Amended in Assembly August 17, 2015

Amended in Senate June 2, 2015

Amended in Senate May 12, 2015

Amended in Senate April 6, 2015

Senate Bill No. 513

Introduced by Senator Beall

February 26, 2015

An act to amend Sections 41081, 44223, 44225, 44229, 44233, 44275, 44281, 44282, 44283, 44286, 44287, 44287.1, 44287.2, 44288, 44291, and 44299.2 of, and to amend and repeal Section 44299.1 of, the Health and Safety Code, relating to vehicular air pollution.

LEGISLATIVE COUNSEL’S DIGEST

SB 513, as amended, Beall. Carl Moyer Memorial Air Quality Standards Attainment Program: fees.

(1) Existing law authorizes the Sacramento Metropolitan Air Quality Management District to adopt a $6 surcharge on motor vehicle registration fees applicable to motor vehicles registered within the district. Existing law requires the collected fees to be used for specified purposes, including, among others, awarding grants eligible for funding under the Carl Moyer Memorial Air Quality Standards Attainment Program.

This bill would additionally authorize those fees to be used for projects that involve alternative fuel and electric infrastructure, as specified.

(2) Existing law authorizes an air pollution control or air quality management district, except the Sacramento district, that has been designated by the State Air Resources Board as a state nonattainment area for any pollutant emitted by motor vehicles to levy a fee of up to $6 on motor vehicles registered within the air district, subject to specified conditions.

This bill instead would authorize any air district, except the Sacramento district, regardless of its state attainment designation to levy a fee of up to $6 on motor vehicles registered within the air district. The bill also would authorize those fees to be used for the attainment or maintenance of state or federal ambient air quality standards or the reduction of toxic air contaminant emissions from motor vehicles and for alternative fuel and electric infrastructure projects, as specified.

(3) Existing law establishes the Carl Moyer Memorial Air Quality Standards Attainment Program, which is administered by the state board, to provide grants to offset the incremental cost of eligible projects that reduce emissions of air pollutants from vehicular sources in the state and for the funding of a fueling infrastructure demonstration program and technology development efforts.

This bill would revise and recast provisions of the program, including, among others, changing the definition of covered source to include any marine vessel and any other category necessary for the state and air districts to meet air quality goals; authorizing the state board to adjust, rather than just reduce, the values of the maximum grant award criteria to improve the ability of the program to achieve its goals; authorizing the state board to reserve up to 10% of the program moneys available each year to directly fund any project that is a covered source, as defined, or a specified eligible project; removing the prohibition on using specified motor vehicle registration fees as matching funds; requiring the state board, instead of the State Energy Resources Conservation and Development Commission, to publish procedures to monitor and audit infrastructure projects; increasing the authorization for support and outreach costs from not more than 2% to not more than 2.5% of the moneys for use by the program in the Air Pollution Control Fund; removing the repeal date of January 1, 2024, from the provisions on how moneys in the Air Pollution Control Fund are allocated and segregated; removing the repeal date of January 1, 2024, from the provisions regarding the terms and conditions for an allocation of moneys to an air district; and requiring an air district to liquidate, as defined, the moneys by begin delete a specified date 4 years end delete begin insert June 30 of the fourth year end insert following the year of allocation and to return, as defined, those moneys that have not been liquidated to the state board within 90 days.

(4) The California Global Warming Solutions Act of 2006 establishes the state board as the state agency responsible for monitoring and regulating sources emitting greenhouse gases. The act authorizes the state board to include the use of market-based compliance mechanisms. Existing law requires all moneys, except for fines and penalties, collected by the state board from the auction or sale of allowances as part of a market-based compliance mechanism to be deposited in the Greenhouse Gas Reduction Fund and to be available upon appropriation by the Legislature.

This bill would authorize the state board to allocate moneys from the Greenhouse Gas Reduction Fund and other specified sources for the Carl Moyer Memorial Air Quality Standards Attainment Program without those other moneys being required to be factored into the criteria emission reduction cost-effectiveness calculations.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 41081 of the Health and Safety Code, as
amended by Section 1 of Chapter 401 of the Statutes of 2013, is
amended to read:

41081.  

(a) Subject to Article 3.7 (commencing with Section
53720) of Chapter 4 of Part 1 of Division 2 of Title 5 of the
Government Code, or with the approval of the board of supervisors
of each county included, in whole or in part, within the Sacramento
district, the Sacramento district board may adopt a surcharge on
the motor vehicle registration fees applicable to all motor vehicles
registered in those counties within the Sacramento district whose
boards of supervisors have adopted a resolution approving the
surcharge. The surcharge shall be collected by the Department of
Motor Vehicles and, after deducting the department’s
administrative costs, the remaining funds shall be transferred to
the Sacramento district. Prior to the adoption of any surcharge
pursuant to this subdivision, the district board shall make a finding
that any funds allocated to the district as a result of the adoption
of a county transportation sales and use tax are insufficient to carry
out the purposes of this chapter.

(b) The surcharge shall not exceed six dollars ($6).

(c) After consulting with the Department of Motor Vehicles on
the feasibility thereof, the Sacramento district board may provide,
in the surcharge adopted pursuant to subdivision (a), to exempt
from all or part of the surcharge any category of low-emission
motor vehicle.

(d) Funds received by the Sacramento district pursuant to this
section shall be used by that district as follows:

(1) The revenues resulting from the first four dollars ($4) of
each surcharge shall be used to implement reductions in emissions
from vehicular sources, including, but not limited to, a clean fuels
program and motor vehicle use reduction measures.

(2) The revenues resulting from the next two dollars ($2) of
each surcharge shall be used to implement the following programs
that achieve emission reductions from vehicular sources and
off-road engines, to the extent that the district determines the
program remediates air pollution harms created by motor vehicles
on which the surcharge is imposed:

(A) Projects eligible for grants under the Carl Moyer Memorial
Air Quality Standards Attainment Program (Chapter 9
(commencing with Section 44275) of Part 5).

(B) The new purchase, retrofit, repower, or add-on of equipment
for previously unregulated agricultural sources of air pollution, as
defined in Section 39011.5, within the Sacramento district, for a
minimum of three years from the date of adoption of an applicable
rule or standard, or until the compliance date of that rule or
standard, whichever is later, if the state board has determined that
the rule or standard complies with Sections 40913, 40914, and
41503.1, after which period of time, a new purchase, retrofit,
repower, or add-on of equipment shall not be funded pursuant to
this chapter. The district shall follow any guidelines developed
under subdivision (a) of Section 44287 for awarding grants under
this program.

(C) The purchase of new schoolbuses or the purchase for the
repower or retrofit of emissions control equipment for existing
schoolbuses pursuant to the Lower-Emission School Bus Program
adopted by the state board.

