BOARD MEETING DATE: September 3, 2004
AGENDA NO. 6
(Continued from the August 6, 2004 Board Meeting)

Issue Program Announcement & Application for New CNG School Buses with Funding from State’s Proposition 40, EPA and Chairman’s Modified School Bus Initiative and Installation of Oxidation Catalysts with Funding from U.S. EPA

SYNOPSIS:

This action is to approve issuance of a new program announcement (PA 2005-01) with funding of $9,725,000, consisting of (a) up to $2,030,000 in Proposition 40 funds, (b) up to $7,200,000 from AQMD Chairman’s Initiative Program, (c) up to $245,000 in U.S. EPA funds to replace pre-1987 school buses; and (d) up to $250,000 from U.S. EPA funds to retrofit school buses with diesel oxidation catalysts.

COMMITTEE:

Technology, August 27, 2004, Recommended for Approval

RECOMMENDED ACTIONS:

1. Recognize up to $2,030,000 of Proposition 40 funding (AB 425) from CARB to the Lower-Emission School Bus Program Fund.
    
2. Recognize up to $495,000 in grant funds from the U.S. EPA to the Lower-Emission School Bus Program Fund.
    
3. Approve issuance of a Program Announcement & Application PA 2005-01 making available up to $9,725,000 to:
    

   a)	Replace school buses with new alternative fuel buses in an amount not to exceed $2,030,000 from State Proposition 40 funding to be placed in the Lower-Emission School Bus Fund (Part A).
   b)	Replace school buses with new alternative fuel buses under the modified AQMD Chairman’s School Bus Initiative as outlined in Attachment 1, in the amount not to exceed $7,200,000 from the unspent funds from the original AQMD School Bus Initiative available in the Lower-Emission School Bus Fund, and $245,000 from U.S. EPA grant funds to be placed in the Lower-Emission School Bus Fund (Part A).
   c)	Retrofit school buses with diesel oxidation catalysts in an amount not to exceed $250,000 from U.S. EPA grant funds to be placed in the Lower-Emission School Bus Fund (Part B).

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Exhaust emissions from high emitting diesel-fueled school buses present a risk to children and are a source of public exposure to toxic diesel particulate matter and smog-forming pollutants. There are thousands of older school buses on the road that have remained in service simply because school districts lack funds to replace them. To reduce emissions from these vehicles, AQMD has used state funds and its own funds to replace older diesel buses with new lower-emitting diesel or CNG buses, and to retrofit particulate traps on school buses. Over 50 percent of these funds have gone to school buses operating in communities meeting legislated criteria for disproportionate impacts, as set in Health and Safety Code Section 43023.5 (AB1390, Firebaugh).

Table 1 summarizes awards made under previous AQMD program announcements for replacement of pre-1987 school buses, and retrofits of 1994 and newer school buses with PM traps.

Table 1: Summary of AQMD’s School Bus and PM Trap Awards
 

** Includes 10 percent funding for CNG Refueling Infrastructure

Proposition 40 Funding

The AQMD expects to receive $2,030,000 from CARB for the school bus replacement program. These funds originate from Proposition 40, passed by the state electorate on March 5, 2002, to conserve natural resources and improve state and local parks. Assembly Bill (AB) 425 (Statutes of 2002, Chapter 379) set aside 20 percent for school bus funding from Proposition 40 to public school districts to purchase clean burning buses transporting school children. For FY2002-03, on a statewide basis, this amounted to $4,920,000, of which AQMD had been allocated $2,175,000 to purchase 16 new CNG buses. For FY 2003-2004, out of a total state allocation of $4,600,000, the AQMD will receive $2,030,000 to buy about 15 to 16 new CNG buses.

As stated in the state guidelines, the ratio of new CNG buses to new cleaner diesel buses on a statewide basis is to be on the order of 2:1. Since many districts outside of AQMD plan to purchase cleaner diesel buses, the AQMD has been given the flexibility to allocate its share towards new CNG buses exclusively.

