SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Socioeconomic Analysis for Rule 4694 December 15, 2005

D – 1 Final Staff Report with Appendices

For Revised Proposed Rule 4694

APPENDIX D

Socioeconomic Analysis for

Rule 4694 (Wine Fermentation and Storage Tanks)

December 15, 2005
Final Staff Report with Appendices

For Revised Proposed Rule 4694

SOCIOECONOMIC ANALYSIS

FOR RULE 4694:

WINE FERMENTATION AND STORAGE TANKS

DECEMBER 15, 2005

Prepared for

San Joaquin Valley Unified Air Pollution Control District

1990 E. Gettysburg Avenue

Fresno, CA 93726

Prepared by

Applied Development Economics

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

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

www.adeusa.com
Final Staff Report with Appendices

For Revised Proposed Rule 4694

CONTENTS

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

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

3. Description Of New Rule 4694..............................................3

4. Methodolgy............................................................................5

5. Impacted Industries Subject To New Rule 4694 (Wine 

Fermentation And Storage Tanks).........................................7

5.1 Regional Demographic And Economic Trends...............7

5.2 Description Of Affected Industries...............................10

6. Socioeconomic Impacts.......................................................22

6.1 Compliance Cost Estimates...........................................23

6.2 Business Responses To Compliance Costs.....................23

6.3 Impacts On Affected Industries....................................25

6.4 Impact On Small Businesses..........................................29

 FIGURE

1 San Joaquin Valley Unified Air Pollution Control District 

(SJVUAPCD) Air Basin ........................................................2

2. Index of Trends in Exports By Top Twenty-Five Leading 

Wine Producing Countries: 1993-2003 (1993 = 100%)........12

3. Index of United States Wine Import Trends: 1993-2003 

(1993 = 100%)....................................................................14

TABLES 

1 Population Growth: San Joaquin Valley Region, 1993 - 2003 ..8

2 Employment Profile Of The San Joaquin Valley Region 

1998 – 2003.........................................................................10

3 Trends In Exports By Top Twenty-Five Leading Wine 

Producing Countries 1993-2003 ($2003)..............................12

4 United States Wine Import Trends: 1993-2003 ($2003).........14

5 US Trends in Wineries, 1993 - 2003 ($2003)..........................16

6 US Trends in Wineries, 1993 - 2003: Average Value and 

Value-Added ($2003)..........................................................16
Final Staff Report with Appendices

For Revised Proposed Rule 4694

7 Trends in Wine Grape Production San Joaquin Valley 

Region 1998 - 2003 .............................................................18

8 Trends in Crushed Wine Grapes San Joaquin Valley Region 

1998 - 2003 .........................................................................19

9 Employment Profile Of The San Joaquin Valley Region: 

Wineries 1998 – 2003..........................................................20

10 Economic Trends: Wineries: The San Joaquin Valley 

Region.................................................................................20

11 Comparison of Employment in Affected Sources 

(Wineries) Versus the Region and State...............................21

12 Net Profit Ratios: Wineries: Dun and Bradstreet and CCH, 

Incorporated: 1992-2002.....................................................21

13 Economic Characteristics, 2003: Wineries: The San 

Joaquin Valley Region.........................................................22

14 Socioeconomic Impact Analysis: Wineries...........................23

15 Socioeconomic Impact Analysis: Wineries...........................25

16 Socioeconomic Impact Analysis: Wineries...........................27
1 Final Staff Report with Appendices

For Revised Proposed Rule 4694

1. EXECUTIVE SUMMARY

The San Joaquin Valley Unified Air Pollution Control District 

(“District”) seeks to adopt Draft Rule 4694 to meet certain 

United States Environmental Protection Agency (US EPA) 

mandates and timelines with regards to improved air quality 

in the region. This section of the report summarizes the 

findings of the socioeconomic analysis of Rule 4694. 

The analysis indicates that there are approximately 15 

wineries that could be potentially subject to Draft Rule 4694. 

These sources employ an estimated 5,000 workers, or less 

than one percent of all workers in the eight-county region. 

These sources generate an estimated $1.96 billion per year in 

revenues, from which $137.78 million in net profit is earned 

annually.

The socioeconomic impact analysis investigates the business 

response to annual costs associated with the new rule in three 

scenarios. District staff estimated annual compliance costs 

that range from $3.6 million to $7.2 million in the Scenario I 

(“Low Range”), to $14.4 million to $18.1 million in the 

Scenario II (“Mid Range”). Affected stakeholders submitted 

their estimates on the annual cost to comply with Draft Rule 

4694. Affected stakeholders estimate that annual compliance 

costs will range between $36.2 million and $45.2 million. For 

the purposes of analysis, this range is referred to as the 

Scenario III (“High Range”). 

The socioeconomic impact analysis shows that total a nnual 

compliance costs represent between 2.6 percent to 32.8 

percent of net profits of affected sources, depending on the 

compliance cost scenario. Annual compliance costs 

associated with the District’s Scenario II (“Mid Range”) and 

stakeholders’ Scenario III (“High Range”) exceed the 

threshold of significance, resulting in direct employment 

impacts ranging from two to 96 jobs. The analysis also 

examines whether small businesses are disproportionately 

impacted by the draft rule and concludes that these sources 

are not disproportionately impacted.
2 Final Staff Report with Appendices

For Revised Proposed Rule 4694

2. INTRODUCTION

This report describes the socioeconomic impacts of Draft 

Rule 4694 (Wine Fermentation and Storage Tanks). 

Following this introduction, the report summarizes the 

proposed amendments and describes the methodology for 

the socioeconomic analysis. In Section 5, the report describes 

the economic characteristics of sources affected by Draft 

Rule 4694. The sixth section analyzes the socioeconomic 

impacts of compliance costs on the affected sources and the

regional economy. This report is based on the version of 

Draft Rule 4694 that was published on June 9, 2005 in 

preparation for the June 28, 2005 public workshop.

The report is prepared pursuant to the provisions of AB2051 

(Section 40728.5 of the California Health and Safety Code), 

which requires an assessment of socioeconomic impacts of 

proposed air quality rules. The findings in this report can 

assist District staff in understanding the socioeconomic 

impacts of New Rule 4694, and can assist staff in preparing a 

refined version of the rule. A final draft report will be 

presented at a workshop conducted by District staff in 

October 2005. Figure 1 is a map of the eight-county region 

that comprises the San Joaquin Valley Air Basin. As indicated 

in the map, Kern County is not completely in the District.

FIGURE 1

San Joaquin Valley Unified Air Pollution Control District (SJVUAPCD) Air Basin
3 Final Staff Report with Appendices

For Revised Proposed Rule 4694

3. DESCRIPTION OF NEW RULE 4694

The San Joaquin Valley Unified Air Pollution Control 

District’s (District) 2003 PM10 Plan and the 2002 and 2005 

Rate and Progress Plan (ROP) identify the need to address 

VOC emissions from wine fermentation and wine aging 

processes occurring in the San Joaquin Valley Air Basin 

(SJVAB). These plans estimate that ethanol emissions from 

wineries averaged 7.0 tons per day (TPD) in 1999 (2003 

PM10 Plan) and project that those emissions will be 8.5 TPD 

in 2005. Draft Rule 4694 (Wine Fermentation and Storage 

Tanks) focuses on developing a control measure to reduce 

VOC emissions from tanks used in wine fermentation and 

storage. For this rule making process, the District is primarily 

interested in the wine fermentation step, which is typically a 

batch process.

