1 MEETING 2 CALIFORNIA AIR RESOURCES BOARD 3 4 MARKET INCENTIVES AND OTHER INNOVATIVE ) 5 CONTROLS FOR MOBILE SOURCES AND CONSUMER ) PRODUCTS: ) 6 ) PRACTICAL MEASURES FOR INCLUSION IN THE ) 7 STATE IMPLEMENTATION PLAN ) ___________________________________________) 8 9 10 11 REPORTER'S TRANSCRIPT OF PROCEEDINGS 12 Volume 2 13 14 15 Location: COUNTY ADMINISTRATION CENTER Supervisors' Chambers, Room 310 16 1600 Pacific Highway San Diego, CA 17 Date and Time: Thursday, July 21, 1994 18 -and- 19 Friday, July 22, 1994 20 Reported by: JOANNE P. CUNNINGHAM, CSR 2734 21 Job No. 25427JC2 22 23 24 25 281 GILLESPIE REPORTING SERVICES 1 San Diego, CA Friday, July 22, 1994 2 3 P R O C E E D I N G S 4 5 CHAIRWOMAN SCHAFER: Good morning, ladies 6 and gentlemen. Welcome to the Air Resource Board's 7 second day in a series of symposia on "Market Incentives 8 and Other Innovative Control Methods: Practical 9 Measures for Inclusion in the State Implementation 10 Plan." 11 Today's sessions are going to break out into 12 two parts. Part I this morning is on the "Efficient 13 Movement of People and Goods," and this afternoon we'll 14 discuss "Accelerated Vehicle Retirement/Conversion." 15 We've come to San Diego to talk about what we 16 might do better or differently in the field of air 17 quality management as we approach the 21st century, and 18 as I said yesterday, the stock and trade of our business 19 has been performance-based standards, increasing the 20 better technologies, and the lack of turnover of aging 21 machinery of all kinds. And that will undoubtedly 22 continue, but we also are learning that there's a great 23 deal more to discuss: how to use the marketplace more 24 effectively, for one; expanding markets, as we certainly 25 know, can still stimulate the production of cleaner 282 GILLESPIE REPORTING SERVICES 1 goods and services; and also we're coming to recognize 2 more than ever how pricing signals may induce more 3 efficient and therefore less wasteful and therefore more 4 environmentally friendly choices. We hope to explore 5 market-based alternatives in some detail during these 6 symposia. 7 Focusing and accelerating our rate of 8 progress is another area important in this debate. For 9 example, we've concluded that removing gross emitters 10 from the road in California is a top priority, and we're 11 considering any ancillary embelishments to California's 12 smog check program to bring that about, and what kinds 13 of changes, specifically. 14 Another area we're exploring is the world of 15 new business practices, cutting-edge technologies or new 16 applications of existing tools that place less burden on 17 our overstrained air supply, to include manufacturing, 18 smart highway systems, more routine telecommuting and/or 19 teleconferencing. Could we achieve increased 20 productivity at a reduced emissions rate? Is there 21 something there? 22 And finally, we can talk about how we as a 23 society intend to pay for the actions that we know we 24 need, particularly as they affect existing sources of 25 emissions. 283 GILLESPIE REPORTING SERVICES 1 As we learned yesterday, some of the answers 2 to these questions may be well outside the Air Resources 3 Board's authority to control, but we should be able to 4 influence consideration of these matters in other 5 appropriate forums. 6 As I did yesterday, I would like to ask each 7 speaker to emphasize the practical aspects of his or her 8 remarks, what you'd have this board do the same or 9 differently in managing emission sources under the 10 state's jurisdiction, what obstacles you see and how 11 they might be surmounted, and what kinds of returns you 12 expect both in economic and air quality terms. 13 Our particular concern will be to try to 14 identify the emissions reductions benefit of each 15 proposal, as we go along, and I mean over a period of 16 time, this summer and fall as we put together the State 17 Implementation Plan. 18 I know many of you have been engaged in 19 discussion about the Federal Implementation Plan, and I 20 know there are strong feelings about that plan, which 21 have been reported in the local press in the last week. 22 And although this board shares many of those sentiments, 23 I don't want to use today's session to get involved in a 24 protracted discussion about the FIP. There are other 25 forums for that debate. 284 GILLESPIE REPORTING SERVICES 1 I'm also going to ask the participants to be 2 patient with respect to the State's Implementation 3 Plan. We in the local air districts are in the process 4 of constructing various features of that plan and 5 packages coming together but won't be completed until 6 later this year until after we've gone over the numbers 7 more carefully, consider our policy and legal options 8 and have a chance to reflect on some of the alternatives 9 that we'll be hearing about at these symposia. 10 There will be appropriate public hearings on 11 the State Implementation Plan, and interested parties 12 will have an opportunity to participate at that time. 13 As a state with a track record in air quality 14 management that is second to none, I believe that we can 15 chart our own future. And so we've invited all of you 16 here today to partner with us in that effort. I want to 17 thank you all for coming, and I'd like to begin by 18 inviting Councilman John Cox to the podium. 19 The way you've done it, that's fine. John, 20 however you want to proceed, with slides or anything 21 like that, will be okay too. 22 Councilman Cox, City of Newport Beach, has a 23 list of government credentials as long as your arm. I 24 won't read all of them. 25 COUNCILMAN COX: Good. 285 GILLESPIE REPORTING SERVICES 1 CHAIRMAN SCHAFER: But his role here today 2 is to represent the Southern California Economic 3 Partnership. I expect you'll be telling us a little bit 4 more about what that partnership's goals are. And we 5 want to welcome you to the Air Resources Board. Good 6 morning. 7 COUNCILMAN COX: Thank you. Thank you, 8 Chairwoman Schafer. I appreciate this opportunity to 9 talk to you this morning. I'll try to make this work as 10 best as we can. I'm going to give you some highlights 11 of comments that came out of a task force that SCAG put 12 together, an advanced transportation technology task 13 force. 14 (Overhead presented.) 15 And what I'm going to comment on is the 16 evolution of this process. 17 The objective of the task force was to deal 18 with future growth problems in the region, traffic 19 congestion, air quality congestion, and certainly the 20 economic problems that exist. 21 (Overhead presented.) 22 And you have provided us with a lot of 23 information about where we're going with air quality 24 emission reductions. I just wanted to point out some 25 market indicators which helps demonstrate the difficulty 286 GILLESPIE REPORTING SERVICES 1 with getting there. 