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APPENDIX D 

SOCIOECONOMIC IMPACT ANALYSIS REPORT 

FOR RULE 4695 

September 17, 2009 
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DRAFT RULE 4695 (WINE & BRANDY): 

SOCIOECONOMIC IMPACT ANALYSIS 

JULY 29, 2009 

Prepared for 

San Joaquin Valley Air Pollution Control District 

Prepared by 

Applied Development Economics 

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

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

www.adeusa.com
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CONTENTS 

Executive Summary ...............................................................................................................................5

Introduction ............................................................................................................................................7

Section 1. Overview of Draft Wine & Brandy Rule..........................................................................9

Existing Conditions.........................................................................................................................9

Proposed Draft New Rule 4695....................................................................................................10

Section 2. Methodology.........................................................................................................................11

Section 3. Impacted Industries Subject To Draft Rule 4695...........................................................13

3.1 Regional Demographic Rules..................................................................................................13

3.2 Regional Economic Trends.....................................................................................................14

3.3 Description of Affected Industries.........................................................................................17

Section 4. Socioeconomic Impacts Analysis ......................................................................................18

4.1 Annual Compliance Cost Estimates.......................................................................................18

4.2 Business Responses ..................................................................................................................18

4.3 Socioeconomic Impact Analysis .............................................................................................19

4.4 Small Business Disproportionate Impact Analysis ..............................................................20

Definition Of A Small Business....................................................................................................20
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EXECUTIVE SUMMARY 

Proposed Draft New Rule 4695 codifies the requirement for VOC emission controls which 

have been installed by wine fermentation operators under Rule 4694’s alternative emission 

reduction option. This rule would specify RACT for major sources as the means to achieve 

the maximum amount of VOC emission reductions by using control technologies that are 

reasonably available. Any VOC emissions reduction from the control of brandy aging have 

already been accounted for by Rule 4694 and are not considered to be additive for SIP 

purposes. This rule applies to all brandy aging and wine aging facilities but does not require 

emission controls for those facilities which have a Stationary Source Potential to Emit of less 

than 10 tons per year. 

The proposed new rule will affect two entities operating in the region. The report finds that 

these entities are not significantly impacted by the proposed draft new rule. 
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INTRODUCTION 

The San Joaquin Valley Unified Air Pollution Control District (“District”) seeks to adopt 

proposed Draft New Rule 4695 to implement emission control requirements listed in the 

2007 Ozone Plan as well as the 2008 PM 2.5 The report is prepared pursuant to the 

provisions of AB2051 (Section 40728.5 of the California Health and Safety Code), which 

requires an assessment of socioeconomic impacts of proposed air quality rules. The findings 

in this report can assist District staff in understanding the socioeconomic impacts of the 

proposed Draft New Rule 4695, and can assist staff in preparing a refined version of the 

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

Basin. As indicated in the map, Kern County is not completely in the District. 

FIGURE 1 

MAP OF SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Source: ADE, Inc. 
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SECTION 1. OVERVIEW OF DRAFT WINE & 

BRANDY RULE 

Proposed Draft New Rule 4695 codifies the requirement for VOC emission controls which 

have been installed by wine fermentation operators under Rule 4694’s alternative emission 

reduction option. This rule would specify RACT for major sources as the means to achieve 

the maximum amount of VOC emission reductions by using control technologies that are 

reasonably available. Any VOC emissions reduction from the control of brandy aging have 

already been accounted for by Rule 4694 and are not considered to be additive for SIP 

purposes. This rule applies to all brandy aging and wine aging facilities but does not require 

emission controls for those facilities which have a Stationary Source Potential to Emit of less 

than 10 tons per year. 

EXISTING CONDITIONS 

There are no existing rules in the nation that require controlling VOC emissions from 

brandy aging and wine aging operations. Rule 4623 (Storage of Organic Liquids) limits VOC 

emissions from the storage of organic liquids. The EPA originally proposed a limited 

approval/limited disapproval of Rule 4623, citing deficiencies in Rule 4623 that conflict with 

Section 110 of the federal Clean Air Act (CAA). Although not identified as a rule deficiency, 

EPA expressed concern that the rule provides an exemption for tanks used in wine 

fermentation and storage of resulting products, by-products, and spirits. EPA considers 

VOC emissions from this source category to be significant and recommended further study 

and analysis. The District Governing Board subsequently adopted amendments to Rule 4623 

in order to correct the rule deficiencies identified by EPA. 