Seventy percent of the State of California’s wine production 

occurs within the San Joaquin Valley Air Basin (SJVAB).1 The 

majority of wine production in the SJVAB occurs at large 

wineries, with annual wine production capacities of about 

tens of millions of gallons. In 2002, 18 wineries had annual 

permitted production volumes ranging from 5 million to 

greater than 50 million gallons.2 These wineries accounted for 

95 percent of the District’s emissions from wine 

fermentation. Of the 109 wineries operating in the SJVAB in 

2002, 58 percent of the wineries had annual production 

volumes of less than 2,000 gallons and 70 percent of the 

wineries had annual production volumes of less than 200,000 

gallons.

Wine fermentation is seasonal, corresponding to the grape 

harvest. In the SJVAB, fermentation typically occurs over a 

90- to 120-day period, resulting in seasonal daily averages of 

8.8 to 6.6 TPD, respectively. In 2002, 75 percent of annual 

fermentation emissions occurred during September and 

October. This period coincides with when the SJVAB 

experiences the greatest exceedance of National Ambient Air 

 

1 U.S. Department of the Treasury, Alcohol and Tobacco Tax Bureau, 2002 Alcohol Production Statistics

2 California Department of Alcoholic Beverage Control, Licenses Database, 2002
4 Final Staff Report with Appendices

For Revised Proposed Rule 4694

Quality Standards (NAAQS) for one-hour ozone, in both 

frequency and magnitude. Based on data from the Air 

Resources Board (ARB), total annual VOC emissions from 

wine fermentation within the SJVAB are estimated to be 788 

tons for 2002.

District staff estimates that implementation of Draft Rule 

4694 will result in 578 tons of VOC emissions being subject 

to control requirements. Draft VOC control requirements 

would require operators to install and operated VOC control 

systems achieving at least 86 percent capture and control 

efficiency. Thus, the achievable VOC emission reductions 

are estimated to be 497 tons annually, or 1.4 TPD. This is a 

63 percent reduction in total wine fermentation emissions. 

As presented in the Extreme Ozone Attainment Demonstration 

Plan, October 2004, the 2008 planning baseline emissions 

from wineries is 2.1 TPD, and planned emission reductions 

for Rule 4694 are 0.7 TPD, for a planned emission reduction 

of 33 percent.

Because of processing differences, emissions from white wine 

fermentation are less than emissions from red wine 

fermentation. Thus, District staff has estimated the cost 

effectiveness of controlling each type of wine separately. 

Average cost effectiveness of controlling VOC emissions 

from red wine is estimated at $27,000 per ton. Average cost 

effectiveness of controlling the same emissions from white 

wine is estimated at $82,000 per ton. 

Emissions estimates prepared by Sonoma Technology, Inc, a 

District consultant, show annual working losses from all bulk 

wine stored in the SJVAB, in 2002, ranged from three to ten 

tons. Therefore, District staff considers use of pressure-relief 

valves, and temperature control to constitute reasonable 

available control technology (RACT) for bulk wine storage 

tanks.
5 Final Staff Report with Appendices

For Revised Proposed Rule 4694

4. METHODOLGY

The socioeconomic analysis involves the use of information 

provided directly by affected sources, as well as secondary 

data used to describe the industries affected by the proposed 

provisions of Draft Rule 4694. The approach is briefly 

described below. 

Applied Development Economics (ADE) began the analysis 

by preparing a statistical description of the industry groups of 

which the affected sources are a part, analyzing data on the 

number of jobs, sales levels, the typical profit ratios and other 

economic indicators for each industry. 

This report relies heavily on the most current data available 

from a variety of sources, such as the 2002 Economic 

Census, 1997 Economic Census, Minnesota IMPLAN Group 

and the State of California’s Employment Development 

Department (EDD) Labor Market Information Division. 

For purposes of estimating profits, ADE relied on Dun and 

Bradstreet and CCH, Incorporated.

With the above information, ADE was able to estimate net 

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

ADE calculated ratios of profit per dollar of revenue for 

affected industries. The result of the socioeconomic analysis 

shows what proportion of profits the compliance costs 

represent. Based on assumed thresholds of significance, ADE 

discusses in the report whether the affected sources are likely 

to reduce jobs as a means of recouping the cost of rule 

compliance or as a result of reducing business operations. To 

the extent that such job losses appear likely, the indirect 

multiplier effects of the jobs losses are estimated using a 

regional IMPLAN input-output model.

When analyzing the socioeconomic impacts of proposed new 

rules and amendments, ADE works closely within the 

parameters of accepted methodologies discussed in a 1995 

California Air Resources Board report called “Development 

of a Methodology to Assess the Economic Impact Required 

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 
6 Final Staff Report with Appendices

For Revised Proposed Rule 4694

report reviewed a methodology to assess the impact that 

California Environmental Protection Agency proposed 

regulations would have on the ability of California businesses 

to compete. The California Air Resources Board (ARB) has 

incorporated the methodologies described in this report in its 

own assessment of socioeconomic impacts of rules generated 

by ARB. One methodology relates to determining a level 

above or below which a rule and its associated costs is 

deemed to have significant impacts. When analyzing the 

degree to which its rules are significant or insignificant, ARB 

employs a threshold of significance that ADE follows. Berck 

reviewed the threshold in his analysis and wrote, “The Air 

Resources Board’s (ARB) use of a 10 percent change in 

[Return on Equity] ROE (i.e. a change in ROE from 10 

percent to a ROE of 9 percent) as a threshold for a finding of 

no significant, adverse impact on either competitiveness or 

jobs seems reasonable or even conservative.” 
7 Final Staff Report with Appendices

For Revised Proposed Rule 4694

5. IMPACTED INDUSTRIES SUBJECT TO NEW RULE 

4694 (WINE FERMENTATION AND STORAGE 

TANKS)

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 1998 and 2003. Starting with subsection 5.2, the second part of this section narrows the focus 

of the socioeconomic analysis to industries affected by Draft 

Rule 4694. The second part of this section describes the 

economic characteristics of potentially impacted industries 

that might be subject to Rule 4694. 

In this report, the San Joaquin Valley region is defined as 

Fresno, Kern, Kings, Madera, Merced, San Joaquin, Stanislaus 

and Tulare counties. Data for Kern County in Tables 1 and 2 

are for all of Kern County, although Kern County is only 

partially in the San Joaquin Valley Air Basin. Starting with 

Table 3, data for Kern County are for the part of Kern 

County that is in the San Joaquin Valley Air Basin.