2 This is an example of how the consumer has 3 been operating over the last 30 years, moving from -- 4 whether the use of the private vehicle to public transit 5 to walk -- work at home, walk to work, and so forth, is 6 just the opposite direction of where a lot of us have 7 been talking about we would like to see it go in the 8 future. So it is going to be difficult to address some 9 of that when the consumer functions somewhat differently 10 than we would like him to. 11 (Overhead presented.) 12 The region -- and this is directed at the 13 Southern California region. This just gives us a 14 profile of the difficulties we face, not only with 15 population growth, trip growth, VMT growth, land 16 constraints, road mile constraints, open space 17 conservation -- there's a variety of things that we have 18 to deal with in this region in order to come to grips 19 with the issue that you're focusing on. 20 (Overhead presented.) 21 To help put this in perspective of the 22 magnitude of what it is, the SCAG population forecasts 23 call for 20 million people in this region alone in the 24 year 2010. If we did all of the trip reduction programs 25 we're talking about, we would still have 10 million 287 GILLESPIE REPORTING SERVICES 1 single-occupant vehicles traveling around this region 2 every day, which points to the view that the tailpipe 3 emission issue has to be dealt with in a significant 4 fashion. Even with transit ridership being desirous, 5 you still don't get the kinds of numbers that you would 6 like to get to. And we have at risk, as we move to 7 clean fuels, a gas tax revenue strain that comes into 8 the basin of about two and a half billion dollars a year 9 that also has to be dealt with. 10 (Overhead presented.) 11 SCAG, in looking at its transportation 12 facilities, is looking at a significant problem. Forty 13 percent increase in population, 48 increase in VMT, but 14 only 12 percent increase in road mile miles, which means 15 further delay, further congestion, and thus further 16 emission problems from that congestion. 17 (Overhead presented.) 18 The problem is not only just dealing with 19 major roads. We tend to talk about the average of 12 20 percent as across all of them, but a difficulty is, how 21 are the local governments going to deal with only a 3 22 or 4 or 5 percent increase on the arterial system which 23 even causes more congestion and pollution problems. 24 (Overhead presented.) 25 The SCAG mobility plan calls for a mode 288 GILLESPIE REPORTING SERVICES 1 split. And this may be optimistic in some; some feel a 2 shift in the SOV area, ride share area, and so forth. 3 Well, one of the significant points to point out here is 4 even if we spent all the money we possibly could, the 5 view is that we could never get above 8 percent; thus 6 rail transit, the traditional rail transit program, we 7 need to get significantly higher. Our goals are 15 8 percent. 9 So proposed is a third tier transit system 10 that is something new that needs to be developed and 11 needs support to make it work. 12 Telecommute, work at home, and other issues 13 are those that have to be dealt with. 14 (Overhead presented.) 15 I won't go into the air emission reductions. 16 You provided that. But I might -- would like to point 17 out the AQMP, something that we -- I have been 18 intimately involved in, and the support of its direction 19 has got some significant challenges before it. 20 Number one, the proposal that ZEV represents 21 50 percent of the vehicle new car sales by the year 2010 22 is an enormous challenge to -- for any of us to 23 achieve. Also, of concern is the ISRs, Indirect Source 24 Rules, that are calling for trip reductions in shopping 25 centers, special event centers, and also an increase 289 GILLESPIE REPORTING SERVICES 1 of 15 -- 2.0 AVR. 2 What's significant about that chart and that 3 piece of information is that many, many people believe 4 that basing our emission reductions on trip reductions 5 criteria is a design for failure. Especially local 6 government is concerned about the business activities 7 and how it's going to continue to work if it doesn't 8 have people coming to its shopping centers. So an 9 equivalency methodology needs to be considered. 10 (Overhead presented.) 11 I know there's law changes that are required 12 in that area in order to make some of that work. 13 But let me get to the major point of where -- 14 the marketing goals that we're looking at for this 15 region. I and many of us believe we're dealing with a 16 marketing problem, not a regulatory problem, not a 17 command and control problem, but a way that we can get 18 the technology into the market and get it utilized. 19 To get to the 50 percent share of the 20 electric vehicles, we need 500,000 new vehicles every 21 year. The alternative fuels may represent 250,000. And 22 these are ballpark numbers. But in order to make the 23 transit system work, we could need as many as 50,000 24 vehicles running around the region, not the 4,000 that 25 we have today. It's a significant number. 290 GILLESPIE REPORTING SERVICES 1 Telecommute and teleservices. We have to be 2 able to have -- in this area, one of the examples that 3 some of us look at as we look at teleshopping. We would 4 prefer not to shop in New England for our goods. We 5 would prefer to shop at our local shopping centers. And 6 how do we create a teleshopping mechanism so our local 7 businesses can remain successful? 8 In the IVHS arena, you know a lot about that, 9 but I think it's one of the areas that has significant 10 opportunities, not only for travel or information, but 11 from the standpoint of dealing with this congestion 12 issue I mentioned earlier. We have got to get more 13 throughput to our system, whether it's the roads or it's 14 the parking systems, or whatever. 15 And again, if -- the example I like, 16 Disneyland always says, "Why should I have a trip 17 reduction program when I already have a 3.8 AVR; my 18 customers don't travel the peak hour." But maybe our 19 agenda ought to be better parking management so those 20 cars can park more efficiently and thus reduce the 21 emissions that would come out of a congestion process. 22 Because this is a marketing problem, we have 23 three groups here to deal with. Not only is it the 24 technology, but pricing in any product is a major, major 25 issue. And what's been put forth is the need for an 291 GILLESPIE REPORTING SERVICES 1 emissions fee to change the impact of the dirty cars and 2 help finance the technology, and that's an issue there 3 that is very, very important, but needs a lot of 4 political will to make it work. 5 And certainly there needs to be some changes 6 in our destination building standards, and in order to 7 make that happen is also very, very significant. 8 (Overhead presented.) 9 We have proposed a -- the VMT emissions fee, 10 but one of the things I would just like to point out is 11 the form of technology that could help it work in a 12 market-based sense is to have a clean transport debit 13 card. If you were to charge the public for driving 14 dirty cars, that money could be given back to the public 15 so the public can make a choice as to whether to use 16 electric vehicles, alternative fuels, etc., through a 17 debit system that the technology currently provides 18 for. 19 We also have to change the attitudes of the 20 development community and the local governments on how 21 they invest in future expansion, rather than just in 22 parking garages or street improvements. Technologies 23 need to be that -- need to be considered in that 24 fashion. 