### CMAQ COST-EFFE CTIVENESS THRESHOLD DOCUMENTATION

FOR THE Kings County Association of Governments 2011 FTIP

The Congestion Mitigation and Air Quality (CMAQ) program provides funding for transportation projects or programs that cont ribute to attainment or maintenance of the national ambient air quality standards. A ll San Joaquin Valley Metropolitan Planning Organizations (MPOs) adopted policies in 2007 for distributing at least 20 percent of the CMAQ funds to projects that meet a cost-e ffectiveness threshold for emission reductions beginning in Fiscal Year (FY) 2011. Fo r the 2011 Federal Transportation Improvement Program (FTIP), this applie s to years 2010-2011 through 2013-2014. The Kings County Association of Governments ( KCAG ) has made every effort to expend the minimum 20 percent funding for cost-effectiv e projects over the course of the FTIP and the attached spreadsheet demonstrates that KCAG has met the 20 percent funding goal.

Project eligibility con tinues to be based on federal CMAQ guidance. MPOs can fund projects within local jurisdictions or contribute funding to the San Joaquin Valley Air Pollution Control District (SJVAPCD) grant incentive programs to meet the cost-effectiveness threshold requirements. Funds contributed to the SJVAPCD grant incentive programs will

be assumed to have met the threshold, as that threshold is more stringent than the one established by the CMAQ cost-effectiveness policy.

Emission benefits and cost-eff ectiveness calculations are based on the applicable pollutants for the region, including the compone nts of ozone (nitrogen oxides [NO

x 

### ] and reactiveorganic gases [ROG]) and particulate matter (PM). The “Methods to Find the CostEffectiveness of Funding Air Quality Projects ” document developed by the Air Resources Board (ARB) is currently th e appropriate methodology for cal culating cost-effectiveness. Cost-effectiveness is expressed as dollars spent per pound of pollutant reduced (ROG + NO

x 

### + PM 10 

### ). The cost-effectiveness threshold for the 2011 FTIP has been maintained at the previously recommended level of $30 per pound ($60,000 per ton) and is based on CMAQ dollars only, not total project cost.

KCAG has identified, through existi ng programmed projects in thos e years or other selection methods, projects that qualify fo r the cost-effectiveness policy. KCAG revised our CMAQ project selection and scoring criteria to incorporate th e 2007 CMAQ Cost effectiveness policy. The KCAG CMAQ scoring criteria was develope d in consultation with the county, cities, and transit agencies in Kings County. The KCAG Technical Advisory Committee and Transportation Policy Committee approved the revi sed CMAQ scoring criteria as part of our ongoing CMAQ program.

As stated in the Cost-Effectiveness Policy, KCAG has agreed to post information related to the implementation of the cost-effectivene ss CMAQ policy on its website. Attached is

documentation that fulfills this re quirement and demonstrates that KCAG has estimated the amount of funding in the 2011 FTIP necessary to meet the 20 percent cost-effectiveness goal and provided a summary of the CMAQ projects that meet the minimum cost-effectiveness

threshold.

1EXHIBIT A

LOCAL COST-EFFECTIVENESS CMAQ POLICY

Summary

The Congestion Mitigation and Air Quality (CMAQ) program provides funding for transportation projects or programs that will contribute to atta inment or maintenance of the national ambient air quality standards. The CMAQ program supports two important goals of the Department of Transportation: improving air quality and relieving congestion. SAFETEA-LU strengthens these goals by establishing priority consideration for cost-effective emission reduction and congestion mitigation activities. Exhibit A provides a summary of the policy for distributing at least 20% of the CMAQ funds to projects that meet a minimum cost-effectiveness threshold for emission reductions beginning in FY 2011. This policy will focus on achieving the most cost-effective emission reductions, while maintaining the flexibility to meet local needs.

Estimates of Available Funds

Caltrans Programming provides apportionment estimates to all regions of the state. The FTIP is currently developed for a four-year programming cycle. With each new FTIP document, the Kings County Association of Governments (KCAG) will use the Caltrans estimate to develop the available CMAQ funds over the four-year period. KCAG commits to dedicate at least 20% of the total funding for the four-year period of each FTIP as part of the local cost-effectiveness CMAQ policy. For example, if a region is es timated to receive $20 million over a four year period, it would allocate 20%, or $4 million, of th e CMAQ program funds to projects that meet a

minimum cost-effectiveness.

The CMAQ allocation formula is currently based on population, ozone status, and carbon monoxide status. Revisions to the formula or updates to estimates may result in changes to available funds for the KCAG CMAQ program; such updates will also affect the funds available for the local cost-effectiveness policy. CMAQ estimates may be revised at any time due to changes from Caltrans, Federal legislation, or classification of the air quality standards in the San Joaquin Valley or other air basins.

Timeframe

The local cost-effectiveness CMAQ policy is scheduled to be implemented in FY 2011 because the 2007 and 2009 Federal Transportation Improvement Programs (FTIPs) had committed CMAQ funds through FY 2009 and FY 2010. In addition, the 2007 and 2009 CMAQ programming was assisting in implement ing approved local RACM (Amended 2003 PM-10 Plan) that are committed through 2010.

The San Joaquin Valley Air Basin was classified as a serious ozone nonattainment area in 2007, with an attainment deadline of 2013. As part of the 2007 Ozone plan, the Air District requested and received an “extreme” classification, which delays the attainment deadline until 2023. Assuming no change to the current funding formula, the MPOs may continue to receive CMAQ funding through that time (2023). The local cost-effectiveness CMAQ policy may remain in effect through 2023; however, continuation of the policy will be reviewed on a regular basis per the Policy Review section below.