5.1 REGIONAL DEMOGRAPHIC AND 

ECONOMIC TRENDS

REGIONAL DEMOGRAPHIC TRENDS

The San Joaquin Valley region experienced tremendous 

population growth during the 1990s. Many came to this area 

because of affordable housing. As a result, population 

increased significantly. The eight-county region’s population 

increased by 22 percent (or approximately 2.0 percent 

annually), from 2.9 million in 1993 to 3.6 million in 2003. 

While the State of California’s population increased by 15 

percent (or approximately 1 percent annually), all the counties 

in the region experienced faster rates of growth, and two 

counties grew at rates that were triple the State’s growth rate, 

as Table 1 shows. While by many standards Madera County 

continues to be a small county– at 135,262 residents 
8 Final Staff Report with Appendices

For Revised Proposed Rule 4694

according to the Department of Finance–it still experienced a 

35 percent growth in population during the last decade (or 

three percent annually). Kings County also grew by three 

percent per year. As demonstrated in the following section on 

regional economic trends, the demographic changes that 

occurred in the San Joaquin Valley region during the 1990s 

significantly influenced the economy of this eight-county 

region.

TABLE 1 

Population Growth: San Joaquin Valley Region, 1993 - 2003

1993 1998 2003

Distribution, 

2003

Annual 

% Chng 

93-98

Annual 

% Chng 

98-03

Annual 

% Chng 

93-03

California 31,303,452 32,670,019 36,144,267 1% 2% 1%

SJV Region 2,959,911 3,192,439 3,615,696 10% 2% 3% 2%

 Fresno 722,608 781,936 862,642 24% 2% 2% 2%

 Kern 593,087 637,227 724,883 20% 1% 3% 2%

 Kings 109,648 120,957 141,434 4% 2% 3% 3%

 Madera 100,297 114,137 135,262 4% 3% 3% 3%

 Merced 191,883 203,181 232,141 6% 1% 3% 2%

 San Joaquin 507,170 546,852 630,577 17% 2% 3% 2%

 Stanislaus 400,417 428,272 491,929 14% 1% 3% 2%

 Tulare 334,801 359,877 396,828 11% 1% 2% 2%

Source: Applied Development Economics, based on California Department of Finance

REGIONAL ECONOMIC TRENDS

Economic development practitioners and planners have 

traditionally divided economies into two broad industrial 

categories—the economic base and local support industries. 

Economic base industries are the drivers of local and regional 

economies in that these industries draw income into a local 

economy by selling products outside of the local economy, 

much like the export industries of a national economy. 

Accrued earnings then circulate throughout the local area in 

the form of wages and salaries, investments, purchases of 

fixed assets, and goods and services, generating more jobs 

and wealth. 

The economic base is typically comprised of industries within 

the manufacturing, minerals-resource extraction, and 

agricultural sectors. There are also the “local support 

industries” such as retail or service sectors, the progress of 

which is a function of the economic base and demographic 

changes, and more so the latter than the former. As 
9 Final Staff Report with Appendices

For Revised Proposed Rule 4694

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. Fourteen 

percent of all workers in the region are employed by 

industries within agriculture, as Table 2 shows. However, in 

1998 the proportion of workers in agriculture was 18 percent. 

In fact, over the five-year period between 1998 and 2003, 

employment in agriculture declined by three percent per year, 

or by 15 percent over five years.

Between 1998 and 2003, local support industries gained in 

prominence within the San Joaquin Valley region. Servicerendering industries employed the most workers as a 

proportion of total employment in the region. As Table 2 

shows, excluding wholesale, retail and transportation, servicerendering industries comprise the largest employment sector 

in the region, at 647,100 or 53 percent of all jobs. With retail, 

transportation and wholesale, services accounts for slightly 

over 70 percent of all jobs. In 1998, service-rendering 

industries represented 50 percent of all jobs, and when 

including retail, wholesale and transportation in the mix, 67 

percent. 

Increases in employment in service-rendering industries are 

consistent with regional population growth. In the region, 

local support industries of construction, education and health, 

financial activities, and government increased annually by six 

percent, four percent, three percent and three percent 

respectively between 1998 and 2003. 

[This space is intentionally blank]
10 Final Staff Report with Appendices

For Revised Proposed Rule 4694

TABLE 2 

Employment Profile Of The San Joaquin Valley Region 1998 – 2003

MAJOR SECTORS

San Joaquin 

Valley 

Region 

Employment 

1998

San Joaquin 

Valley Region 

Employment 

2003

San Joaquin 

Valley 

Region 

Employment 

Distribution, 

2003

Annual 

Percent 

Change 

1998 to 2003

California 

Employment 

Distribution, 

2003

Annual 

Percent 

Change 

1998 to 2003

Agriculture 204,200 174,900 14% -3% 3% -2%

Resources, Mining and Construction 57,400 78,100 6% 6% 5% 5%

Manufacturing 114,300 110,300 9% -1% 10% -4%

Wholesale 34,400 39,000 3% 3% 4% 1%

Retail 121,400 133,200 11% 2% 11% 2%

Transportation/Warehousing/Utilities 37,600 45,700 4% 4% 3% -1%

Information 15,000 14,200 1% -1% 3% -0.5%

Financial Activities 40,400 46,600 4% 3% 6% 3%

Professional and Business Services 88,000 95,100 8% 2% 14% 1%

Educational and Health Services 101,500 122,200 10% 4% 10% 3%

Leisure, Hospitality and Other Srvs 112,500 116,400 9% 1% 13% 2%

Government 221,200 252,600 21% 3% 16% 2%

Total Employment 1,147,900 1,228,300 100% 1% 100% 1%

Source: Applied Development Economics, based on data from California Employment Development Department LMID

The emergence of local support industries in the San Joaquin 

Valley region mirrors and leads statewide trends, as Table 2 

shows. In the region, construction, health-education, and 

government increased annually by six percent, four percent 

and three percent, whereas, statewide, these industries grew 

by five percent, three percent and two percent per year 

between 1998 and 2003. In short, while agriculture remains 

the leading edge of the economy, the San Joaquin Valley 

region’s economy has become more diverse, with the growth 

occurring within population-driven local support industries 

rather than the export-focused economic base industries of 

manufacturing and agriculture.

5.2 DESCRIPTION OF AFFECTED INDUSTRIES

The analysis below discusses global, national, state and 

regional trends with respect to wineries. For purposes of 

context, the discussion below starts with broad global and 

national trends, then moves to state and regional trends.

