# USEPA REGION IX

TECHNICAL SUPPORT DOCUMENT

for

SJVUAPCD Rule 9510

ATTACHMENT 2

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 1 

# APPENDIX F

Socioeconomic Analysis for Proposed Rule 9510 (Indirect Source Review) and Rule 3180 (Administrative Fees for Indirect Source Review )

December 15, 2005

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 2 

# SOCIOECONOMIC ANALYS IS

PROPOSED INDIRECT SO URCE RULE: DRAFT

RULES 95 10 AND 3180

4 November 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) 54 8

- 5912 1029 J Street, Suite 310 • Sacramento, California 95814 • (916) 441

- 0323
www.adeusa.com

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 3 

# CONTENTS

1. Executive summary

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

2. Intro duction

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

3. Description of New Rules 9510 & 3180

................................ ........ 10

4. Methodology

................................ ................................ ........................... 13

5. Impact to industries subject to New Rules 9510 & 3180 (Indirect SourceRrule)

................................ ................................ ........ 15

5.1 Regional demographic and economic trends

............................. 15

Regional Demographic Trends

................................ .............. 15

Regional Economic Trends

................................ ..................... 19

5.2 Description of affected industries

................................ ................. 21

Housing Trends in Select Cities

................................ ............. 22

Commercial

- Industrial Trends

................................ ............... 27

6. Socioeconom

ic impacts

................................ ................................ ....... 30

6.1 New rule 9510 and 3180 FEE

................................ .................. 30

6.2 Business responses to proposed fees

................................ ...... 32

6.3 Impacts on Affected Industries

................................ ................ 32

Single

- Family Dwelling Units

................................ ................ 33

Multi

- Family Dwelling Units

................................ .................. 37

Affordable Housing For Low

- and Moderate Income

Households

................................ ................................ .................. 41

Non

- Residential Development

................................ .............. 44

6.4 Impact on Small Businesses

................................ ..................... 49

Off

- Site Emission Reduction Fees, Minimum Household Income, and the Downpayment

..................... 49

Small Business Disproportionate Impact Analysis and Prospective Homebuyers

................................ ........................ 51

Small Business Disproportionate Impact Analysis and

Non

- Residential Developments

................................ ............ 55

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 4 Appendix A: Economic Benefits Associated With Draft Rule
9510 and 3180

................................ ................................ ....................... 58

Local Purchases

................................ ................................ ........... 58

Local Projects

................................ ................................ ............... 58

Job Creation

................................ ................................ ................. 59



# TABLES

1 Population Growth: San Joaquin Valley Region, 1993

- 2003

. 16

2 Single

- Family Residential Building Permit Trends: San Joaquin Valley, 1993

- 2003

................................ ................................ ................. 17

3 Mu lti

- Family Residential Building Permit Trends: San Joaquin Valley, 1993

- 2003

................................ ................................ ................. 17

4 Average Value of Single

- Family Unit Building Permit, San Joaquin Valley

................................ ................................ ....................... 18

5 Median Home Sale Prices: San Joaquin Valley, 2003

- 2005 ($2005)

................................ ................................ ................................ ..... 19

6 Employment Profile Of The San Joaquin Valley Region 1998

– 2003

................................ ................................ ................................ ...... 21

7 Select Central Valley Cities By Type

................................ ................ 22

8 Population Trends of Select Cities in the San Joaquin Valley Region, 1993

- 2003

................................ ................................ ............... 23

9 Single

- Family Dwelling Units Building Construction Permits, San Joaquin Valley Region 2000

- 2003

................................ .......... 24

10 Multi

- Family Dwelling Units Building Construction P ermits, San Joaquin Valley Region 2000

- 2003

................................ .......... 24

11 Average Selling Price of New Single

- Family and Multi

- Family Housing San Joaquin Valley Region 2005

................................ .... 25

12 Existing Fees On A Per Unit Basis

................................ ................ 26

13 Home Prices, Construction Costs, Fees and Profit: Single Family Housing

................................ ................................ .................... 26

14 Home Prices, Construction Costs, Fees and Profit: Multi

Family Housing

................................ ................................ .................... 27

15 Commercial

- Industrial Trends: San Joaquin Valley Region,

2005

................................ ................................ ................................ .......... 29

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 5 16 Worst Case Estimate: Fee That Corresponds to A Typical Residential Development

................................ ................................ .. 31

17 Worst Case Estimate: Fee That Corresponds To The Typical

Industrial Devel opment

................................ ................................ ..... 31

18 Worst Case Estimate: Fee That Corresponds To a Typical Commercial Development

................................ ................................ 32

19 Impact Analysis of 2006 Air Qua lity Fee on Typical Single

Family Development: $784 per unit

................................ .............. 34

20 Impact Analysis of 2007 Air Quality Fee on Typical Single

Family Development: $1,268 per unit

................................ .......... 34

21 Impact Analysis of 2008 Air Quality Fee on Typical Single

Family Development: $1,772 per unit

................................ .......... 35

22 Median Home Sale Prices in Small to Medium Communit ies,

2003

- 2005

................................ ................................ ............................... 35

23 Impact Analysis of 2006 Fee on Typical Multi

- Family Housing Development: $784 per unit

................................ .......... 39

24 Impact Analys

is of 2007 Fee on Typical Multi

- Family Housing Development: $1,268 per unit

................................ ....... 39

25 Impact Analysis of 2008 Fee on Typical Multi

- Family Housing Development: $1,772 per unit

................................ ....... 40

26 HUD Income Guidelines, 2005

................................ ...................... 42

27 Affordable Monthly Rents

................................ ................................ 43

28 Impact Analysi s of 2006 and 2008 Fee on Typical

Commercial

- Industrial Project

................................ ........................ 46

29 2006 and 2008 Fee on Typical Commercial

- Industrial Project: Affect of Fee on Monthly Rent

................................ ....................... 48

30 Potential Per Household Impact on Downpayment of Air Quality Mitigation Fees: Single

- Family Units

........................ 48 45

31 Potential Per Household Impact on Downpayment o f Off

site Emission Reduction Fees: Multi

- Family Units

.............. 48

46

32 Number of Establishments that Sell Discretionary Consumer Items: San Joaquin Valley Air Basin, 2002

.............................. 48

47

33 Aggregate Amount of Additional Dollars All Housholds Will Need To Set Aside As A Result of Air Quality Mitigation

Fees

................................ ................................ ................................ ..... 48 48

34 Impact on Net Profits of Retail and Select Services
Establishments

................................ ................................ ................. 48 49

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 6 35 Impact of Additional Rent Resulting From Proposed Air Quality Mitigation Fees

................................ ................................ ...... 51



# FIGURE

1 San Joa quin Valley Unified Air Pollution Control District (SJVUAPCD) Air Basin

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

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 7 

# 1. EXECUTIVE SUMMARY

The San Joaquin Valley Unified Air Pollution Control District (“District”) seeks to adopt New Rule 9510 and 3180 to meet

certa in 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 Rules 9510 and

3180.

The analysis ind

icates that while the worst

- case residential fee that a typical residential development would pay under Draft

Rule 9510 and 3180 can increase the amount of household income required to finance the purchase of a new home, the estimated increase represents a small fraction of the original household income required to finance a new home in the event no air quality fees were in place. The affect of the fees on rents is similarly small.

The analysis also examines the question of housing affordability from the v

antage point of low

- and moderate

income households. The analysis demonstrates that, even before the imposition of an air quality fees, most low

- income and households in the Central Valley are priced out of newly constructed multifamily unit market, the r ents for which need to be at levels that account for price of land, development costs, developer fees, and an adequate level of profit, among other things. The analysis discusses how public subsidies can assist in enhancing the financial feasibility of a real estate project in which a certain portion of units are set

- aside as

below

- market rental units.

The analysis also examines the impacts of proposed worst

case off

- site emission reduction fees on commercial, industrial and institutional projects. While a typical non

residential development can absorb the 2006 and 2008 fees, projects will have to recover the cost of the fee over a period

of time.

It is important to note that any fee identified in the report is

the estimated maximum fee in the worst

- case s cenario for a

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 8 typical development project, with the understanding that the actual fee will vary with the particulars of any project. Any fee in the report is presented for the purposes of analyzing potential impacts given costs associated with reducing

qu antifiable emissions resulting from what constitutes typical residential, commercial and industrial developments. It is also important to note that the developer may reduce fees by
incorporating on

- site emission reduction measures into the projects. Ther

e may or may not be costs associated with on

site measures. In any event, it is anticipated that the developer will choose the least costly option.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 9 

# 2. INTRODUCTION

This report describes the socioeconomic impacts of Rule 9510 (Indirect Source Review

– ISR ) and 3180 (Administrative Fees for Indirect Source Review). 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 characteri

stics of sources affected by Rule 9510 and 3180. The sixth section analyzes the socioeconomic impacts of compliance costs on the regional economy.

The report is prepared pursuant to the provisions of AB2051 (Section 40728.5 of the California Health and Sa fety 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 Rules 9510 and 3180, and can assist staff in
preparing a re

fined version of the rule. A final report will be presented at the Governing Board hearing by District staff in December 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 Count

y is not completely in the District.

FIGURE 1 San Joaquin Valley Unified Air Pollution Control District (SJVUAPCD) Air Basin

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 10 

# 3. DESCRIPTION OF NE W RULES 9510 & 3180

The San Joaquin Valley Air Basin (SJVAB) is classified as a

nonattainment area for the st ate and federal health based ambient ozone and PM 10 standards by the California Air Resources Board (ARB) and the U.S. Environmental Protection Agency (EPA). The SJVAB is currently classified

as serious nonattainment for the 24

- hour and annual National

A mbient Air Quality Standards (NAAQS) for particulate matter 10 microns in size and smaller (PM10), extreme

nonattainment for the federal 1

- hour ozone standard, serious

nonattainment for the new federal 8

- hour ozone standard,

and severe nonattainment for th e 1

- hour state ozone

standard.

The San Joaquin Valley Unified Air Pollution Control District’s (District) adopted 2003 PM10 Plan projects attainment of NAAQS for PM10 at the earliest practicable
date of December 31, 2010. The Indirect Source Rule 1 

# (ISR)

i s one of the commitments contained in the 2003 PM10 Plan

to achieve these emissions reductions. The ISR commitment will be implemented through Rules 9510 and 3180. The purpose of Draft Rule 9510 is to reduce emissions of NOx and PM10 from new development projects. The purpose of Draft Rule 3180 is to recover the costs of administering Draft Rule 9510. Implementation of these draft rules is expected to reduce NOx and PM10 emissions by 5.4 and 5.8 tons per day respectively.

The District identified several examples of air pollution agencies in California that are currently reviewing land use projects for indirect source impacts and/or collecting mitigation fees in their districts. District staff reviewed programs being implemented by the Mendocino County a nd Shasta County Air Quality Management Districts and the Great Basin, Colusa County, and Placer County Air Pollution

Control Districts. District staff also considered a number of

1 

## Indirect Sources are land uses that attract or generate motor vehicle trips.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 11 program types including District permitting, city/county

review, District r

eview, and simple fee.

