Fee increases at air quality regulator fund expensive trips and more while consumer costs rise

Not even a month after sending two dozen people on a pricey trip to New Orleans, a member of the board of directors of the Bay Area’s air quality regulator boasted that the agency was “flush” with cash.

In July, the Bay Area Air Quality Management District was considering whether to hire additional staffers to assist with administering a new regulation when board member Shirlee Zane boasted “this air board, quite frankly, is flush.”

“We can more than afford to hire … extra help to do the assessment,” said Zane, a Sonoma County supervisor.

“We have plenty of money,” Zane added — a sentiment echoed by Katie Rice, a board member and Marin County supervisor.

While the rosy perception of the district’s finances may have been isolated to just a few board members, the willingness to spend on additional staff and a lavish New Orleans trip coincided with what’s become a routine increase in fees charged to those local businesses considered stationary sources of air pollution — costs which experts say are then passed onto consumers. 

New Orleans

Two months prior to Zane’s comments, Jack Broadbent, the district’s executive director, sent a letter encouraging all board members and staff to attend the Air and Waste Management Association’s 109th annual conference in “vibrant” New Orleans, to “witness the rebirth of this spectacular region of the Gulf Coast.”

The conference was an opportunity to “address environmental issues that can best be approached in a collaborative setting,” wrote Broadbent, who sits on the association’s Board of Directors.

Twenty-five people took advantage of Broadbent’s offer, costing the district $54,000, which included a $2,300 dinner for everyone. All of this was absorbed by an out-of-state travel budget that more than doubled this fiscal year. 

The conference’s website included a packed schedule, but also highlighted the many tourist attractions available, like carriage tours, shopping opportunities, cooking classes, art museums and steamboat cruises. 

District spokesperson Kristine Roselius said the trip’s average of $2,160 per person was an “appropriate” cost for the level of training received, which included “the opportunity to learn from air quality experts and learn the latest academic research, innovative approaches to measurement and quality science from engineers and scientists from all over the world.”

Fee increases

The district aims to have 85 percent of expenses covered by fees associated with things like equipment permitting and inspection, while the rest comes mostly from Bay Area property taxes. However, the district is only recovering about 81 percent of its costs through fees, with the gap costing around $8 million. 

Fees have increased each year for some time, as have general expenses. Roselius said the travel budget is still rebounding from the cost-cutting days of the last budget crisis, and that the district considers the effect on consumers when increasing fees, adding that there’s a state-imposed, 15 percent cap on annual increases.

“We look at the impact on the business/facility through our detailed socio-economic analysis,” Roselius said. “This helps us weigh this against the cost recovery percentage and what percentage the fees will increase.”

Someone’s gotta pay

While power plants, chemical plants and petroleum refineries fall under the district’s jurisdiction, so do smaller businesses like gas stations, dry cleaners, auto body shops and manufacturers of all sizes. Even boilers at schools, hospitals and apartment buildings are subject to the districts fees and regulations.

Some businesses may be situated to absorb higher fees. But most of the time, an increase in expenses will get passed through to consumers with higher prices for goods and services.

“Anytime you move on fees, somebody’s going to pay the price,” said Tom Scott, the National Federation of Independent Business’ executive director for California. 

Most industries in the state are subjected to some kind of regulatory costs, though those considered to have a higher environmental impact are often hit the hardest — this can have a lopsided effect on the overall economy.

The Bay Area has enjoyed a consistent hiring surge in the past few years, with gains primarily in technology, health care and leisure and hospitality. Meanwhile, statewide manufacturing job creation — long considered the backbone of the American middle class — lags far behind the national average. 

Moving on up

Based on an internal study, the district aims to keep a reserve fund of at least 20 percent of the annual budget, which comes to around $15 million. 

At least $9 million of the reserve fund will be used as a down payment on a new office space. This year the district moved out of a building it owned in San Francisco to a new location nearby, which it will share with the Metropolitan Transportation Commission and the Association of Bay Area Governments.

BAAQMD has plans of purchasing the new space for somewhere around $29 million. The prior building, which was owned by the district, sold for around $16 million. 

The new building is supposed to improve communication between the organizations, while the old building was outdated and needed $30 million in renovations, according to BAAQMD documents. 

Currently, the reserve fund is projected to have around $7 million more than the desired minimum, which no doubt aided Zane (and Rice) in her willingness to spend. But she wasn’t looking at the whole picture, said Roselius.

“The statement by one board member about the state of the Air District finances did not take into account what will be paid out soon when the Air District puts its down payment toward the cost of the new building,” Roselius said.