Global Trends

In April 2005, the United State Department of Agriculture 

reported that the global wine trade “continued to be very 
11 Final Staff Report with Appendices

For Revised Proposed Rule 4694

robust during 2004.”3 The USDA reports that US wine 

producers’ competitors are primarily from Europe, as well as 

from other areas such as Australia. While multilateral rulesenforcing organizations such as the World Trade 

Organization (WTO) are in place to promote free trade, as 

the USDA hints in its April 2005 report, not all global trade is 

free or fair. The USDA notes that many foreign 

governments assist their respective wine industries through a 

variety of export promotion programs.4

Table 3 below tracks trends of the 25 leading world exporters 

of wine. Underscoring the USDA’s observation on the 

robustness of the global wine trade, Table 3 shows that the 

amount of wine produced for export had increased by 2.2 

million metric tons between 1993 and 2003, going from 4.6 

million to 6.8 million metric tons. Table 3 also includes the 

amount of wine exported by the US, which in 2003, exported 

329,330 metric tons of wine, significantly above the amount 

exported ten years before. It should be noted that almost 90 

percent of all US wine exports come from California, 

including from San Joaquin Valley wineries such as Gallo and 

Canandaigua. Table 3 also includes value of wine on a per 

metric ton basis. This table shows that the 2003 value of 

wine on a per metric ton basis ($2,470) was practically the 

same as the value in 1993 ($2,439). Figure 2 illustrates how 

the value of wine exports on a per metric ton basis had 

declined and or remained stagnant as global export increased.

 

3 USDA. Foreign Agricultural Service. International Strategic Marketing Group. “World Wine Situation and 

Outlook” (April 2005) page 3

4 USDA. Foreign Agricultural Service. International Strategic Marketing Group. “World Wine Situation and 

Outlook” (April 2005) page 9
12

For Revised Proposed Rule 4694

TABLE 3 

Trends In Exports By Top Twenty-Five Leading Wine Producing Countries 

1993-2003 ($2003)

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Total Global Exports (Metric Tons) 4,597,768 5,106,543 5,216,724 5,106,315 5,672,498 6,202,903 6,082,371 5,808,339 6,234,000 6,325,919 6,819,542

 US Global Exports (Metric Tons) 115,382 117,791 132,874 161,471 204,049 252,013 262,397 276,943 284,356 266,239 329,330

Tot Global Exports (Value\Metric Ton) $2,439 $2,365 $2,573 $2,835 $2,643 $2,651 $2,676 $2,397 $2,117 $2,278 $2,470

Source: Applied Development Economics, based on United Nations. Food and Agricultural Organization (http://www.fao.org/es/ess/toptrade/trade.asp)

Figure 2. Index of Trends in Exports By Top Twenty-Five Leading Wine Producing Countries: 1993-2003 (1993 = 100%)

135% 136%

148%

109%

87%

101%

285%

80%

90%

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200%

210%

220%

230%

240%

250%

260%

270%

280%

290%

300%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Total Global Exports (Metric Ton)

Global Exports Value per Metric Ton

US Exports (Metric Ton)
13 Final Staff Report with Appendices

For Revised Proposed Rule 4694

Table 4 shows the amount of wine imported into the United 

States over the ten-year period stretching from 1993 to 2003. 

In 1993, US consumers purchased 235,809 metric tons of 

imported wine, and starting from that year, the amount of 

imported wine increased steadily every year, to the point that 

the US imported 608,245 metric tons of wine by 2003. 

Figure 3 illustrates data found in Table 4, and it shows how 

the value of imported wine on a per metric ton basis had 

declined significantly between 1993 and 2003. As Figure 3 

shows, the amount of wine imported in 2003 was 258 percent 

of the amount imported in 1993. Over that same period, the 

value of imported wine on a per metric ton basis declined 

significantly. At $5,604, the 2003 per metric ton value of 

imported wine was 86 percent of the 1993 value, or $6,488. 

Data on wine imports into the US market come from the 

United Nation’s Food and Agriculture Organization, and it 

supports a general observation of the USDA on the quality of 

wine imports. “While French wine remains popular, market 

share has been lost to lower-priced wines from other 

countries,” reports the USDA.5 Because Central Valley 

wineries for the most part produce low-end ($8.00 and under 

per 750 ml bottle) to mid-priced wines ($8.00 to $14.99 per 

750 ml bottle), Central Valley wineries are directly affected by 

recent trends in wine imports, particularly with respect to 

importation of low-end wines. MKF Research reported that 

over the last decade, “California wines have lost eight points 

of market share to imports – chiefly, but not solely, 

Australian imports. The lost market share occurred almost 

entirely for wines under $10.00 per 750ml bottle and, 

particularly, those under $8.00 per bottle.”6

 

5USDA. Foreign Agricultural Service. International Strategic Marketing Group. “World Wine Situation and 

Outlook” (April 2005) page 7

6 MKF Research. “Socioeconomic assessment of Proposed Rule 4694: Wine Fermentation and Storage Rule” 

(July 2005) page 9
14

For Revised Proposed Rule 4694

TABLE 4 

United States Wine Import Trends: 1993-2003 ($2003)

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Total Global Imports into US (Metric Tons) 235,809 261,812 275,331 347,244 445,150 400,425 407,234 447,940 468,794 552,140 608,245

Total Global Imports into US (Value\Metric Ton) $6,488 $6,084 $6,207 $5,755 $5,169 $6,047 $6,706 $5,863 $5,307 $5,005 $5,604

Source: Applied Development Economics, based on United Nations. Food and Agricultural Organization (http://www.fao.org/es/ess/toptrade/trade.asp)

Figure 3. Index of United States Wine Import Trends: 1993-2003 (1993 = 100%)

170%

199%

258%

93%

82%

86%

70%

80%

90%

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200%

210%

220%

230%

240%

250%

260%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Total Global Imports into US (Metric Ton)

Total Global Imports into US (Value per Metric Ton)
15 Final Staff Report with Appendices

For Revised Proposed Rule 4694

National Trends

Table 5 includes data for wineries in the United States as a 

whole over the ten-year period stretching from 1993 to 2003. 

In that time period, industry employment grew by five 

percent per year. Between 1998 and 2003, winery 

employment grew by two percent annually. It is worth noting 

that between 1998 and 2003, employment in wineries in the 

eight-county San Joaquin Valley region grew annually by six 

percent as discussed below. As an indication of activity in the 

winery industry in the nation as a whole, winery plants were 

operating anywhere between 70 and 80 percent of capacity 

between 1995 and 2000. Manufacturing and food processing 

plants across the nation were operating at approximately 75 

percent capacity between 1995 and 2000. Prior to 1995, 

wineries were operating at no more than 57 percent capacity. 

In short, over the 1990s the number of wineries in the nation 

increased, and these wineries were operating at higher 

capacities with more workers than ever before. The surge in 

national and global interest in high quality wines produced in 

the US, particularly California’s Wine Country, and the touted 

beneficial health attributes of wine drinking perhaps in no 

small way contributed to the success of this industry in the 

1990s.