(D) An accelerated vehicle retirement or repair program that is
adopted by the state board pursuant to authority granted hereafter
by the Legislature by statute.

(E) The replacement of onboard natural gas fuel tanks on
schoolbuses that are 14 years or older or the enhancement of
deteriorating natural gas fueling dispensers of fueling infrastructure,
pursuant to the Lower-Emission School Bus Program adopted by
the state board.

(F) The funding of alternative fuel and electric infrastructure
projects solicited and selected through a competitive bid process.

(e) Not more than 6.25 percent of the funds collected pursuant
to this section shall be used by the district for administrative
expenses.

(f) A project funded by the program shall not be used for credit
under any state or federal emissions averaging, banking, or trading
program. An emission reduction generated by the program shall
not be used as marketable emission reduction credits or to offset
any emission reduction obligation of any person or entity. Projects
involving new engines that would otherwise generate marketable
credits under state or federal averaging, banking, and trading
programs shall include transfer of credits to the engine end user
and retirement of those credits toward reducing air emissions in
order to qualify for funding under the program. A purchase of a
low-emission vehicle or of equipment pursuant to a corporate or
a controlling board’s policy, but not otherwise required by law,
shall generate surplus emissions reductions and may be funded by
the program.

(g) This section shall remain in effect only until January 1, 2024,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2024, deletes or extends that date.

SEC. 2.  

Section 44223 of the Health and Safety Code is
amended to read:

44223.  

(a) In addition to any other fees specified in this code,
the Vehicle Code, and the Revenue and Taxation Code, a district,
except the Sacramento district, may levy a fee of up to two dollars
($2) on motor vehicles registered within the district. A district may
impose the fee only if the district board adopts a resolution
providing for both the fee and a corresponding program for the
reduction of air pollution from motor vehicles pursuant to, and for
related planning, monitoring, enforcement, and technical studies
necessary for the implementation of, the California Clean Air Act
of 1988 (Chapter 1568 of the Statutes of 1988), or for the
attainment or maintenance of state or federal ambient air quality
standards or the reduction of toxic air contaminant emissions from
motor vehicles.

(b) In districts with nonelected officials on their boards, a
resolution adopted pursuant to subdivision (a) shall be approved
by both a majority of the board and a majority of the board
members who are elected officials.

(c) A fee imposed pursuant to this section shall become effective
on either April 1 or October 1, as provided in the resolution adopted
by the board pursuant to subdivision (a).

SEC. 3.  

Section 44225 of the Health and Safety Code, as
amended by Section 6 of Chapter 401 of the Statutes of 2013, is
amended to read:

44225.  

A district may increase the fee established under Section
44223 to up to six dollars ($6). A district may increase the fee only
if the following conditions are met:

(a) A resolution providing for both the fee increase and a
corresponding program for expenditure of the increased fees for
the reduction of air pollution from motor vehicles pursuant to, and
for related planning, monitoring, enforcement, and technical studies
necessary for the implementation of, the California Clean Air Act
of 1988 (Chapter 1568 of the Statutes of 1988), or for the
attainment or maintenance of state or federal ambient air quality
standards or the reduction of toxic air contaminant emissions from
motor vehicles, is adopted and approved by the governing board
of the district.

(b) In districts with nonelected officials on their governing
boards, the resolution shall be adopted and approved by both a
majority of the governing board and a majority of the board
members who are elected officials.

(c) An increase in fees established pursuant to this section shall
become effective on either April 1 or October 1, as provided in
the resolution adopted by the board pursuant to subdivision (a).

(d) This section shall remain in effect only until January 1, 2024,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2024, deletes or extends that date.

SEC. 4.  

Section 44229 of the Health and Safety Code, as
amended by Section 8 of Chapter 401 of the Statutes of 2013, is
amended to read:

44229.  

(a) After deducting all administrative costs it incurs
through collection of fees pursuant to Section 44227, the
Department of Motor Vehicles shall distribute the revenues to
districts, which shall use the revenues resulting from the first four
dollars ($4) of each fee imposed to reduce air pollution from motor
vehicles and to carry out related planning, monitoring, enforcement,
and technical studies necessary for implementation of the California
Clean Air Act of 1988 (Chapter 1568 of the Statutes of 1988). Fees
collected by the Department of Motor Vehicles pursuant to this
chapter shall be distributed to districts based upon the amount of
fees collected from motor vehicles registered within each district.

(b) Notwithstanding Sections 44241 and 44243, a district shall
use the revenues resulting from the next two dollars ($2) of each
fee imposed pursuant to Section 44227 to implement the following
programs that the district determines remediate air pollution harms
created by motor vehicles on which the surcharge is imposed:

(1) Projects eligible for grants under the Carl Moyer Memorial
Air Quality Standards Attainment Program (Chapter 9
(commencing with Section 44275) of Part 5).

(2) The new purchase, retrofit, repower, or add-on equipment
for previously unregulated agricultural sources of air pollution, as
defined in Section 39011.5, for a minimum of three years from
the date of adoption of an applicable rule or standard, or until the
compliance date of that rule or standard, whichever is later, if the
state board has determined that the rule or standard complies with
Sections 40913, 40914, and 41503.1, after which period of time,
a new purchase, retrofit, repower, or add-on of equipment shall
not be funded pursuant to this chapter. The districts shall follow
any guidelines developed under subdivision (a) of Section 44287
for awarding grants under this program.

(3) The purchase of new schoolbuses or the purchase for the
repower or retrofit of emissions control equipment for existing
schoolbuses pursuant to the Lower-Emission School Bus Program
adopted by the state board.

(4) An accelerated vehicle retirement or repair program that is
adopted by the state board pursuant to authority granted hereafter
by the Legislature by statute.

(5) The replacement of onboard natural gas fuel tanks on
schoolbuses that are 14 years or older or the enhancement of
deteriorating natural gas fueling dispensers of fueling infrastructure,
pursuant to the Lower-Emission School Bus Program adopted by
the state board.

(6) The funding of alternative fuel and electric infrastructure
projects solicited and selected through a competitive bid process.

(c) The Department of Motor Vehicles may annually expend
not more than 1 percent of the fees collected pursuant to Section
44227 on administrative costs.

(d) A project funded by the program shall not be used for credit
under any state or federal emissions averaging, banking, or trading
program. An emission reduction generated by the program shall
not be used as marketable emission reduction credits or to offset
any emission reduction obligation of any person or entity. Projects
involving new engines that would otherwise generate marketable
credits under state or federal averaging, banking, and trading
programs shall include transfer of credits to the engine end user
and retirement of those credits toward reducing air emissions in
order to qualify for funding under the program. A purchase of a
low-emission vehicle or of equipment pursuant to a corporate or
a controlling board’s policy, but not otherwise required by law,
shall generate surplus emissions reductions and may be funded by
the program.

