Report 2019-127 Recommendation 5 Responses

Report 2019-127: San Diego County Air Pollution Control District: It Has Used Vehicle Registration Fees to Subsidize Its Permitting Process, Reducing the Amount of Funds Available to Address Air Pollution (Release Date: July 2020)

Recommendation #5 To: San Diego County Air Pollution Control District

To ensure that the permit fees it charges are sufficient to pay for its permitting program, the San Diego Air District should, by December 2020, monitor the impact of the COVID-19 pandemic on San Diego County's economy and, when economic conditions allow, propose to the district board that it increase fees annually by the maximum percentage allowed until the district's revenue from permit fees is equal to the full cost of the permitting program.

Annual Follow-Up Agency Response From September 2023

As previously reported, District staff proposed to the District Governing Board, and the Board approved, a plan to increase permit application and renewal fees by the maximum percentage allowed (15%). Subsequently the District Board has approved increases to permit application and renewal fees by 15% for each fiscal year (FY 2021/22, FY 2022/23, and FY 2023/24) and those fees became effective on January 1, 2022, July 1, 2022, and July 1, 2023, respectively. Projected costs and estimated revenues for the permitting program will fluctuate year to year due to shifts in staffing levels, program costs, level of effort, and other factors. In early 2024 the District plans to present another revised fee package to the Board for FY 2024/25 which would take effect on July 1, 2024. The District will continue to calculate the full cost of the permitting program annually and recommendations to increase fees as needed to recover the full cost of the program will be provided to the Governing Board each year.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

The Air District 's Governing Board has approved a plan to increase permit applications and renewal fees. However, the Air District has not yet demonstrated that the fees it is charging are equal to the full cost of the permitting program. Thus, we will continue to request updates on the Air District's efforts to implement this recommendation.

Annual Follow-Up Agency Response From October 2022

On December 9, 2021 the District Governing Board approved revisions to District Rule 40 to increase permit fees for Fiscal Year 2021/22 by the maximum percentage allowed in a fiscal year. The revised Fiscal Year 2021/22 fees became effective on January 1, 2022. On April 14, 2022 the District Governing Board approved revisions to District Rule 40 to increase permit fees for Fiscal Year 2022/23 by the maximum percentage allowed in a fiscal year. The revised Fiscal Year 2022/23 fees became effective on July 1, 2022. Calculating the full cost of the permit program will be performed annually and recommendations to continue to pursue full cost recovery will be provided to the Governing Board each year.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

The San Diego Air District explained that it has raised permit fees. However, we will continue to monitor the district's progress in this area until it demonstrates that its revenue from permit fees is equal to the full cost of the permitting program, as we recommended.

Annual Follow-Up Agency Response From October 2021

The District held a public workshop on August 31, 2021 regarding the Governing Board Adopted Cost Recovery Plan and proposed fee increases. If approved, these fee increases would increase permit fees by the maximum percentage allowed in a fiscal year. The Governing Board will conduct the first Fee Hearing on October 14, 2021 to consider public comments on the proposed fees (https://www.sdapcd.org/content/sdc/apcd/en/apcd-cob-agendas-and-meeting-materials-.html). A second public hearing is scheduled for December 9, 2021 to consider adoption of the proposed fees. Calculating the full cost of the permit program will be performed annually and recommendations to continue to pursue full cost recovery will be provided to the Governing Board each year.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

We look forward to reviewing the District Board's decision regarding the proposed fee increases for the permitting program.

1-Year Agency Response

To prepare for the next proposed fee adjustments (when economic conditions allow), the District selected Matrix Consulting to conduct a Cost Recovery and Fee Analysis Study. In May 2021 the Governing Board adopted a cost recovery plan and timeline with a projected revenue increase of 18% for FY 21-22, with full cost recovery projected between 2 to 5 years for all fee categories; and most fee categories can achieve 100% full cost recovery in 2 to 3 years. Calculating the full cost of the permit program will be performed annually and recommendations to continue full cost recovery will be provided to the Governing board each year.

California State Auditor's Assessment of 1-Year Status: Partially Implemented

As described in its response, the Air District contracted with a consultant to establish a methodology for calculating the full cost of its permitting program. However, the Air District's cost recovery plan and timeline indicate that it plans to conduct public workshops and additional board hearings related to the permit fee increases. Because it is not clear whether these steps will result in changes to the proposed cost recovery plan and permit fee increases, we are reserving our determination on whether this recommendation has been implemented until the fee increases go into effect.

6-Month Agency Response

The District conducted a competitive RFQ process and selected a consulting firm (Matrix Consulting Group). Contract with Matrix was signed on September 28, 2020. Matrix is currently in the process of evaluating our cost procedures and providing recommendations for calculating the full cost of the permit program.

The District is monitoring the impacts of the pandemic on San Diego County's economy including regional employment, consumer price index, housing market, and foreclosures (see attachments). These indicators will assist the District in determining when economic conditions allow the District to recommend proposed fee increases to the board. To prepare for the next proposed fee adjustments (when economic conditions allow), the District has selected Matrix Consulting to conduct a Cost Recovery and Fees Study.

California State Auditor's Assessment of 6-Month Status: Pending

Although the San Diego Air District stated in its response that it is monitoring the impact of the COVID-19 pandemic on San Diego County's economy by tracking certain indicators, it did not identify at what levels of economic activity it will recommend a fee increase. We encourage the District to do so in order to ensure that it takes action as soon as conditions allow.

60-Day Agency Response

The District is monitoring the impacts of the pandemic on San Diego County's economy including regional employment, consumer price index, housing market, and foreclosures (see attachments). These indicators will assist the District in determining when economic conditions allow the District to recommend proposed fee increases to the board. To prepare for the next proposed fee adjustments (when economic conditions allow), the District has selected a consulting firm to conduct a Cost Recovery and Fees Study.

California State Auditor's Assessment of 60-Day Status: Pending

Although the San Diego Air District stated in its response that it is monitoring the impact of the COVID-19 pandemic on San Diego County's economy by tracking certain indicators, it did not identify at what levels of economic activity it will recommend a fee increase. We encourage the District to do so in order to ensure that it takes action as soon as conditions allow.

All Recommendations in 2019-127

Agency responses received are posted verbatim.