25 (Overhead presented.) 292 GILLESPIE REPORTING SERVICES 1 Same way in terms of the investment of funds 2 that funds like Reg XV, 2766, or VMT emissions fees also 3 could be used to help make these products come to market 4 in a significant way. 5 (Overhead presented.) 6 The benefits are many, not only in the trip 7 reduction, emission reduction, convenience to access of 8 centers for the public, but we gain more efficiency out 9 of our transportation resource. 10 (overhead presented.) 11 The benefits are jobs, as you've heard from 12 Project California, could be some 350,000 jobs in this 13 region. 14 (Overhead presented.) 15 We have a vision that we put forth that this 16 doesn't start in 1998. You just don't turn the switch 17 and sell 30,000 cars. You need to start it sooner, and 18 our vision is to start this program of selling these 19 technologies in 1996. And it's going to take a lot of 20 work to get there. 21 (Overhead presented.) 22 We have significant barriers that take 23 place. For example, you're aware of the technology 24 shortcomings in the battery technology and the range 25 limitations. We need to develop a system of charging 293 GILLESPIE REPORTING SERVICES 1 stations that help us fit into the environment that the 2 public works in. 3 (Overhead presented.) 4 The barriers in that regard is that if you 5 had the first 10,000 electric vehicles on the market 6 for sale, you would need, in our view, 27,000 charging 7 stations out there to accommodate the customers driving 8 today. 9 Alternative fuels would require 5,000. And 10 I say that to put out there before you the form of 11 magnitude that's necessary to accommodate the customers' 12 driving habits. 13 (Overhead presented.) 14 The same way is truth in the Smart Shuttle 15 technology. Current PUC requirements don't allow you to 16 take a customer to and from shopping centers if you were 17 to use Super Shuttle, and we need to get more abilities 18 for the private sector to function in this area to 19 provide a service. 20 IVHS, AVI transponders, Automatic Vehicle 21 Identification systems. If they were a universal 22 system, we could use them on toll roads, in parking 23 garages, parking systems, whatever the case may be, 24 transit systems, and we need to created a mechanism 25 where that's available. 294 GILLESPIE REPORTING SERVICES 1 I spoke to the telecommunications area 2 earlier. 3 (Overhead presented.) 4 How do we make all of this happen? It isn't 5 going to happen by ourselves -- by itself. And our view 6 is, we have formed -- what we propose and formed is what 7 we've called the Southern California Economic 8 Partnership. 9 (Overhead presented.) 10 It's made up of -- well, let me put it this 11 way, the objective or mission of the partnership is to 12 do everything it can to accelerate the deployment of 13 advanced transportation technologies through cluster 14 group collaboration dedicated to modifying the market 15 conditions. 16 You hear a lot about partnerships. Many of 17 them are dealing with the technology side; many are 18 dealing with the manufacturing side. This is dealing 19 with the consumer side, the marketplace that will thus 20 enhance the utilization of the technologies. 21 (Overhead presented.) 22 The Partnership is made up of support 23 through -- at AQMD, Caltrans, SCAG, and Project 24 California. We have a support staff and local 25 government officials involved in the process. 295 GILLESPIE REPORTING SERVICES 1 (Overhead presented.) 2 The board members are made up of industry 3 leaders throughout the Greater Los Angeles air basin 4 area, covering all aspects of the basin that are 5 necessary to make it work. 6 (Overhead presented.) 7 Probably the most significant part of it, 8 though, is the industry cluster groups, and these groups 9 are already beginning to be formed. They -- the 10 electric vehicle group has met now three times. They 11 are very, very excited about the collaboration of how 12 they can make these products come to market in a 13 meaningful way. The auto industry is there, the utility 14 industries are there, and so forth. 15 Examples that surface just by bringing these 16 people together are building codes that are a problem to 17 the electric-fueled vehicle arena. Building codes don't 18 allow the charging stations to be put in, in a uniform 19 fashion. And Edison has found this out the hard way, 20 trying to deploy the G.M. Impact. 21 Also, the permit process. It takes 90 days 22 to get a permit to install a charging unit in your home 23 or your garage at work. Hardly attractive to a customer 24 who wants to buy a car today and drive it home tomorrow 25 and be able to get it refueled. 296 GILLESPIE REPORTING SERVICES 1 So getting issues like that -- and I just 2 cite that one, and it's true across the board, is very, 3 very important. 4 You see the five cluster groups, each one of 5 those technologies, but supporting those are very 6 important in the financial arena. Today, if you wanted 7 to change your parking standards, you probably couldn't 8 do it, because the financial community requires a 9 certain number of parking spaces -- parking stalls in 10 order to finance a development structure. 11 We hear over and over and over again about 12 the need for education. We brought together the leading 13 advertising, public relations, sales promotions, 14 marketing people in Los Angeles to collaborate on a 15 program of how everybody can participate, from 16 television commercials down to education in kindergarten 17 level on the issue of clean air and the issue of clean 18 vehicles. 19 Clean cities is local government. They're 20 collaborating on how we will have a local government 21 building code, a permitting process, a clean fuel 22 purchasing process that will make and accelerate all 23 these things to take place. 24 Business centers or activity centers, listed 25 across the bottom. How can we help them deal with the 297 GILLESPIE REPORTING SERVICES 1 trip reduction goals that have been laid out in the 2 plan, but maybe do it in a different way that we can get 3 more throughput through the system that will reduce 4 emissions rather than just trip reductions by 5 themselves. 6 I'm going to wrap this up by saying -- 7 because I can go on and on and on with issues that have 8 come forward, and we don't have the time. But in our 9 view there's key elements that must be a part of the 10 total plan, in one way or another. Not only is it the 11 technology, but it is the investment that needs to be 12 there. It is the pricing mechanism that helps deal with 13 changing people's habits and purchase decisions, and 14 certainly the land use issues that are necessary to make 15 it convenient for the consumer to use the product. 