(e) This section shall remain in effect only until January 1, 2024,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2024, deletes or extends that date.

SEC. 5.  

Section 44233 of the Health and Safety Code is
amended to read:

44233.  

Not more than 6.25 percent of the fees distributed to
any district pursuant to Section 44229, or distributed by a district
to any other public agency pursuant to this chapter, shall be used
by the district or other public agency for administrative costs.

SEC. 6.  

Section 44275 of the Health and Safety Code, as
amended by Section 15 of Chapter 401 of the Statutes of 2013, is
amended to read:

44275.  

(a) As used in this chapter, the following terms have
the following meanings:

(1) [Reserved]

(2) “Btu” means British thermal unit.

(3) “Commission” means the State Energy Resources
Conservation and Development Commission.

(4) “Cost-effectiveness” means dollars provided to a project
pursuant to subdivision (d) of Section 44283 for each ton of
covered emission reduction attributed to a project or to the program
as a whole. In calculating cost-effectiveness, one-time grants of
funds made at the beginning of a project shall be annualized using
a time value of public funds or discount rate determined for each
project by the state board, taking into account the interest rate on
bonds, interest earned by state funds, and other factors as
determined appropriate by the state board. Cost-effectiveness shall
be calculated by dividing annualized costs by average annual
emissions reduction. The state board, in consultation with the
districts and concerned members of the public, shall establish
appropriate cost-effective limits for oxides of nitrogen, particulate
matter, and reactive organic gases and a reasonable system for
comparing the cost-effectiveness of proposed projects as described
in subdivision (a) of Section 44283.

(5) “Covered emissions” include emissions of oxides of nitrogen,
particulate matter, and reactive organic gases from any covered
source.

(6) “Covered engine” includes any internal combustion engine
or electric motor and drive powering a covered source.

(7) “Covered source” includes onroad vehicles, off-road
nonrecreational equipment and vehicles, locomotives, marine
vessels, agricultural sources of air pollution, as defined in Section
39011.5, and, as determined by the state board, other categories
necessary for the state and districts to meet air quality goals.

(8) “Covered vehicle” includes any vehicle or piece of
equipment powered by a covered engine.

(9) “District” means a county air pollution control district or an
air quality management district.

(10) “Fund” means the Air Pollution Control Fund established
pursuant to Section 43015.

(11) “Incremental cost” means the cost of the project less a
baseline cost that would otherwise be incurred by the applicant in
the normal course of business. Incremental costs may include
added lease, energy, or fuel costs pursuant to Section 44283 as
well as incremental capital costs.

(12) “Liquidated” means that all moneys for a specified fiscal
year have been spent by a district to reimburse grantees for valid
and eligible project invoices and district administrative costs.
Payments withheld from the grantee by a district until all
contractual reporting requirements are met may be excluded from
these amounts for the purposes of liquidation.

(13) “Mobile Source Air Pollution Reduction Review
Committee” means the Mobile Source Air Pollution Reduction
Review Committee created by Section 44244.

(14) “New very low emission vehicle” means a heavy-duty
vehicle that qualifies as a very low emission vehicle when it is a
new vehicle, where new vehicle has the same meaning as defined
in Section 430 of the Vehicle Code, or that is modified with the
approval and warranty of the original equipment manufacturer to
qualify as a very low emission vehicle within 12 months of delivery
to an owner for private or commercial use.

(15) “NO_x” means oxides of nitrogen.

(16) “Program” means the Carl Moyer Memorial Air Quality
Standards Attainment Program created by subdivision (a) of
Section 44280.

(17) “Recaptured” means those moneys that are returned to a
district or the state board by a grantee because that grantee did not
meet contractual obligations.

(18) “Repower” means replacing an engine with a different
engine. The term repower, as used in this chapter, generally refers
to replacing an older, uncontrolled engine with a new,
emissions-certified engine, although replacing an older
emissions-certified engine with a newer engine certified to lower
emissions standards may be eligible for funding under this program.

(19) “Retrofit” means making modifications to the engine and
fuel system so that the retrofitted engine does not have the same
specifications as the original engine.

(20) “Returned” means those moneys sent by a district to the
state board for reallocation because those moneys are not liquidated
by a liquidation deadline.

(21) “Very low emission vehicle” means a heavy-duty vehicle
with emissions significantly lower than otherwise applicable
baseline emission standards or uncontrolled emission levels
pursuant to Section 44282.

(b) This section shall remain in effect only until January 1, 2024,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2024, deletes or extends that date.

SEC. 7.  

Section 44275 of the Health and Safety Code, as
amended by Section 16 of Chapter 401 of the Statutes of 2013, is
amended to read:

44275.  

(a) As used in this chapter, the following terms have
the following meanings:

(1) [Reserved]

(2) “Btu” means British thermal unit.

(3) “Commission” means the State Energy Resources
Conservation and Development Commission.

(4) “Cost-effectiveness” means dollars provided to a project
pursuant to subdivision (d) of Section 44283 for each ton of NO_x
reduction attributed to a project or to the program as a whole. In
calculating cost-effectiveness, one-time grants of funds made at
the beginning of a project shall be annualized using a time value
of public funds or discount rate determined for each project by the
state board, taking into account the interest rate on bonds, interest
earned by state funds, and other factors as determined appropriate
by the state board. Cost-effectiveness shall be calculated by
dividing annualized costs by average annual emissions reduction
of NO_x in this state.

(5) “Covered engine” includes any internal combustion engine
or electric motor and drive powering a covered source.

(6) “Covered source” includes onroad vehicles of 14,000 pounds
gross vehicle weight rating (GVWR) or greater, off-road
nonrecreational equipment and vehicles, locomotives, diesel marine
vessels, stationary agricultural engines, and, as determined by the
state board, other high-emitting diesel engine categories.

(7) “Covered vehicle” includes any vehicle or piece of
equipment powered by a covered engine.

(8) “District” means a county air pollution control district or an
air quality management district.

(9) “Fund” means the Air Pollution Control Fund established
pursuant to Section 43015.

(10) “Incremental cost” means the cost of the project less a
baseline cost that would otherwise be incurred by the applicant in
the normal course of business. Incremental costs may include
added lease or fuel costs pursuant to Section 44283 as well as
incremental capital costs.

(11) “Liquidated” means that all moneys for a specified fiscal
year have been spent by a district to reimburse grantees for valid
and eligible project invoices and district administrative costs.
Payments withheld from the grantee by a district until all
contractual reporting requirements are met may be excluded from
these amounts for the purposes of liquidation.