Despite significant air pollution reductions from both mobile and stationary sources, the District exceeds state and federal air quality standards for ozone and PM10. Although today’s new cars pollute about 90 percent less than mode ls produced 25 years ago (due to California’s strict vehicle emissions standards), large increases in population and driving partially

offset the benefits these cleaner

- burning vehicles provide. The District’s total population increased by 22 percent

betw een 1990 and 2000; and, California’s Department of Finance projects that the SJVAB’s population will increase by 24 percent between 2000 and 2010. With increased population, there is an increase in emissions from area sources, such as consumer products, f uel combustion, landscape maintenance equipment, etc.

The total number of vehicle miles traveled (VMT) in the District has increased at a rate faster than population growth. The district witnessed a nine percent increase between 1999 and 2002, and is expe

cting a 27 percent increase from 2002 to

2010. Entrained and re

- entrained paved road dust and corresponding PM10 emissions increase as VMT increases.

To reduce emissions of NOx and PM10, Draft Rule 9510 would apply to development projects that will seek t o gain a discretionary approval for projects that, upon full build

- out will include any one of the following: 50 residential units, 2,000 square feet of commercial space, 25,000 square feet of industrial space, 20,000 square feet of medical office space,

3 9,000 square feet of general office space, 9,000 square feet of educational space, 10,000 square feet of government space, 20,000 square feet of recreational space, or 9,000 square feet of unidentified space. Certain transportation projects, transit
proje cts, reconstruction projects that result from a natural disaster, and development projects whose primary source of emissions are subject to District Rule 2201 or 2010 would be exempt from this Draft Rule. Also, development projects that have a mitigated b

aseline below two tons per year for each pollutant would be exempt from the emission reduction requirements of the rule.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 12 Draft Rule 9510 would require new development project applicants to submit an Air Impact Assessment application to the District prior t

o or at application for a project’s final discretionary approval with a public agency. The application would include an assessment, project location and description, an on

- site emission reduction checklist, a proposed Monitoring and Reporting Schedule (MR S), and a fee deferral agreement if necessary. The District would have 10 days to determine whether or not the application is complete. After deeming an application complete, the district would have 30 days to approve the application and notify the appli cant of the fee amounts.

Draft Rule 9510 would require developers to reduce cumulative NOx emissions in excess of 50 percent of the project’s first

- year operational baseline emissions until the emissions reach 50 percent of the first

- year baseline emission

s (approximately 10 years). Developers would be required to reduce PM10 emissions equal to half of the first

- year emissions after build

- out for the same time period required for NOx reductions. Developers would also be required to

reduce emissions from c

onstruction equipment NOx by 20%, and PM10 by 45% compared to the statewide fleet average. Emissions could be reduced through on

- site emission reduction measures, by paying the District a fee to fund emission reduction projects off

- site, or through a

com bination of the two.

To recover the costs of administering Draft Rule 9510, Draft
Rule 3180 would include a non

- refundable application filing fee to be paid when an application is submitted to the District. Once an application and application fee are

rece ived, District staff would log the total staff hours spent on the project. So that only the cost of the actual hours spent on the project is recovered, the cost of the hours spent on the project (hours multiplied by a weighted average labor rate)

would be subtracted from the application fee. Draft Rule 3180 would also contain a fee, payable when the off

- site emission reduction fees are collected, equal to four percent of
the off

- site fees to recover the cost of administering off

- site emission reduction pr

ojects.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 13 

# 4. METHODOLOGY

The socioeconomic analysis involves the use of information provided directly by affected sources, as well as secondary data used to describe the industries affected by the proposed provisions of Rule

9510 and 3180. The approach is b riefly

described below.

This report relies heavily on the most current data available from a variety of sources. For commercial

- industrial prices, this report relies on Dataquick, Loopnet.com and Realtor.com. For construction trends, this report relied on the Construction Industry Research Board. When estimating cost of construction, we used “Commercial Square Foot Building Costs: 2004”, by Deloitte Saylor Publication, as well as per square foot cost of construction estimates used by many cities when es

timating the value of a project. For purposes of estimating profits, ADE relied on Dun and Bradstreet, as well as corporate reports of major home builders and developers of commercial

- industrial space operating in California and the Central Valley.

With t he above information, ADE was able to estimate 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 th

e compliance costs represent. Based on assumed thresholds of significance, ADE discusses in the report whether the affected sources are likely to pass on costs to consumers or to reduce jobs as a means of recouping the cost of rule compliance or as a resul t 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, U C Berkeley

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 14 Department of Agricultural and Resources Economics,

Contract No. 93

- 314, August, 1995). The author of this report reviewed a methodology to assess the impact that California Environmental Protection Agency proposed regulations would have on the ability of California businesses to compete. The California Air Resources Board (ARB) has incorporated the methodologies described in this report in its own assessment of socioeconomic impacts of rules generated by ARB. One methodology relates to determ ining 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

revie wed 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 o n either competitiveness or jobs seems reasonable or even conservative.”

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 15 

# 5. IMPACT INDUSTRIES SUBJECT TO NEW RULE S 9510 & 3180 (INDIREC T SOURCE RULE)

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 a nd 2003. Starting with sub

section 5.2, the second part of this section narrows the focus of the socioeconomic analysis to industries affected by New Rules 9510 and 3180. The second part of this section

describes the economic characteristics of potentially impacted industries that might be subject to Ru les 9510 and 3180.

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 DEMOGRA PHIC AND

ECONOMIC TRENDS

R EGIONAL 

# D EMOGRAPHIC 

# T RENDS


# 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 pop

ulation 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 regi on 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

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 16 according to the Department of Fina nce

– 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 t hat 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

Per. Chng

93

- 98 A nnual

Per. Chng

98

- 03 Annual

Per. 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



# Housing construction in the San Joaquin Valley Air Basin has paralleled this increase in population. Low interest and the

a vailability of land at prices lower than in coastal areas of California has fueled construction activity in the Central Valley. Tables 2 and 3 track building permits for single

family and multi

- family homes. According to the California

Construction Indu

stry Research Board, home

- builders typically take out building permits only when they are ready to construct housing. Thus, building permits is a good indicator of housing production. As Table 2 shows, the amount of single

- family building permits increas ed by 14 percent annually between 1998 and 2003 in the Central Valley, easily surpassing the statewide annual rate of eight percent. Almost forty percent of all single family building permits was for projects in San Joaquin and Stanislaus County

in 2003. As the tables below show, the amount of new construction for single

- family homes greatly exceeds new

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 17 construction for multi

- family housing, for reasons related to market demand, availability of land, and historically low

interest rates, among other reason s.

TABLE 2 Single

- Family Residential Building Permit Trends:

San Joaquin Valley, 1993

- 2003

---------- SFU Building permits

----------

1993 1998 2003 Distribution,

2003 Annual

Per. Chng

93

- 98 Annual

Per. Chng

98

- 03 Annual

Per. Chng

93

- 03

California 69,901 94,298 138,762 6% 8% 7%

SJV Region 15,055 14,280 27,080 20%

- 1% 14% 6%

Fresno 3,743 2,742 4,479 17%

- 6% 10% 2%

Kern 3,082 3,025 5,529 20% 0% 13% 6%

Kings 530 526 835 3% 0% 10% 5%

Madera 694 473 1,144 4%

- 7% 19% 5%

Merced 1,087 960 2,489 9%

- 2% 21% 9%

San Joaquin 2,545 3,170 6,727 25% 4% 16% 10%

Stanislaus 1,835 1,997 3,884 14% 2% 14% 8%

Tulare 1,539 1,387 1,993 7%

- 2% 8% 3%



### Source: Applied Development Economics, based on Constr uction Industry Research Board

TABLE 3

Multi

- Family Residential Building Permit Trends: San Joaquin Valley, 1993

- 2003

---------- MFU Building permits

----------

1993 1998 2003 Distribution,

2003 Annual

Per. Chng

93

- 98 Annual

Per. Chng

98

- 03 Annual

Per. Chng

93

- 03

California 14,755 31,409 56,920 16% 13% 14%

SJV Region 1,309 1,403 3,699 6% 1% 21% 11%

Fresno 404 292 1,520 41%

- 6% 39% 14%

Kern 314 428 583 16% 6% 6% 6%

Kings 13 231 143 4% 78%

- 9% 27%

Made ra 105 160 90 2% 9%

- 11%

- 2%

Merced 20 72 457 12% 29% 45% 37%

San Joaquin 83 59 225 6%

- 7% 31% 10%

Stanislaus 148 93 284 8%

- 9% 25% 7%

Tulare 222 68 397 11%

- 21% 42% 6%



### Source: Applied Development Economics, based on Construction I ndustry Research Board



# While the value of single

- family unit building permits in the Central Valley is lower by almost $40,000 than the value of single family building permits for the state as a whole, it is worth noting that between 1998 and 2003 averag e values rose

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 18 faster in the region as compared to the state (see Table 4). Using average construction cost figures adjusted for regional
and historical variations, local officials estimate the value of single

- family, multi

- family and commercial and industr ial building permits for reasons related to calculating fees and maintaining departmental budgets. The actual price of housing on the market is typically higher than the estimated value of the building permit, though changes in the value of building permit

s are a good indication as to the trajectory of change in the actual housing market.

TABLE 4 Average Value of Single

- Family Unit Building Permit, San Joaquin Valley

---------- Average Value

----------

1993 1998 2003 Annual Per. Chng

93

- 98 A nnual

Per. Chng

98

- 03 Annual

Per. Chng

93

- 03

California $183,559 $218,055 $217,271 4% 0% 2%

SJV Region $130,879 $141,956 $170,604 2% 4% 3%

Fresno $135,736 $150,044 $183,122 2% 4% 3%

Kern $130,191 $130,167 $149,816 0% 3% 1%

Kings $141,740 $136,190 $119,485

- 1%

- 3%

- 2%

Madera $100,791 $102,214 $150,562 0% 8% 4%

Merced $135,439 $140,674 $153,139 1% 2% 1%

San Joaquin $143,809 $161,303 $197,209 2% 4% 3%

Stanislaus $119,981 $143,309 $176,566 4% 4% 4%

Tulare $118,658 $122,141 $153,456 1% 5% 3%



### Source: Applied Development Economics, based on Construction Industry Research Board



# Table 5 below identifies the median price for for

- sale owner

occupied housing in the Central Valley. The data comes from

Da taquick. In the last two years, the median selling price of homes sold on the market has increased substantially. Dataquick’s median housing price data cover transactions involving newly built homes, reselling of older homes, and

condominiums and townhou ses. At almost $300,000 the median price of a home in Madera County is almost twice what is was in July 2003.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 19 TABLE 5 Median Home Sale Prices: San Joaquin Valley, 2003

- 2005 ($2005)

July 2003 July 2004 July 2005 03

- 04 04

- 05
Fresno County $171,220 $ 220,955 $265,000 29% 20%

Kern County $136,353 $176,041 $236,500 29% 34%

Madera County $151,811 $242,638 $299,500 60% 23%

Merced County $207,151 $242,638 $335,000 17% 38%

San Joaquin County $247,295 $320,075 $403,000 29% 26%

Stanislaus County $245 ,165 $278,775 $360,000 14% 29%

Tulare County $131,494 $159,005 $215,500 21% 36%

$184,356 $234,304 $302,071 27% 29%



### Source: Applied Development Economics, based on Dataquick



# R EGIONAL 

# E CONOMIC 

# T RENDS


# The influx of people moving into the region in sea rch of

homes that are more affordable than homes in the San Francisco Bay Area affects more than the housing market. The affect of more people in the San Joaquin Valley region can also be seen in the changing economic profile of the
region.

