 1. EXECUTIVE SUMMARY

The District seeks to amend Rule 4308 (Boilers, Ste am Generators and Process Heaters 0.075 to

less than 2.0 MMBtu/hr) to satisfy the goals of the District’s 2007 Ozone Plan and 2008 PM2.5

Plan. Currently, Rule 4308 is a point of sale type rule and the source category affected would

include water heater manufacturers, plumbing wholes alers, business and oil supply stores, plumbers

and contractors, and oil businesses. The proposed c hanges would require any commercial owners

or operators to replace their unit(s) that are 15 y ears and older or prove that the unit performs at

the designated standard. For residential units the requirement will remain a point of sale standard,

with no requirement to replace units older than 15 years. District staff seeks to amend Rule 4308 to

implement an emission control measure (S-COM-3) in the District’s 2007 Ozone Plan and 2008

PM 2.5 Plan. The control measure indicates that NOx emission reductions could be achieved by

lowering the NOx emission limit.

The analysis shows that a wide range of private- an d public-sector industries are potentially affected

by the proposed amendments. Many of these industri es grew at rates faster than the regional

economy as a whole over the last five years. The a nalysis concludes that industries are not

significantly impacted by the proposed amendments. Small businesses are not disproportionate

impacted as well.8 Final Staff Report with Appendices Final Staff Report with Appendices

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# 2. INTRODUCTION

This report describes the socioeconomic impacts of Draft Amendments to Rule 4308 (Boilers,

Steam Generators and Process Heaters 0.075 MMBtu/hr to less than 2.0 MMBtu/hr) dated

September 1, 2009, which implements an emission con trol measure in the District’s 2007 Ozone

Plan and 2008 PM2.5 Plan . Following this introduction, the report summariz es the proposed

amendments and describes the methodology for the so cioeconomic analysis. In Section 5, the

report describes the economic characteristics of so urces affected by the proposed amendments.

The sixth section analyzes the socioeconomic impact s of compliance costs on the affected sources

and the regional economy.

The report is prepared pursuant to the provisions o f AB2051 (Section 40728.5 of the California

Health and Safety Code), which requires an assessme nt of socioeconomic impacts of proposed air

quality rules. The findings in this report can assi st District staff in understanding the

socioeconomic impacts of the proposed amendments, a nd can assist staff in preparing a refined

version of the rule. Figure 1 is a map of the eight -county region that comprises the San Joaquin

Valley Air Basin. As indicated in the map, Kern Cou nty is not completely in the District.

FIGURE 1

MAP OF SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CON TROL DISTRICT10 Final Staff Report with Appendices Final Staff Report with Appendices

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# 3. DESCRIPTION OF DRAFT AMENDMENTS TO RULE

4308

This section of the report begins by reviewing the context within which the District seeks to amend

Rule 4308. Then, this section discusses Rules 4308 as currently written, and summarizes proposed

changes to this rule.

The District seeks to amend Rule 4308 (Boilers, Ste am Generators and Process Heaters 0.075

MMBtu/hr to less than 2.0 MMBtu/hr) to satisfy the goals of the District’s 2007 Ozone Plan and

2008 PM2.5 Plan. The draft amendments to Rule 4308 will seek to obtain as much NOx, SOx, and

PM emission reductions from the source category as expeditiously practicable, technologically

feasible, and economically reasonable, as determine d by the District’s Governing Board.



## CURRENT RULE 4308 (BOILERS, STEAM GENERATORS AND PR OCESS

HEATERS 0.075 TO LESS THAN 2.0 MMBTU PER HR) AND PR OPOSED

CHANGES

The District’s Governing Board adopted Rule 4308 (B oilers, Steam Generators, and Process

Heaters – 0.075 MMBtu/hr to less than 2.0 MMBtu/hr) on October, 20, 2005. Rule 4308 currently

is a point of sale type rule and the source categor y affected would include water heater

manufacturers, plumbing wholesalers, business and o il supply stores, plumbers and contractors,

and oil businesses. The proposed changes would requ ire any commercial owners or operators to

replace their unit(s) that are 15 years and older o r prove that the unit performs at the designated

standard. For residential units the requirement wil l remain a point of sale standard, with no

requirement to replace units older than 15 years.

District staff seeks to amend Rule 4308 to implemen t an emission control measure (S-COM-3) in

the District’s 2008 PM 2.5 Plan. The control measur e indicates that NOx emission reductions

could be achieved by lowering the NOx emission limi t.

As guidelines for developing the proposed changes t o Rule 4308, District staff studied rules from

other air districts within and outside of Californi a. Lower NOx limits are already in place in the

following rules; South Coast Air Quality Management District (SCAQMD) Rule 1146.2 (Emissions

of Oxides of Nitrogen from Large Water Heaters and Small Boilers and Process Heaters)

(Amended May 5, 2006) and Bay Area Air Quality (BAA QMD) Regulation 9 Rule 6 (Nitrogen

Oxides Emissions From Natural Gas-Fired Boilers And Water Heaters) (Amended November 7,

2007).12 Final Staff Report with Appendices Final Staff Report with Appendices

For Amendments to Rule 4308 For Amendments to Rule 4308 

# 4. METHODOLOGY

The socioeconomic analysis involves the use of info rmation provided directly by affected sources,

as well as secondary data used to describe the indu stries affected by the proposed amendments to

the Rule 4308. The approach is briefly described be low.