AQMD Chairman’s School Bus Initiative

At its February 6, 2004 meeting, the Board approved the issuance of Program Announcement & Applications #2004-07, for the Chairman’s School Bus Initiative in the amount of $12 million. The school bus initiative was designed to provide funding for the replacement of pre-1987 school buses with new alternative fuel buses as well as the purchase and installation of particulate traps on diesel-powered school buses. Specifically, the initiative provided for:

a)

Total of $7.2 million, with up to $60,000 for Type D, CNG transit bus, $50,000 for mid-size, and $25,000 for a Type A bus. Public school districts and private operators were eligible for the funding with public school districts receiving first priority. Public schools would also have received an additional $12,000 per bus for CNG infrastructure. To be eligible, applicant had to scrap/crush a pre-1987 bus.

b)

Total of $4.8 million for installation of CARB verified particulate traps on 1994 and newer diesel school buses, capable of reducing diesel exhaust particulate matter by at least 85 percent. Both public and private fleets are eligible.

By the closing date of June 11, 2004, four public schools applied for seven new CNG buses, another four public school districts applied for 48 PM traps, and five private operators applied for 1,126 PM traps. Applications for CNG buses are addressed in this Board letter, while applications for PM traps are discussed in another Board letter.

U.S. EPA Grant Funding

AQMD has applied and has been awarded $495,000 in school bus grant funding by the U.S. EPA. The grant funding is comprised of $250,000 for the purchase and installation of diesel oxidation catalysts, and $245,000 for school bus replacement.

Proposal

Program Announcement with Funding Opportunities
Staff recommends the Board to approve the issuance of Program Announcement & Applications #PA 2005-01 with two separate funding opportunities:

Part A
Proposition 40 funds for Replacement School Buses
The AQMD expects to receive $2,030,000 from CARB through Proposition 40 for the school bus replacement program. Part A of the program announcement is in accordance with CARB’s Lower-Emission School Bus Replacement Program guidelines. These funds are available for replacement of existing pre-1987 diesel-fueled buses with new alternative fuel buses. The new buses shall meet CARB’s NOx and PM engine certification standards of 2.5 g/bhp-hr and 0.03 g/bhp-hr, respectively, and shall be equipped with an oxidation catalyst. In reality, CNG buses are certified at lower NOx emission levels. Funding of up to 10 percent of the award amount for each new CNG bus granted will also be made available to install CNG infrastructure. Only public school districts are eligible to apply for infrastructure funding. Further details and application forms for this program are included in Part A of the program announcement.

Modified AQMD Chairman’s School Bus Initiative and EPA funds
Chairman’s School Bus Initiative Program, which was originally adopted by the Board at its February 6, 2004 meeting, offered public school districts and private school bus operators the incremental cost differential of an alternative fuel bus to replace a pre-1987 school bus as shown below.

Incremental Funding per Bus in
Previous AQMD Announcement (PA 2004-07)
 

Due to difficult economic conditions and the lower relative amount of incremental cost offered, the number of submitted applications was smsll. Staff therefore recommends that the program be modified to offer new alternative fuel school buses to replace pre-1987 buses with the same amount of funding as offered under the state program with Proposition 40 funds. However, depending on the numbered of applications received and the availability of funding, the Board retains the discretion to award full funding, partial funding, or no funding at all under this Program Announcement. If the choice to award partial funding causes any bidders to withdraw, the amount that would have been awarded to that bidder will be allocated to the remaining bidders in pursuant to a new Program Announcement. Specifically, award recipients will pay a maximum of $25,000 for the replacement of a pre-1987 school bus and a maximum of $10,000 for the replacement of a pre-1977 school bus. It is also proposed to add $245,000 from U.S. EPA grant funds to this program for additional school bus replacements.

On July 13, 2004, AQMD staff held a public workshop for the proposed school bus program. Based on the comments received from public school districts, staff recommends adding the following provisions to the AQMD Chairman’s School Bus Initiative that go beyond those specified under the Proposition 40 program:

• Public school districts, private operators and private schools may apply under this program. Public school districts will be given preference over private school bus operators and private schools. Only if surplus funds are available will private school bus operators and, later private schools will be addressed.
   
• Public school districts will be allowed to replace a 1987-90 diesel school bus with a new alternative fuel bus, provided their donated bus replaces a pre-1977 diesel school bus in another public school district within the AQMD jurisdiction, and that the subject pre-1977 bus is crushed. The public school district receiving the new alternative-fueled bus and donating the bus will pay a maximum of $10,000 as its local match. The public school district donating its 1987 to 1990 school bus to another public school district is not allowed to receive any money in return from the recipient for this transaction.