[ This space is intentionally blank ]
16

For Revised Proposed Rule 4694

TABLE 6

US Trends in Wineries, 1993 - 2003: Average Value and Value-Added ($2003)

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Annual 

Change 

1993-

2003

Value Added ($ millions) $3,119.9 $2,872.4 $2,948.9 $3,670.3 $3,979.7 $4,162.7 $3,641.5 $4,418.4 $4,863.2 $4,513.3 $4,519.8 4%

Value Added per production worker ($ millions) $0.47 $0.44 $0.39 $0.49 $0.46 $0.44 $0.39 $0.42 $0.44 $0.46 $0.44 -1%

Source: Applied Development Economics, based on Gale Group and US Bureau of Labor Statistics

TABLE 5

US Trends in Wineries, 1993 - 2003 ($2003)

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Annual 

Change 

1993-2003

Establishments 559 565 584 656 687 727 788 856 1125 902 933 5%

Employment 14,100 13,700 15,300 17,000 18,200 20,300 20,800 21,900 23,800 21,900 22,600 5%

Payroll ($ millions) $642.5 $621.1 $690.3 $752.8 $841.0 $897.0 $895.7 $892.8 $931.7 $868.1 $870.3 3%

Average Wage $45,568 $45,339 $45,116 $44,280 $46,210 $44,188 $43,064 $40,767 $39,146 $39,639 $38,509 -2%

Production workers 6,600 6,600 7,500 7,500 8,600 9,400 9,400 10,400 11,100 9,900 10,200 4%

Production as % of Tot. Employment 47% 48% 49% 44% 47% 46% 45% 47% 47% 45% 45%

Production Worker Hours (millions) 12.8 12.9 15.1 15.9 15.8 18.1 16.9 18.1 19.9 18.4 18.9 4%

Production Hours Per Production Worker 1,939 1,955 2,013 2,120 1,837 1,926 1,798 1,740 1,793 1,859 1,853 -0.5%

Winery Plant Capacity Utilization Rate 56% 57% 75% 73% 80% 71% 72% 70% 63% 61% 62% 67%

Value Added ($ millions) $3,119.9 $2,872.4 $2,948.9 $3,670.3 $3,979.7 $4,162.7 $3,641.5 $4,418.4 $4,863.2 $4,513.3 $4,519.8 4%

Value of Shipment ($ millions) $6,647.5 $6,107.4 $6,463.5 $7,118.0 $7,797.9 $8,386.6 $8,073.9 $8,368.6 $8,726.4 $8,098.6 $8,110.3 2%

Source: Applied Development Economics, based on Gale Group ["Manufacturing and Distribution USA: Industry Analyses, Statistics and Leading Companies: Volume 1 (Third Edition: Joyce 

Piwowarski, Editor) 2005], US Bureau of the Census ["Survey of Plant Capacity"], and US Bureau of Labor Statistics
17 Final Staff Report with Appendices

For Revised Proposed Rule 4694

Since the onset of the economic recession that began in 

summer 2000 and stretched into 2003, winery plant capacity 

decreased to approximately 63 percent. Even as they 

operated at lower capacities, US wineries were as efficient as 

they were in the 1990s, particularly with regard to valueadded production. Value-added is a measure of 

manufacturing productivity that is derived by subtracting the 

cost of materials, supplies, containers, fuel, purchased 

electricity, and contract work from the value of shipments. 

While in inflation-adjusted dollars value-added production 

per winery production worker in 2003 was less than what it 

was in 1993, it was only slightly less.

State and Regional Trends

The following discussion examines state and regional trends 

with respect to wineries and wine grape growers. Table 7 

below identifies broad trends in wine grape production in the 

eight-county San Joaquin Valley region. As the table shows, 

wine grape harvested acreage had declined annually by a slight 

–0.2 percent between 1998 and 2003, going from 312,042 to 

308,462 harvested acres. In terms of tonnage, the amount of 

wine grapes produced also declined slightly in the region, 

going from 2.64 million to 2.58 million tons. However, on 

value per acre or value per ton bases, grape growers in the 

region had received significantly less in 2003 than what they 

received in 1998. Between 1998 and 2003, the value per ton 

of wine grapes had declined annually by 12 percent, going 

from $379 to $205 in inflation-adjusted dollars. In addition, 

wine grapes produced in the region received a lower price 

than grapes produced in California as a whole, as Table 5 

shows. At $530 per ton in 2003, the value of wine grapes 

produced in California was more than double that of wine 

grapes produced in the San Joaquin Valley region.
18 Final Staff Report with Appendices

For Revised Proposed Rule 4694

TABLE 7

Trends in Wine Grape Production

San Joaquin Valley Region

1998 - 2003

San Joaquin 

Valley Region 

1998

San Joaquin 

Valley Region 

2003

Annual 

Percent 

Change 1998 

to 2003

California 

1998

California 

2003

Annual 

Percent 

Change 1998 

to 2003

Harvested Acres 312,042 308,462 -0.2% 488,832 545,425 2.2%

Production (tons) 2,639,416 2,584,234 -0.4% 3,407,177 3,451,150 0.3%

Value (inflation-adjusted) $1,001,016,213 $528,865,900 -12% $2,270,066,799 $1,828,077,900 -4%

Value per acre $3,208 $1,715 -12% $4,644 $3,352 -6%

Value per ton $379 $205 -12% $666 $530 -4%

Source: Applied Development Economics, based on California Agricultural Commissioners and US Bureau of Labor Statistics

Table 8 identifies trends in the amount and value of wine 

grapes that were crushed in the San Joaquin Valley region by 

wineries and other related beverage makers in the region. 

While the overall tonnage of crushed grapes had increased 

annually by a slight 0.5 percent between 1998 and 2003, the 

amount of crushed red wine grapes had grown significantly at 

almost three percent per year over this five-year period. At 

the same time, the per ton value of crushed red wine grapes 

decreased annually by 13 percent, going from $518 to $265 in 

inflation-adjusted dollars between 1998 and 2003 in the eightcounty region. For the state as a whole, the annual decrease 

in value of crushed red wine grapes was significantly less, 

dropping at an annual rate of one percent per year, or from 

$643 to $608. In short, while grape growers in the region 

produced slightly less wine grapes between 1998 and 2003 on 

harvested acreage and per ton bases in response perhaps to 

the dramatic decrease in values during that time period, the 

amount of grapes that eventually were crushed had increased, 

particularly with regard to red wine grapes, as Table 8 

demonstrates.
19 Final Staff Report with Appendices

For Revised Proposed Rule 4694

TABLE 8

Trends in Crushed Wine Grapes

San Joaquin Valley Region

1998 - 2003

San Joaquin 

Valley Region 

1998

San Joaquin 

Valley Region 

2003

Annual 

Percent 

Change 

1998 to 2003

California

1998

California

2003

Annual 

Percent 

Change 

1998 to 2003

Crushed Wine Grapes (ton) 1,648,067 1,693,638 0.5% 2,147,788 2,314,113 1.5%

 red wine grapes 874,640 997,241 2.7% 1,142,409 1,348,861 3.4%

 white wine grapes 773,427 696,397 -2% 1,005,379 965,252 -1%

Crushed Wine Grapes (value) $736,375,514 $412,930,358 -11% $1,545,362,093 $1,234,894,082 -4%

 red w ine grapes $453,083,513 $264,705,384 -10% $902,017,166 $820,916,805 -2%

 white wine grapes $283,292,001 $148,224,974 -12% $643,344,927 $413,977,278 -8%

Crushed Wine Grapes (val\ton) $446.81 $243.81 -11% $719.51 $533.64 -6%

 red wine grapes $518.02 $265.44 -13% $642.91 $608.60 -1%

 white wine grapes $366.28 $212.85 -10% $521.04 $428.88 -4%

Source: Applied Development Economics, based on California Department of Food and Agriculture (Grape Crush Reports) and US Bureau of 