Applied Development Economics (ADE) began the analy sis by preparing a statistical description

of the industry groups of which the affected source s are a part, analyzing data on the number of

jobs, sales levels, the typical profit ratios and o ther 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 and the State of California’s Employment Development Department

(EDD) Labor Market Information Division. For purpos es of estimating profits, ADE reviewed

industry-specific financial ratios issued by the US Internal Revenue Services.

With the above information, ADE was able to estimat e 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 socioeconomi c analysis shows what proportion of profits the

compliance costs represent. Based on assumed thresh olds of significance, ADE discusses in the

report whether the affected sources are likely to r educe 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 t he jobs losses are estimated using a regional

IMPLAN input-output model.

When analyzing the socioeconomic impacts of propose d new rules and amendments, ADE works

closely within the parameters of accepted methodolo gies discussed in a 1995 California Air

Resources Board report called “Development of a Met hodology to Assess the Economic Impact

Required by SB513/AB969” (by Peter Berck, PhD, UC B erkeley Department of Agricultural and

Resources Economics, Contract No. 93-314, August, 1 995). The author of this report reviewed a

methodology to assess the impact that California En vironmental Protection Agency proposed

regulations would have on the ability of California businesses to compete. The California Air

Resources Board (ARB) has incorporated the methodol ogies described in this report in its own

assessment of socioeconomic impacts of rules genera ted 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 w hich its rules are significant or insignificant,

ARB employs a threshold of significance that ADE fo llows. 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.”13 Final Staff Report with Appendices Final Staff Report with Appendices

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# 5. IMPACTED INDUSTRIES SUBJECT TO PROPOSED

AMENDMENTS TO RULE 4308

This section of the socioeconomic analysis describe s demographic and economic trends in the San

Joaquin Valley region. The first part of this secti on compares the San Joaquin Valley region against

California as a whole, and provides a context for u nderstanding demographic and economic

changes that occurred within the San Joaquin Valley region between 1998 and 2008. Starting with

sub-section 5.2, the second part of this section na rrows the focus of the socioeconomic analysis to

industries affected by the proposed changes to Rule 4308. The second part of this section describes

the economic characteristics of potentially impacte d industries that might be subject to these rules.



## 5.1 REGIONAL DEMOGRAPHIC AND ECONOMIC TRENDS

R EGIONAL 

## D EMOGRAPHIC 

## T RENDS



### The San Joaquin Valley region experienced tremendou s 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 24 pe rcent (or approximately 2.2 percent annually),

from 3.2 million in 1998 to 3.9 million in 2007. In the last five years, population growth rate

slightly declined, as regional population grew by 2 .2 percent annually between 2003 and 2008.

While the State of California’s population increase d by 14 percent (or approximately 1.4 percent

annually) between 1998 and 2008, all the counties i n the region experienced faster rates of growth

than California over the period, as Table 1 shows. While, by many standards, Madera County

continues to be a small county– at 150,887 resident s according to the Department of Finance–it

still experienced an annual growth rate of 2.8 perc ent between 1998 and 2008. Between 2003 and

2008, this county continued to grow annually but at a slightly lesser rate of 2.7 percent. In the same

five-year period, Kern, Merced, and San Joaquin Cou nties experienced rapid growth, growing

annually by 2.9 percent, 2.4 percent, and 2.2 perce nt respectively, as Table 1 below shows. As

demonstrated in the following section on regional e conomic trends, the demographic changes that

occurred in the San Joaquin Valley region during th e 1990s and into the new century significantly

influenced the economy of this eight-county region.14 Final Staff Report with Appendices Final Staff Report with Appendices

For Amendments to Rule 4308 For Amendments to Rule 4308 TABLE 1

POPULATION TRENDS

1998 2003 2008 98-03 03-08 98-08

State 33,225,655 35,652,700 38,049,462 1.4% 1.3% 1. 4%

Region 3,192,439 3,540,392 3,956,003 2.1% 2.2% 2.2%

Fresno 781,936 846,485 931,098 1.6% 1.9% 1.8%

Kern 637,227 708,753 817,517 2.2% 2.9% 2.5%

Kings 120,957 137,411 154,434 2.6% 2.4% 2.5%

Madera 114,137 131,821 150,887 2.9% 2.7% 2.8%

Merced 203,181 227,132 255,250 2.3% 2.4% 2.3%

San Joaquin 546,852 616,477 685,660 2.4% 2.2% 2.3 %

Stanislaus 428,272 483,705 525,903 2.5% 1.7% 2.1%

Tulare 359,877 388,608 435,254 1.5% 2.3% 1.9%

Source: ADE, Inc., based on California Department o f Finance



## R EGIONAL 

## E CONOMIC 

## T RENDS



### Economic development practitioners and planners hav e traditionally divided economies into two

broad industrial categories—the economic base and l ocal support industries. Economic base

industries are the drivers of local and regional ec onomies 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 circul ate 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 industr ies within the manufacturing, minerals-resource

extraction, and agricultural sectors. There are als o the “local support industries” such as retail or

service sectors, the progress of which is a functio n 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 health care–increases, as does demand for basic retail

items like groceries, gas for commuting, or clothin g 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 nat ion and the globe. Slightly less than 14 percent

of all workers in the region are employed by indust ries within agriculture, as Table 2 shows. In

1996, approximately 13.1 percent of all workers wor ked in agriculture. By 2003, this ratio stood at

14 percent. In fact, over the five-year period betw een 2003 and 2008, employment in agriculture

increased at a modest pace of one percent per year.