Rule 4694 (Wine Fermentation and Storage Tanks) requires installation and operation of 

VOC emission control system to reduce emissions from wine fermentation and storage 

operations. As an alternative to controlling the emissions from wine fermentation and 

storage tanks, Rule 4694 allows operators to mitigate fermentation emissions by controlling 

alternative emission sources (i.e., reductions in surplus emissions from mobile sources, area 

sources, or stationary sources) with the expectation that reductions would be permanent. In 

lieu of installing VOC control devices to wine fermentation tanks to fulfill the Rule 4694 

requirements, operators voluntarily offered to control surplus emissions from brandy aging 

operations to obtain equivalent reductions which could then be creditable as Certified 

Emissions Reduction Credits (CER) to the wine fermentation Rule 4694. 

To attain the CER, operators of brandy aging facilities modified existing brandy aging 

warehouses to meet the requirements for a Permanent Total Enclosure as specified in EPA 

Test Method 204. This enabled ethanol emissions to be captured and destroyed using 

regenerative thermal oxidizer technology. Until the successful demonstration that the 
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operation of the capture and control system will not result in unacceptable impacts on 

brandy quality, consistency, or volume loss; the conditions of the operating permits are 

provisional, and subject to revisions. 

PROPOSED DRAFT NEW RULE 4695 

The District staff prepared a report that discusses in detail elements to proposed Draft New 

Rule 4695 (“Draft Staff Report for New Draft Rule 4695”, April 2009). Below is a list of 

changes associated with the proposed new draft rule. 

Section 3.0 – Definitions 

Section 4.0 – Exemptions 

Section 4.1 Operation Exemption 

Section 5.0 – Requirements 

Section 5.1 Thresholds 

Section 5.1.1 Meeting PTE Requirements 

Section 5.1 Demonstrating PTE 

Section 5.1.2 Continuous Negative Pressure Maintenance 

Section 5.1.5 Continuous, Automatic, Monitoring System 

Section 5.2 Routine Maintenance Down Time And Capture Efficiency 

Section 5.3.1 CEMS/Alternate Monitoring Scheme 

Section 5.3.2 Operation, Demonstration of Continuous, Automatic, Monitoring System 

Section 6.0 – Administrative Requirements 

Section 6.1 Recordkeeping 

Section 6.2.1 – 6.2.4 Compliance Testing 

Section 6.2.5 Test Methods 

Section 6.3 Compliance Testing 
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SECTION 2. 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 

new Draft Rule 4695. The approach is briefly described below. 

Applied Development Economics (ADE) began the analysis by preparing a statistical 

description of the industry groups of which the affected sources are a part, analyzing data on 

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

each industry. 

This report relies heavily on the most current data available from a variety of sources, such 

as the Dun and Bradstreet, 2002 Economic Census and the State of California’s 

Employment Development Department (EDD) Labor Market Information Division. In 

addition, ADE utilized data from California Department of Conservation and the California 

Energy Commission. For purposes of estimating profits, ADE reviewed a number of 

sources, including Dun and Bradstreet, the CCH, Inc., the US Internal Revenue Services, 

and corporate annual reports of companies subject to Rule 4695. 

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

affected by the proposed amendments. ADE calculated ratios of profit per dollar of revenue 

for affected industries. The result of the socioeconomic analysis shows what proportion of 

profits the compliance costs represent. Based on assumed thresholds of significance, ADE 

discusses in the report whether the affected sources are likely to reduce jobs as a means of 

recouping the cost of rule compliance or as a result of reducing business operations. To the 

extent that such job losses appear likely, the indirect multiplier effects of the jobs losses are 

estimated using a regional IMPLAN input-output model. 