Economic dev

elopment 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 population increases in a given area, demand for services

– such as realtors, teachers, and health care

– increases, as does

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 20 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 exp orts 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 p eriod 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. Service

rendering indust

ries employed the most workers as a proportion of total employment in the region. As Table 2 shows, excluding wholesale, retail and transportation, service

rendering industries comprise the largest employment sector in the region, at 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 b y six percent, four percent, three percent and three percent respectively between 1998 and 2003.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 21 TABLE 6 Employment Profile Of The San Joaquin Valley Region 1998

– 2003

MAJOR SECTORS San Joaquin Valley Region Employment

1998 San Joaquin

Valley R egion 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 an d 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 Srvcs 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 6 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 fi ve 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

- dri ven local support industries rather than the export

- focused economic base industries of manufacturing and agriculture.



# 5.2 DESCRIPTION OF AFFEC TED INDUSTRIES


# The analysis below examines trends of industries that will be likely affected by Draft Rules 9510 and 3180. According to the rule, developers of applicable development projects will have to pay a fee to reduce emissions related to the project

that are not reduced on

- site. The analysis below seeks to understand the possible impact of the fee on the e conomics of a development project, particularly with respect to project profitability and with respect to impacts on the final user,

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 22 which, in the case of housing, is the homebuyer or renter. The report takes into consideration existing fees that are

alr eady in place, meaning that the analysis is on the incremental impact of the new fee on top of existing fees.

The following section reviews residential and commercial

industrial trends in certain number of cities in the eight

county region. The report f ocuses on 27 cities in the region. Table 7 below organizes the 27 cities into different typologies. The consultant obtained information regarding existing fees on residential and commercial development from many of these jurisdictions. In addition, the report references a report issued by State of California’s Housing and Community Development Department, called “Pay to Play.” This report also tracks residential development fees for many cities in the Central Valley.

TABLE 7 Select Central Valley Citie s By Type

Type Cities
Large Urban Fresno, Bakersfield

Bay Area Commuter Shed Stockton, Modesto, Manteca, Lodi, Tracy

Medium Visalia, Clovis, Merced, Turlock,
Hanford, Porterville, Tulare

Small/Med Bedroom Community Ceres, Sanger, Atwater, Selma,

Linden

Small Rural/Farming Mendota, Wasco, Firebaugh, Avenal, Taft, Orange Cove,
Oakhurst, Shafter



### Source: San Joaquin Valley Unified Air Pollution Control District



# H OUSING 

# T RENDS IN 

# S ELECT 

# C ITIES



# Table 8 below identifies the population for the 27 c ities that are the focus of this analysis. These cities consist of over 2 million residents, or 55 percent of all people in the eight

county San Joaquin Valley region. Between 1998 and 2003, population in these cities grew by three percent annually,

whic h is consistent with annual population growth rates for the region as a whole (see Table 1).

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analys is for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 23 TABLE 8 Population Trends of Select Cities in the San Joaquin Valley Region, 1993

- 2003

------ Population

------ City County 1993 1998 2003 1993

- 1998 199 8

- 2003

01 Large Urban 3 Bakersfield Kern 192,351 220,771 268,914 3% 4%

01 Large Urban 7 Fresno Fresno 385,914 409,070 450,614 1% 2%

578,265 629,841 719,528 2% 3%

02 Bay Area Commuter Shed 10 Lodi San Joaquin 52,936 55,844 60,317 1% 2%

02 Bay Area Commuter Shed 11 Manteca San Joaquin 42,833 47,256 57,485 2% 4%

02 Bay Area Commuter Shed 14 Modesto Stanislaus 176,241 182,929 203,498 1% 2%
02 Bay Area Commuter Shed 21 Stockton San Joaquin 222,992 241,777 262,553 2% 2%

02 Bay Area Commuter Shed 23 Tr acy San Joaquin 39,913 47,687 69,987 4% 8%

534,915 575,493 653,840 1% 3%

03 Medium 5 Clovis Fresno 57,036 67,291 76,545 3% 3%

03 Medium 8 Hanford Kings 33,892 39,012 44,833 3% 3%

03 Medium 13 Merced Merced 59,270 61,705 68,155 1% 2%

03 Medium 17 P orterville Tulare 32,310 36,286 42,181 2% 3%

03 Medium 24 Tulare Tulare 37,342 40,848 46,538 2% 3%

03 Medium 25 Turlock Stanislaus 46,481 50,958 62,256 2% 4%

03 Medium 26 Visalia Tulare 84,725 93,856 99,460 2% 1%

351,056 389,956 439,968 2% 2%

04 S mall/Med Bedroom Community 1 Atwater Merced 22,528 22,944 26,216 0.4% 3% 04 Small/Med Bedroom Community 4 Ceres Stanislaus 29,331 32,289 36,449 2% 2% 04 Small/Med Bedroom Community 9 Linden San Joaquin 1,090 1,068 1,046

- 0.4%

- 0.4%

04 Small/Med Bedroom Community 12 Mendota Fresno 7,287 7,521 8,203 1% 2% 04 Small/Med Bedroom Community 18 Sanger Fresno 17,927 18,557 19,993 0.7% 2% 04 Small/Med Bedroom Community 19 Selma Fresno 16,462 17,937 21,003 2% 3%

94,625 100,316 112,910 1% 2%

05 Small Rural/F arming 2 Avenal Kings 11,459 12,178 15,428 1% 5% 05 Small Rural/Farming 6 Firebaugh Fresno 5,031 5,565 6,201 2% 2% 05 Small Rural/Farming 15 Oakhurst Madera 2,570 2,519 2,833 0% 2% 05 Small Rural/Farming 16 Orange Cove Fresno 5,709 7,095 8,782 4% 4%

05 Small Rural/Farming 20 Shafter Kern 10,771 11,182 13,443 0.8% 4% 05 Small Rural/Farming 22 Taft Kern 6,508 7,375 9,027 3% 4% 05 Small Rural/Farming 27 Wasco Kern 17,212 20,083 22,400 3% 2%

59,260 65,996 78,114 2% 3%

San Joaquin Valley Ai r Basin 1,618,121 1,761,601 2,004,360 2% 3%



### Source: Applied Development Economics, based on California Department of Finance and US Census



# Table 9 identifies the number of single

- family dwelling unit building permits issued by the 27 cities. As the t able shows, the cities issued 17,641 single

- family building permits in 2003, which represents almost two

- thirds of all single

- family building permits issued in the eight

- county region as a whole.

Table 10 identifies the number of multi

- family dwelling uni ts issued by the 27 cities. The amount of these permits represents almost 80 percent of all multi

- family building permits issued in the region as a whole in 2003. For these reasons, the cities are representative of the larger region.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rul

e 3180 

# F

- 24 TABLE 9 Single

- Fami ly Dwelling Units Building Construction Permits, San Joaquin Valley Region 2000

- 2003

2000 2001 2002 2003 2000

- 2003

Nos. of

Permits Avg. Value Nos. of

Permits Avg. Value Nos. of

Permits Avg. Value Nos. of

Permits Avg. Value Annual Change in

Permits Annual

Change in Avg. Value

01 Large Urban 3,381 $132,038 4019 $132,089 4083 $137,988 5162 $152,257 15% 5%
02 Bay Area Commuter Shed 6,223 $161,757 4699 $172,165 6084 $172,996 6208 $176,852

- 0.1% 3%

03 Medium 2,705 $125,488 3585 $141,040 4178 $153,806 5218 $156,243 24% 8%
04 Small/Med Bedroom Community 365 $105,702 542 $112,427 651 $118,285 801 $128,044 30% 7%

05 Small Rural/Farming 190 $83,956 262 $87,732 314 $85,667 252 $98,046 10% 5%

12,864 $143,580 1310 7 $147,205 15310 $154,305 17641 $160,217 11% 4%



### TABLE 10 Multi

- Family Dwelling Units Building Construction Permits, San Joaquin Valley Region 2000

- 2003

2000 2001 2002 2003 2000

- 2003

Nos. of

Permits Avg. Value Nos. of

Permits Avg. Value N os. of

Permits Avg. Value Nos. of

Permits Avg. Value Annual Change in

Permits Annual

Change in Avg. Value

01 Large Urban 177 $67,079 182 $73,639 454 $61,259 1150 $67,333 87% 0%
02 Bay Area Commuter Shed 84 $56,183 368 $59,905 514 $65,380 275 $69,075 48.5% 7%

03 Medium 206 $63,512 27 $64,680 155 $76,627 1119 $77,362 76% 7%
04 Small/Med Bedroom Community 51 $48,135 7 $38,617 71 0 162 $22,627 47%

- 22%

05 Small Rural/Farming 83 $40,584 135 $36,997 4 $48,978 194 $56,369 3 3% 12%

601 $59,067 719 $59,052 1,198 $61,344 2900 $68,137 69% 5%



### Source: Applied Development Economics, based on Construction Industry Research Board

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 25 Table 11 identifies the average selling price of a new 3 to 4

bedroom home in the select cities. As expected, housing prices in the Bay Area Commuter Shed tend to be higher, in large part because of the close proximity to the San Francisco Bay Area housing market. Prices there are on average $402,644 per 3

- 4 bedroom unit, versus almost $250,000 for new units in Small/rural farming communities such as Avenal (Kings County) or Orange Cove (Fresno County).

TABLE 11 Average Selling Price of New Single

- Family and Multi

- Family Housing San Joaquin Val ley Region 2005

------ Single

- Family Units

------ ------ Multi

- Family Units

------

Avg 3

- 4 BR

SFU Values Avg 3

- 4

BR SFU

Size Lot Size

3

- 4 BR

SFU

Value Per

SQFT Average

MFU Values Average

MFU Size Value Per

SQFT
01 Larg e Urban $338,047 1,893 5,407 $179 $146,914 1,071 $137

02 Bay Area Commuter Shed $402,664 2,112 6,034 $191 $180,603 1,071 $169

03 Medium $296,428 1,779 5,083 $167 $137,357 1,071 $128
04 Small/Med Bedroom Community $314,030 1,883 5,379 $167 $136,0 62 1,071 $127

05 Small Rural/Farming $247,836 1,644 4,697 $151 $125,482 1,071 $117

$323,966 1,862 5,320 $171 $145,283 1,071 $136



### Source: Applied Development Economics, based on Realtor.com, Dataquick, and California Housing and Community Developme nt, "Pay to Play"



# Table 12 identifies existing fees on residential development in
the 27 cities. As the table shows, fees amount to approximately five to six percent of values for single

- and

multi

- family units. Data for fees comes from a variety of

so urces, including local jurisdictions and the California Department of Housing and Community Development (HCD), which issued a detailed report on residential developer fees of many cities throughout California. In using the HCD figures, this report adjuste d the amount for general inflation and housing price inflation.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 26 TABLE 12 Existing Fees On A Per Unit Basis

Existing Fees On 3

- 4

BR SFU Unit All Fees

As Percent of

Value Existing Fees

On MFU Unit All Fees

As Percent of

Value

01 Large Urban $17, 796 5% $6,149 4%
02 Bay Area Commuter Shed $24,576 6% $8,093 4%

03 Medium $19,266 6% $7,355 5%
04 Small/Med Bedroom Community $21,162 7% $11,883 9%
05 Small Rural/Farming $12,689 5% $5,969 5%