Between 2003 and 2008, local support industries gai ned in prominence within the San Joaquin

Valley region. Service-rendering industries employe d the most workers as a proportion of total

employment in the region. Service-rendering industr ies comprise 71 percent of all jobs, including

public sector positions. In other words, 932,713 jo bs out of a total of 1,317,365 jobs are in servicerendering industries. Excluding the public sector, service-rendering jobs account for 52 percent of

all jobs in 2006. In 2003, service-rendering indust ries (excluding the public sector) represented 51

percent of all jobs, indicating that the transition toward a services economy was in place as early as

the mid to late 1990s with the significant increase in the number of people during that time.15 Final Staff Report with Appendices Final Staff Report with Appendices

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### Employment increases in service-rendering industrie s are consistent with regional population

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

financial activities increased annually by 3.9 perc ent, 3.0 percent, and 2.7 percent respectively

between 2003 and 2008.

Construction and financial services are two other l ocal support industries that grew in accordance

with the region’s population surge; however, with t he downturn in the national economy, these

industries’ rates of growth have lowered dramatical ly. Employment in construction grew by a 6.7

percent per year in the five-year period stretching from 1998 to 2003. Between 2003 and 2008,

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

services, which grew annually by 3.9 percent betwee n 1998 and 2003, and has since grown by a

slight 0.9 percent per year.

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

as employment in this sector grew annually by 0.9 p ercent between 2003 and 2008. This modest

increase reversed substantial declines experienced between 1998 and 2003, when manufacturing

employment dropped annually by 0.6 percent. What w as a regional bright spot between 1998 and

2003, transportation and warehousing experienced ne gative 1.1 percent declines between 2003 and

2008, as compared to the 2.7 percent annual growth in the previous five-year period.16Final Staff Report with Appendicesinal Staff Report with AppendicesFor Amendments to Rule 4308For Amendments to Rule 4308.TABLE 2ECONOMIC TRENDS: SAN JOAQUIN VALLEY, 1998-2008EmploymentDistributionEmployment:Annual PercentChange----------------1998--------------- ----------------2003---------------- ----------------2008--------------- 200898-03 03-08NAICS Estab. EmploymentAveragePay Estab. EmploymentAveragePay Estab. EmploymentAveragePay Region CaliforniaALL80,398 1,060,454 $33,566 92,231 1,209,849 $40,577 100,414 1,317,365 $39,543 100.0%100.0%2.7%1.7%Ag, Natural Resources 11 7,580 139,953 $18,285 8,646 169,556 $23,354 7,371 178,522 $21,714 13.6% 2.5%3.9% 1.0%Utilities 21 251 9,533 $66,831 213 8,340 $81,309 185 10,512 $82,627 0.8% 0.0% -2.6% 4.7%Mining 22 165 4,231 $72,458 179 5,071 $86,065 169 5,618 $81,296 0.4% 0.4% 3.7% 2.1%Construction 23 6,124 49,851 $38,969 6,074 69,065 $46,870 6,705 72,312 $44,716 5.5% 5.7% 6.7% 0.9%Manufacturing 31-33 2,998 113,344 $40,989 2,779 110,002 $48,735 2,662 115,153 $43,352 8.7% 9.3% -0.6%0.9%Wholesale 42 2,749 33,365 $47,726 2,722 37,124 $53,053 3,027 45,299 $46,510 3.4% 4.6% 2.2% 4.1%Retail 44-45 9,586 121,132 $26,446 8,941 132,956 $31,349 8,882 143,910 $25,892 10.9% 10.8% 1.9% 1.6%Transport Warehousing 48-49 2,306 33,821 $38,946 2,237 38,554 $44,962 1,957 36,514 $40,166 2.8% 2.7% 2.7% -1.1%Information 51 653 14,885 $43,401 692 14,257 $53,695 625 15,328 $47,417 1.2% 3.0% -0.9% 1.5%Finance and Insurance 52 2,637 27,792 $46,709 3,04630,690 $59,530 3,373 32,027 $50,112 2.4% 4.0% 2.0%0.9%Real Estate 53 2,575 13,180 $26,755 2,607 15,932 $34,144 2,784 15,897 $32,633 1.2% 1.8% 3.9% 0.0%Prof Technical Services 54 4,064 25,130 $44,216 4,501 31,812 $52,467 4,839 36,411 $46,773 2.8% 6.8% 4.8% 2.7%Management of Companies 55 321 17,997 $52,338 316 13,988 $60,045 288 10,551 $55,323 0.8% 1.3% -4.9% -5.5%Admn and Waste Services 56 2,910 44,283 $22,362 2,768 48,182 $28,986 2,947 58,761 $27,165 4.5% 6.4% 1.7% 4.0%Private Educational Services 61 459 7,107 $25,456 480 9,298 $29,532 497 10,781 $27,407 0.8% 1.7% 5.5%3.0%Health Services 62 6,082 90,304 $38,243 6,526 110,647 $47,867 6,983 126,598 $44,058 9.6% 8.8% 4.1% 2.7%Arts, Entertainment, Rec 71 617 10,386 $16,985 62110,244 $20,192 641 11,172 $17,305 0.8% 1.6% -0.3% 1.7%Food and Accommodations 72 5,050 70,335 $12,860 4,942 78,805 $15,831 5,312 90,404 $14,020 6.9% 8.3% 2.3% 2.8%Other Services 81 20,157 41,069 $21,165 30,390 47,370 $25,731 35,629 52,505 $21,606 4.0% 4.6% 2.9% 2.1%Unclassified 99 85 199 $38,033 1,769 2,534 $26,836 0.2% 0.3%Local Govt. 409 51,325 $45,674 437 60,768 $56,307477 68,469 $51,051 5.2% 5.2% 3.4% 2.4%Local Govt., Education 881 90,200 $39,664 1,487 109,087 $48,304 1,792 118,716 $78,718 9.0% 5.9% 3.9%1.7%State, ALL 1,464 23,639 $46,051 1,166 28,463 $56,515 1,078 31,639 $51,222 2.4% 2.9% 3.8% 2.1%Federal, ALL 360 27,592 $52,749 376 29,439 $66,395424 27,732 $58,945 2.1% 1.6% 1.3% -1.2%Source: ADE, Inc., based on California Employment Development Department, LMID17 Final Staff Report with Appendices Final Staff Report with Appendices