When analyzing the socioeconomic impacts of proposed new rules and amendments, ADE 

works closely within the parameters of accepted methodologies discussed in a 1995 

California Air Resources Board report called “Development of a Methodology to Assess the 

Economic Impact Required by SB513/AB969” (by Peter Berck, PhD, UC Berkeley 

Department of Agricultural and Resources Economics, Contract No. 93-314, August, 1995). 

The author of this report reviewed a methodology to assess the impact that California 

Environmental Protection Agency proposed regulations would have on the ability of 

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

incorporated the methodologies described in this report in its own assessment of 

socioeconomic impacts of rules generated by ARB. One methodology relates to determining 

a level above or below which a rule and its associated costs is deemed to have significant 

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

employs a threshold of significance that ADE follows. Berck reviewed the threshold in his 

analysis and wrote, “The Air Resources Board’s (ARB) use of a 10 percent change in 
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[Return on Equity] ROE (i.e. a change in ROE from 10 percent to a ROE of 9 percent) as a 

threshold for a finding of no significant, adverse impact on either competitiveness or jobs 

seems reasonable or even conservative.” 
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SECTION 3. IMPACTED INDUSTRIES SUBJECT TO 

DRAFT RULE 4695 

This section of the socioeconomic analysis describes demographic and economic trends in 

the San Joaquin Valley region. The first part of this section compares the San Joaquin Valley 

region against California as a whole, and provides a context for understanding demographic 

and economic changes that occurred within the San Joaquin Valley region between 1998 and 

2008. Starting with sub-section 3.3, the second part of this section narrows the focus of the 

socioeconomic analysis to industries affected by the proposed amendments to proposed 

New Draft Rule 4695. 

3.1 REGIONAL DEMOGRAPHIC RULES 

The San Joaquin Valley region experienced tremendous population growth during the 1990s. 

Many came to this area because of affordable housing. As a result, population increased 

significantly. The eight-county region’s population increased by 24 percent (or approximately 

2.2 percent annually), from 3.2 million in 1998 to 3.9 million in 2008. In the last five years, 

population growth rate slightly declined, as regional population grew by 2.2 percent annually 

between 2003 and 2008. While the State of California’s population increased by 14 percent 

(or approximately 1.4 percent annually) between 1998 and 2008, all the counties in the region 

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

by many standards, a small county of 150,887 residents, Madera County experienced an 

annual growth rate of 2.8 percent between 1998 and 2008. Between 2003 and 2008, this 

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

five-year period, Kern, Merced, and San Joaquin Counties experienced rapid growth, 

growing annually by 2.9 percent, 2.4 percent, and 2.2 percent respectively, as Table 1 below 

shows. As demonstrated in the following section on regional economic trends, the 

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

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

TABLE 1 

POPULATION TRENDS 

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

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

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

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

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

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

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

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

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

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

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

Source: ADE, Inc., based on California Department of Finance
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3.2 REGIONAL ECONOMIC TRENDS 

Economic development practitioners and planners have traditionally divided economies into 

two broad industrial categories—the economic base and local support industries. Economic 

base industries are the drivers of local and regional economies in that these industries draw 

income into a local economy by selling products outside of the local economy, much like the 

export industries of a national economy. Accrued earnings then circulate throughout the 

local area in the form of wages and salaries; investments; purchases of fixed assets, goods, 

and services; and generation of more jobs and wealth. 

The economic base is typically comprised of industries within the manufacturing, mineralsresource extraction, and agricultural sectors. There are also the “local support industries” 

such as retail or service sectors, the progress of which is a function of the economic base 

and demographic changes, and more so the latter than the former. As population increases 

in a given area, demand for services–such as realtors, teachers, and healthcare–increases, as 

does demand for basic retail items like groceries, gas for commuting, or clothing at the local 

apparel shops. 

Agriculture is the economic base of the San Joaquin Valley region by virtue of the amount of 

goods this sector produces and exports throughout the nation and the globe. Slightly less 

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

Table 2 shows. In 1998, approximately 13.1 percent of all workers worked in agriculture. By 

2003, this ratio stood at 14 percent. In fact, over the five-year period between 2003 and 

2008, employment in agriculture increased at a modest pace of one percent per year. 