$18,552 6% $7,890 5%



### Source: Applied Development Economics, based on Realtor.com, Dataquick, and California Housing and Community Development, "Pay to Play"



# Tables 13 and 14 compare existing fees against other development costs, including the price of land, to estimate profit and a profit rate. The pr ofit rates calculated below are similar to what would be found in corporate reports of national homebuilders, particularly Centex Homes, Kaufman
and Broad, Lennar, and Pulte Homes, whose combined average profit rate is approximately eight percent. 2



### TABLE 13 Home Prices, Construction Costs, Fees and Profit: Single Family Housing

Community Types Avg 3

- 4

BR SFU

Values Land

Value

Per 3

- 4

BR SFU

Unit All Fees

Per 3

- 4

BR

SFU Unit Site

Development

Cost Per 3

- 4

BR Unit Building

Construction

Cost s Per

3

- 4 BR Unit TOTAL

COSTS Profit per

Unit Profit as

% Value
Large Urban $338,047 $77,124 $21,759 $40,233 $167,600 $306,716 $31,330 9%

Bay Area Commuter Shed $402,664 $93,015 $26,957 $46,410 $200,828 $367,210 $35,454 9%

Medium

- Sized Cities $296,428 $50,069 $19,266 $37,346 $159,484 $266,165 $30,263 10%

Small \ Medium Bedroom Communities $314,030 $74,468 $21,162 $34,570 $157,136 $287,336 $26,694 9%

Small Rural \ Farming Communities $247,836 $47,847 $12,689 $28,825 $131,024 $220,386 $27,450 11%

$323,966 $68,505 $20,367 $38,373 $166,739 $293,983 $29,982 9%

2 

## www.sec.gov

see Form 10

- K

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 27 TABLE 14 Home Prices, Construction Costs, Fees and Profit: Multi

- Family Housing

Community Types Avg MFU

Values Land

Value

Per MFU

Unit All Fees

Per M FU

Unit Site Development

Cost Per

MFU Unit Building

Construction

Costs Per

MFU Unit TOTAL

COSTS Profit per

Unit Profit as

% Value

Large Urban $146,914 $12,999 $6,149 $20,324 $81,295 $120,767 $26,147 18%
Bay Area Commuter Shed $ 180,603 $14,794 $8,093 $23,116 $92,464 $138,467 $42,136 23%

Medium

- Sized Cities $137,357 $10,831 $7,355 $19,519 $80,260 $117,964 $19,393 14%

Small \ Medium Bedroom Communities $136,062 $12,868 $11,883 $19,435 $80,926 $125,113 $10,949 8%

Small Rural \ Farming Communities $125,482 $10,955 $5,969 $17,085 $77,658 $111,666 $13,815 11%

$145,283 $12,489 $7,890 $20,140 $83,179 $123,698 $21,585 15%



# Commercial

- Industrial Trends Table 15 below estimates the value, costs and profit

associated with develo

ping one acre of commercial, industrial and office development. Information for the table comes from a variety of sources, including Realtor.com and Loopnet.com for current price of new industrial and commercial projects in the Central Valley. When esti mating cost of construction, we used “Commercial Square Foot Building Costs: 2004”, by Deloitte Saylor Publication, as well as per square foot cost of construction estimates used by many cities when estimating the value of a project. In determining the amo

unt of fees on a commercial

- industrial development, we asked building officials in five cities to calculate the amount of fees that would be generated by a 10,000 square feet light industrial development on a 2.5

- acre parcel and by a 10,000 square feet ret ail project on a similarly

sized piece of land. We converted the fees into a per acre amount. The per acre values in the table below were calculated after having calculated the development costs, based on a profit of ten percent, and these values were

ch ecked against what we found on Loopnet.com and Realtor.com. The 10 percent profit is based on a review of

Deloitte

- Saylor’s “Commercial Square Foot Building Costs: 2004.” It is also based on a review of corporate reports of Catellus (industrial developer) and ProLogis (warehouse

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 28 distribution developer). It should be noted that while data in the residential section above represents trends in 27 cities in the Central Valley, information in this section is for five cities that fit the different city types.

As Table 15 shows, existing fees on commercial and office developments are significantly higher than on industrial projects. This is so because of the traffic generated by retail and office is much higher than traffic generated by industrial
users, which

then requires a corresponding amount of

reduction via fees.

# SAN JOAQUIN VALLEY UNIFIED AI R POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 29 TABLE 15 Commercial

- Industrial Trends: San Joaquin Valley Region, 2005

Avg. Value

Per Acre (Land and Building) Unimproved

Land Value Per

Acre Fees Per

Acre Site

Development

Cost Per Acre B uilding

Construction

Costs Per Acre TOTAL

Costs per

Acre Est. Profit

Per Acre Profit As

percent

of Value
Large Urban

Industrial $1,594,742 $157,518 $14,726 $60,768 $1,202,256 $1,435,268 $15 9,474 10%

Commercial $1,910,201 $546,032 $35,306 $45,576 $1,092,267 $1,719,181 $191,020 10%

Office $2,828,107 $546,032 $35,306 $45,576 $1,918,382 $2,545,296 $282,811 10%

Bay Area Commuter Shed

Industrial $1,679,815 $200,905 $47,904 $60,768 $1,202,256 $1,511,833 $167,981 10%

Commercial $2,011,879 $522,536 $150,312 $45,576 $1,092,267 $1,810,692 $201,188 10%

Office $2,929,785 $522,536 $150,312 $45,576 $1,918,382 $2,636,807 $292,979 10%

Medium

- sized Cities

Industrial $1,546,952 $ 100,000 $29,233 $60,768 $1,202,256 $1,392,257 $154,695 10%

Commercial $1,748,583 $303,178 $132,704 $45,576 $1,092,267 $1,573,724 $174,858 10%

Office $2,666,489 $303,178 $132,704 $45,576 $1,918,382 $2,399,840 $266,649 10%
Small/Medium Bedroom Community

Industrial $1,631,301 $130,700 $74,447 $60,768 $1,202,256 $1,468,171 $163,130 10%

Commercial $1,668,338 $280,576 $83,085 $45,576 $1,092,267 $1,501,504 $166,834 10%

Office $2,586,244 $280,576 $83,085 $45,576 $1,918,382 $2,327,619 $258,624 10 %

Small Rural \ Farming Communities

Industrial $1,877,846 $350,642 $76,395 $60,768 $1,202,256 $1,690,061 $187,785 10%

Commercial $1,653,475 $217,800 $136,292 $41,769 $1,092,267 $1,488,127 $165,347 10%

Office $2,567,106 $217,800 $132,444 $41, 769 $1,918,382 $2,310,395 $256,711 10%

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendi x F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 30 

# 6. SOCIOECONOMIC IMP ACTS

This section of the report compares the economic characteristics of affected industries against the possible Rule 9150 and 3180 air quality fees. The first part of this section

discusses a

nnual compliance cost. Section 6.2 discusses general business responses to compliance costs. Section 6.3 analyzes the socioeconomic impacts of Draft Rules 9510 and

3180.



# 6.1 NEW RULE 9510 AN D 3180 FEE

Tables 16 through 18 identify the worst

- case fees ass

ociated

with New Rules 9510 and 3180. To reduce emissions of NOx and PM10, Draft Rule 9510 would apply to development projects that will seek to gain a final discretionary approval for projects that, upon full build

- out will include any one of the followi ng: 50 residential units, 2,000 square feet of commercial space, 25,000 square feet of industrial space, 20,000 square feet of medical office space, 39,000 square feet of general office space, 9,000 square feet of educational space, 10,000 square feet of g overnment space, 20,000 square feet of recreational space, or 9,000 square feet of unidentified space. Certain transportation projects, transit projects, reconstruction projects that result from a natural disaster, and development projects whose primary s ource of emissions are subject to District Rule 2201 or 2010 would be exempt from this Draft Rule. Also, development projects that have a mitigated baseline below two tons per year for each pollutant would be exempt from the emission reduction
requirement

s of the rule.

It is important to note that any fee identified below are the

estimated maximum fee in the worst case scenario for a typical residential, commercial and or industrial development, with the understanding that the actual fee will vary with the particulars of any project. Any fee below is presented for the purposes of analyzing potential impacts given costs associated with reducing quantifiable emissions resulting from what constitutes typical applicable developments. The fee amounts

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendi x F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 31 identifie d include all off

- site emission reduction fees and all

administrative fees.

In the worst case, the fee that a typical residential development will pay is estimated at $784 per unit starting in 2006, climb to $1,268 the following year, and above $1,772 in

t he years starting in 2008. The fee could be lower depending on the strategies that a developer employs to reduce

emissions.

TABLE 16

Worst Case Estimate: Fee That Corresponds to A Typical Residential Development

Year Per Unit

2006 $784.12

2007 $1,268 .09

2008 $1,772



### TABLE 17

Worst Case Estimate: Fee That Corresponds To The

Typical Industrial Development

2006

Use Average

Acres Corresponding

Fee Total

Heavy Industrial 300.0 $357,394.75
Light Industrial 75.0 $240,508.75

Warehouses 25.0 $83,645.68
Misc. Industrial (industrial park) 39.0 $143.797.05

2008

Heavy Industrial 300.0 $747,626

Light Industrial 75.0 $518,237

Warehouses 25.0 $179,956

Misc. Industrial 39.0 $309,965

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendi x F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 32 TABLE 18

Worst Case Estimate: Fee That Corresponds To a Typical Commercial Development

TYPE OF SHOPPING CENTERS SIZE RANGE TYPICAL SIZE (sq ft) Corresponding Fee

Total

2006 convenience shopping center up to 30,000 20,000 $24,524.94

neighborhood shopping center 30,000 to 100,000 50,00 0 $61,599.54

community shopping center 100,000 to 450,000 150,000 $184,647.45

super community shopping center 200,000 to 300,000 250,000 $403,546.91

regional shopping center 300,000 to 700,000 450,000 $626,791.07

superregional shopping cente r 500,000 to 2 million 900,000 $1,253,582.15

2008
convenience shopping center up to 30,000 20,000 $52,971.24

neighborhood shopping center 30,000 to 100,000 50,000 $131,689.99

community shopping center 100,000 to 450,000 150,000 $397,48 3.34

super community shopping center 200,000 to 300,000 250,000 $872,322.57

regional shopping center 300,000 to 700,000 450,000 $1,353,824.12

superregional shopping center 500,000 to 2 million 900,000 $2,708,116.82



# 6.2 BUSINESS RESPONS ES TO PROPOSED FEES

Industries impacted by the proposed new 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

aff ected business operation altogether and, where practical,

shift from lower

- value to higher

- value product. Affected sources may also seek to renew efforts to increase productivity and reduce costs elsewhere in their operation in order to recoup the regulato ry costs and maintain profit levels. Based on the discussion during a focus group meeting held in July, 2005, industries impacted by the new rules will in all likelihood seek to pass the costs on to homebuyers and
renters in the case of residential fees, to the extent that the

market allows.



# 6.3 IMPACTS ON AFFECTED INDUSTRIES

This section of the report analyzes revenues and profits of affected industries against anticipated costs associated with

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendi x F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 33 implementation of the draft rule. The analysis first examine s impacts on builders of single

- family homes. Then, it analyzes impacts on builders of multi

- family units. In addition to impacts on homebuilders, the section analyzes how changes in price affect prospective homebuyers and renters. Finally,

the section below examines impacts on non

- residential developments, particularly commercial retail, industrial, and office projects.