F o r A m e n d m e n t s t o R u l e 4 3 0 8 

## 5.2 DESCRIPTION OF AFFECTED INDUSTRIES

Whereas the previous section described the larger e conomic context within which the District is

contemplating proposed amendments to Rule 4308, thi s section analyzes trends of industries

directly affected by the proposed amendments. This rule affects a broad array of industries in

the private and public sectors. As it is, the Dist rict estimates that there are 17,600 units with a

heat input rating between 0.075 MMBtu/hr to less th an 2.0 MMBtu/hr located in the District.

Businesses use their respective units to run small furnaces and heaters, and these units can heat

process fluids directly or use a heat exchange flui d.

Table 3 below identifies the industries that will b e impacted by proposed amendments to Rule

4308. It is important to note that not all business es in industries listed in the table below will be

impacted by proposed amendments to Rule 4308. Some may already operate units that comply

with the proposed amendments. Table 3 includes the industries below because, for the most

part, their respective businesses require units wit h a heat input rating between 0.075 MMBtu/hr

and 2.0 MMBtu/hr to operate their respective buildi ngs, which they operate in on a stand-alone

basis. Thus, any costs stemming from the proposed amendments will be borne by the business

themselves, and not distributed amongst other tenan ts and lessees.

As demonstrated in the table below, 12 specific pri vate sector industries will be subject to the

proposed amendments, and an even broader array of l ocal, state and federal agencies will be

impacted as well. Altogether, affected industries employ 400,772 workers. Between 2004 and

2008, these public and private sector industries gr ew by 54,406 workers, or by 3.7 percent per

year. Of the 400,772 workers, 163,600 workers are in the private sector, or 41 percent. At 3.7

percent per year, industries potentially impacted b y the proposed amendments have grown at

faster rates than overall industries in the region (1.7 percent annual growth), as indicated in Table