Between 2003 and 2008, local support industries gained in prominence within the San 

Joaquin Valley region. Service-rendering industries employed the most workers as a 

proportion of total employment in the region. Service-rendering industries comprise 71 

percent of all jobs, including public sector positions. In other words, 932,713 jobs out of a 

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

service-rendering jobs account for 52 percent of all jobs in 2008. In 2003, service-rendering 

industries (excluding the public sector) represented 51 percent of all jobs, indicating that the 

transition toward a services economy was in place as early as the mid to late 1990s with the 

significant increase in the number of people during that time. 

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

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

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

between 2003 and 2008. 

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

accordance with the region’s population surge; however, with the downturn in the 
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national economy, these industries’ rates of growth have lowered dramatically. Employment 

in construction grew by a 6.7 percent per year in the five-year period stretching from 1998 to 

2003. Between 2003 and 2008, construction continued to grow but by a slower rate of 0.9 

percent per year. Likewise for financial services, which grew annually by 3.9 percent between 

1998 and 2003, and has since grown by a slight 0.9 percent per year. 

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

manufacturing, as employment in this sector grew annually by 0.9 percent between 2003 and 

2008. This modest increase reversed substantial declines experienced between 1998 and 

2003, when manufacturing employment dropped annually by 0.6 percent. What was a 

regional bright spot between 1998 and 2003 (2.7 percent per year), transportation and 

warehousing declined annually by 1.1 percent between 2003 and 2008, as compared to the 

2.7 percent annual growth in the previous five-year period.
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TABLE 2 

ECONOMIC TRENDS: SAN JOAQUIN VALLEY, 1998-2008 

Employment 

Distribution 

Employment: 

Annual Percent 

Change 

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

 NAICS Estab. Employment 

Average 

Pay Estab. Employment 

Average 

Pay Estab. Employment 

Average 

Pay Region California 

ALL 80,398 1,060,454 $33,566 92,231 1,209,849 $40,577 100,414 1,317,365 $39,543 100.0% 100.0% 2.7% 1.7%Ag, Natural Resources 11 7,580 139,953 $18,285 8,646 169,556 $23,354 7,371 178,522 $21,714 13.6% 2.5% 3.9% 1.0% 

Utilities 21 251 9,533 $66,831 213 8,340 $81,309 185 10,512 $82,627 0.8% 0.0% -2.6% 4.7% Mining 22 165 4,231 $72,458 179 5,071 $86,065 169 5,618 $81,296 0.4% 0.4% 3.7% 2.1% Construction 23 6,124 49,851 $38,969 6,074 69,065 $46,870 6,705 72,312 $44,716 5.5% 5.7% 6.7% 0.9% Manufacturing 31-33 2,998 113,344 $40,989 2,779 110,002 $48,735 2,662 115,153 $43,352 8.7% 9.3% -0.6% 0.9% Wholesale 42 2,749 33,365 $47,726 2,722 37,124 $53,053 3,027 45,299 $46,510 3.4% 4.6% 2.2% 4.1% Retail 44-45 9,586 121,132 $26,446 8,941 132,956 $31,349 8,882 143,910 $25,892 10.9% 10.8% 1.9% 1.6% 

Transport Warehousing 48-49 2,306 33,821 $38,946 2,237 38,554 $44,962 1,957 36,514 $40,166 2.8% 2.7% 2.7% -1.1% 

Information 51 653 14,885 $43,401 692 14,257 $53,695 625 15,328 $47,417 1.2% 3.0% -0.9% 1.5% Finance and Insurance 52 2,637 27,792 $46,709 3,046 30,690 $59,530 3,373 32,027 $50,112 2.4% 4.0% 2.0% 0.9% Real Estate 53 2,575 13,180 $26,755 2,607 15,932 $34,144 2,784 15,897 $32,633 1.2% 1.8% 3.9% 0.0% Prof Technical Services 54 4,064 25,130 $44,216 4,501 31,812 $52,467 4,839 36,411 $46,773 2.8% 6.8% 4.8% 2.7% Management of Companies 55 321 17,997 $52,338 316 13,988 $60,045 288 10,551 $55,323 0.8% 1.3% -4.9% -5.5% 