Single

- Family Dwelling Units Tables 19 through 21 compare the fee that a typical residential development would pay in the year 2006, 20 07 and 2008, or $784, $1,268 and $1,772, against estimated profits. In calculating the impacts of the fee, we have included the

additional $400 administrative cost associated with Rule 3180. As Tables 19, 20 and 21 show, the fees do not significantly
imp act affected builders of single

- family homes in a negative manner. The fee amounts to approximately three, four and six percent of estimated net profits, meaning that affected stakeholders would still garner between 94 sand 97 percent of their original pr

ofit. Moreover, the impact is below the ten percent significance threshold employed in this analysis.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 34 TABLE 19 Impact Analysis of 2006 Air Quality Fee on Typical Single

- Family Development: $784 per unit

Community Types (1)

Profit as %

Value (2 )

Air Quality Fee

on New Res.

Cons. @ $.421/sqft (3)

Impact

on Profit (4)

Impact Significance (5)

Modified

Profit as

Percent of

Value (6)

Initial

Home

Value @
5.85%, 30 yrs and

20% down (7)

Home

Value @
5.85%, 30 yrs and

20%

down:

With Air

Fee (8)

Initial

Home

Value @
6.85%, 30 yrs and

20% down (9)

Home

Value @
6.85%, 30 yrs and

20%

down:

With Air

Fee (10)

Affect of

Fee (11)

Affect of

1% Change in

Interest

Rate
Large Urban 11.5% $797

- 2.1% <significant 11.3% $93,624 $93,846 $101,737 $101,979 $223 $8,113

Bay Area Commuter Shed 10.8% $889

- 2.1% <significant 10.6% $111,520 $111,768 $121,184 $121,454 $248 $9,664

Medium

- Sized Cities 8.3% $749

- 3.1% <significant 8.0% $82,097 $82,307 $89,212 $89,439 $209 $7,114

Small \ Medi um Bedroom Communities 8.5% $793

- 3.0% <significant 8.2% $86,972 $87,194 $94,509 $94,750 $221 $7,537

Small Rural \ Farming Communities 10.6% $692

- 2.7% <significant 10.3% $68,639 $68,833 $74,587 $74,798 $193 $5,948

All Select Cities Average 9.3% $784

- 2.6% <significant 9.0% $89,724 $89,943 $97,499 $97,737 $219 $7,775



### TABLE 20 Impact Analysis of 2007 Air Quality Fee on Typical Single

- Family Development: $1,268 per unit

Community Types (1)

Profit as %

Value (2)

Air Quality Fee

on New Res.

Cons. @ $.681/sqft (3)

Profit as

% Value (4)

Impact Significance (5)

Modified

Profit as

Percent of

Value (6)

Initial

Home

Value @
5.85%, 30 yrs and

20%

down (7)

Home

Value @

5.85%, 30 yrs and

20%

down:

With Air

Fee (8)

Initial

Home

Value @
6.85%, 30 yrs and

20%

down (9)

Home

Value @

6.85%, 30 yrs and

20%

down:

With Air

Fee (10)

Affect of

Fee (11)

Affect of

1% Change in

Interest

Rate
Large Urban 11.5% $1,289

- 3.3% <significant 11.2% $93,624 $93,983 $101,737 $102, 127 $359 $8,113

Bay Area Commuter Shed 10.8% $1,438

- 3.3% <significant 10.5% $111,520 $111,920 $121,184 $121,619 $400 $9,664

Medium

- Sized Cities 8.3% $1,212

- 5.0% <significant 7.9% $82,097 $82,435 $89,212 $89,578 $337 $7,114

Small \ Medium Bedroom Communi ties 8.5% $1,282

- 4.8% <significant 8.1% $86,972 $87,329 $94,509 $94,897 $357 $7,537

Small Rural \ Farming Communities 10.6% $1,120

- 4,3% <significant 10.2% $68,639 $68,951 $74,587 $74,925 $312 $5,948

All Select Cities Average 9.3% $1,268

- 4.3% <significan t 8.9% $89,724 $90,007 $97,499 $97,883 $353 $7,775

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 35 TABLE 21 Impact Analysis of 2008 Air Quality Fee on Typical Single

- Family Development: $1,772 per unit

Community Types (1) Profit

as % Value (2)

Air Quality Fee

on New Re s.
Cons. @ $.952/sqft (3)

Profit as

% Value (4)

Impact Significance (5)

Modified

Profit as

Percent of

Value (6)

Initial

Home

Value @
5.85%, 30 yrs and

20%

down (7)

Home

Value @
5.85%, 30 yrs and

20%

down:

With Air

Fee (8)

Initi al

Home

Value @
6.85%, 30 yrs and

20%

down (9)

Home

Value @
6.85%, 30 yrs and

20%

down:

With Air

Fee (10)

Affect

of Fee (11)

Affect of

1% Change in

Interest

Rate
Large Urban 11.5% 1,802

- 4.6 <significant 11.0% $93,624 $94,125 $101,737 $102,281 $501 $8,113

Bay Area Commuter Shed 10.8% 2,011

- 4.6 <significant 10.3% $111,520 $112,079 $121,184 $121,791 $559 $9,664

Medium

- Sized Cities 8.3% 1,694

- 6.9 <significant 7.7% $82,097 $82,568 $89,212 $89,723 $471 $7,114

Small \ Medium Bedroom Communities 8.5% 1,7 92

- 6.7 <significant 7.9% $86,972 $87,471 $94,509 $95,050 $498 $7,537

Small Rural \ Farming Communities 10.6% 1,565

- 6.0 <significant 10.0% $68,639 $69,074 $74,587 $75,060 $435 $5,948

All Select Cities Average 9.3% 1,773

- 5.9 <significant 8.7% $89,724 $90, 217 $97,499 $98,035 $493 $7,775



### TABLE 22 Median Home Sale Prices in Small to Medium Communities, 2003

- 2005

July 2003 July 2004 July 2005 03

- 04 Change 04

- 05 Change 03

- 04 Per Chg 04

- 05 Per Chg

Medium Merced (Merced) $204,341 $226,741 $322,500 $22,400 $95,759 11% 42%
Tulare (Tulare) $125,379 $161,146 $204,000 $35,767 $42,854 29% 27%

Turlock (Stanislaus) $240,088 $284,330 $369,500 $44,242 $85,170 18% 30%

Visalia (Tulare) $154,723 $185,938 $270,000 $31,215 $84,062 20% 45%

Small/Medium Bedroom Commu nity Atwater (Merced) $207,009 $232,422 $324,250 $25,413 $91,828 12% 40%

Mendota (Fresno) $77,438 $120,000 $42,563 55%
Sanger (Fresno) $161,659 $171,734 $276,500 $10,075 $104,766 6% 61%

Selma (Fresno) $123,245 $177,158 $249,250 $53,912 $72,092 44% 41%

Small Rural/Farming Oakhurst (Madera) $209,143 $273,742 $306,000 $64,599 $32,258 31% 12%

Taft (Kern) $82,697 $77,474 $110,000

- $5,223 $32,526

- 6% 42%

Wasco (Kern) $93,101 $103,299 $132,000 $10,198 $28,701 11% 28%

$160,139 $179,220 $244,000 $1 9,082 $64,780 12% 36%



### Source: Applied Development Economics, based on Dataquick

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 36 A close review of Tables 19 through 21 reveals that the fees under consideration could potentially impacts different community types in different ways. For Medium

- sized

comm unities, Small

\ medium bedroom communities, and

Small rural \ farming communities, the impact of the possible fee on profits is slightly higher than impact to home builders operating in the large urban and Bay Area Commuter Shed markets. This is so because p rices of new homes are higher

in the latter markets. To understand the influence of the $784, 1,268 or $1,772 fee on home prices in the Medium

sized cities, Small

\ medium bedroom communities, and Small

rural \ farming communities, it is worthwhile to compare the fees against recent changes in home prices in cities in these three community types.

Table 22 above includes recent data from Dataquick. Among other things, it shows that between July 2003 and July 2004 and July 2004 and July 2005, median prices of h omes increased by $19,000 and $65,000 in specific cities in

Medium

- sized cities, Small

\ medium bedroom communities,

and Small rural \ farming communities. Table 22 includes all homes sold, not just newly constructed three

- to

- four

bedroom homes. While the fe e could raise home prices by $784 to $1,772, it is apparent that larger market forces are the primary culprit behind the increase in housing prices in these three community types. The fee associated with Draft Rules
9510 and 3180 would amount to, at most, three percent of recent change in housing prices in these three community types (or $1,772 divided by $65,000).

Tables 19 through 21 above also include an analysis on how the $784, $1,268 or $1,772 fee would impact potential homebuyers. In other words, we assume that the homebuilder will pass this cost on to homebuyers to the fullest extent possible allowed by the market. As Table 11 above previously showed, the price of a new three

- to

- four bedroom home in the San Joaquin Valley region is approximately $3

24,000. In large urban areas of Bakersfield and Fresno, the average price of a new three

- to

- four bedroom home is $338,000, while in the Bay Area Commuter Shed, it is even higher at $402,700. Housing is more
affordable in rural communities such as Avenal, where the

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 37 average price of a new home is $247,800 (see Table 11 above).

In Column Six of Tables 19 though 21, we estimate the minimum household income required to qualify for conventional financing for new three

- to

- four bedroom

homes in the different mark et types. We assume that the potential homebuyer is a first

- time homebuyer, meaning that there are no proceeds from the sale of a previous home to put towards the purchase of the new home. We assume that the potential homebuyer will have a downpayment eq ual to 20 percent of the market value of the unit. We also factor in a 5.85 interest rate, monthly bills, homeowners insurance, and property taxes when calculating the minimum household income needed to qualify for a new three

- to

- four bedroom

home in the San Joaquin Valley.

To qualify for financing for a $324,000 home in the Central Valley, a prospective first

- time home buying household would need to earn approximately $89,724 annually.

Columns Seven and Ten to the tables above show the extent

to which the different fees raise the minimum qualifying
household income. As a result of the $784, $1,268 and $1,772 fees, minimum qualifying incomes for the region as a whole would rise, on average, by $219, $353, and $493 respectively. The $219 to $493 amount is less than one percent of the original income needed to qualify for a new

three

- to

- four bedroom home in the Central Valley.

For comparative purposes, Tables 19 through 21 include Columns Eight and Eleven, which show what would happen

if interest rates ro

se from 5.85 percent to 6.85 percent. If this occurred, the minimum qualifying income would rise from $89,724 to $97,499, or by $7,775. In other words, while the fees have the potential to increase the amount of income required to qualify for financing, larger market forces such as

interest rates and market

- driven price fluctuations play a significantly greater role in determining the income level needed to qualify for a new three

- to

- four bedroom home.