(12) “Mobile Source Air Pollution Reduction Review
Committee” means the Mobile Source Air Pollution Reduction
Review Committee created by Section 44244.

(13) “New very low emission vehicle” means a vehicle that
qualifies as a very low emission vehicle when it is a new vehicle,
where new vehicle has the same meaning as defined in Section
430 of the Vehicle Code, or that is modified with the approval and
warranty of the original equipment manufacturer to qualify as a
very low emission vehicle within 12 months of delivery to an
owner for private or commercial use.

(14) “NO_x” means oxides of nitrogen.

(15) “Program” means the Carl Moyer Memorial Air Quality
Standards Attainment Program created by subdivision (a) of
Section 44280.

(16) “Recaptured” means those moneys that are returned to a
district or the state board by a grantee because that grantee did not
meet contractual obligations.

(17) “Repower” means replacing an engine with a different
engine. The term repower, as used in this chapter, generally refers
to replacing an older, uncontrolled engine with a new,
emissions-certified engine, although replacing an older
emissions-certified engine with a newer engine certified to lower
emissions standards may be eligible for funding under this program.

(18) “Retrofit” means making modifications to the engine and
fuel system such that the retrofitted engine does not have the same
specifications as the original engine.

(19) “Returned” means those moneys sent by a district to the
state board for reallocation because those moneys are not liquidated
by a liquidation deadline.

(20) “Very low emission vehicle” means a vehicle with
emissions significantly lower than otherwise applicable baseline
emission standards or uncontrolled emission levels pursuant to
Section 44282.

(b) This section shall become operative on January 1, 2024.

SEC. 8.  

Section 44281 of the Health and Safety Code, as
amended by Section 19 of Chapter 401 of the Statutes of 2013, is
amended to read:

44281.  

(a) Eligible projects include, but are not limited to, any
of the following:

(1) Purchase of new very low or zero-emission covered vehicles
or covered heavy-duty engines.

(2) Emission-reducing retrofit of covered engines, or
replacement of old engines powering covered sources with newer
engines certified to more stringent emissions standards than the
engine being replaced, or with electric motors or drives.

(3) Purchase and use of emission-reducing add-on equipment
that has been verified by the state board for covered vehicles.

(4) Development and demonstration of practical, low-emission
retrofit technologies, repower options, and advanced technologies
for covered engines and vehicles with very low emissions of NO_x.

(5) Light- and medium-duty vehicle projects in compliance with
guidelines adopted by the state board pursuant to Title 13 of the
California Code of Regulations.

(b) No project shall be funded under this chapter after the
compliance date required by any local, state, or federal statute,
rule, regulation, memoranda of agreement or understanding, or
other legally binding document, except that an otherwise qualified
project may be funded even if the state implementation plan
assumes that the change in equipment, vehicles, or operations will
occur, if the change is not required by the compliance date of a
statute, regulation, or other legally binding document in effect as
of the date the grant is awarded. No project funded by the program
shall be used for credit under any state or federal emissions
averaging, banking, or trading program. No covered emission
reduction generated by the program shall be used as marketable
emission reduction credits or to offset any emission reduction
obligation of any person or entity. Projects involving new engines
that would otherwise generate marketable credits under state or
federal averaging, banking, and trading programs shall include
transfer of credits to the engine end user and retirement of those
credits toward reducing air emissions in order to qualify for funding
under the program. A purchase of a low-emission vehicle or of
equipment pursuant to a corporate or a controlling board’s policy,
but not otherwise required by law, shall generate surplus emissions
reductions and may be funded by the program.

(c) The program may also provide funding toward the
installation of fueling or energy infrastructure to fuel or power
covered sources.

(d) Eligible applicants may be any individual, company, or
public agency that owns one or more covered vehicles that operate
primarily within California or otherwise contribute substantially
to the NO_x, particulate matter (PM), or reactive organic gas (ROG)
emissions inventory in California.

(e) It is the intent of the Legislature that all emission reductions
generated by this chapter shall contribute to public health by
reducing, for the life of the vehicle being funded, the total amount
of emissions in California.

(f) This section shall remain in effect only until January 1, 2024,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2024, deletes or extends that date.

SEC. 9.  

Section 44282 of the Health and Safety Code, as
amended by Section 21 of Chapter 401 of the Statutes of 2013, is
amended to read:

44282.  

The following criteria apply to all projects to be funded
through the program except for projects funded through the
infrastructure demonstration program and infrastructure projects,
pursuant to subdivision (c) of Section 44281 and Section 44284:

(a) The state board may establish project criteria, including
minimum project life for source categories, in the guidelines
described in Section 44287. For previously unregulated source
categories, project criteria shall consider the timing of newly
established regulatory requirements.

(b) To be eligible, projects shall meet the cost-effectiveness per
ton of covered emissions reduced requirements of Section 44283.

(c) To be eligible, retrofits, repowers, and installation of add-on
equipment for covered vehicles shall be performed, or new covered
vehicles delivered to the end user, or covered vehicles scrapped
on or after the date the program is implemented.

(d) Retrofit technologies, new engines, and new vehicles shall
be certified for sale or under experimental permit for operation in
California.

(e) Repower projects that replace older, uncontrolled engines
with new, emissions-certified engines or that replace
emissions-certified engines with new engines certified to a more
stringent NO_x emissions standard are approvable subject to the
other applicable selection criteria. The state board shall determine
appropriate baseline emission levels for the uncontrolled engines
being replaced.

(f) For heavy-duty-vehicle projects, retrofit and add-on
equipment projects shall document a NO_x or PM emission
reduction of at least 25 percent and no increase in other covered
emissions compared to the applicable baseline emissions accepted
by the state board for that engine year and application. The state
board shall determine appropriate baseline emission levels.
Acceptable documentation shall be defined by the state board.
After study of available emission reduction technologies and after
public notice and comment, the state board may revise the
minimum percentage emission reduction criterion for retrofits and
add-on equipment provided for in this section to improve the ability
of the program to achieve its goals.

(g) (1) For heavy-duty-vehicle projects involving the purchase
of new very low or zero-emission vehicles, engines shall be
certified to an optional low NO_x emissions standard established
by the state board, except as provided for in paragraph (2).

(2) For heavy-duty-vehicle projects involving the purchase of
new very low or zero-emission covered vehicles for which no
optional low NO_x emission standards are available, documentation
shall be provided showing that the low or zero-emission engine
emits not more than 70 percent of the NO_x or NO_x plus
hydrocarbon emissions of a new engine certified to the applicable
baseline NO_x or NO_x plus hydrocarbon emission standard for that
engine and meets applicable particulate standards. The state board
shall specify the documentation required. If no baseline emission
standard exists for new vehicles in a particular category, the state
board shall determine an appropriate baseline emission level for
comparison.