Admin and Waste Services 56 2,910 44,283 $22,362 2,768 48,182 $28,986 2,947 58,761 $27,165 4.5% 6.4% 1.7% 4.0% 

Private Educational Services 61 459 7,107 $25,456 480 9,298 $29,532 497 10,781 $27,407 0.8% 1.7% 5.5% 3.0% Health Services 62 6,082 90,304 $38,243 6,526 110,647 $47,867 6,983 126,598 $44,058 9.6% 8.8% 4.1% 2.7% 

Arts, Entertainment, Rec. 71 617 10,386 $16,985 621 10,244 $20,192 641 11,172 $17,305 0.8% 1.6% -0.3% 1.7% 

Food and Accommodations 72 5,050 70,335 $12,860 4,942 78,805 $15,831 5,312 90,404 $14,020 6.9% 8.3% 2.3% 2.8% Other Services 81 20,157 41,069 $21,165 30,390 47,370 $25,731 35,629 52,505 $21,606 4.0% 4.6% 2.9% 2.1% Unclassified 99 85 199 $38,033 1,769 2,534 $26,836 0.2% 0.3% Local Govt., excl Education 409 51,325 $45,674 437 60,768 $56,307 477 68,469 $51,051 5.2% 5.2% 3.4% 2.4% Local Govt., Education 881 90,200 $39,664 1,487 109,087 $48,304 1,792 118,716 $78,718 9.0% 5.9% 3.9% 1.7% State, ALL 1,464 23,639 $46,051 1,166 28,463 $56,515 1,078 31,639 $51,222 2.4% 2.9% 3.8% 2.1% Federal, ALL 360 27,592 $52,749 376 29,439 $66,395 424 27,732 $58,945 2.1% 1.6% 1.3% -1.2% Source: ADE, Inc., based on California Employment Development Department, LMID 
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3.3 DESCRIPTION OF AFFECTED INDUSTRIES 

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

District is contemplating proposed new Draft Rule 4695, this section analyzes industries 

directly affected by the proposed rule. This rule affects wineries and brandy aging facilities 

operating in the eight county region. As the table below shows, there are 78 wineries/brandy 

aging facilities in the San Joaquin Valley region. These establishments employ an estimated 

5,161 workers. Between 2004 and 2008, the number of wineries/brandy aging facilities 

increased by 11, with the number of workers also increasing by 359, for an annual 

employment growth rate of 1.8 percent per year. In the state as a whole, employment growth 

more than doubled that of the San Joaquin Valley region, as winery employment grew by 3.8 

percent per year in California between 2004 and 2008. While employment grew faster across 

the state, wineries in the Central Valley tend to be larger than those in the state as a whole, at 

66 workers per winery versus the state average of 25 workers per winery. 

TABLE 3 

ECONOMIC TRENDS: INDUSTRIES POTENTIAL SUBJECT TO PROPOSED DRAFT 

NEW RULE 4695: 1994-2008: WINERIES AND BRANDY AGING FACILITIES 

 04-08 

REGION 2004 2005 2006 2007 2008 Change CAGR 

Establishments 67 66 67 68 78 11 3.87% 

Employment 4,802 4,998 5,037 4,951 5,161 359 1.82% 

STATE 

Establishments 850 892 976 1042 1102 252 6.71% 

Employment 24,047 25,218 26,317 26,716 27,900 3,853 3.79% 

Source: Applied Development Economics, Inc., based on California EDD LMID 

The 78 wineries/brandy aging facilities in the region generate an estimated $2.6 

billion in revenues. This figure is based on data from the US Economic Census of 

2002, which was then adjusted for inflation and converted into a revenue per 

worker ratio, which was further adjusted to account for changes in the number of 

workers between 2002 and 2008. 

TABLE 4 

ECONOMIC PROFILE OF 

WINERIES IN SAN JOAQUIN 

VALLEY REGION, 2008

Establishments 78 

Employment 5,161 

Revenues Est. $2,596,538,232 

Source: ADE, Inc., based on EDD LMID 

and US Census 
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SECTION 4. SOCIOECONOMIC IMPACTS 

ANALYSIS 

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

against annual compliance costs associated with the proposed draft rule. We begin with a 

review of compliance cost estimates generated by the San Joaquin Valley Unified Pollution 

Control District. 