16 This is a process that involves hundreds of 17 people, thousands of people. 18 (Overhead presented.) 19 We kind of put this out because this is not 20 one agency, one person's idea, but all of these people 21 are involved. And so far we have been meeting with 22 everyone that's in the box up here to share this message 23 and point out the necessary -- the necessity for all of 24 us to collaborate in order to bring this partnership 25 together and make it effective so that we -- the 298 GILLESPIE REPORTING SERVICES 1 marketplace is what determines whether you've cleaned up 2 the air, not just a specific regulation. 3 I've said many, many times to groups like 4 this, we look for a regulation and try to count the 5 beans that will reduce that emission. My view, the 6 ultimate test is going to be, did we get 500,000 cars a 7 year out there by 2010? The EVs. Did we get some of 8 these technologies in place? And it will take the 9 collaboration of everybody to make that work. 10 So in a brief nutshell, that's an overview of 11 what we proposed in the AQMD as a mechanism to help 12 bring the clean air about. 13 Thank you. 14 CHAIRWOMAN SCHAFER: Well done, Councilman 15 Cox. 16 Supervisor Wieder. 17 SUPERVISOR WIEDER: You should have said 18 "Woo," the train has stopped. 19 COUNCILMAN COX: I only had 15 minutes. 20 SUPERVISOR WIEDER: First of all, John, 21 you did an absolutely fantastic job. 22 COUNCILMAN COX: Thank you. 23 SUPERVISOR WIEDER: Do you have copies of 24 this? 25 COUNCILMAN COX: I can leave you with 299 GILLESPIE REPORTING SERVICES 1 some. 2 SUPERVISOR WIEDER: I would like this. I 3 have some questions. 4 COUNCILMAN COX: Okay. 5 SUPERVISOR WIEDER: How long has -- well, 6 first of all, I want to compliment SCAG on the spin-off 7 which this has become, or will become. Am I right? 8 COUNCILMAN COX: Yes. The articles of 9 incorporation for this nonprofit corporation are filed 10 now. The board of directors will meet on August 9th and 11 10th, and the cluster groups are already meeting. So 12 it's already under way. 13 We are seeking funding, as every agency does 14 these days, for a variety of reasons, and we also have 15 some funding -- advanced funding in place. 16 SUPERVISOR WIEDER: The question I have to 17 ask, John, is you indicated that AVR's goal had to be 18 enhanced, Reg XV, for 2 percent, if I remember. 19 COUNCILMAN COX: 2.0, yes. That's what's 20 in the current plan. 21 SUPERVISOR WIEDER: Okay. That's in spite 22 of the present climate of opinion and data that we're 23 gathering that still -- would almost still be 24 anti-Reg XV? 25 COUNCILMAN COX: Yes. The reason for 300 GILLESPIE REPORTING SERVICES 1 that -- and I'm not attacking the plan -- I mean, I'm 2 aware it's there, but it's there because in a planning 3 sense, you've got to look at in the future what kind of 4 mechanisms might give you the emissions reductions. And 5 the technology side of this issue is so brand-new, the 6 IVHS is hardly measurable, even telecommunications is 7 hard to measure, and the direct emission reductions is 8 going to come off of that, and then the question, can 9 you really get to a 50 percent market penetration of 10 ZEV, as an example. 11 So the plan, the way they're -- the current 12 guidelines are, is that you have to put in things that 13 you know about. The models run that way and so forth. 14 That could be fine, but I think what we're 15 suggesting needs to happen is you need to have an 16 equivalency option, and so that maybe if we get better 17 throughput, less congestion, and so forth, we also wind 18 up with emission credits for that somehow. 19 SUPERVISOR WIEDER: All right. Thank 20 you. 21 The next question that I have. Is Detroit 22 ready for those ZEV vehicles? 23 COUNCILMAN COX: Are they ready? 24 SUPERVISOR WIEDER: Yes. What do they 25 have, 35 prototypes out now? 301 GILLESPIE REPORTING SERVICES 1 COUNCILMAN COX: Well G.M. does on the 2 Impact. But Detroit's in a position where they don't 3 want to commit their product plan, so it's hard to get 4 them to say. But I get the sense that they could start 5 marketing in 1997. 6 There's other non-Detroit manufacturers that 7 are looking to do it earlier, and -- but the biggest 8 difficulty that we have, even if you bought one today, 9 you can't get it charged. I mean, I say that bluntly, 10 because I -- granted, we can plug it into a wall socket, 11 but that's not where the real market opportunities are, 12 if they're going to get the masses. And so we have to 13 build this infrastructure system, get it in place, so 14 that the cars can be purchased. 15 SUPERVISOR WIEDER: Which will encourage 16 the manufacturer. 17 COUNCILMAN COX: That's right. 18 SUPERVISOR WIEDER: The last question I 19 have, John, is kind of parochial, if not -- parochial, 20 possessive. You don't include -- you do say something 21 about county partnerships, county economic 22 partnerships. Would that not include -- for instance, 23 in our county, John -- you know, yours and mine a 24 Partnership 2010? Because partnerships are already 25 working on group clusters. I would hate to think that 302 GILLESPIE REPORTING SERVICES 1 they're off in a vacuum doing their thing, and you're 2 off in a vacuum doing yours. 3 COUNCILMAN COX: No. There are different 4 types of partnerships, and that issue and question comes 5 up in economic programs and so forth. 6 This program is an umbrella program, probably 7 going to be ultimately a nationwide model. It does not 8 preclude what is going on at the local level. We would 9 not be able to get a building code, Uniform Building 10 Code, throughout the region if we just had a local 11 partnership do that. 12 When we are driving back and forth to L.A., 13 we want to be sure we can charge in L.A. the same way as 14 here. So that's why we're dealing with an umbrella 15 thing, and it's a hand-me-down program. 16 SUPERVISOR WIEDER: Except -- and maybe I 17 don't know enough about it -- except at this point the 18 effort that Partnership 2010 is using is really in a 19 pioneer stage, and they could be a prototype to build in 20 what is yet to happen other places. So I would really 21 try to encourage you to really find out more about what 22 UCI is doing, and -- 23 COUNCILMAN COX: Right. I'm not 24 disagreeing with that. It represents a local level, 25 which we need. San Bernardino County is doing the same 303 GILLESPIE REPORTING SERVICES 1 thing. 2 SUPERVISOR WIEDER: No, they're not. 3 COUNCILMAN COX: Well, their own versions 4 of them. Each one of them has a little different spin 5 on it. But those all are necessary to make this work. 6 I agree with you. 7 SUPERVISOR WIEDER: Thank you. 8 CHAIRWOMAN SCHAFER: Let me pursue a 9 couple of these things. Has the task force put together 10 a price tag on the overall concept that you're 11 advocating? 12 COUNCILMAN COX: Well, no. 13 CHAIRWOMAN SCHAFER: The question I'm 14 really trying to get at, are you expecting to pay for 15 this through public funds? 16 COUNCILMAN COX: No. Market-based 17 programs ought to operate in the marketplace, and the 18 difficulty we've often had with identifying what this 19 program costs is the trade-offs of what we're talking 20 about. I'll site some examples. 