2 above.18Final Staff Report with Appendicesinal Staff Report with AppendicesFor Amendments to Rule 4308For Amendments to Rule 4308TABLE 3. INDUSTRIES SUBJECT TO PROPOSED AMENDMENTS TO RULE 4308: EMPLOYMENT TRENDS: 2004-20082004 2005 2006 2007 20082004-2008Change2004-2008PercentChange04-08 AnnualPercentChangePrivate Food production3111 1,050 1,477 899 1,158 1,911 861 82.0% 16.1%Petroleum refineries32111 647 587 579 626 637 -10 -1.5% -0.4%General Merchandise Stores 4521 20,738 24,644 26,102 25,997 25,636 4,898 23.6% 5.4%Elementary and Secondary Schools 6111 1,977 1,9371,946 2,368 2,590 613 31.0% 7.0%Junior Colleges6112 478 709 771 807 971 493 103.2% 19.4%Universities/College6113 1,950 1,728 1,960 2,171 2,252 302 15.5% 3.7%Hospitals6221 18,903 18,845 35,519 46,211 45,614 26,711 141.3% 24.6%Hotels/Motels7211 1,324 1,880 345 497 495 -829 -62.6% -21.8%Room/Boarding Houses 7213 29,228 30,293 32,166 33,059 32,481 3,253 11.1% 2.7%Limited Service Restaurants 7222 41,235 43,163 45,900 46,355 46,774 5,540 13.4% 3.2%Drycleaning/Laundry Services 8123 2,720 2,563 2,711 2,666 2,644 -76 -2.8% -0.7%Religious Organizations 8131 1,653 1,642 1,690 1,532 1,603 -51 -3.1% -0.8%Federal Agencies/Departments 9,537 9,224 9,031 8,971 9,258 -279 -2.9% -0.7%Military\National Security 10,305 9,196 9,306 9,499 9,674 -631 -6.1% -1.6%Hospitals1,043 1,033 1,026 1,028 1,027 -17 -1.6% -0.4%Postal Service6,287 6,356 6,496 6,414 6,022 -265 -4.2% -1.1%Other Federal1,675 1,608 1,936 1,797 1,825 150 9.0% 2.2%State Agencies/Departments 20,789 17,371 18,147 22,320 23,155 2,366 11.4% 2.7%Correctional Institutions 14,166 13,362 13,085 16,217 15,992 1,827 12.9% 3.1%Hospitals1,993 2,009 1,885 1,926 1,886 -107 -5.4% -1.4%Elementary and Secondary Schools 73 73 73 73 73 00.0% 0.0%Colleges and Universities 3,927 4,052 4,160 4,4024,418 491 12.5% 3.0%Other Agencies/Departments 328 328 328 328 328 00.0% 0.0%Local Agencies/Departments 29,041 28,599 30,620 28,058 26,301 -2,740 -9.4% -2.4%Hospitals10,641 10,847 11,106 11,850 11,926 1,284 12.1% 2.9%Utilities2,856 3,442 3,511 2,863 3,305 449 15.7% 3.7%Elementary and Secondary Schools 102,182 104,744106,225 108,270 109,719 7,537 7.4% 1.8%Junior Colleges7,777 8,077 8,569 9,016 10,370 2,593 33.3% 7.5%Other local agencies 1,843 1,614 1,638 1,106 1,886 43 2.3% 0.6%Private121,902 129,469 150,588 163,447 163,607 41,705 34.2% 7.6%Public224,464 221,934 227,141 234,138 237,165 12,701 5.7% 1.4%Total346,366 351,403 377,728 397,585 400,772 54,406 15.7% 3.7%Source: ADE, Inc., based on US Bureau of Labor Statistics19 F i n a l S t a f f R e p o r t w i t h A p p e n d i c e s

F o r A m e n d m e n t s t o R u l e 4 3 0 8 

### In Table 4 below we profile economic characteristic s of affected industries in greater depth. For

private sector industries, revenue estimates are ba sed on US Economic Census 2002 data for the

eight county region, which was adjusted to 2008 bas ed on 2002 revenue per worker ratios adjusted

for inflation. For federal agencies, revenues are based on federal budget issued by the White

House/US Congress in 2008, as well as US Statistica l Abstract. Revenue estimates for the State of

California are from the California Legislative Anal ysts Office. Revenue estimates for local

governments (except schools, hospitals, and utiliti es) are based ratio of $127,272 per worker. Data

for hospitals are based on Economic Census 2002, wh ereas revenue estimates for utilities are based

on Public Sector Economic Census 2002. School reve nue figures come from the socioeconomic

impact analysis for the school bus rule, adjusted f or inflation. The table below includes net profits

for public sector elementary/secondary schools. In reality, these figures are not net profit but rath er

estimated amount of fund balances/reserves carried by public schools in the region. By state law,

school districts are supposed to carry fund balance s/reserves that amount to at least three percent of

expenditures. While the report analyzes impacts to elementary and secondary schools, as well as

junior colleges and colleges/universities, trade sc hools and technical educational institutions are no t

included. Whereas elementary/secondary, junior col leges, and universities tend to be stand-alone

facilities and campuses, technical and trade school s tend to share buildings with other businesses,

meaning that units costs of control measures contem plated in Rule 4308 are shared with other