4.1 ANNUAL COMPLIANCE COST ESTIMATES 

District staff analyzed seven control measures that affected sources might employ when 

seeking to comply by proposed Draft New Rule 4695. For a detailed discussion on these 

control measures, see District staff report called “Appendix C: Cost Effectiveness Analysis 

for Draft New Rule 4695” (April, 2009). The measures are listed below in the table below, 

which includes total annual costs of each measure. It is important to note that only one 

wine-aging and one brandy-aging are right now out of compliance with proposed Draft New 

Rule 4695, in the event this rule is adopted. 

TABLE 5 

ANNUAL COMPLIANCE COST SCENARIOS PER VARIOUS CONTROL MEASURES: 

DISTRICT COST SCENARIO

Brandy Aging 

Facility Cost 

Scenarios 

Wine Aging 

Facility Cost 

Scenarios 

Thermal oxidation with 50% heat recovery (low capital/high fuel cost) $82,000 $232,300 

Catalytic oxidation with 50% heat recovery (mid range capital/mid range fuel cost) $83,234 $197,100 

Regenerative thermal oxidation with 95% heat recovery (high capital/low fuel cost) $172,600 

Water scrubber $276,800 $579,100 

Biofilter $83,700 $188,300 

Carbon adsorption $156,100 $251,000 

Refrigerated Condenser $83,400 $172,800 

Source: San Joaquin Valley Unified Air Pollution Control District

In June, 2009, stakeholders directly affected by the proposed draft new rule shared what they 

believe to be total costs of the new rule. Combined, these entities will bear $3,466,245 in 

total costs, or $843,207 when total costs are annualized using a factor of 0.162745. 

4.2 BUSINESS RESPONSES 

Industries impacted by the draft rule may respond in a variety of ways when faced with new 

regulatory costs. These responses may range from simply absorbing the costs and accepting 

a lower rate of return, to shutting down the affected business operation altogether and, 

where practical, shift from lower-value to higher-value product. Affected sources may also 

seek to renew efforts to increase productivity and reduce costs elsewhere in their operation 

in order to recoup the regulatory costs and maintain profit levels. 
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It is important to note that wineries in the San Joaquin Valley region tend to market to lower 

to middle segments of the wine and brandy markets, where price is a significant factor when 

it comes to purchasing. Thus, sources impacted by proposed Draft New Rule 4695 may 

experience some difficulty in passing to consumers costs stemming from the proposed rule. 

Consumers might decide to purchase less expensive wines from other parts of the state, 

nation, and world. 

4.3 SOCIOECONOMIC IMPACT ANALYSIS 

This section of the report analyzes estimated after tax net profits of affected industries 

against anticipated costs associated with implementation of proposed Draft New Rule 4695. 

While there are 78 wineries and brandy aging facilities operating in the San Joaquin Valley 

region per the California EDD, only two facilities operated will be impacted by the proposed 

new rule. These facilities are owned by two major, global corporations. As indicated in the 

table below, these entities annually generate an estimated $1.6 billion in revenues, off of 

which is generated an estimated $109.9 million in net profits.1

TABLE 6 

REVENUE AND NET PROFITS OF ENTITIES AFFECTED BY PROPOSED NEW 

DRAFT RULE 4695

 Revenues Est. Net Profits 

Entities (2) Impacted By Proposed Draft New Rule $1,570,735,484 $109,982,972 

Source: ADE, Inc., based on CA EDD (establishments and employment and aggregate payroll), 

Forbes, Mondavi SEC 10-K corporate annual report 2004, Wine Business Monthly, US Census 

(employment, wages, shipment value), Dun and Bradstreet, US IRS, Almanac of Business and 

Financial Ratios/CCH, and Gale Group 

Table 7 below analyzes socioeconomic impacts with regard to cost data generated by the 

District, whereas Table 8 analyzes cost data produced by two impacted stakeholders. As the 

tables below show, entities are not significantly impacted by the proposed draft new rule, as 

costs-to-net profit ratios are less than significant for the most part, with one exception in 

Table 7. Table 8 shows that, per annual costs produced by affected industry stakeholders, 

costs are less than significant. 