1Local Allocation of Funds

The most current CMAQ guidance based on SAFETEA-LU was released by the Federal Highway Administration (FHWA) on October 31, 2008. The new legislation and guidance clarifies project eligibility, including advanced truck stop electrification systems and the purchase of diesel retrofits. SAFETEA-LU directs States and MPOs to give priority to diesel retrofits and to cost-effective congestion mitigation activities that provide air quality benefits. Though SAFETEA-LU establishes these investment priorities, it also retains State and local agencies' authority in project selection, meaning that changes to local procedures are not required by SAFETEA-LU. KCAG has previously developed procedures for allocating CMAQ funds; the local cost-effectiveness CMAQ policy will be incorporated into existing procedures. Prioritization and funding of projects will continue to be based on criteria developed by KCAG.

Cost-Effectiveness Threshold

Cost-effectiveness is a key component of providing funding to projects that improve air quality and reduce congestion. The cost-effectiveness of an air quality project is based on the amount of pollution it eliminates for each dollar spent. Policies that focus on cost-effectiveness will result in the largest emission reductions for the lowest cost. Cost-effectiveness can be based on total project costs, including capital investments and operating costs. However, for the purposes of this policy, cost-effectiveness is based on CMAQ funding dollars only.

In the state of California, the Air Resources Board (ARB) provides funding for air quality improvement projects through the Carl Moyer Pr ogram, which requires that heavy-duty vehicle projects meet a cost-effectiveness threshold. The San Joaquin Valley Air Pollution Control District (SJVAPCD) also uses cost-effectiveness thresholds for projects funded through the REMOVE II and Heavy-Duty Incentive Programs. However, at the time of the development of this policy there was no minimum cost-effectiveness established for the CMAQ program, and according to studies, the numbers varied widely across the country and by project type.

The SJV MPOs in consultation with the interagency consultation (IAC) partners developed the minimum cost-effectiveness threshold at $30.00 per pound of pollutants removed. This policy will be reviewed at a later date and the threshold may change. While other criteria may be developed at the discretion of KCAG, all projects funded by the 20% of CMAQ dollars related to the local cost-effectiveness CMAQ policy must meet that minimum threshold.

Expenditure of Funds under the Local Cost-Effectiveness Policy

KCAG will make every effort to expend the minimum 20% funding for the cost-effective projects as soon as possible beginning in FY 2011. However, recognizing that there are additional issues related to project delivery and financial c onstraint, KCAG will be allowed to meet the 20% funding over the course of the FTIP. For example, if the four-year estimate is $5 million, then the MPO must spend $1 million over the four year FTIP cycle.

Project eligibility will continue to be based on federal CMAQ guidance. MPOs can continue to fund projects within the local jurisdictions, or contribute funding to the SJVAPCD air quality grant incentive programs to meet their cost-effectiveness threshold requirements.

23 Emissions Estimates

CMAQ projects must demonstrate an air qualit y benefit, and the expected emissions reductions will continue to be estimated with the most recent methodology. As of 2011, the ARB “Methods to Find the Cost-Effectiveness of Funding Air Quality Projects” released in 2005 is an appropriate methodology for quantitative analysis of cost-effectiveness. If necessary, interagency consultation will be used to reach agreement on the methodology for future

estimates. Emission benefits and cost-effectiveness calculations will continue to be based on the applicable pollutants for the region, including nitrogen oxides (NOx), volatile organic compounds (VOC), and particulate matter (PM).

Reporting Requirements

Tracking of the CMAQ policy will be achieved through several methods. MPOs must develop annual reports for Caltrans and FHWA that specify how CMAQ funds have been spent and the expected air quality benefits. This report is due to Caltrans by December 31 and to FHWA by the first day of February following the end of the previous Federal fiscal year (September 30) and covers all CMAQ obligations for that fiscal year. A copy of the CMAQ annual report will also be submitted to the Air District for information purposes. In addition to the required annual report, KCAG will post information related to the implementation of the local cost-effectiveness CMAQ policy on its website; this includes a summary of the projects selected for the minimum

cost-effectiveness threshold that will be m ade available at the earliest opportunity.

Policy Review

Due to changes in project costs and technology over time, the MPOs will revisit the minimum cost-effectiveness threshold, as well as policy feasibility, at least once every four years prior to FTIP development. A periodic review of the policy is necessary due to potential changes in federal transportation legislation, apportionments, and project eligibility. This policy will only affect 20% of the allocated federal CMAQ funds, and does not imply changes to other funding programs. Should future transportation legislati on not include CMAQ funding, this policy will no longer be in effect.

Example Schedule

The following is an example schedule of the policy implementation and updates. This information is only representative of the general approach and specific schedules will be developed in the future (annual reports will continue to be prepared and submitted as required).

Summer 2007 Develop cost-effectiveness threshold through interagency consultation.Fall 2007 Identify funding available in the 2008 FTIP related to the 20% local costeffectiveness policy. Spring 2008 KCAG call for projects – Quantify, rank, and select CMAQ projects. Summer 2008 Approve 2008 FTIP.

Summer 2011 Review policy feasibility. If policy is continued, proceed with following

steps. Update cost-effectiveness threshold through interagency consultation.Fall 2011 Identify funding available in the 2012 FTIP related to the 20% local costeffectiveness policy. Spring 2012 KCAG call for projects – Quantify, rank, and select CMAQ projects. Summer 2012 Approve 2012 FTIP.