21 Take the EV program. We hear a lot of 22 numbers, like a $20,000 vehicle today or the $35,000 23 vehicle. That's fine in a prototype sense, but in the 24 real world marketplace taking EV, Westinghouse has an 25 electric engine that cost $1800 that is equivalent to 304 GILLESPIE REPORTING SERVICES 1 the internal combustion engine that costs $2300. 2 The operation of -- and maintenance of 3 electric vehicles is half of what it is on internal 4 combustion engine. So if you put this into the true 5 mass market arena, there is no cost other than what the 6 customer is going to retain in -- attain for an 7 alternative purchase of a product, or the cost we have 8 to deal with is how do we get this jump-started? How do 9 we really begin to feed the system? And programs like 10 IVHS America and the IVHS program in ISTEA is helping do 11 that in some of these areas, in telecommunications and 12 IVHS. 13 Smart Shuttle has got a problem, how that 14 gets started, because the market -- private market is 15 not available to it yet. And I think the EV has got a 16 problem because the infrastructure is not there yet and 17 the price of the car hasn't come down. 18 So through the collaboration of these 19 industry cluster groups, we're hoping to identify really 20 what the financial barriers ultimately are, what kind of 21 jump-starting money would be required, and how do we 22 make it work from there. 23 CHAIRWOMAN SCHAFER: Okay. Because I 24 thought I heard you talk about the emission fee and VMT 25 fee as something that was, quote, to pay for this 305 GILLESPIE REPORTING SERVICES 1 technology, and I want to point out that a witness 2 yesterday, Dr. Arnn from the Claremont Institute, 3 through the studies and focusing -- and focus groups, 4 polling exercises that they're participating in, the 5 public may tolerate a change in the way that they're 6 paying for certain things now, but not increase claims 7 on their income. So I'm trying to find out whether you 8 expect these VMT emission fees would be offset by, say, 9 the reduction and what they discussed yesterday, the 10 gasoline taxes. 11 COUNCILMAN COX: Right. What they're 12 looking at is from a public policy standpoint. I look 13 at it from a marketing standpoint. When I talk about 14 pricing, the gasoline, traditional gasoline automobile 15 today is underpriced in terms of what we have to pay for 16 gasoline. If it was -- if the price was higher, you'd 17 have a different decision-making process. If the public 18 got that money back to use that money in an alternative 19 means, so it's a zero sum to them, but it gives the 20 opportunity to invest in other -- into the clean 21 technologies, that's the point of that. 22 I don't disagree that getting the political 23 will to get there is going to be very, very tough. 24 CHAIRWOMAN SCHAFER: I'm just 25 suggesting -- the testimony we got yesterday suggested 306 GILLESPIE REPORTING SERVICES 1 that if the public got its money back by a reduction in, 2 say, taxes, and therefore it chose, you know, how it 3 would get the return, the public is going to be a lot 4 more likely to accept some of these changes than if the 5 money was routed through a government agency or several 6 government agencies. 7 COUNCILMAN COX: Exactly. And that is 8 what the debit card concept was, giving it back to them 9 rather than a government agency. 10 CHAIRWOMAN SCHAFER: I gather that the 11 South Coast draft proposed plan has escalated emission 12 reductions related with them in some of these private 13 sector activities. Can you tell me to what extent the 14 plan proposals that you're advocating here to the 15 private sector are -- have emissions benefits associated 16 with them that find their way into that plan. 17 COUNCILMAN COX: Well, some of the items 18 are in the baseline, so -- like the ZEV program is in 19 the baseline -- and it calls for a 50 percent market 20 penetration by 2010 of new car sales. 21 That isn't going to happen if the marketing 22 efforts that we've been talking about here don't take 23 place to support that. It's an assumption that they 24 made in order to get there. 25 Some of the other items, I can't speak to 307 GILLESPIE REPORTING SERVICES 1 exactly the emissions reduction attainment strategy by 2 detail, because it's hard enough for, I think, them to 3 even explain it, let alone a layman like me, so I hope 4 they can help you with that. 5 CHAIRWOMAN SCHAFER: Okay. What was the 6 basis for predicting the 50 percent ZEV market share by 7 2010 that you all had done? And I assume -- and then 8 they took a 50 percent point -- midpoint there? What 9 was the basis for your assumption? 10 COUNCILMAN COX: We did it on an 11 assumption that if you had certain technologies 12 available, meaning that you got to a point out in 13 2010 that you had fuel cells available, you had 14 nickel-metal-hydride batteries available, and the 15 current lead-acid battery, you could be able to provide 16 that offset because the car, with the form, is in the 17 same fashion by that time as the way the car performs 18 today. If that technology doesn't evolve by that point 19 in time, then it doesn't happen. 20 There's a lot of evidence the technology is 21 improving extremely fast, and we could make that -- 22 those goals. 23 I have to say, though, you know, when you're 24 dealing with market-based issues and market-incentive 25 issues, you cannot force the customer to do anything. 308 GILLESPIE REPORTING SERVICES 1 We can have all the regulations we want, but the 2 customer isn't going to buy it, if he doesn't want to 3 buy. Thus, the reason we need to have all of the 4 marketing tools available possible to try to assist the 5 customer in that purchase decision, and thus the reason 6 for the partnership programs of market communications 7 and facilitation of infrastructure, removing all the 8 barriers that we can possibly uncover. Even then, they 9 may not buy it. 10 There's 300 vehicles to choose from today in 11 the marketplace, and you never know why somebody buys 12 any given one of them. It's tough. I've been there. 13 Excuse me. I worked for the auto industry for about 15 14 years, and so I understand how difficult it is to sell a 15 car. 16 CHAIRWOMAN SCHAFER: Speaking of 17 marketing, what's wrong with the teleshopping between 18 Maine and California? Presumably Maine residents are 19 going to teleshop for things in California. Maine -- 20 given the difference in population size, of course, we 21 hope it's more than Maine. But it seems to me we should 22 also be trying to promote teleshopping of the things 23 that we can do. 24 COUNCILMAN COX: Yes, we can. But 25 I'm referring sort of simplistically to the current 309 GILLESPIE REPORTING SERVICES 1 teleshopping mechanisms. You want to shop at Land's 2 End, which I think is in Massachusetts, they get the 3 sales tax, they get the sale, not the local department 4 store, not the local city. So if you have a shift in 5 sales to national places like that, the cities lose out, 6 unless every other city also has a -- 7 CHAIRWOMAN SCHAFER: I know some states 8 have figured out a way around that. I have no doubt 9 that governments will find a way of taxing things in 10 commerce, if they need to. 11 But it is interesting that -- if this is 12 going to happen, we might as well take advantage of it 13 and promote our export, so to speak. 