Labor Statistics

Table 9 below identifies employment trends in grape 

production, food processing and wineries in the eight-county 

region and California as a whole. Between 1998 and 2003, 

employment in wineries increased by six percent per year, 

exceeding total employment growth rates for the region as a 

whole and for food processing in particular. The six percent 

annual growth rate is somewhat consistent with the trajectory 

of change described in Table 8, which shows that the amount 

of red wine grapes crushed in the region increased by almost 

three percent per year between 1998-2003. Table 9 also 

shows employment on grape farms. Employment on these 

farms declined by four percent a year, a trajectory of change 

that is somewhat consistent with negative trajectory in wine 

grape production in terms of harvested acreage and tonnage 

for the 1998-2003 period.
20 Final Staff Report with Appendices

For Revised Proposed Rule 4694

TABLE 9

Employment Profile Of The San Joaquin Valley Region: Wineries

1998 – 2003

San Joaquin 

Valley 

Region 

Employment 

1998

San Joaquin 

Valley 

Region 

Employment 

2003

San Joaquin

Valley Region 

Employment 

Distribution, 

2003

Annual 

Percent 

Change 

1998 - 2003

California 

Employment 

1998

California 

Employment 

2003

California 

Employment 

Distribution, 

2003

Annual 

Percent 

Change 

1998 - 2003

MAJOR SECTORS 

INDUSTRIES

All Industries 1,147,900 1,228,300 1% 14,002,300 14,785,200 1%

Agriculture 204,200 174,900 14% -3% 406,200 375,000 3% -2%

 Grapes 25,610 21,173 2% -4% 37,917 34,950 0.2% -2%

Manufacturing 114,300 110,300 9% -0.7% 1,857,200 1,544,900 10% -4%

 Food processing 45,700 47,000 4% 0.6% 158,400 156,000 1% -0.3%

 Wineries 4,716 6,366 0.5% 6% 21,465 21,129 0.1% -3.2%

Source: Applied Development Economics, based on California Agricultural Bulletin, California EDD-LMID, and IMPLAN

Table 10 includes additional information on wineries in the 

region and state. An estimated 135 wineries operate in the 

eight-county region, which represents an annual increase of 

13 percent between 1998 and 2003. These wineries generate 

an estimated $2.08 billion in revenues. In the state as a 

whole, there were approximately 790 wineries in 2003, 

meaning that 17 percent of all wineries are in the eight-county 

region. 

TABLE 10

Economic Trends: Wineries: The San Joaquin Valley Region

San Joaquin Valley Region California

1998 2003

Annual 

Change 1998 2003

Annual 

Change

Establishments 74 135 13% 461 790 11%

Employment 4,716 6,366 6% 18,821 22,825 4%

Average Wages $43,678 $42,342 -1% $41,677 $43,632 1%

Shipment Value (Rev) $1,684,925,528 $2,089,486,182 4% $6,125,433,600 $7,274,939,100 3%

Sources: Applied Development Economics, based on CA EDD (establishments and employment and aggregate payroll), US 

Census 1997 (employment, wages, shipment value), Dun and Bradstreet, and Gale Group

Table 11 compares employment in regional wineries against 

the state as a whole. Among other things, this table shows 

that 28 percent of all winery employees work in wineries 

operating in the eight-county region. 
21 Final Staff Report with Appendices

For Revised Proposed Rule 4694

TABLE 11

Comparison of Employment in Affected Sources (Wineries) Versus the Region and State

SJVAB Employment 

2003

Affected Industries 

as % of Total 

California 

Employment 

(n = 14,785,200)

Affected Industries 

as % of Total 

Regional 

Employment 

(n = 1,228,300)

Affected Industries 

as % of Same 

Industries in 

California 

(n = 22,825)

SJVAB Wineries 6,366 0.04% 0.5% 28%

Sources: Applied Development Economics, based on CA EDD, IMPLAN, and US Census 1997

Table 12 tracks net profit ratios for wineries from 1992 to 

2002. Data comes from two sources, including Dun and 

Bradstreet and the CCH, Incorporated. Dun and Bradstreet 

tracks a wide variety of business and financial indicators, 

including after tax net profit, and these indicators are based 

on performance of a representative sample of establishments 

from across the country in a particular industry at the fourdigit Standard Industrial Classification (SIC) level. CCH, 

Incorporated also tracks a wide variety of business and 

financial indicators, but its findings are based on a 

significantly greater number of establishments. Both sources 

track information on annual bases, allowing us to calculate a 

weighted average after tax net profit ratio for wineries that 

smoothens out the affects of economics booms and 

recessions. 

TABLE 12

Net Profit Ratios: Wineries: Dun and Bradstreet and CCH, Incorporated: 1992-2002

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

ten-yr 

avg

CCH (avg) 6.5% 9.1% 8.7% 7.7% 10.3% 4.4% 10.1% 4.7% 6.7% 5.7% 3.3% 7.0%

Dun and Bradstreet (avg) 5.4% 1.9% 2.2% 3.5% 8.0% 6.0% 9.8% 9.6% 10.5% 7.8% 6.6% 6.5%

Dun and Bradstreet-CCH (weighted avg) 6.5% 8.4% 8.1% 7.4% 10.1% 4.5% 10.1% 4.9% 6.9% 5.7% 3.4% 7.0%

Source: Applied Development Economics, based on Dun and Bradstreet, "Industry Norms and Key Business Ratios" (1993-2004) and CCH, Inc., "Almanac of Business 

and Industrial Financial Ratios" (1993-2005)

Table 13 applies the ten-year weighted average after tax net 

profit ratio for wineries (seven percent) to revenue estimates, 

particularly for the 15 wineries in the region that will be 
22 Final Staff Report with Appendices

For Revised Proposed Rule 4694

directly affected by the draft rule. The 15 wineries generate 

an estimated $1.96 billion in revenues, or the bulk of 

revenues generated by all wineries operating in the eightcounty region. In addition, the table includes estimates on 

after tax net profits, or $137.78 million.

TABLE 13

Economic Characteristics, 2003: Wineries: The San 

Joaquin Valley Region

Establishments Employment Revenues Net Profit

SJVAB wineries 135 6,366 $2,089,486,182 $138,208,463

 Affected wineries 15 5,032 $1,967,741,853 $137,781,376

Sources: Applied Development Economics, based on CA EDD, IMPLAN, US Census 1997, Gale 

Group, Dun and Bradstreet and CH, Inc.

6. SOCIOECONOMIC IMPACTS
23 Final Staff Report with Appendices

For Revised Proposed Rule 4694

This section of the report compares the economic 

characteristics of affected industries against the compliance 

costs. The first part of this section discusses annual 

compliance costs. Section 6.2 discusses general business 

responses to compliance costs. Section 6.3 analyzes the 

socioeconomic impacts of Draft Rule 4694.