(h) For projects other than heavy-duty-vehicle projects, the state
board shall determine appropriate criteria under the provisions of
Section 44287.

(i) This section shall remain in effect only until January 1, 2024,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2024, deletes or extends that date.

SEC. 10.  

Section 44283 of the Health and Safety Code, as
amended by Section 23 of Chapter 401 of the Statutes of 2013, is
amended to read:

44283.  

(a) (1) For all projects funded pursuant to this chapter,
except for an infrastructure project described in subdivision (c) of
Section 44281, the following cost-effectiveness criteria shall apply:

(A) (i) Project grants shall not be made that exceed
cost-effectiveness begin insert values end insert calculated in accordance with this section.

(ii) The state board, in collaboration with the districts, shall
establish cost-effectiveness values in the guidelines issued pursuant
to Section 44287, taking into consideration factors, including, but
not limited to, the following:

(I) The cost of emission control technologies identified in
Section 44281.

(II) The cost-effectiveness values for NO_x, particulate matter,
or reactive organic gases for any adopted rule or control measure
in any district’s approved state implementation plan, or rule
adopted by the state board.

(B) For projects obtaining reactive organic gas and particulate
matter reductions, the state board shall determine appropriate
adjustment factors to calculate a weighted begin delete cost-effectiveness. end delete
begin insert cost-effectiveness value. end insert

(2) When a district board approves funding for a project or
project category, the district board shall include, in its agenda or
supporting materials for the meeting approving funding for the
project or project category, a brief statement of the rationale for
funding that source category, including the basis for selection and
the importance of that project type.

(b) Only covered emission reductions occurring in this state
shall be included in the cost-effectiveness determination. The
extent to which emissions generated at sea contribute to air quality
in California nonattainment areas shall be incorporated into these
methodologies based on a reasonable assessment of currently
available information and modeling assumptions.

(c) The state board shall develop protocols for calculating the
surplus covered emission reductions in California from
representative project types over the life of the project.

(d) The cost of the covered emission reduction is the amount
of the grant from the program, including matching funds provided
pursuant to subdivision (e) of Section 44287, or funding provided
pursuant to paragraph (2) of subdivision (d) of Section 41081 or
subdivision (b) of Section 44229, not including funds described
in subdivision (a) of Section 44287.2. The state board shall
establish reasonable methodologies for evaluating project
cost-effectiveness, consistent with the definition contained in
paragraph (4) of subdivision (a) of Section 44275, and with
accepted methods, taking into account a fair and reasonable
discount rate or time value of public funds.

(e) A grant shall not be made that, net of taxes, provides the
applicant with funds in excess of the incremental cost of the project.
Incremental lease costs may be capitalized according to guidelines
adopted by the state board so that these incremental costs may be
offset by a one-time grant award.

(f) Funds under a district’s budget authority or fiduciary control
may be used to pay for the incremental cost of energy or liquid or
gaseous fuel, other than standard gasoline or diesel, which is
integral to a covered emission reducing technology that is part of
a project receiving grant funding under the program. The fuel shall
be approved for sale in the state. The incremental energy or fuel
cost over the expected lifetime of the vehicle may be offset by the
district if the project as a whole, including the incremental energy
or fuel cost, meets all of the requirements of this chapter, including
the maximum allowed cost-effectiveness. The state board shall
develop an appropriate methodology for converting incremental
energy or fuel costs over the vehicle lifetime into an initial cost
for the purposes of determining project cost-effectiveness.
Incremental energy or fuel costs shall not be included in project
costs for fuels dispensed from any facility that was funded, in
whole or in part, from the fund.

(g) For the purposes of determining any grant amount pursuant
to this chapter, project proponents applying for funding shall be
required to state in their application any other public financial
assistance to the project.

(h) For projects that would repower off-road equipment by
replacing uncontrolled diesel engines with new, certified diesel
engines, the state board may establish maximum grant award
amounts per repower. A repower project shall also be subject to
the incremental cost maximum pursuant to subdivision (e).

(i) After study of available emission reduction technologies and
costs and after public notice and comment, the state board may
adjust the values of the maximum grant award criteria stated in
this section to improve the ability of the program to achieve its
goals. Every year the state board shall adjust the maximum
cost-effectiveness amount established in subdivision (a) and any
per-project maximum set by the state board pursuant to subdivision
(h) to account for inflation and other factors as authorized by this
section.

(j) This section shall remain in effect only until January 1, 2024,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2024, deletes or extends that date.

SEC. 11.  

Section 44286 of the Health and Safety Code is
amended to read:

44286.  

(a) The responsibilities of the state board include
management of program funds and program oversight. The state
board is responsible for producing guidelines, protocols, and
criteria for covered vehicle projects and developing methodologies
for evaluating project cost-effectiveness in accordance with this
chapter. The state board shall have primary responsibility for the
reporting aspects of the program.

(b) The responsibilities of a district include local administration
of project funds, monitoring funded projects, and reporting results
to the state board, in accordance with this chapter. Any project
funds awarded to a successful applicant shall be disbursed by the
district.

(c) Relative to the allocation of funds in the south coast district,
for purposes of this program, Mobile Source Air Pollution
Reduction Review Committee funds shall only be used as matching
funds upon approval, by minute action, of the Mobile Source Air
Pollution Reduction Review Committee.

(d) The state board may reserve up to 10 percent of the program
funds available each year to directly fund any project that is a
covered source and is described in Section 44281. A project that
is multidistrict in nature shall be funded by the state board in
coordination with the appropriate districts. The state board shall
coordinate outreach efforts with a participating district to ensure
that any parallel availability of a district grant and a grant from
the state board is clear to an eligible applicant. Reserved funds not
committed to a project funded directly by the state board by the
end of the fiscal year shall be made available to the districts in the
following year.

(e) The commission, in consultation with the state board, shall
manage the Advanced Technology Account and the Infrastructure
Demonstration Program in accordance with this chapter.

(f) The state board shall work closely with the commission and
the districts for the duration of this program to maximize the ability
of the program to achieve its goals.

(g) The state board and the districts shall take all appropriate
and necessary actions to ensure that emissions reductions achieved
through the program are credited by the United States
Environmental Protection Agency to the appropriate emission
reduction objectives in the state implementation plan.

SEC. 12.  

Section 44287 of the Health and Safety Code, as
amended by Section 25 of Chapter 401 of the Statutes of 2013, is
amended to read:

44287.  