14 COUNCILMAN COX: I'm not opposing it. I 15 am just saying we might get more trip reductions out of 16 a shopping center if we can do teleshopping out of our 17 local malls. 18 CHAIRMAN SCHAFER: Supervisor Riordan. 19 SUPERVISOR RIORDAN: Sure. A question. 20 And I want to understand something, if you can clarify 21 how it works, what this transfer debit card is and how 22 it works. Could you run that by me again one more 23 time. 24 COUNCILMAN COX: It's just an idea. 25 Sometimes we have to throw these on the table to 310 GILLESPIE REPORTING SERVICES 1 discuss -- 2 SUPERVISOR RIORDAN: That's what we're 3 here for. 4 COUNCILMAN COX: The issue developed out 5 of the concern that the gentleman points out, that the 6 public is very, very concerned about taxing me some more 7 and giving it to government who's going to waste that 8 money. 9 So if you could figure out a way to level 10 that playing field, you take the money away from the 11 dirty cars, you give it back to everybody that's of 12 driving age, in the form of a debit card, like a credit 13 or debit card. And the technology accommodates this 14 today. Then the consumer can make the choice of where 15 he purchases the clean vehicles. It's designated where 16 you can spend that money. You can't spend it on 17 clothes, you can't spend it on food, you can't spend it 18 on things like that, but you can designate that you 19 could spend it on electricity, teleshopping, 20 telecommuting, or whatever. So the consumer makes the 21 choice on what products that he would choose to 22 purchase, not the government. That's the concept. 23 Now, technologywise, we can do it. 24 Policywise, can we? I don't know. 25 SUPERVISOR RIORDAN: Interesting. Thank 311 GILLESPIE REPORTING SERVICES 1 you. 2 CHAIRWOMAN SCHAFER: Yes, Miss Edgerton. 3 MS. EDGERTON: Hi. You continue to make 4 incredibly progressive progress, and the breadth of your 5 vision continues to be so impressive. 6 When you said the problem is not regulatory, 7 the problem is market, is with the market -- I thought 8 that was an important articulation of your vision, but 9 then your slides go on and say there are certain 10 regulatory barriers to the market, which means that 11 there are certain regulatory -- problems that are 12 regulatory. 13 If it's a regulatory barrier, if it's a 14 certain kind of regulation that is preventing the market 15 from proceeding -- for example, codes that take 90 16 days -- then that is a regulatory problem. 17 So why am I saying this? The reason is 18 because one of the things that this board does is 19 regulate, and what we want to do is be sure that there 20 are -- we're -- we've got in place a system whereby the 21 regulations that we're adopting work cooperatively with 22 the regulations at state and local -- I mean, at local 23 levels. 24 So what we would -- what I would be 25 interested in seeing and what I will review your 312 GILLESPIE REPORTING SERVICES 1 material for is, I think we need to be thinking about -- 2 kind of like the (incomprehensible word) -- is sort of a 3 list of the specific regulations that are barriers to 4 your vision. And we could sort of look at them and see 5 if there's something within our authority to do, to 6 change. So I guess I'd look at it as regulatory 7 opportunities and barriers. 8 So that's one of the things we need to look 9 at, is to make sure we've got our house in order and 10 that we are doing everything we can to make sure that 11 the market can work, that government is not doing things 12 that preclude the market from working successfully. 13 COUNCILMAN COX: Yes. That's right. I 14 don't mean to say that there's barriers that preclude 15 opportunities. There are opportunities. And I don't 16 mean to say that there shouldn't be regulatory 17 activities. There needs to be for health and safety 18 reasons. There needs to be for guideline reasons, like 19 the building code. They need to be there. 20 We've been reluctant at this point in time 21 to get too far out in front on ideas until we start 22 collaborating on them. But like your tailpipe catalytic 23 converter regulations, maybe there's a regulation that 24 says you need an automatic vehicle identification system 25 on all cars that will help throughput, if you will, of 313 GILLESPIE REPORTING SERVICES 1 garages or wherever the case may be. 2 Maybe there needs to be a way to help with 3 the telecommunications arena. Maybe there needs to be a 4 way of dealing with the Smart Shuttle arena. 5 But we don't know what those are yet, and we 6 hate -- those of us who tend to be concerned about 7 regulations hate to look at regulations only as being 8 the opportunity. 9 I mean, I like this idea of examples today. 10 Nobody regulated the amount of cellular telephones that 11 are being sold today. I mean, they created an 12 opportunity for them to be sold. Or that nobody 13 regulated the number of PCs to be sold, but they created 14 the opportunity. 15 The credit card system that's on a fuel 16 pump -- your gasoline pump -- those are not regulations 17 that had to happen. It came for the consumer's 18 convenience. And if we can identify consumer 19 convenience like that, and then if there's a regulatory 20 barrier to it, let's remove it; or if we can assist it 21 and become more of a standard in the marketplace and an 22 opportunity, then let's do that. 23 But that's what this process, the 24 partnership, is looking at over the next few years, 25 is to do it -- is to identify all those barriers and 314 GILLESPIE REPORTING SERVICES 1 opportunities. And right now they're just ideas. 2 MS. EDGERTON: Well, I appreciate that. I 3 wanted to ask about the 50 percent assumption for the 4 South Coast. Do you know whether that -- isn't -- are 5 you assuming any change in the ARB regulations to 6 achieve that? 7 COUNCILMAN COX: No. I'm assuming that 8 the technology comes along and the price comes down and 9 the infrastructure is in place that allows that to 10 happen. You wouldn't need it. The district may have a 11 different view of that, but not to my knowledge that 12 they're looking at a change. That's just one mechanism 13 you could look at. 14 MS. EDGERTON: And the other thing I 15 noticed was that you were in partnership with -- doesn't 16 some -- it does address Smart Shuttles and personal 17 transportation, but it doesn't seem to have addressed 18 the issue of heavy-duty trucks and transport of -- 19 where's your -- transport of larger -- of a larger sort, 20 or off-road transport. 