Total amount of funding for this section of the program shall not exceed $7,445,000, comprised of $7,200,000 in unspent funds available in the previously announced AQMD Chairman’s School Bus Initiative Program (PA 2004-07), and $245,000 from U.S. EPA grant funds. Further details and application forms are included in Part A of the program announcement. The modified AQMD Chairman’s School Bus Initiative criteria are outlined in Attachment 1.

Part B
Availability of U.S. EPA Funds for Diesel Oxidation Catalysts
Contingent upon receiving grant funds from the U.S. EPA it is recommended that $250,000 be made available to public school districts to retrofit their diesel buses of 1991-93 model years with diesel oxidation catalysts at $2,500 funding per bus. Further details and application forms are included in Part B of the program announcement.

In addition, staff recommends the following action

1. Four public school districts applied for replacement of seven pre-1987 diesel school buses with new CNG buses under the Chairman’s School Bus Initiative Program. The detailed list of the applicants with the number of buses requested is listed in Table 2. Since staff is proposing to modify the guidelines for the new bus component of this program to allow more funding per vehicle replacement similar to the state program under Proposition 40, staff recommends that these four school districts be awarded funds under the modified guidelines of the AQMD Chairman’s Initiative Program contained in the new Program Announcement being presented for the Board’s approval. Thus, the school districts listed in Table 2 will not be required to reapply. They will be given preference over other applicants and due to modification of the program guidelines they will be eligible for more funding for replacement of the subject school buses.

Table 2: Applicants of New Replacement CNG Buses
(under PA 2004-07)
 

Funding Distribution

    a) 50% to AB 1390 and 50% to non-AB 1390 (Part A)

Total funds available for Part A of this program is $ 9,475,000. For part A of the proposed program announcement, staff recommends to distribute at least one-half ($4,737,500) of the total funding in compliance with Health and Safety Code Section 43023.5 (AB1390, Firebaugh), to directly benefit low-income communities and communities of color that are disproportionately impacted by air pollution. An AB1390 School District will be defined as the school district that is directly receiving the funds from this program, and not the school district that is crushing a pre 1977 bus under the trading provisions of this program.

Thus, at least 50 percent of the funds will be allocated to school districts that qualify under this AB 1390 category. All applications will be evaluated for poverty level, PM exposure, and toxic exposure according to the following criteria:
 

A)	Poverty Level: All school districts in areas where at least 10% of the population falls below the Federal poverty level based on the Year 2000 Census, will be eligible to be ranked in this category.
B)	PM Exposure: All school districts in areas with the highest 15% of PM concentration will be eligible to be ranked in this category. Based on an annual average, the highest 15% of PM concentration is 46 micrograms per cubic meter and above.
C)	Toxic Exposure: Based on AQMD’s MATES II estimates, all projects in areas with the highest 15% of toxic exposure, will be eligible to be ranked in this category. The highest 15% represents a cancer risk of 1,139 in a million and above (MATES II study).

Any applicant qualifying based on both the poverty level and either PM or toxic exposure categories will qualify for disproportionate impact funding.

Applicants unable to qualify under AB 1390 can qualify for the remaining 50 percent of the funding, in an amount not to exceed $4,737,500.

For the school bus replacement programs, and with adequate funding available, first one bus will be awarded to each public school district first. The remaining funds will then be distributed among public school districts on a first come first served basis subject to county allocation listed in Table 3 below. If a school district applies for a disproportionately large number of buses compared to other applicants, and except for Los Angeles Unified School District, no school district will receive more than 30 percent of the funds allocated for that county (see Table 3 below).

After public school districts have been awarded, the remainder of the funds, if any, will be distributed among private school bus operators and then private schools on a first come first served basis. Because of the special funding for school bus replacement under the AES Settlement Fund, Jurupa Unified School District will not be eligible for this specific solicitation.

    b) Funds Proportionate to County Population (Part A)

• Funds will be distributed proportionately to each county’s general population in the Basin as shown in Table 3.
   
• Los Angeles Unified School District’s eligibility is limited to a maximum of fifty percent of the total funds allocated for Los Angeles County.
   
• If funds are undersubscribed in a particular county, the surplus funds would flow to the other counties.
   

Table 3: Proposed Distribution of Funds for School Bus Replacement
 

*The population number is for year 2000, obtained from the California Statistical Abstract,
     published by the Department of Finance.
**Funds allocated to each county will be close to the nearest amounts shown in the table.