Multi

- Family Dwelling Units Tables 23 through 25 show the affects of the fees on

construction of multi

- family dwelling units. Small \ medium

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 38 bedroom communities and Small rural \ farming communities are affected negatively more so than the other communities, because the price of multi

- family dwelling units elsew here are higher than in these community types. Columns Six and

Seven in each of the tables below estimate the minimum income required to purchase a multi

- family unit such as a
condominium or townhouse, and the extent to which the impact fee could raise th

is amount, in the event developers of

multi

- family units pass costs onto the consumers. The fee could raise the minimum income needed to qualify for financing for the purchase of a condominium or townhouse valued at $145,300 (see Table 14 above), from $40 ,237 to $40,455 ($784 fee), $40,589 ($1,268 fee) or at most $40,696 ($1,772 fee), which represent at most a one percent change. Tables 23 through 25 below show that the fee would only slightly affect rents, in the event units were rented out as opposed to

sold.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 39 TABLE 23 Impact Analysis of 2006 Fee on Typical Multi

- Family Housing Development: $784 per unit

Community Types (1)

Profit

as %

Value (2)

Air Quality

Fee on New

Res. Cons. @ .732/sqft (3)

Impact

on Profit (4)

Impact Signifi cance (5)

Modified

Profit as

Percent of

Value (6)

Initial

Condo

Townhouse

Value @

5.85%, 30 yrs and 20%

down (7)

Condo

Townhouse

Value @
5.85%, 30 yrs and 20%

down: With

Air Fee (8)

Minimum

Rent

without

Air Fee (9)

Minimum

Rent with

Air Fee (10)

Qualifying

Rental

Household

without Air

Fee (11)

Qualifying

Rental

Household

with Air

Fee

Large Urban 17.7% $788

- 3.0% <significant 17.3% $40,689 $40,907 $1,150 $1,157 $41,453 $41,675

Bay Area Commuter Shed 23.3% $788

- 1.9% <significant 22.9% $50,0 19 $50,237 $1,414 $1,420 $50,958 $51,180

Medium 14.1% $788

- 4.1% <significant 13.5% $38,042 $38,260 $1,076 $1,082 $38,756 $38,978
Small/Med Bedroom Community 8.0% $788

- 7.2% <significant 7.5% $37,683 $37,901 $1,065 $1,072 $38,391 $38,613

Small Rural/Far ming 11.0% $788

- 5.7% <significant 10.4% $34,753 $34,971 $983 $989 $35,405 $35,628

All Select Cities Average 14.9% $788

- 3.6% <significant 14.3% $40,237 $40,455 $1,138 $1,144 $40,992 $41,215



### TABLE 24 Impact Analysis of 2007 Fee on Typical Multi

- Family H ousing Development: $1,268 per unit

Community Types (1)

Profit

as %

Value (2)

Air Quality

Fee on New

Res. Cons. @ $1.184/sqft (3)

Impact

on Profit (4)

Impact Significance (5)

Modified

Profit as

Percent of

Value (6)

Initial C ondo

Townhouse

Value @
5.85%, 30 yrs and 20%

down (7)

Condo

Townhouse

Value @
5.85%, 30 yrs and 20%

down: With

Air Fee (8)

Minimum

Rent

without Air

Fee (9)

Minimum

Rent with

Air Fee (10)

Qualifying

Rental

Household

without Air

Fee (11)

Qualifying

Ren tal

Household

with Air Fee

Large Urban 17.7% $1,268

- 4.9% <significant 16.9% $40,689 $41,041 $1,150 $1,160 $41,453 $41,812

Bay Area Commuter Shed 23.3% $1,268

- 3.0% <significant 22.6% $50,019 $50,371 $1,414 $1,424 $50,958 $51,317

Medium 14.1% $1,268

- 6 .6% <significant 13.2% $38,042 $38,394 $1,076 $1,086 $38,756 $39,115
Small/Med Bedroom Community 8.0% $1,268

- 11.6% significant 7.1% $37,683 $38,035 $1,065 $1,075 $38,391 $38,749
Small Rural/Farming 11.0% $1,268

- 9.2% <significant 10.0% $34,753 $35,105 $ 983 $993 $35,405 $35,764

All Select Cities Average 14.9% $1,268

- 5.9% <significant 14.0% $40,237 $40,589 $1,138 $1,148 $40,992 $41,351

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 40 TABLE 25 Impact Analysis of 2008Fee on Typical Multi

- Family Housing Development: $1,772 per unit

Community Types (1)

Profit

as %

Value (2) Air Quality

Fee on New

Res. Cons. @ 1.655/sqft (3)

Impact

on Profit (4)

Impact Significance (5)

Modified

Profit as

Percent of

Value (6)

Initial Condo

Townhouse

Value @
5.85%, 30 yrs and 20%

down (7)

Condo

Townhouse

Value @
5.*5%, 30 yrs and 20%

down: With

Air Fee (8)

Minimum

Rent

without Air

Fee (9)

Minimum

Rent with

Air Fee (10)

Qualifying

Rental

Household

without Air

Fee (11)

Qualifying

Rental

Household

with Air Fee

Large Urban 17.7% $1,657

- 6. 3% <significant 16.7% $40,689 $41,148 $1,150 $1,150 $41,453 $41,920

Bay Area Commuter Shed 23.3% $1,657

- 3.9% <significant 22.4% $50,019 $50,478 $1,414 $1,427 $50,958 $51,426

Medium 14.1% $1,657

- 8.5% <significant 12.9% $38,042 $38,501 $1,076 $1,089 $38, 756 $39,224
Small/Med Bedroom Community 8.0% $1,657

- 15.1% significant 6.8% $37,683 $38,142 $1,065 $1,078 $38,391 $38,858
Small Rural/Farming 11.0% $1,657

- 12.0% significant 9.7% $34,753 $35,212 $983 $996 $35,405 $35,873

All Select Cities Average 14.9% $1,657

- 7.7% <significant 13.7% $40,237 $40,696 $1,138 $1,151 $40,992 $41,460

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 41 Affordable Housing For Low

- and Moderate

Income Households

The discussion above focused on how fees would affect first

time homebuyers of single

- family and multi

- family units, as well as potential renters. In that context, housing affordability refers to the minimum income required to qualify for either a mortgage or the minimum income needed to pay a certain rent, with the understanding that the annual housing payment must not exceed one

- third of annual household income. The federal agency called the Department of Housing and Urban Development (HUD) and private lenders use the one

- third threshold as a way to gauge housing affordability. Anyone paying more than one

third of hi s or her income on housing is living in an

unaffordable situation.

Affordable housing also refers to the extent to which low

income and moderate

- income households can access housing at affordable rents. Every year, the federal government issues guidelin es as to what constitutes low

- income and moderate

income households, particularly for the purposes of qualifying households for federal housing programs such as

Section 8 or the Low

- Income Housing Tax Credit program. In turn, state and local agencies adopt these guidelines when carrying out their respective housing programs.

Table 26 below identifies the federal Housing and Urban Development’s (HUD) 2005 income guideline for most of the Central Valley, and this guideline adjusts for number of people in a ho

usehold. A single individual earning no more
than $27,500 is a low

- income individual, while a single
individual make $27,502 would be a moderate

- income

person.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 42 TABLE 26 HUD Income Guidelines, 2005

Low Income Moderate

Minimum Maximum Minimum Maxi mum

1 person $0 $27,500 $27,501 $41,250

2 persons $0 $31,400 $31,401 $47,100

3 persons $0 $35,350 $35,351 $53,025

4 persons $0 $39,300 $39,301 $58,950

5 persons $0 $42,400 $42,401 $63,600

6 persons $0 $45,550 $45,551 $68,325

7 persons $0 $48,700 $48 ,701 $73,050

8 or more persons $0 $51,850 $51,851 $77,775



### Source: Applied Development Economics, based on Department of Housing and Urban Development



# More importantly for the purposes of this analysis, a single person making no more than $27,500 a year and who, at the same time, pays a rent that does not exceed one

- third of her or his income lives in an affordable situation. Conversely, a single individual making no more than $27,500 who is paying

a rent that exceeds one

- third of his or her income is li ving in

an unaffordable situation. Table 27 below calculates the rents

that would be affordable to low

- and moderate

- income households. For the most part, rents that low

- income households should pay are substantially below the rents that typical new multi

- family units constructed in the region should command, even before the imposition of the air fee. For example, 2

- person low

- income households should pay no more than $785 on rent. As Tables 23 through 25 showed, rent for a newly constructed apartment un it should be $1,138,

which is unaffordable to 2

- person low

- income households by standards established by HUD. On the other hand, a two

person moderate

- income household that paid the $1,138 would be living in an affordable situation, since the maximum

rent for purposes of calculating affordability is $1,178. A

one

- person moderate

- income household should pay no more
than $1,031 toward rent; thus the $1,138 rent calculated in Table 23 through 25 would constitute unaffordable housing.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 43 TABLE 27 Affordable Mo nthly Rents

Affordable Rent:

Low Income Affordable Rent:

Moderate Income

Minimum Maximum Minimum Maximum

1 person $0 $688 $689 $1,031

2 persons $0 $785 $786 $1,178

3 persons $0 $884 $885 $1,326

4 persons $0 $983 $984 $1,474

5 persons $0 $1,060 $ 1,061 $1,590

6 persons $0 $1,139 $1,140 $1,708

7 persons $0 $1,218 $1,219 $1,826

8 or more persons $0 $1,296 $1,297 $1,944



# Without public subsidies to either the renting households or to housing developers, most low

- income households in the

Central Va

lley are priced out of newly constructed multifamily units, the rents for which need to be at a level to take into account price of land, development costs, developer fees, and an adequate level of profit, among other things. For the region as a whole, the

market rate rent for a typical multi

family unit is calculated at $1,138, though rents are higher or lower depending on the community type, with Large Urban communities and the Bay Area Commuter Shed requiring higher rents (see Tables 23 through 25 Column Eight).

Moderate

- income households consisting of no more than three persons should be able to afford newly constructed

multi

- family units with monthly rents at or about $1,138, although the same cannot be said for moderate

- income households consisting of

four or more persons, who will need higher

- priced living quarter with additional rooms.

There are a number of housing programs and policies that

can assist low

- and moderate

- income households to live in market rate housing. Federal housing programs such as Section 8 provide the difference between the amount 3 

# that a

low

- income household can pay and the actual rent for an apartment in the private sector that is willing to accept Section 8. However, local governments receive only a limited

number of Section

8 vouchers from the federal government,

3 

## The amount that a Section 8 tenant contributes toward rent on an out of pock et basis must not exceed one

third of the tenant’s annual income.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 44 resulting in waiting lists consisting of many households waiting a relatively long time. Other public subsidies are aimed at encouraging the private sector to set

- aside some, if not all, newly constructed housing a s affordable to low

- and

moderate

- income households. The federal Low

- Income Housing Tax Credit (LIHTC) or, at the local level, the twenty percent housing redevelopment tax increment set

- aside are just two revenue sources that can increase the feasibility of setting aside units at below market rents for low

- and

moderate

- income households. Like the Section 8 program,

there are some inherent limitations to the LIHTC and the tax

increment set

- aside programs. The financing via the federal LIHTC program is not

readily available as it is accessed on a competitive basis. Not all cities have redevelopment agencies, and, of those with such agencies, it takes some time to generate the necessary amount of revenues (also known as tax increment) for a successful housi ng set

- aside program.