 

1Net profit is based on an after-tax net profit rate for wineries generating more than $250 million in revenues 

per year. The after-tax net profit rate is a ten-year average (1994-2004), which was calculated so as to balance 

years of high profitability and years of low/no profitability (Source: Troy, Leo, Almanac of Business and 

Industrial Financial Ratios [CCH, Inc., Chicago, IL]) 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Socioeconomic Analysis September 17, 2009 

Final Staff R Final Staff R Staff Report with Appendices eport with Appendices eport with Appendices 

for Rule 4695 for Rule 4695




TABLE 7 

SOCIOECONOMIC IMPACT ANALYSIS OF PROPOSED DRAFT 

NEW RULE 4695: DISTRICT COST SCENARIO

Wine 

Aging 

Facilities 

Total 

Annual 

Cost 

Adjusted Wine 

Aging Facilities 

Total Annual 

Cost: 

(Adjustment 

Factor: 13/9) 

Cost as 

Percent 

of Net 

Profits Significant 

Brandy 

Aging 

Facilities 

Total 

Annual 

Cost 

Adjusted 

Brandy Aging 

Facilities Total 

Annual Cost: 

(Adjustment 

Factor: 47/5) 

Cost as 

Percent 

of Net 

Profits Significant 

Thermal Ox $232,300 $335,544 1.65% no $82,000 $770,800 0.9% no

Cat OX $197,100 $284,700 1.40% no $83,234 $782,400 0.9% no

RTO $172,600 $249,311 1.22% no 

Scrubber $579,100 $836,478 4.11% no $276,800 $2,601,920 2.9% no 

Biofilter $188,300 $271,989 1.34% no $83,700 $786,780 0.9% no

Carbon $251,000 $362,556 1.78% no $156,100 $1,467,340 1.6% no 

Refrigeration $172,800 $249,600 1.23% no $83,400 $783,960 0.9% no

Source: ADE, Inc. 

TABLE 8 

SOCIOECONOMIC IMPACT ANALYSIS OF PROPOSED DRAFT 

NEW RULE 4695: IMPACTED STAKEHOLDER COST SCENARIO 

Impacted Wine/Brandy Aging 

Facilities Total Annual Cost 

Cost as Percent of 

Net Profits Significant 

RTO $843,207 0.8% No 

Source: ADE, Inc. 

4.4 SMALL BUSINESS DISPROPORTIONATE IMPACT ANALYSIS

In addition to analyzing the employment impacts of proposed New Draft Rule 4695, state 

legislation requires that the socioeconomic analysis assess whether small businesses are 

disproportionately affected by air quality rules. This section begins by briefly summarizing 

how the state government defines small businesses for the purposes of qualifying certain 

businesses for various programs. This section concludes with a discussion as to whether the 

affected industries include small businesses and assesses whether those small businesses are 

disproportionately impacted by the new rules. 

DEFINITION OF A SMALL BUSINESS

For purposes of qualifying small businesses for bid preferences on state contracts and other 

benefits, the State of California defines small businesses in the following manner2. To be 

eligible for small business certification, a business: 

Must be independently owned and operated; 

Cannot be dominant in its field of operation; 

 

2 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 D: Socioeconomic Analysis September 17, 2009 

Final Staff R Final Staff R Staff Report with Appendices eport with Appendices eport with Appendices 

for Rule 4695 for Rule 4695



Must have its principal office located in California 

Must have its owners (or officers in the case of a corporation) domiciled in 

California; and 

Together with its affiliates, be either: 

• A business with 100 or fewer employees, and an average gross receipts of $10 

million or less over the previous tax years, or 

• A manufacturer with 100 or fewer employees 

The proposed draft rule affects two large, global corporations, which for the most part do 

not fall within the definition of a small business. Thus, proposed Draft Rule 4695 does not 

disproportionately impact small businesses. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Socioeconomic Analysis September 17, 2009 

Final Staff R Final Staff R Staff Report with Appendices eport with Appendices eport with Appendices 

for Rule 4695 for Rule 4695



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