21 Where is your cut-off line, that -- there's 22 something there that you all have decided, is obvious 23 from the slides, but you probably can articulate it for 24 me. 25 COUNCILMAN COX: That's right. In fact, 315 GILLESPIE REPORTING SERVICES 1 that's an issue that has come up, that we have 2 addressed, and should we. That's a good question. And 3 should we be addressing the poor issues or the trucking 4 industry issues? We haven't because we think that's a 5 lot to handle. We've got a -- but we could. 6 The bigger picture still comes out of getting 7 the automobile that is contributing so much to the 8 pollution and has to change over the next 10, 15 years, 9 creating the market forces that will allow that to 10 happen faster. 11 The district believes -- I think -- and again 12 I don't want to speak for them, but I -- they believe 13 that some technological advancements can come forth in 14 the heavy-duty vehicle arena that will begin to address 15 that problem. It's a focus that needs to happen, not 16 unlike what happened in stationary sources. 17 MS. EDGERTON: Who thinks that there needs 18 to be -- 19 COUNCILMAN COX: The district. 20 MS. EDGERTON: Okay. Good. Because I was 21 wondering if there was any -- any -- since your group is 22 not handling it, is anybody else making the same sort of 23 consorted effort? 24 COUNCILMAN COX: Not yet. There's some 25 talk about doing that. The railroads are doing it -- 316 GILLESPIE REPORTING SERVICES 1 they're talking about doing it. The port centers are 2 talking about doing it with the trucking industry, 3 right -- or heavy duty. It's not only trucking, it's 4 off-road vehicles too. 5 MS. EDGERTON: Let me go back to -- I had 6 a question about the Southern California Economic 7 Partnership. What's your opening budget? What sort 8 of -- what's your goal in terms of your funding for 9 SCEP? 10 COUNCILMAN COX: The numbers right now -- 11 I think the numbers are about 5, 600,000 that is 12 available for this year. We're looking at probably in 13 the neighborhood of a million dollars a year for 14 operations. But one of the things you get into is that 15 you have also needs to do other types of things. 16 For example, we look at every industry 17 cluster group coming out with a cookbook, for lack of a 18 better definition, a guidance, on how certain things 19 ought to operate. We need to communicate with 186 20 cities in this region and what their building code ought 21 to look like. We have to adopt documentation for that. 22 So there will be special contracts that will 23 be put together as time goes on to deal with these 24 special projects. Now, maybe some of them will be done 25 on a free basis, if you will, by the parties being put 317 GILLESPIE REPORTING SERVICES 1 together; others we may have to hire special people to 2 do that. 3 The cities are very, very much interested in 4 it because they don't want to do it individually -- the 5 cities and counties. If we can collaborate and do it at 6 once, so much the better. 7 SUPERVISOR RIORDAN: To have it 8 standardized. 9 COUNCILMAN COX: That's right. We're much 10 better off. So there will be identified budgets as we 11 address those issues. 12 MS. EDGERTON: And is that then -- this 13 project for establishing the code, for example, a model 14 code for adoption by the 186 cities -- it's not yet -- 15 there's no contract let or -- what's the status of 16 that? Because that is vital for our infrastructure. 17 COUNCILMAN COX: That's correct. Well, it 18 is actually moving fast now, if you will -- fast in the 19 sense that the EV cluster group has met, as I mentioned, 20 two or three times. We met again this week. Building 21 code is number one on the priority list. They 22 established a working group made up of a building 23 director, Edison Company, DWP, CALSTART -- and they're 24 dealing with a National Building Code Association 25 also -- and hopefully in 30 days to have a draft plan 318 GILLESPIE REPORTING SERVICES 1 back to the cluster to propose as a -- for dialogue, and 2 take it to the clean city group, which is the local 3 government, by -- within 90 days. That's the goal. 4 And then from there, disseminate it for 5 comment, and comment on it within six months, have one 6 that we can begin to use that would come as close as 7 possible to the national standard. 8 The national standard, we understand, may not 9 be ultimately approved until 1997, and that's not good 10 enough for us. 11 MS. EDGERTON: Well, that's excellent. 12 You know, one thought that comes to my mind is that ARB 13 has had the opportunity to use guidelines, and if we -- 14 if you had a model -- I know we're not regulating land 15 use. I'm just wondering whether the statewide issuing 16 of guidelines to make sure everyone knew what was going 17 to be the code, what was the specs, for the plugs, what 18 were the expectations with respect to how quickly they 19 were to be installed, and so forth, it might be 20 useful -- might be useful for us to help spread that 21 uniformity through the state. 22 COUNCILMAN COX: Well, absolutely. And 23 once that is established, we want to share that with 24 everybody, and we'll see if we can get a buy-in from 25 everybody and make it happen. But that's the reason for 319 GILLESPIE REPORTING SERVICES 1 the cluster group, to follow through on those goals. 2 CHAIRWOMAN SCHAFER: That kind of 3 conformity could also have been privately done, 4 Underwriters Laboratory kind of a model. Just a point. 5 If it's done, it's a generally accepted standard that 6 then everybody goes towards. 7 COUNCILMAN COX: Yes, that's true, and 8 that's in a sense how this is happening. But the 9 difficulty you have is every city has to adopt it, and 10 they always want to change it. And what we're trying to 11 do is have them be a part of the solution, not become a 12 problem so they don't -- so they oppose it later because 13 they think there's something wrong with it. So that 14 it's they that take ownership of it through the 15 collaboration that you're talking about. And then the 16 goal is to accelerate its implementation. And we just 17 think that kind of collaboration might help. 18 MS. EDGERTON: Well, one question I would 19 have. Do you think it would be any value to having a 20 state enabling once that is done -- a state enabling 21 measure or code or something to establish -- some pieces 22 of it that are state law. I mean, it's in the state's 23 interest. 24 COUNCILMAN COX: That's right. 25 MS. EDGERTON: That would be legislative. 320 GILLESPIE REPORTING SERVICES 1 COUNCILMAN COX: There again, there's a 2 timetable, a time problem. But that's correct. There 3 is really a three-prong strategy, is develop a local 4 agreed-upon standard that would come as close as 5 possible to complying with the national and state 6 standards, and then go and help advocate a state 7 legislation necessary to adopt it, and the federal 8 approval too. 9 MS. EDGERTON: Thank you very much. 10 CHAIRWOMAN SCHAFER: Supervisor Wieder. 11 SUPERVISOR WIEDER: John, what's apparent 12 to me is a conviction I have had for the last few years 13 that air quality as a public policy issue is going to be 14 the engine that's going to be driving our future 15 decisions in the next -- in the next century, and which 16 economic decisions are significantly important. 