Some cities have what are called “inclusionary housing” policies, meaning that in order to obtain approval for this or that housing project, the developer must guarantee that a certain portion (typically 15 percent) is reserved for low

- and

moderate

- income households. Some cities sweeten their inclusionary policies with public financing, and some do not. It is argued that “inclusionary housing” policies without public subsidies result in overall higher rents or home prices,

as deve lopers required to set

- aside housing at below

- market levels for some units make up the difference by driving up the price of rest of the bulk of the units in a project. 4



# Non

- Residential Development Table 28 below analyzes the impacts of the Draft Rule 9510 and 3180 commercial and industrial fees on a per acre basis. In 2006, the fee on a typical retail and office development will amount to $15,286 and $7,914 per acre respectively. In the year 2008, fees on a per acre basis are expected to increase to
$33, 008 (retail) and $17,099 (office). As the table shows, in

4 Home Builders Association of Northern California

- HBA News, ( www.hbanc.org/ news2000/
JulAug2001/ JulAug01feat2.html) / “The Inclusionary Housing Debate

- Who Really Pays for Affordable ...”
(www.realtor.org/sg3.nsf/Pages/housingdebatepays?OpenDocument)

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 45 the year 2006 possible off

- site emission reduction fees on new typically

- sized commercial and office developments will not exceed the threshold of significance. The possible off

site fee amounts t

o an estimated 21 percent of profits in the year 2006. In 2008, the possible air off

- site fees on new typically

- sized commercial retail developments will exceed the threshold of significance by six to ten percent, depending on the community in which devel opment occurs. The dollar amount in excess of the threshold in the year 2008 ranges from $12,889 to $16,324 per acre for commercial developments.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 46 TABLE 28 Impact Analysis of 2006 and 2008 Fee on Typical Commercial

- Industrial Project

Est. Fees Per Acre Est. Fees As % of Profit Percent Abo ve Significance

Threshold Dollar Amount

Above Significance

Threshold

Avg. Value

Per Acre Est. Profit

Per Acre Profit as

percent of

Value 2006 2008 2006 2008 2006 2008 2006 2008

Large Urban

Industrial $1,594,742 $159,474 10% $1,880 $4,000 1% 3% < sig. < sig.

Commercial $1,910,201 $191,020 10% $15,286 $33,008 8% 17% < sig. 7% $13,906

Office $2,828,107 $282,811 10% $7,914 $17,099 3% 6% < sig. < sig.

Bay Area C ommuter Shed

Industrial $1,679,815 $167,981 10% $1,880 $4,000 1% 2% < sig. < sig.

Commercial $2,011,879 $201,188 10% $15,286 $33,008 8% 16% < sig. 6% $12,889

Office $2,929,785 $292,979 10% $7,914 $17,099 3% 6% < sig. < sig.

Medium

- sized Cities

Industrial $1,546,952 $154,695 10% $1,880 $4,000 1% 3% < sig. < sig.

Commercial $1,748,583 $174,858 10% $15,286 $33,008 9% 19% < sig. 9% $15,522

Office $2,666,489 $266,649 10% $7,914 $17,099 3 % 6% < sig. < sig.

Small/Medium Bedroom Community

Industrial $1,631,301 $163,130 10% $1,880 $4,000 1% 2% < sig. < sig.

Commercial $1,668,338 $166,834 10% $15,286 $33,008 9% 20% < sig. 10% $16,324

Office $2,586,244 $258,624 10% $7,914 $17,099 3% 7% < sig. < sig.

Small Rural \ Farming Communities

Industrial $1,877,846 $187,785 10% $1,880 $4,000 1% 2% not sig. not sig.

Commercial $1,653,475 $165,347 10% $15,286 $33,008 9% 20% not sig. 10%

Office $2,567,106 $256,711 10% $7,914 $17,099 3% 7% not sig. not sig.

# SAN JOAQUIN VALLEY UNI FIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 47 It is not clear how the development community will adjust to
the additional costs. Rather than absorb the costs, the developer (or a subsequent owner of an affected project site) might seek to pass costs onto commercial tenants in the form

of rent increases. Table 29 translates the amount of the total fee into a per square foot rent for significantly impacted commercial uses. While the 2006 fee does not significantl y impact developers of commercial uses, the 2008 fee significantly impacts these developers to the tune of $13,905. This amounts to almost one cent per square foot, which developers will pass onto future commercial tenant.

It is worth noting that the 2006 and 2008 fee, in effect, sets the bar slightly higher with respect to lease rates on all new commercial developments in the region. Comparable office developments that have been in place prior to the new fees could conceivably raise monthly rents by one cent. In addition, comparable retail sites in place prior to the new fees could conceivably raise rents by two cents in 2008.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 48 TABLE 29 2006 and 2008 Fee on Typical Commercial

- Industrial Project: Affect of Fee on Monthly Rent

2006 Dollar

Amount Signifi cance Threshold Fee as a

Percent of

Profit Amount Above

Significance

Threshold 2006 Fee Per

SqFt 2006 Per Sqft

Fee As Monthly

Rent Increase Over Typical

Amortization

Period (15 years) 2008 Dollar

Amount Significance

Threshold Fee as a Percent

of Profit Amount Above

Significance

Threshold 2008 Fee Per

SqFt 2008 Per Sqft

Fee As Monthly

Rent Increase Over Typical

Amortization

Period (15 years) Large Urban

Industrial < sig. 1% < sig. < sig. 3% < sig.

Commercial < sig. 8% < sig. $13,906 17% 7% $1.28 $0.007

Office < sig. 3% < sig. < sig. 6% < sig.
Bay Area Commuter Shed

Industrial < sig. 1% < sig. < sig. 2% < sig.

Commercial < sig. 8% < sig. $12,889 16% 6% $1.18 $0.007

Office < sig. 3% < sig. < sig. 6% < sig.

Medium

- sized Cities

Industrial < sig. 1% < sig. < sig. 3% < sig.

Commercial < sig. 9% < sig. $15,522 19% 9% $1.43 $0.008

Office < sig. 3% < sig. < sig. 6% < sig.

Small /Medium Bedroom Community

Industrial < sig. 1% < sig. < sig. 2% < sig.

Commercial < sig. 9% < sig. $16,324 20% 10% $1.50 $0.008

Office < sig. 3% < sig. < sig. 7% < sig.

Small Rural \ Farming Communities

Industrial < sig. 1% < sig. < sig. 2% < sig.

Commercial < sig. 9% < sig. $16,473 20% 10% $1.51 $0.008

Office < sig. 3% < sig. < sig. 7% < sig.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 49 

# 6.4 IMPACT ON SMALL BUSINESSES

In addition to analyzing the various impacts of the P roposed Indirect Source Rule (Draft Rules 9510 and 3180) that are discussed above, state legislation requires that the socioeconomic analysis assess whether small businesses are disproportionately affected by air quality rules. This section

discusses how fees that are assessed on developers of residential and commercial projects are typically passed onto

the consumer. Because of the additional costs associated with the proposed off

- site emission reduction fee, prospective buyers must either increase their respective household incomes or produce a downpayment that is larger than the typical 20 percent. Thus, prospective homebuyers may have to delay purchasing goods and services as a result of the need to raise additional downpayment, resulting in
impacts t o local stores, particularly small businesses. This section discusses potential small business impacts resulting

from Draft Rule 9510 and 3180.

Off

- Site Emission Reduction Fees, Minimum Household Income, and the Downpayment As the analysis above demonstra ted, the 2006, 2007 and 2008

off

- site emission reduction fee under consideration could slightly raise the minimum qualifying incomes for obtaining a conventional loan by, on average, $219, $353, and $493. In
other words, to finance a new three to four bed room home valued at $323,966 in the region, a first

- time homeowner
would need an income of at least $89,724. 5 

# The 2006 fee could raise this minimum by a slight $219, to $90,217

What if a lender is inflexible and will not extend a loan to

household that is

$219 to $493 short of the minimum income needed to qualify for financing? In cases such as this, the prospective homeowner will have to produce a larger downpayment or pay a higher interest rate. The table below identifies the amount of additional downp ayment above the

5 

## This minimum will change depending on the housing market, with households in Large Urban and Bay Area
Commuter Shed communities needing more income than households in other part of the r egion.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 50 amount generated by the typical 20 percent downpayment

rate.

As Table 30 shows, in the region in general, a household with at least $89,724 in income can afford to purchase a newly constructed three to four bedroom unit priced at $323,966 so long it has a downpayment in the amount of $64,793, or 20 percent of the value of the home. In general, the 2006 through 2008 off

- site emission reduction fees will require prospective homeowners to produce an additional $970 to $2,147 that will go tow

ards the downpayment, in the event a lender is unwilling to exercise flexibility with respect to minimum income needed to qualify for a loan. The amount of additional downpayment differs between housing markets, with households in the Large Urban communit ies and the Bay Area Commuter Shed having to pay more.

Table 30 Potential Per Household Impact of Off

- Site Emission Reduction Fees On Downpayment: Single Family Unit

Initial Qualifying

Household

Income

Prior to

Fee: SFU Initial

Downpayment Additional

Do wnpayment (2006 fee: $784) Additional

Downpayment (2007 fee: $1,268) Additional

Downpayment (2008 fee: $1,772)

Large Urban $93,624 $67,609 $1,008 $1,616 $2,231

Bay Area Commuter Shed $111,520 $80,533 $1,188 $1,906 $2,629

Medium

- Sized Cities $82,097 $59,286 $894 $1,434 $1,980

Small \ Medium Bedroom Communities $86,972 $62,806 $947 $1,519 $2,097

Small Rural \ Farming Communities $68,639 $49,567 $761 $1,221 $1,686

All Select Cities Average $89,724 $64,793 $970 $1,556 $2,147



# Table 31 is similar to Table 30, although it focuses on the additional amount of downpayment required of prospective buyers of townhouses and condominiums. In general, the 2006 through 2008 off

- site emission reduction fees will require prospective homeowners to produce an additional downpayment ranging from $932 to $1,948.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 51 Table 31 Potential Per Household Impact of Off

- Site Emission Reduction Fees On Downpayment: Multi

- Family Unit

Initial Qualifying

Household

Income

Prior to

Fee: MFU Initial

Downpayment Additional

Downpayment (2006 fee: $784) Additional

Downpayment (2007 fee: $1,268) Additional

Downpayment (2008 fee: $1,772)

Large Urban $40,907 $29,383 $940 $1,529 $1,966

Bay Area Commuter Shed $50,237 $36,121 $1,119 $1,818 $2,336

Medium

- Sized Cities $38,260 $27,471 $890 $1, 447 $1,860

Small \ Medium Bedroom Communities $37,901 $27,212 $883 $1,435 $1,846

Small Rural \ Farming Communities $34,971 $25,096 $827 $1,344 $1,730

All Select Cities Average $40,455 $29,057 $932 $1,515 $1,948



# Prospective Homebuyers and Small Business

Di sproportionate Impact Analysis Faced with the need to increase the amount of downpayment, a household will have to save by cutting back on expenditures, which could result in a decline in purchases of discretionary items from local retail and services

esta blishments. Consumers may stop spending altogether, or shift their spending toward lower

- priced goods and services. As we shall see, there is ample reason to believe that impacts associated with the decline in spending that corresponds to
the 2006, 200

7 and 2008 fees will be temporary. Before engaging in that discussion, below is a brief summary of what constitutes a small business for the purposes of analysis.

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 manner 6



# . 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 princi pal office located in California

6 

## State of California. Department of General Services. “California Small Business Certification” (http:
www.pd.dgs.ca.gov/smbus/sbcert.htm)

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 52 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 l ess over the previous tax years, or

• 

# A manufacturer with 100 or fewer employees

Data is available as to the number of retail and services establishments in the eight

- county region, and with this data we can estimate sales by stores with 100 or fewer employe es. Table 32 below provides an estimate on the number of retail,

accommodations

- food services, and arts

- entertainment

recreation establishments in the region, including estimates on their respective sales. Data comes from the County

Business Patterns an

d the US Economics Census.