businesses.20Final Staff Report with Appendicesinal Staff Report with AppendicesFor Amendments to Rule 4308TABLE 4. ECONOMIC PROFILE: PRIVATE/PUBLIC INDUSTRIES POTENTIALLY SUBJECT TO PROPOSED AMENDMENTS TO RULE 4308: 20082008Establishments EmploymentAverageEmploymentPayrollAverageWageAggregateRevenues (est.)Aggregate NetProfit (est.)Private Food Production 3111 176 1,911 11 64,512,676 33,757 12,280,834,504 532,361,669Petroleum Refineries 32111 6 637 106 82,445,713 129,428 2,631,319,832 168,930,700General Merchandise Stores 4521 167 25,636 153 472,320,463 18,424 5,483,305,220 149,554,525Elementary and Secondary Schools 6111 92 2,590 2875,175,307 29,026 310,789,831 21,054,573Junior Colleges 6112 12 971 81 35,514,624 36,594 116,460,000 7,889,626Universities/College 6113 35 2,252 65 59,907,340 26,605 270,210,732 18,305,527Hospitals6221 94 45,614 488 2,741,369,708 60,099 5,975,863,381Hotels/Motels7211 183 495 3 7,055,121 14,266 558,778,266 26,560,063Room/Boarding Houses 7213 1,787 32,481 18 491,469,996 15,131 4,120,375,954 196,524,532Limited Service Restaurants 7222 2,127 38,969 18 492,948,348 12,650 1,675,454,882 72,044,560Drycleaning/Laundry Services 8123 219 2,644 12 71,066,776 26,879 191,273,685 10,188,791Religious Organizations 8131 170 1,603 9 32,399,788 20,213 74,207,194Federal Agencies/Departments 171 9,258 54 496,682,020 53,649 3,937,895,180Military/National Security 19 9,674 509 723,512,872 74,786 8,629,450,085Hospitals3 1,027 342 42,838,865 41,726 146,981,460Postal Service 196 6,022 31 298,080,495 49,499 599,598,542Other Federal 36 1,825 51 64,986,564 35,603 776,413,484State Agencies/Departments 642 23,155 36 299,697,311 12,943 3,538,375,846Correctional Institutions 451 15,992 35 773,833,752 48,388 2,435,289,935Hospitals55 1,886 34 18,075,813 9,583 270,054,572Elementary and Secondary Schools 2 73 37 3,131,422 42,701 9,077,852 499,601Colleges and Universities 355 4,418 12 187,676,706 42,483 350,505,617Other Agencies/Departments 3 328 109 1,591,4394,859 50,045,971Local Agencies/Departments 243 26,301 108 1,361,180,728 51,753 3,347,446,221Hospitals14 11,926 852 596,699,194 50,035 1,707,323,274Utilities148 3,305 22 180,536,250 54,631 931,005,585Elementary and Secondary Schools 1,780 109,719 624,685,139,915 42,701 13,582,010,590 747,487,545Junior Colleges 24 10,370 432 440,546,085 42,48382,959,075Other local agencies 208 1,886 9 160,206,434 84,956 240,004,545Source: ADE, Inc., based on US Bureau of Labor Statistics, US Economic Census, and US Public Sector Census21 Final Staff Report with Appendices Final Staff Report with Appendices

F o r A m e n d m e n t s t o R u l e 4 3 0 8 

### “This page intentionally left blank”22 F inal Staff Report wi inal Staff Report with Appendices

th Appendices th Appendices

F o r A m e n d m e n t s t o R u l e 4 3 0 8 

# 6. SOCIO-ECONOMIC IMPACTS

This section of the report compares the economic ch aracteristics of affected industries

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

compliance costs. Section 6.2 discusses general bus iness responses to compliance costs.

Section 6.3 analyzes the socioeconomic impacts of t he proposed amendments to Rules 4308.



## 6.1 COMPLIANCE COST ESTIMATES

Table 5 summarizes the estimated annualized costs a ssociated with proposed amendments to

Rule 4308. The table includes cost estimates issue d by the District. The annual cost of units

with a heat input rating between 0.075 MMBtu/hr and 0.40 MMBtu/hr is estimated to range

from a low of $287 to a high of $1,468. Annual cos t of units with a heat input rating

between 0.40 MMBtu/hr and 2.0 MMBtu/hr will range b etween $1,468 and $3,510 per year.

TABLE 5 ESTIMATED ANNUALIZED COSTS PER UNIT

Unit Size

(MMBtu/hr) Range of Annualized

Cost ($/yr)

> 0.075 to <0.4 $287- $1,468

≥ 0.4 to <2.0 $1,468 – $3,510

Source: San Joaquin Valley Unified Air Pollution Co ntrol District



### It is important to note that based on a SCAQMD stud y, the average useful life of boilers,

with a rated heat input between 0.4 and 2.0 MMBtu/h r is 15 years. Comments received and

research points toward the useful life of units in this size category to be between 7yrs – 30

yrs. Businesses and operators may already be replac ing units in this size category as

frequently as 15 years. Therefore, the compliance c osts for this rule may not be as

significant, especially with many units available t hat are below the average cost used for the

analysis.23 Final Staff Report with Appendices Final Staff Report with Appendices

F o r A m e n d m e n t s t o R u l e 4 3 0 8 

## 6.2 BUSINESS RESPONSES TO COMPLIANCE COSTS

Industries impacted by the proposed amendments may respond in a variety of ways when

faced with new regulatory costs. These responses ma y range from simply absorbing the costs

and accepting a lower rate of return, to shutting d own the affected business operation

altogether and, where practical, shift from lower-v alue to higher-value product and or

service. Impacted industries might also seek to pas s costs to users of services or purchasers

of goods. Affected sources may also seek to renew e fforts 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 implement ation of proposed amendments to Rule

4308.



## S OCIO 

## -E CONOMIC 

## A NALYSIS AND 

## S MALL 

## B USINESS 

## D ISPROPORTIONATE



## I MPACT 

## A NALYSIS 

## : I NDUSTRIES 

## A FFECTED BY 

## P ROPOSED 

## A MENDMENTS TO



## R ULE 

## 4308

As Tables 6 shows, annual costs stemming from the p roposed project when expressed as a

ratio of net profit are below the ten-percent thres hold used for purposes of determining

whether costs are significant. With respect to pub lic schools, annual costs are compared

against estimated fund balance/reserves, which by s tate law is required to be at least three

percent of total expenditures. In aggregate, we es timated local public schools are

maintaining reserve levels of 5.5 percent. At 0.06 8 percent to 0.84 percent, annual costs

stemming from the proposed amendments do not impact local public schools’ estimated

reserves in any significant manner. Local governme nts are also not significantly impacted,

when annual costs are compared against estimated re venues. Impacts to local governments

amount to 0.002 percent to 0.03 percent of estimate d revenues.