For Part B of this program, diesel oxidation catalysts, allocation of funds will be made on a first-come, first served basis. If oversubscribed, no school district will receive more than 30 percent of the total funds (i.e. over $75,000).

Outreach

In accordance with AQMD’s Procurement Policy and Procedure, a public notice advertising the RFP/RFQ and inviting bids will be published in the following publications:
 

1.	Antelope Valley Press	11.	La Opinion	21.	Rafu Shimpo
2.	Black Voice News	12.	La Prensa Hispana	22.	San Bernardino Sun
3.	Chinese Daily News	13.	La Voz Publications	23.	State of California Contracts
4.	Desert Sun	14.	Los Angeles Daily News		Register
5.	Eastern Group Publications	15.	Los Angeles Sentinel	24.	The Daily Breeze
6.	El Chicano	16.	Los Angeles Times	25.	The Excelsior
7.	El Informador	17.	Orange County Register	26.	The Signal
8.	Inland Empire Hispanic News	18.	Philippine News	27.	Wave Community Newspapers
9.	Inland Valley Daily Bulletin	19.	Precinct Reporter
10.	Korea Central Daily	20	Press Enterprise

Additionally, potential bidders will be notified utilizing the Los Angeles County MTA Directory of Certified Firms, the Inland Area Opportunity Pages Ethnic/Women Business & Professional Directory; and AQMD’s own electronic listing of certified minority vendors. Notice of the RFP/RFQ will be mailed to the Black and Latino Legislative Caucuses and various minority chambers of commerce and business associations, and placed on the Internet at AQMD’s Web site (http://www.aqmd.gov where it can be viewed by making menu selections "Inside AQMD"/"Employment and Business Opportunities"/"Business Opportunities" or by going directly to http://www.aqmd.gov/rfp/index.html). Information is also available on AQMD’s bidder’s 24-hour telephone message line (909) 396-2724.

Benefits to AQMD

The successful implementation of the Lower-Emission School Bus Replacement program will provide less polluting and safer school transportation for school children, and will reduce public exposure to toxic diesel particulate matter emissions.

The selection methodology, using AB 1390 criteria, for the school bus replacement awards will maximize the potential emission benefits in low income, high-diesel and high-PM10 exposure areas, and will enhance the objectives of the Environmental Justice and Children’s Health Initiatives adopted by the Board.

Resource Impacts

a)	Total funding for replacement of school buses with Proposition 40 funding shall not exceed $2,030,000.
b)	Total funding for school bus replacement under the modified AQMD Chairman’s Initiative Program shall not exceed $7,445,000 comprised of $ 7,200,000 from unspent funds available under this program and $245,000 from U.S. EPA grant funds.
c)	Total amount of funding for the retrofit of school buses with diesel oxidation catalysts shall not exceed $250,000 from U.S. EPA grant funds.

Sufficient funds are available in the Lower-Emission School Bus Fund.

Attachments

1. Modified AQMD Chairman’s School Bus Initiative Criteria
2. Program Announcement & Application #PA 2005-01

Attachment 1

Modified AQMD Chairman’s School Bus Initiative Criteria

1. Replacement of pre-1987 school buses with new alternative fuel buses consistent with state program guidelines under Proposition 40. Specifically, a maximum of $25,000 to be paid by award recipient for a pre-1987 school bus replacement, and a maximum of $10,000 to be paid by award recipient of a pre-1977 school bus replacement.
    
2. Public school districts, private school bus operators, and private schools may apply. Preference would be giving to public school districts over private school bus operators and private schools. Awards will be made consistent with the requirements of AB1390 and other criteria under Proposition 40. Further details are explained in the Program Announcement PA2005-01
    
3. Trading of 1987-90 school buses will be allowed. Public school districts will be allowed to replace a 1987-90 diesel school bus with a new alternative fuel bus, provided their 1987-90 bus replaces a pre-1977 diesel school bus in another public school district within the AQMD jurisdiction, and that the subject pre-1977 bus is crushed. The public school district receiving the new alternative-fueled bus will pay a maximum of $10,000 as its local match. The public school district giving its 1987-90 diesel school bus to another public school district is not allowed to receive any money in return from the recipient for this transaction.

Please Note:

Depending upon the number of applications received and availability of funding, the AQMD Governing Board retains discretion to make full awards, partial awards, or no awards at all under this Program. In addition, AQMD reserves the right to make changes to the terms and conditions of the solicitation documents.

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