6.1 COMPLIANCE COST ESTIMATES

Table 14 below identifies annual costs associated with Draft 

Rule 4696. The District cost estimates are based in part on 

data provided by representatives from certain industries and 

in part on District analysis. Annual costs are organized into 

three scenarios, each of which contain a low-end and highend value. The three annual compliance cost scenarios are 

listed in the following manner: “Lower Range”, “Mid-range” 

and “High Range.” Representatives from certain industries 

submitted compliance costs that formed the basis of the 

“High Range” annual cost compliance estimates. 

TABLE 14

Socioeconomic Impact Analysis: Wineries

Compliance Cost 

Source

Total Annual 

Compliance Costs

 Scenario I (Low Range) SJVUAPCD $3,620,000 

$7,240,000 

 Scenario II (Mid Range) SJVUAPCD $14,480,000 

$18,100,000 

 Scenario III (High Range) Industry $36,200,000 

$45,250,000 

Source: Applied Development Economics, based on San Joaquin Valley Unified Air 

Pollution Control District and Industry

6.2 BUSINESS RESPONSES TO COMPLIANCE 

COSTS

Industries impacted by the draft rule may respond in a variety 

of ways when faced with new regulatory costs. These 

responses may range from simply absorbing the costs and 

accepting a lower rate of return, to shutting down the 

affected business operation altogether and, where practical, 

shift from lower-value to higher-value product and or crop. 

Affected sources may also seek to renew efforts to increase 

productivity and reduce costs elsewhere in their operation in 
24 Final Staff Report with Appendices

For Revised Proposed Rule 4694

order to recoup the regulatory costs and maintain profit 

levels. 

On behalf of affected stakeholders, MKF Research produced 

an analysis of Draft Rule 4694. Among other things, the 

MKF Research analysis indicates that in response to costs 

associated with the draft rule, affected stakeholders may do 

any one of the following: ß Abandon red wine fermentation in the eight-county 

San Joaquin Valley region, substituting low cost 

imported bulk wine for local grapes, but maintaining 

white win fermentation, red and white bottling and 

administration facilities in the region

ß Shift red wine crushing and fermentation facilities to 

neighboring state or other regions, in effect trucking 

grapes from the eight-county region to facilities 

outside of the region

ß Close entirely some or all winery facilities in the eightcounty region in favor of imported bottled bulk wines 

or developing winemaking capacity in other regions 

or states

The MKF Research reports that much of the wine produced 

in the eight-county region is for the lower- and mid-priced 

segment (i.e. below $8.99 a bottle) of the bottled wine market. 

According to MKF Research, the draft rule will result in a 

cost that, if and when applied on a per bottle basis, places 

Central Valley wines at a competitive disadvantage against 

lower and mid-priced wines produced elsewhere. Citing the 

Eichlay report, MKF Research reports that, “[T]he cost per 

9L case across all wineries of installing and operating the 

proposed technology will average $0.80 to the winery, or 

$0.07 per 750ml bottle equivalent.” Given differences in 

wineries, the MKF Research goes on to conclude, “Thus, the 

direct cost of implementing this technology will range from 

about $.50 per case for the lower priced wines to about $1.50 

per case for higher priced wines.” Because a case contains 12 

bottles, the $.50 and $1.50 per case figures amount to $0.04 

per bottle and $0.13 per bottle (rounded). “The wine markets 

segments affected by this rule are highly competitive and 

subject to extensive discounting, inhibiting the ability of any 

producer to successfully put through price increases,” writes 

MKF Research. 
25 Final Staff Report with Appendices

For Revised Proposed Rule 4694

6.3 IMPACTS ON AFFECTED INDUSTRIES

This section of the report analyzes estimated after tax net 

profits of affected industries against anticipated costs 

associated with implementation of the draft rule. The 

estimated annual compliance costs used in this analysis were 

provided to ADE by District staff and stakeholders. Table 15 

below compares the total annual compliance costs by the 

three scenarios against net profits, and it includes figures on 

annual compliance cost as a proportion of net profits. In the 

Scenario I (“Low Range”), the annual cost of compliance 

represents 2.6 to 5.3 percent of net profit, which places this 

result below the threshold of significance used for the 

purposes of evaluating the point above which a rule is said to 

have significant impacts. In the Scenario II (“Mid Range”), 

the annual cost of compliance could represent 10.5 to 13.1 

percent of net profits, placing this cost scenario slightly above 

the significance threshold. Scenario III (“High Range”) 

annual cost compliance figures place the cost of the draft rule 

at 26.3 to 32.8 percent of net profits. It is worth noting that 

the maximum impact of 32.8 percent of net profit figure is 

somewhat consistent with one of the findings of MKF 

Research, which employed a different methodology in 

arriving at what it believes is the maximum impact of the 

draft rule, or 31.0 percent of profits.

TABLE 15

Socioeconomic Impact Analysis: Wineries

Scenario

Compliance 

Cost Source

Total Annual 

Compliance 

Costs

Estimated 

Net Profits

Annual Cost as 

Percent of 

Affected 

Wineries' Profit

Amount Above 

Threshold of 

Significance

Direct Winery 

Employment 

Impacts

Potential Direct 

Employment 

Impacts As 

Percent of 

Affected Sources 

Employment

 Scenario I (Low Range) SJVUAPCD $3,620,000 $137,781,376 2.6% -- below sig --

$7,240,000 $137,781,376 5.3% -- below sig --

 Scenario II (Mid Range) SJVUAPCD $14,480,000 $137,781,376 10.5% $701,862 2 0.04%
26 Final Staff Report with Appendices

For Revised Proposed Rule 4694

$18,100,000 $137,781,376 13.1% $4,321,862 13 0.3%

 Scenario III (High Range) Industry $36,200,000 $137,781,376 26.3% $22,421,862 68 1%

$45,250,000 $137,781,376 32.8% $31,471,862 96 2%

Source: Applied Development Economics, based on San Joaquin Valley Unified Air Pollution Control District and Industry

Table 15 also includes direct employment impacts associated 

with the amount of impacts on profits above the threshold of 

significance. Employment losses by affected stakeholders as 

a result of Scenario II costs range between two and 13 

workers, while direct impacts associated with Scenario III 

range between 68 and 96 workers. 

Because of the way in which one business in one industry 

interacts through buyer and supplier relations with businesses 

in the same or other industries, we also need to understand 

the indirect and what are called induced impacts associated 

with the draft rule. Using the IMPLAN Impro Professional 

input-output model, the consultant estimated the multiplier 

impacts associated with the cost of compliance above the 

threshold of significance, looking particularly at two measures 

– employment and industry output. These measures are 

defined as follows:

n Employment indicates the number of jobs lost given the 

level of compliance cost. This employment total includes 

self-employment.

n Industry output represents the sum of all economic 

activity lost by wineries and ancillary activities. This 

activity includes all commodity inputs, labor income, 

property income, and other value added components. 