It is important to note that the table below shows limited service restaurants as experiencing

cost-to-net profit ratios above the ten-percent thr eshold, at 10.4 percent. In all likelihood, a

limited service restaurant would not require a unit with a heat input rating of 2.00

MMBtu/hr.24Final Staff Report with Appendicesinal Staff Report with AppendicesForForAmendments to Rule 4308Amendments to Rule 4308TABLE 6. SOCIOECONOMIC IMPACT ANALYSIS OF PROPOSED AMENDMENTS TO RULE 43080.075 MMBtu/hr TO 0.400 MMBtu/hr 0.400 MMBtu/hrTO 2.000 MMBtu/hr0.075MMBtu/hrAggregateCostLow CostAsPercentof NetProfits0.400MMBtu/hrAggregateCostLow CostAsPercentof NetProfits0.400MMBtu/hrAggregateCostHigh CostAsPercentof NetProfits2.000MMBtu/hrAggregateCostHigh CostAsPercentof NetProfitsPrivate Food Production $287 $50,440 0.009% $1,468$258,001 0.05% $1,468 $258,001 0.05% $3,510 $616,883 0.12%Petroleum Refineries $287 $1,722 0.001% $1,468 $8,808 0.01% $1,468 $8,808 0.01% $3,510 $21,060 0.01%General Merchandise Stores $287 $48,001 0.032% $1,468 $245,523 0.16% $1,468 $245,523 0.16% $3,510 $587,048 0.39%Elementary and Secondary Schools $287 $26,261 0.125% $1,468 $134,322 0.64% $1,468 $134,322 0.64% $3,510 $321,165 1.53%Junior Colleges $287 $3,444 0.044% $1,468 $17,6160.22% $1,468 $17,616 0.22% $3,510 $42,120 0.53%Universities/College $287 $9,902 0.054% $1,468 $50,646 0.28% $1,468 $50,646 0.28% $3,510 $121,095 0.66%Hospitals$287 $26,835 0.000% $1,468 $137,258 0.00% $1,468 $137,258 0.00% $3,510 $328,185 0.01%Hotels/Motels $287 $52,521 0.198% $1,468 $268,6441.01% $1,468 $268,644 1.01% $3,510 $642,330 2.42%Room/Boarding Houses $287 $512,726 0.261% $1,468 $2,622,582 1.33% $1,468 $2,622,582 1.33% $3,510 $6,270,615 3.19%Limited Service Restaurants $287 $610,449 0.847% $1,468 $3,122,436 4.33% $1,468 $3,122,436 4.33% $3,510 $7,465,770 10.36%Drycleaning/Laundry Services $287 $62,925 0.618% $1,468 $321,859 3.16% $1,468 $321,859 3.16% $3,510 $769,568 7.55%Religious Organizations $287 $48,790 0.066% $1,468 $249,560 0.34% $1,468 $249,560 0.34% $3,510 $596,700 0.80%Federal Agencies/Departments $287 $49,077 0.001% $1,468 $251,028 0.01% $1,468 $251,028 0.01% $3,510 $600,210 0.02%Military/National Security $287 $5,453 0.000% $1,468 $27,892 0.00% $1,468 $27,892 0.00% $3,510 $66,690 0.00%Hospitals$287 $861 0.001% $1,468 $4,404 0.00% $1,468 $4,4040.00% $3,510 $10,530 0.01%Postal Service $287 $56,180 0.009% $1,468 $287,3610.05% $1,468 $287,361 0.05% $3,510 $687,083 0.11%Other Federal $287 $10,332 0.001% $1,468 $52,8480.01% $1,468 $52,848 0.01% $3,510 $126,360 0.02%State Agencies/Departments $287 $184,254 0.005% $1,468 $942,456 0.03% $1,468 $942,456 0.03% $3,510 2,253,420 0.06%Correctional Institutions $287 $129,365 0.005% $1,468 $661,701 0.03% $1,468 $661,701 0.03% $3,510 1,582,133 0.06%Hospitals$287 $15,785 0.006% $1,468 $80,740 0.03% $1,468 $80,740 0.03% $3,510 $193,050 0.07%Elementary and Secondary Schools $287 $574 0.115%$1,468 $2,936 0.59% $1,468 $2,936 0.59% $3,510 $7,020 1.41%Colleges and Universities $287 $101,885 0.029% $1,468 $521,140 0.15% $1,468 $521,140 0.15% $3,510 $1,246,050 0.36%Other Agencies/Departments $287 $861 0.002% $1,468 $4,404 0.01% $1,468 $4,404 0.01% $3,510 $10,530 0.02%Local Agencies/Departments $287 $69,669 0.002% $1,468 $356,357 0.01% $1,468 $356,357 0.01% $3,510 $852,053 0.03%Hospitals$287 $4,018 0.000% $1,468 $20,552 0.00% $1,468 $20,552 0.00% $3,510 $49,140 0.00%Utilities$287 $42,404 0.005% $1,468 $216,897 0.02% $1,468 $216,897 0.02% $3,510 $518,603 0.06%Elementary and Secondary Schools $287 $510,932 0.068% $1,468 $2,613,407 0.35% $1,468 $2,613,407 0.35%$3,510 $6,248,678 0.84%Junior Colleges $287 $6,888 0.008% $1,468 $35,2320.04% $1,468 $35,232 0.04% $3,510 $84,240 0.10%Other local agencies $287 $59,696 0.025% $1,468 $305,344 0.13% $1,468 $305,344 0.13% $3,510 $730,0800.30%25 Final Staff Report with Appendices Final Staff Report with Appendices