(a) The state board shall establish or update grant
criteria and guidelines consistent with this chapter for covered
vehicle and infrastructure projects as soon as practicable, but not
later than July 1, 2017. The adoption of guidelines is exempt from
the rulemaking provisions of the Administrative Procedure Act
(Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code). The state board
shall solicit input and comment from the districts during the
development of the criteria and guidelines and shall make every
effort to develop criteria and guidelines that are compatible with
existing district programs that are also consistent with this chapter.
Guidelines shall include protocols to calculate project
cost-effectiveness. The grant criteria and guidelines shall include
safeguards to ensure that the project generates surplus emissions
reductions. Guidelines shall enable and encourage districts to
cofund projects that provide emissions reductions in more than
one district. The state board shall make draft criteria and guidelines
available to the public 45 days before final adoption, and shall
hold at least one public meeting to consider public comments
before final adoption. The state board may develop separate
guidelines and criteria for the different types of eligible projects
described in subdivision (a) of Section 44281.

(b) The state board, in consultation with the participating
districts, may propose revisions to the criteria and guidelines
established pursuant to subdivision (a) as necessary to improve
the ability of the program to achieve its goals. A proposed revision
shall be made available to the public 45 days before final adoption
of the revision and the state board shall hold at least one public
meeting to consider public comments before final adoption of the
revision.

(c) The state board shall reserve funds for, and disburse funds
to, districts from the fund for administration pursuant to this section
and Section 44299.1.

(d) The state board shall develop guidelines for a district to
follow in applying for the reservation of funds, in accordance with
this chapter. It is the intent of the Legislature that district
administration of any reserved funds be in accordance with the
project selection criteria specified in Sections 44281, 44282, and
44283 and all other provisions of this chapter. The guidelines shall
be established and published by the state board as soon as
practicable, but not later than January 1, 2006.

(e) Funds shall be reserved by the state board for administration
by a district that adopts an eligible program pursuant to this chapter
and offers matching funds at a ratio of one dollar ($1) of matching
funds committed by the district or the Mobile Source Air Pollution
Reduction Review Committee for every two dollars ($2) committed
from the fund. Funds available to the Mobile Source Air Pollution
Reduction Review Committee may be counted as matching funds
for projects in the South Coast Air Basin only if the committee
approves the use of these funds for matching purposes. Matching
funds may be any funds under the district’s budget authority that
are committed to be expended in accordance with the program.
Funds committed by a port authority or a local government, in
cooperation with a district, to be expended in accordance with the
program may also be counted as district matching funds. Matching
funds provided by a port authority or a local government shall not
exceed 30 percent of the total required matching funds in any
district that applies for more than three hundred thousand dollars
($300,000) of the state board funds. Only a district, or a port
authority or a local government teamed with a district, may provide
matching funds.

(f) The state board may adjust the ratio of matching funds
described in subdivision (e), if it determines that an adjustment is
necessary in order to maximize the use of, or the air quality benefits
provided by, the program, based on a consideration of the financial
resources of the district.

(g) Notwithstanding subdivision (e), a district need not provide
matching funds for state board funds allocated to the district for
program outreach activities pursuant to paragraph (4) of subdivision
(a) of Section 44299.1.

(h) A district may include within its matching funds a reasonable
estimate of direct or in-kind costs for assistance in providing
program outreach and application evaluation. In-kind and direct
matching funds shall not exceed 15 percent of the total matching
funds offered by a district. A district may also include within its
matching funds any money spent on or after February 25, 1999,
that would have qualified as matching funds but were not
previously claimed as matching funds.

(i) A district desiring a reservation of funds shall apply to the
state board following the application guidelines established
pursuant to this section. The state board shall approve or disapprove
a district application not later than 60 days after receipt. Upon
approval of any district application, the state board shall
simultaneously approve a reservation of funding for that district
to administer. Reserved funds shall be disbursed to the district so
that funding of a district-approved project is not impeded.

(j) Any funds reserved for a district by the state board pursuant
to this section are available for disbursement to the district for a
period of not more than two years from the time of reservation.
Funds not liquidated by a district by June 30 of the fourth calendar
year following the date of the reservation shall be returned to the
state board within 90 days for future allocation pursuant to this
chapter. Each reservation of funds shall be accounted for separately,
and unused funds from each application shall revert back to the
state board for use pursuant to this chapter as specified in this
subdivision.

(k) The state board shall specify a date each year when district
applications are due. If the eligible applications received in any
year oversubscribe the available funds, the state board shall reserve
funds on an allocation basis, pursuant to Section 44299.2. The
state board may accept a district application after the due date for
a period of months specified by the state board. Funds may be
reserved in response to those applications, in accordance with this
chapter, out of funds remaining after the original reservation of
funds for the year.

(l) Guidelines for a district application shall require information
from an applicant district to the extent necessary to meet the
requirements of this chapter, but shall otherwise minimize the
information required of a district.

(m) A district application shall be reviewed by the state board
immediately upon receipt. If the state board determines that an
application is incomplete, the applicant shall be notified within 10
working days with an explanation of what is missing from the
application. A completed application fulfilling the criteria shall be
approved as soon as practicable, but not later than 60 working days
after receipt.

(n) The commission, in consultation with the districts, shall
establish project approval criteria and guidelines for infrastructure
projects consistent with Section 44284 as soon as practicable, but
not later than February 15, 2000. The commission shall make draft
criteria and guidelines available to the public 45 days before final
adoption, and shall hold at least one public meeting to consider
public comments before final adoption.

(o) The commission, in consultation with the participating
districts, may propose revisions to the criteria and guidelines
established pursuant to subdivision (n) as necessary to improve
the ability of the program to achieve its goals. A revision may be
proposed at any time, or may be proposed in response to a finding
made in the annual report on the program published by the state
board pursuant to Section 44295. A proposed revision shall be
made available to the public 45 days before final adoption of the
revision and the commission shall hold at least one public meeting
to consider public comments before final adoption of the revision.

(p) Unclaimed funds will be allocated by the state board in
accordance with Section 44299.2.

(q) This section shall remain in effect only until January 1, 2024,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2024, deletes or extends that date.

SEC. 13.  

Section 44287.1 of the Health and Safety Code is
amended to read:

44287.1.  

(a) The state board shall, at its first opportunity,
revise the grant criteria and guidelines adopted pursuant to Section
44287 to incorporate projects in which an applicant turns in
nonroad internal combustion technology and equipment that the
applicant owns and that still has some useful life, coupled with the
purchase of new nonroad zero-emission technology and equipment
that is in a similar category or that can perform the same work.

(b) When it evaluates the benefits of a project described in
subdivision (a), the state board shall count both of the following
emission reduction streams, provided that they are real, enforceable,
quantifiable, and surplus emission reductions:

(1) The displacement of the emissions from the older nonroad
internal combustion technology and equipment for its remaining
life with the new nonroad zero-emission technology and equipment.