The multiplier impacts for these measures come from the 

Type II multipliers. These multipliers include the direct, 

indirect, and induced impacts. These multiplier descriptions 

are summarized below.

n Direct impacts represent the jobs losses and other 

economic impacts that are directly related to costs 

associated by wineries as a result of implementation of 

the draft rule. 

n Indirect impacts represent the jobs and other economic 

effects that will potentially be lost elsewhere in the eightcounty region as a result of the direct impacts on wineries 
27 Final Staff Report with Appendices

For Revised Proposed Rule 4694

resulting from the draft rule. These indirect impacts 

result from supplier purchases.

n Induced impacts represent the economic losses 

associated with reductions in household purchases tied to 

direct and indirect employment losses in the region. 

These induced impacts most typically occur in retail and 

other local-serving industry categories such as personal 

services, education, and health care.

Table 16 shows the direct, indirect and induced impacts 

associated with a nnual cost of compliance resulting from 

Draft Rule 4694. The lower value of Scenario II impact is 

$701,862, which could result in the loss of 2.1 full-time 

equivalent (FTE) positions. As a result of this lower value 

Scenario II direct impact to wineries, businesses that are 

involved in buyer-supplier relations with wineries could 

experience an indirect impact to the tune of $294,793, 

resulting in a loss of 2.7 FTE. The direct and indirect loss of 

2.1 and 2.7 jobs, in turn, could result in the loss of spending 

at a variety of stores, such as retail and personal services 

establishment, in the amount of $162,637. As a result of this 

reduction in consumer spending, an additional 1.8 jobs could 

be lost. As a result of annual compliance costs associated 

with the lower value of Scenario II, total economic impact 

amounts to $1,159,292 and a potential loss of 6.6 FTEs.

TABLE 16

Socioeconomic Impact Analysis: Wineries

Scenario Direct Impacts Indirect Impacts Induced Impacts Total Impacts

 Scenario I (Low Range) -- below sig --

-- below sig --

 Scenario II (Mid Range) Industry Output Impacts $701,862 $294,793 $162,637 $1,159,292

Employment Impacts 2.1 2.7 1.8 6.6

 Scenario II (Mid Range) Industry Output Impacts $4,321,862 $1,815,248 $999,772 $7,136,882

Employment Impacts 13.1 16.4 11.0 40.5

 Scenario III (High Range) Industry Output Impacts $22,421,862 $9,417,522 $5,186,828 $37,026,212

Employment Impacts 68.1 85.1 56.9 210.1

 Scenario III (High Range) Industry Output Impacts $31,471,862 $13,218,660 $7,280,356 $51,970,878

Employment Impacts 95.6 119.5 79.9 295.0

Source: Applied Development Economics, based on San Joaquin Valley Unified Air Pollution Control District and Industry
28 Final Staff Report with Appendices

For Revised Proposed Rule 4694

The upper value of Scenario II impact is $4,321,862, which 

could result in the loss of 13.1 full-time equivalent (FTE) 

positions. As a result of this upper value Scenario II direct 

impact to wineries, businesses that are involved in buyersupplier relations with impacted wineries could experience an 

indirect impact to the tune of $1,815,248, resulting in a loss 

of 16.4 FTE. The direct and indirect loss of 13.1 and 16.4 

jobs, in turn, could result in the loss of spending at a variety 

of stores, such as retail and personal services establishment, 

in the amount of $999,772. As a result of this reduction in 

consumer spending, an additional 11.0 jobs could be lost. As 

a result of annual compliance costs associated with the upper 

value of Scenario II, total economic impact amounts to 

$7,136,882 and a potential loss of 40.5 FTEs.

The lower value of Scenario III impact is $22,421,862, which 

will result in the loss of 68.1 full-time equivalent (FTE) 

positions. As a result of this lower value Scenario III direct 

impact, businesses that are involved in buyer-supplier relations with impacted wineries will experience an indirect 

impact to the tune of $9,417,522, resulting in a loss of 85.1 

FTE. The direct and indirect loss of 68.1 and 85.1 jobs, in 

turn, will result in the loss of spending at a variety of stores, 

such as retail and personal services establishment, in the 

amount of $5,186,828. As a result of this reduction in 

consumer spending, an additional 56.9 jobs could be lost. As 

a result of annual compliance costs associated with the lower 

value of Scenario III, total economic impact amounts to 

$37,026,212 and potential loss of 210.1 FTEs.

The upper value of Scenario III impact is $31,471,862, which 

could result in the loss of 95.6 full-time equivalent (FTE) 

positions. As a result of this upper value Scenario III direct 

impact to wineries, businesses that are involved in buyersupplier relations with wineries could experience an indirect 

impact to the tune of $13,218,660, resulting in a loss of 119.5 

FTE. The direct and indirect loss of 95.6 and 119.5 jobs, in 

turn, could result in the loss of spending at a variety of stores, 

such as retail and personal services establishment, in the 

amount of $7,280,356. As a result of this reduction in 

consumer spending, an additional 79.9 jobs could be lost. As 

a result of annual compliance costs associated with the upper 

value of Scenario III, total economic impact amounts to 

$51,970,878 and a potential loss of 295.0 FTEs.
29 Final Staff Report with Appendices

For Revised Proposed Rule 4694

6.4 IMPACT ON SMALL BUSINESSES

In addition to analyzing the employment impacts of Draft 

Rule 4694, state legislation requires that the socioeconomic 

analysis assess whether small businesses are 

disproportionately affected by air quality rules. This section 

begins by briefly summarizing how the state government 

defines small businesses for the purposes of qualifying certain 

businesses for various programs. This section concludes with 

a discussion as to whether the affected industries include 

small businesses and assesses whether those small businesses 

are disproportionately impacted by the new rules. 

DEFINITION OF A SMALL BUSINESS

For purposes of qualifying small businesses for bid 

preferences on state contracts and other benefits, the State of 

California defines small businesses in the following manner7. 

To be eligible for small business certification, a business:

ß Must be independently owned and operated;

ß Cannot be dominant in its field of operation;

ß Must have its principal office located in California

ß Must have its owners (or officers in the case of a 

corporation) domiciled in California; and

ß Together with its affiliates, be either:

• A business with 100 or fewer employees, and 

an average gross receipts of $10 million or less 

over the previous tax years, or

• A manufacturer with 100 or fewer employees

Due to limitations of the data set, it is difficult to ascertain 

how many of the establishments are small businesses per the 

features identified directly above. It is possible to estimate 

how many affected establishments employ more than 100 

workers, as well as to estimate the average revenues generated 

by affected establishments of a given size. We cannot 

determine how many are independently owned or operated, 

or the location of their principal offices. 

 

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

www.pd.dgs.ca.gov/smbus/sbcert.htm)
30 Final Staff Report with Appendices

For Revised Proposed Rule 4694

Using a variety of sources, including Dun and Bradstreet, 

Manufacturing and Distribution USA: Industry Analyses, 

Statistics and Leading Companies, Google Maps, and Wine 

Business Monthly, we conclude that all of the affected 

sources are not small businesses. Thus, Draft Rule 4694 does 

not disproportionately impact small business sources.