TABLE 32

Number of Commercial Establishments That Sell Goods and Select Discre tionary Services: San Joaquin Valley Air Basin, 2002

Total

Establish

ments Sales Total Nos.

Small

Businesses Sales By Small

Businesses

Commercial

Retail* 8,792 $21,790,159,759 8,601 $14,971,588,578

Accommodations and Food Services 6 27 $532,590,300 615 $365,953,623

Arts, Entertainment and Recreations 5,139 $3,048,315,000 5,108 $2,809,025,816

Gasoline stations 1,044 $2,909,895,000 1,044 $2,909,895,000

15,602 $28,280,960,059 15,368 $21,056,463,017

* Apparel, groceri es, home improvement, specialty retail, auto (except gas stations)



# As Table 32 shows, in 2002 there were 15,602 stores that sold consumer goods and select number of discretionary services (such as entertainment venues and restaurants) and, of these,

15, 368 employed less than 100 workers. These small stores generated approximately $21.1 billion in sales. Based on a

review of ten

- year’s worth of data from Dun and Bradstreet, we estimate that retail generates after tax net profits that amount to 2.2 perce

nt of sales, while both accommodations

-

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 53 food services and arts

- entertainment

- recreations generate returns of 5.1 percent of sales. Combined, these industries generated an estimated $548.6 million in net profits.

Table 33 estimates the aggregate amount of a dditional dollars
that households will have to set aside as a result of the 2006,

2007 and 2008 off

- site emission reduction fees. The additional downpayment per household is multiplied against the number of new single

- family units that are built in the

re gion. According to the California Department of Finance, the eight

- county region grew by an average of 15,000 single

family units per year between 1995 and 2005. This amount is
somewhat consistent with data in Table 2, which shows that

between 1993 and 2

003, homebuilders took out building permits to construct 15,000 and 27,000 single

- family homes in those years, for an annual average of 18,800 single

- family homes. In calculating the aggregate amount of additional

dollars that all households will need to set aside because of the air quality fees, we adjusted for the fact that not all are

first

- time homebuyers. 7



### TABLE 33 Aggregate Amount of Dollars All Households Will Need to Set Aside As A Result of

Off

- Site Emission Reduction Fees

Additional Downpayment (2006 fee) Additional

Downpayment (2007 fee) Additional

Downpayment (2008 fee)

$970 $1,556 $2,147

Scenario 1: Low 15,000 u nits $5,820,000 $9,336,000 $12,882,000

Scenario 2: Mid 19,000 units $7,760,000 $12,448,000 $17,176,000

Scenario 3: High 30,000 units $11,640,000 $18,672,000 $25,764,000



# If 15,000 newly constructed single

- family units are sold in 2006, then the aggregat

e additional downpayment amount

attributable to first

- time homebuyers will equal $5.8 million, as Table 33 shows. If the number of units goes as high as 30,000, then the additional downpayment will equal $11.6 million. In the highest scenario in year 200 8, the aggregate

7 

## Scenario 1 2006 fee = (15,000 x 40% rate of rentership) x $970 = $5,820,000

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 54 amount of additional downpayment could equal $25.8
million. Thus, local retail and services establishments, particularly small businesses, could lose anywhere between

$5.8 million to $25.8 million.

Table 34 below compares the amounts in Table 33 against the estimated net profits of retail and services establishments that employ less than 100 workers. As the table shows, the aggregate amount of additional dollars that households will

need to set aside as a result of the off

- site emission

reduction fee amounts to one to five percent of net profits of small retail and select services establishments. These impacts are below the ten percent threshold of significance employed in this and other socioeconomic analyses for the purposes of

evalua ting proposed air quality rules. 8 

# It is worth noting that the analysis assumes that all of the dollars in Table 33 are spent at small business establishments, which, in reality,
would not be the case. As a result, the table below overstates
impacts on small businesses. Thus, the proposed rule does not disproportionately impact small businesses.

TABLE 34 Impact on Net Profits of Small Business Retail and Select Services Establishments

Additional
Downpayment (2006 fee) Additional

Downpayment (2007 fee) Additional

Downpayment (2008 fee)

$970 $1,556 $2,147

Scenario 1: Low 15,000 units 1% 2% 2%

Scenario 2: Mid 19,000 units 1 % 2% 3%

Scenario 3: High 30,000 units 2% 3% 5%



# In all likelihood, the impacts identified in Table 34 are temporary. More than likely, the purchase of a new home will spur additional spending at retail and services

establishments in excess of what is sh own in Table 33. A

8 

## It should be noted that the r eport does not include a corresponding analysis for multi

- family units because the
impacts on net profits were significantly less than one percent, in large part because the number of newly
constructed and sold new townhouses in the eight

- county region is so low, ranging from 50 to 100 units per

year.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 55 recent Pittsburgh Post

- Gazette newspaper article on spending habits of new homeowners quotes the web

- site of a marketing data company, which indicated that “New homeowners are golden opportunities for the enterprising

businessman. Thes

e prospects are full of hope and ready to spend money.” 9



# Clickdata.com reports that many new homeowners purchase a new car within the first year at their

new address. 10



# New homeowners are in a spending mood not simply

because of the number of new credit c ards and or other financing instruments that lenders eagerly extend to

households that have demonstrated the financial wherewithal to purchase something as significant as a new home. For some, a new home represents a new phase in the life cycle of

a househ old, including the addition of new family members such as children or a spouse. Others simply need bigger and better space. Inevitably, the new stage in the life cycle involves corresponding needs for goods and services from

retail and service establishm ents, including small businesses.

Small Business Disproportionate Impact Analysis

and Non

- Residential Developments The section directly above examined potential impacts on
small businesses that sell retail items to consumers, particularly as the impacts re late to how households shift from funds from spending to saving. The section concludes that impacts will be temporary and more than compensated for when a household purchases a home. New Rule 9510 and 3180 could potentially impact small businesses in oth er ways as well. In particular, small business may not be able to absorb rent increases contemplated in Section 6.3 above.

This section evaluates the impacts of rent increases discussed in Section 6.3 on small businesses, particularly those that

occupy commercial developments. As Section 6.3 demonstrated, new commercial development and are potentially significantly impacted by the proposed new rule.

9 

## Caitlin Cleary, “New homeowners welcomes with onslaught of new mail” (Pittsburgh Post

- Gazette), 10

- 15

- 05

10 

## www.clickdata.com/consumer/newequity.asp

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 56 For purposes of analysis, commercial development refers to
retailers, restaurants, and entertainment and recreation

venues.

The analysis below examines how all commercial small businesses are impacted, not just new ones. As Section 6.3 noted, comparable commercial developments that have been in place prior to the new fees could conceivably have their

mont hly rents raised by one cent per square foot starting in

2008.

If small businesses cannot pass costs onto consumers, and if they are unable to increase sales, then these businesses will have to absorb the additional rent, resulting in a decline in net

p rofits. Lease rates for new and older but well

- maintained commercial space is approximately $1.50 per square foot in the San Joaquin Valley region. Scant data on arts and entertainment space suggest these areas go for $1.25 per square foot a month. 11 

# Old er buildings away from busy

commercial corridors will in all likelihood command less than the $1.50 that new buildings in busy areas command. Thus, in using the $1.50 (retail and restaurants), $1.10 (gas stations) and $1.25 (arts and entertainment), we wi ll overstate the cost in relation to net profits.

Table 35 shows that the 2008 fee will impact net profits of commercial small businesses by 1.5 percent. The bulk of impacts are borne by small businesses because these entities comprise almost 98 percent of commercial businesses and gas stations in the region. 12



# However, the impacts are less than significant. Thus, small businesses are not disproportionately impacted by the rule.

11 

## For the purposes of analysis, we assume that all commercial spaces pay these rents. Similar to the analysis
directly above, commercial space refers to retail and select services such as restaurants and arts and
entertainment venues. Select services exclude office space for industries such as accounting, medical, legal
assistance, etc., because office uses are significantly impacted by the rule, as shows in Section 6.3.

12 

## 15,368dividedby15,602 = 98%

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 57 TABLE 35 Small Business Impact of Additional Rent Resulting From Proposed Air Quality Mitigation Fee

Total Number of Retail and Select Services Establishments 15,602

Total Number of Small Business Retail and Select Services Establishments 14,324

Total Number of Small Business Retail and Select Services: Sales $18,146,568,017

Total Number of Small Business Retail and Select Services: Net Profits $485,376,512

Dollar Amount of One Cent Rent Increase (20 08 fee: commercial) $7,230,586

Impact of One Cent Rent Increase on Net Profit of commercial uses (2008 fee) 1.5%

Impact of One Cent Rent Increase on Net Profit of commercial uses (2008 fee) Less than significant

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 58 

# APPENDIX A: ECONOMIC BENEFITS ASSOCIATED

WITH DRAFT RULE 9510 AND 3180

The San Joaquin Valley Air Pollution Control District (SJVUAPCD) will use the Off

- Site Emission Reduction Fees

will be used to fund off

- site emission reduction projects located within the San Joaquin Valley . Besides providing a health benefit to all Valley residents by reducing overall emissions in the air basin, the funding projects would benefit the Valley’s economy. Potential projects for funding through this program are numerous and varied ranging from public works construction project such as road paving, procuring cleaner vehicles and equipment for businesses and local government agencies, to school bus upgrades. If all projects that go through the ISR program only reduce emissions through the off

- si te fee, the District may receive approximately $11 million dollars in 2006 and approximately $56 million in 2008 (allowing for fee deferrals) for use in the

off

- site emission reduction program. All of the money

received as an off

- site fee will be spent on

projects within the region that make the air cleaner. The program would benefit the economy through three beneficial impacts:



# LOCAL PURCHASES

Projects that require a purchase of equipment, materials, or services will result in money being re

- circulated into the regional economy. The District cannot guarantee that the manufacturer or provider would be located within the Valley, but it can be expected that the majority will be Valley businesses that benefit. For example, road

- paving projects would requir

e asphalt and similar materials that would be provided by Valley businesses. A project that buys a cleaner engine would benefit the Valley engine dealer that sells the
engine.



# LOCAL PROJECTS

It has already been stated that the program would fund local

pro jects. This means that the school, city, industry or private group that receives the funding for an emission reduction

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 59 project would benefit economically from the program. For example, a school district may receive a new, cleaner school

bus. A manufactu

ring facility may receive assistance in procuring a new, cleaner piece of equipment or pollution control device not required by District rules and regulations. A city or county would receive money that makes a road

paving project possible or enables their fleets to operate

cleaner new vehicles.



# JOB CREATION

The off

- site funding program made possible by the ISR Program may also lead to short

- term and perhaps long

- term job creation. For a financially strapped company or public agency, the funding allows f or the purchase and installation or construction of the item (be it a school bus or road project). The installation and construction aspects of the program may benefit the local economy through short

- term job creation. Since the ISR program will provide ongoing funding as development occurs over time, it is expected to continue to provide this type of benefit while the rule is in effect. In addition, more efficient equipment may reduce costs and may allow for later expansion that can create long

term job s.

# SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix F: Socioeconomic Analysis for Rules 9510 and 3180 December 15, 2005

Final Draft Staff Report for Proposed

Rule 9510 and Rule 3180 

# F

- 60 This page intentionally blank.