(2) After the time period specified in paragraph (1), the
displacement of emissions from new nonroad internal combustion
technology and equipment meeting the emission standards in place
at time of purchase, with the new nonroad zero-emission
technology and equipment over its remaining life.

(c) A project described in subdivision (a) shall meet the
cost-effectiveness criteria in Section 44283 and all other criteria
of the program, including the requirement that the emission
reductions be real, enforceable, quantifiable, and surplus.

(d) The incremental cost of a project described in subdivision
(a) may include, at the discretion of the applicant, some or all of
the reasonable salvage value of the nonroad internal combustion
technology and equipment turned in, as determined by the state
board. However, an applicant that elects to include these costs
shall be required to meet the cost-effectiveness criteria in Section
44283.

SEC. 14.  

Section 44287.2 of the Health and Safety Code is
amended to read:

44287.2.  

(a) By July 1, 2017, the state board shall revise
project grant criteria and guidelines pursuant to Section 44287 to
allow funds from federal, state, and local programs or other public
funding sources to be used for a project also funded under this
chapter without those additional public funds being factored into
the criteria emission reduction cost-effectiveness calculations, if
the projects are eligible under those programs and meet all criteria
associated with those funding sources. Those other projects include,
but are not limited to, any of the following:

(1) Federal funding from programs designed to reduce
greenhouse gas emissions.

(2) State and local funding from programs designed to reduce
greenhouse gas emissions, including the Greenhouse Gas Reduction
Fund, created pursuant to Section 16428.8 of the Government
Code, and the Alternative and Renewable Fuel and Vehicle
Technology Program (Article 2 (commencing with Section 44272)
of Chapter 8.9).

(3) Funding from programs designed to support energy diversity.

(4) Funding from programs that are intended to provide covered
emissions reductions but do not require those reductions to be able
to be credited to the state implementation plan.

(b) Nothing in this section authorizes the expenditure of funds
for a project that does not meet all of the requirements of this
chapter, including requirements that require cost sharing or the
matching of funds. The sum of the total grants shall not exceed
the project cost. The covered emissions reductions paid for pursuant
to this chapter shall not be claimed by the other funding sources.

(c) Subdivision (a) shall not apply to funds used pursuant to
paragraph (2) of subdivision (d) of Section 41081 or subdivision
(b) of Section 44229.

SEC. 15.  

Section 44288 of the Health and Safety Code is
amended to read:

44288.  

(a) An application for a project grant shall be reviewed
by the administering district immediately upon receipt. If the
administering district determines that an application is incomplete,
the applicant shall be notified within 30 working days with an
explanation of what is missing from the application. The date and
time of receipt of each application determined to be complete shall
be recorded and the completed application shall be evaluated with
respect to the appropriate project selection criteria. A district shall
make every effort to process an application and grant an award
rapidly and to coordinate project approval with any purchase or
installation timing constraint on an applicant. Notwithstanding
any other provision of this chapter, the administering district may
determine that an application is not in good faith, not credible, or
not in compliance with this chapter and its objectives.

(b) A participating district may request assistance from the state
board on an as-needed basis to clarify project evaluation protocols
or to obtain information necessary to properly evaluate an
application.

(c) An application for a grant for an infrastructure project shall
be reviewed by the commission immediately upon receipt. If the
commission determines that an application is incomplete, the
applicant shall be notified within five working days with an
explanation of what is missing from the application. The date and
time of receipt of each application determined to be complete shall
be recorded and the completed application shall be evaluated with
respect to the appropriate project selection criteria. A complete
grant application fulfilling the project selection criteria shall be
approved as soon as practicable, but not later than 60 working days
after receipt. Notwithstanding any other provision of this chapter,
the commission may determine that an application is not in good
faith, not credible, or not in compliance with this chapter and its
objectives. The commission shall expedite the processing of an
application and shall grant an award as rapidly as possible.

(d) Funds shall be awarded in conjunction with the execution
of a contract that obligates the state board or a participating district
to make the grant and obligates the grantee to take the actions
described in the grant application. A contract shall incorporate the
recapturing provisions contained in subdivision (c) of Section
44291.

SEC. 16.  

Section 44291 of the Health and Safety Code is
amended to read:

44291.  

(a) The state board shall assist districts with developing
procedures to monitor whether the emission reductions projected
in successful grant applications are actually achieved. Monitoring
procedures may include project audits, and may also include
requirements, as part of the contract between the state board or
districts and the grant recipients, that each grant recipient provide
information about the project on an annual basis. Information
required from grant recipients should be minimized and the format
for reporting the information should be made simple and
convenient.

(b) As soon as practicable, the state board, in consultation with
the districts, shall publish procedures to monitor and audit
infrastructure projects. These procedures shall ensure that the
amount of qualifying fuel dispensed annually is greater than or
equal to the amount upon which the grant award is based and that
any project qualifying for funding on the basis of public
accessibility or limited public accessibility is, in fact, providing
that accessibility.

(c) The monitoring and auditing procedures shall be sufficient
to allow emission reductions generated to be fully credited to air
quality plans. The monitoring procedures shall contain provisions
for recapturing grant awards in proportion to any loss of emission
reductions or underachievement in dispensing qualifying fuel
compared with the reductions and fuel dispensing projected in the
grant application. Monitoring and auditing procedures shall be
revised as appropriate to enhance program effectiveness.

(d) The state board shall monitor district programs to ensure
that participating districts conduct their programs consistent with
the criteria and guidelines established by the state board and the
commission pursuant to this chapter. The monitoring procedures
shall contain provisions for return of funds not yet awarded to
approved projects if a district fails to show that they are
implementing a program consistent with the approved program.
If the state board determines, pursuant to this subdivision, that
moneys from the fund allocated to a district should be returned,
the state board shall hold at least one public meeting to consider
public comments prior to requiring the return of the allocated
funds. The state board shall make every effort to assist districts to
implement programs in an approved manner and shall only require
the return of allocated funds if these efforts fail to address problems
adequately. Returned funds shall be deposited in the fund. The
state board shall not require the return of funds already awarded
to approved projects.

(e) Program funds recaptured as a result of a settlement
agreement executed by the state board shall be returned to the
district that provided the funds to the grant recipient. A penalty
resulting from a settlement agreement executed by the state board
with a grant recipient or from a civil action brought by the Attorney
General shall be deposited in the fund.

SEC. 17.  

Section 44299.1 of the Health and Safety Code, as
amended by Section 28 of Chapter 401 of the Statutes of 2013, is
amended to read:

44299.1.  