For Amendments to Rule 4308

For Amendments to Rule 4308 

### As indicated in the table above, industries across the board are not significantly impacted by

the rule. In the table below, we organize industri es in Table 6 by number of workers, to

determine if small businesses are disproportionatel y impacted by the proposed amendments.

Impacts across the board for industries of all size s are less than significant, meaning that

small businesses are not disproportionately impacte d by the proposed amendments to Rule

4308. In preparing this small business impact analy sis, we assume that businesses

employment between one and 49 workers will operate units with a heat input rating of 0.075

MMBtu/hr. Businesses employing between 50 and 249 workers operate units a heat input

rating of 0.400 MMBtu/hr. Business with more than 500 workers operate units with heat

input rating of less than 2.000 MMBtu/hr.26Final Staff Report with Appendicesinal Staff Report with AppendicesForForAmendments to Rule 4308Amendments to Rule 4308TABLE 7. DISTRIBUTION OF INDUSTRIES BY SIZE IN TERMSOF NUMBER OF WORKERS: SAN JOAQUIN VALLEY REGION, 2008Regional Establishments By Size 1 - 4 5 - 9 10 -19 20 - 49 50 - 99 100 - 249 250 - 499 500 - 9991000 -14991500 -24992500 -4999Private Food Production 3111 44 15 19 34 24 21 9 61 2 0Petroleum Refineries 32111 0 2 0 2 1 1 0 0 0 0 0General Merchandise Stores 4521 42 9 26 21 19 35 15 0 0 0 0Elementary and Secondary Schools 6111 39 22 13 116 1 0 0 0 0 0Junior Colleges 6112 0 0 0 4 8 0 0 0 0 0 0Universities/College 6113 8 3 11 3 3 3 3 0 0 3 0Hospitals 6221 2 0 2 2 4 19 19 19 12 6 8Hotels/Motels 7211 67 26 49 32 4 5 0 0 0 0 0Room/Boarding Houses 7213 968 447 149 223 0 0 0 00 0 0Limited Service Restaurants 7222 700 357 423 521 100 25 1 0 0 0 0Drycleaning/Laundry Services 8123 112 49 33 14 6 32 0 0 0 0Religious Organizations 8131 100 35 19 12 3 2 0 00 0 0Source: ADE, Inc. based on US Bureau of Labor Statistics and US Census County Business PatternsTABLE 8. SOCIOECONOMIC IMPACT ANALYSIS OF PROPOSED AMENDMENTS TO RULE 4308: SMALL BUSINESS DISPROPORTIONATE IMPACTANALYSISRegional Costs-to-Net Profits By Size1 - 4 5 - 9 10 - 19 20 - 49 50 - 99 100 - 249 250 -499 500 - 9991000 -14991500 -24992500 -4999Private Food Production 3111 0.53% 0.15% 0.07% 0.03% 0.07% 0.03% 0.03% 0.02% 0.01% 0.01%Petroleum Refineries 32111 0.01% 0.00% 0.00% 0.00%General Merchandise Stores 4521 1.43% 0.41% 0.19%0.08% 0.20% 0.08% 0.09% 0.05%Elementary and Secondary Schools 6111 1.43% 0.41%0.19% 0.08% 0.19% 0.08% 0.09% 0.05% 0.02%Junior Colleges 6112 0.07% 0.19%Universities/College 6113 5.17% 1.48% 0.69% 0.28%0.71% 0.30% 0.34% 0.07%Hospitals 6221 0.19% 0.03% 0.01% 0.03% 0.01% 0.01% 0.01% 0.00% 0.00% 0.00%Hotels/Motels 7211 1.85% 0.53% 0.25% 0.10% 0.25% 0.11%Room/Boarding Houses 7213 1.14% 0.32% 0.15% 0.06%Limited Service Restaurants 7222 8.33% 2.38% 1.11%0.45% 1.14% 0.49% 0.54%Drycleaning/Laundry Services 8123 4.60% 1.31% 0.61% 0.25% 0.63% 0.27% 0.30%Religious Organizations 8131 0.36% 0.10% 0.05% 0.02% 0.05% 0.02% 0.02% 0.01%Source: ADE, Inc.