(a) To ensure that emission reductions are obtained
as needed from pollution sources, any moneys deposited in the
fund for use by the program or appropriated to the program shall
be segregated and administered as follows:

(1) Not more than 2.5 percent of the moneys in the fund for use
by the program shall be allocated to program support and outreach
costs incurred by the state board and the commission directly
associated with implementing the program pursuant to this chapter.
These funds shall be allocated to the state board and the
commission in proportion to total program funds administered by
the state board and the commission.

(2) Not more than 2.5 percent of the moneys in the fund for use
by the program shall be allocated to direct program outreach
activities. The state board may use these funds for program
outreach contracts or may allocate outreach funds to participating
districts in proportion to each district’s allocation from the program
moneys in the fund. The state board shall report on the use of
outreach funds in their reports to the Legislature pursuant to Section
44295.

(3) The balance shall be deposited in the fund to be expended
to offset added costs of new very low or zero-emission vehicle
technologies, and emission reducing repowers, retrofits, and add-on
equipment for covered vehicles and engines, and other projects
specified in Section 44281.

(b) Moneys in the fund shall be allocated to a district that
submits an eligible application to the state board pursuant to
Section 44287. The state board shall determine the maximum
amount of annual funding from the fund for use by the program
that each district may receive. This determination shall be based
on the population in each district as well as the relative importance
of obtaining covered emission reductions in each district,
specifically through the program.

(c) Not more than 6.25 percent of the moneys allocated pursuant
to this chapter to a district with a population of one million or more
may be used by the district for indirect costs of implementation of
the program, including outreach costs that are subject to the
limitation in paragraph (2) of subdivision (a).

(d) Not more than 12.5 percent of the moneys allocated pursuant
to this chapter to a district with a population of less than one
million may be used by the district for indirect costs of
implementation of the program, including outreach costs that are
subject to the limitation in paragraph (2) of subdivision (a).

SEC. 18.  

Section 44299.1 of the Health and Safety Code, as
amended by Section 29 of Chapter 401 of the Statutes of 2013, is
repealed.

SEC. 19.  

Section 44299.2 of the Health and Safety Code is
amended to read:

44299.2.  

Funds shall be allocated to districts, and shall be
subject to administrative terms and conditions as follows:

(a) Available funds shall be distributed to districts taking into
consideration the population of the area, the severity of the air
quality problems experienced by the population, and the historical
allocation of the program funds, except that the south coast district
shall be allocated a percentage of the total funds available to
districts that is proportional to the percentage of the total state
population residing within the jurisdictional boundaries of that
district. For the purposes of this subdivision, population shall be
determined by the state board based on the most recent data
provided by the Department of Finance. The allocation to the south
coast district shall be subtracted from the total funds available to
districts. Each district, except the south coast district, shall be
awarded a minimum allocation of two hundred thousand dollars
($200,000), and the remainder, which shall be known as the
“allocation amount,” shall be allocated to all districts as follows:

(1) The state board shall distribute 35 percent of the allocation
amount to the districts in proportion to the percentage of the total
residual state population that resides within each district’s
boundaries. For purposes of this paragraph, “total residual state
population” means the total state population, less the total
population that resides within the south coast district.

(2) The state board shall distribute 35 percent of the allocation
amount to the districts in proportion to the severity of the air quality
problems to which each district’s population is exposed. The
severity of the exposure shall be calculated as follows:

(A) Each district shall be awarded severity points based on the
district’s attainment designation and classification, as most recently
promulgated by the federal Environmental Protection Agency for
the National Ambient Air Quality Standard for ozone averaged
over eight hours, as follows:

(i) A district that is designated attainment for the federal
eight-hour ozone standard shall be awarded one point.

(ii) A district that is designated nonattainment for the federal
eight-hour ozone standard shall be awarded severity points based
on classification. Two points shall be awarded for transitional,
basic, or marginal classifications, three points for moderate
classification, four points for serious classification, five points for
severe classification, six points for severe-17 classification, and
seven points for extreme classification.

(B) Each district shall be awarded severity points based on the
annual diesel particulate emissions in the air basin, as determined
by the state board. One point shall be awarded to the district, in
increments, for each 1,000 tons of diesel particulate emissions. In
making this determination, 0 to 999 tons shall be awarded no
points, 1,000 to 1,999 tons shall be awarded one point, 2,000 to
2,999 tons shall be awarded two points, and so forth. If a district
encompasses more than one air basin, the air basin with the greatest
diesel particulate emissions shall be used to determine the points
awarded to the district. The San Diego County Air Pollution
Control District and the Imperial County Air Pollution Control
District shall be awarded one additional point each to account for
annual diesel particulate emissions transported from Mexico.

(C) The points awarded under subparagraphs (A) and (B), shall
be added together for each district, and the total shall be multiplied
by the population residing within the district boundaries, to yield
the local air quality exposure index.

(D) The local air quality exposure index for each district shall
be summed together to yield a total state exposure index. Funds
shall be allocated under this paragraph to each district in proportion
to its local air quality exposure index divided by the total state
exposure index.

(3) The state board shall distribute 30 percent of the allocation
amount to the districts in proportion to the allocation of funds from
the program moneys in the fund, as follows:

(A) Because each district is awarded a minimum allocation
pursuant to subdivision (a), there shall be no additional minimum
allocation from the program historical allocation funds. The total
amount allocated in this way shall be subtracted from total funding
previously awarded to the district under the program, and the
remainder, which shall be known as directed funds, shall be
allocated pursuant to subparagraph (B).

(B) Each district with a population that is greater than or equal
to 1 percent of the state’s population shall receive an additional
allocation based on the population of the district and the district’s
relative share of emission reduction commitments in the state
implementation plan to attain the National Ambient Air Quality
Standard for ozone averaged over one hour. This additional
allocation shall be calculated as a percentage share of the directed
funds for each district, derived using a ratio of each district’s share
amount to the base amount, which shall be calculated as follows:

(i) The base amount shall be the total program funds allocated
by the state board to the districts in the 2002-03 fiscal year, less
the total of the funds allocated through the minimum allocation to
each district in the 2002-03 fiscal year.

(ii) The share amount shall be the allocation that each district
received in the 2002-03 fiscal year, not including the minimum
allocation. There shall be one share amount for each district.

(iii) The percentage share shall be calculated for each district
by dividing the district’s share amount by the base amount, and
multiplying the result by the total directed funds available under
this subparagraph.

(b) Funds shall be distributed as expeditiously as reasonably
practicable, and a report of the distribution shall be made available
to the public.

(c) All funds allocated pursuant to this section shall be liquidated
as provided for in the guidelines adopted pursuant to Section 44287
by June 30 begin delete four years end delete begin insert of the fourth year end insert following the year of
allocation. Funds not liquidated within the four years shall be
returned to the state board within 90 days for future allocation
pursuant to this chapter.