17 Having said that, should I assume that SCEP, 18 Southern California Economic Partnership, do not use 19 economics for that; that transportation is just the 20 first beginning issue of that? It's not exclusively 21 just transportation; is that correct? 22 COUNCILMAN COX: Yes. That was very 23 deliberate. There was a question as to whether we ought 24 to create similar kinds of assistance for the film 25 industry, for the clothing industry, or any other 321 GILLESPIE REPORTING SERVICES 1 industry, biomedical industry. 2 That's not our major priority, although all 3 those other those industries, I'm sure, think they are a 4 priority. Our priority now is trying to deal with the 5 issues that I tried to lay out here, but it could become 6 more than that. 7 SUPERVISOR WIEDER: Thank you. 8 CHAIRWOMAN SCHAFER: Thank you very much, 9 Councilman Cox. It's always an interesting session when 10 you're with us. Thank you for your time today. 11 I'd like now to recognize Dr. John McDonald, 12 here representing the Orange County Private Sector Task 13 Force. Dr. McDonald has his doctorate degree in 14 physical chemistry from Purdue University, and is the 15 retired chairman of the board of PDA Engineering and 16 currently is a director of the company. 17 Prior to his association with PDA, he was 18 Director of the Material Science at Sandia Laboratories, 19 one of the national laboratories for the Department of 20 Energy. 21 Dr. McDonald is the chairman of the Private 22 Sector Task Force which provides counsel to the Regional 23 Advisory and Planning Council on matters of air quality 24 regulation. The Task Force has been a leader in 25 promoting market-based incentive programs as 322 GILLESPIE REPORTING SERVICES 1 alternatives to command and control for reducing 2 emissions. He is also the founding member of the Board 3 of Directors for Partnership 2010, a public/private 4 partnership dedicated to strategic planning for Orange 5 County. 6 I'd like to welcome you, Dr. McDonald, today, 7 to be with the Air Resources Board, and we look forward 8 to your comments. 9 SUPERVISOR WIEDER: May I also add that 10 he's an accomplished scuba diver. 11 DR. MC DONALD: I'm looking forward to 12 becoming the world's oldest scuba diver. 13 SUPERVISOR WIEDER: Okay. 14 DR. MC DONALD: Thank you very much. I 15 can't really start this without answering a question 16 that was asked earlier. The Private Sector Task Force 17 and the viewpoints that I'm going to bring are with 18 respect to those of a CEO, the business perspective, is 19 something that in my experience over the last several 20 years does not get expressed often enough. I want to 21 make sure that that does get out this morning. 22 We worked very closely with John in both my 23 private capacity and with -- in the public capacity as a 24 Private Sector Task Force, and for the most part, we 25 have no difficulty with anything he presented except the 323 GILLESPIE REPORTING SERVICES 1 AVR of 2.0 on Regulation XV. And you need to understand 2 the business viewpoint. 3 (Overhead presented.) 4 It is not something which says this is an 5 unreasonable -- it's unrealistic. And the problem is 6 that AVO, AVR of 2.0 means that every single employee in 7 your company is engaged in ride share, and that's 8 absolutely ridiculous. It's never going to happen and 9 it's a ridiculous objective. 10 If you have an AVR of 1.1, it's 18 percent; 11 a 1.5 AVR means that you have two-thirds of the 12 employees involved; and 2.0 means that they are all 13 involved, and it will never happen. 14 The infrastructure and the business 15 operations in this -- in California will never permit 16 that to occur. So you're kidding yourself if you think 17 that is your realistic objective. 18 Now, I'm not going to go into any of the 19 reasons for market-based incentives, any of those sorts 20 of things. There's some thoughts on those in the 21 testimony that I gave you. 22 What I want to start out immediately with is 23 the list of specific items that we have been concerned 24 with for the last several -- last few years. There are 25 four of those on the list: direct emission fees, the 324 GILLESPIE REPORTING SERVICES 1 congestion pricing, at-pump pricing, and parking 2 restrictions and pricing that are going to be covered, 3 we understand, in long-awaited research operation under 4 the ARB. 5 Something else I probably can bring you 6 up-to-date with on this morning is that prompt ticketing 7 of gross polluters, there is now within Orange County a 8 pilot program that is being defined to address what I 9 think is the third issue for gross polluters. And the 10 first one had to do with what kinds of things can 11 employers do. 12 And Hughes Aircraft Company has done a very 13 good job in looking at that. The City of Los Angeles 14 did a study with respect to the socioeconomic impact of 15 ticketing or apprehension of gross polluters, and that 16 study now is due for publication very shortly. 17 The thing that has been missing is, how do 18 you apply this to the streets and highways in a 19 particular area? And the study that's being undertaken 20 as a pilot program is aimed at doing just exactly that. 21 The RFPs are out; the proposals are in. They 22 are currently about be evaluated. And I would expect 23 that perhaps in about a year, we will begin to have some 24 of the information about how do you do it, what does it 25 cost you, and how effective it is. That's a real step 325 GILLESPIE REPORTING SERVICES 1 forward. 2 CHAIRWOMAN SCHAFER: Dr. McDonald, who is 3 doing that work? Who is sponsoring it? 4 DR. MC DONALD: It is being sponsored by 5 the district. The Private Sector Task Force and the 6 Industrial League of Orange County have worked very 7 closely with them, along with a few of the private 8 sector, to define a program which is technologically 9 feasible, which can be accomplished in a reasonable 10 length of time, and economically. It can get out of 11 hand, as you know. And which will give us the answers 12 that you need. 13 If you now put together the employer-based 14 things that you could do, socioeconomic impact, and the 15 implementation strategy, now you've got a complete 16 package. 17 I want to jump straight to a set of obstacles 18 that I see and then make some specific recommendations 19 in a few minutes with respect to that particular list. 20 The first obstacle is a psychological one or 21 a bureaucratic one or both. No bureaucracy has ever 22 voluntarily self-destructed. If you don't believe that, 23 look at the growth of the federal government for the 24 last 200 years. We still have the Commission on the 25 U.S.-Canadian boundaries that was formed after the War 326 GILLESPIE REPORTING SERVICES 1 of 1812, and it hasn't done anything for a hundred 2 years, but you can't get rid of it. 3 So it's a nontrivial issue to be concerned 4 about that as we begin to change to market base. And 5 part of the reason is because there's a real fear within 6 the bureaucracy of the market-based purchase. 7 At a meeting that I was at recently, one of 8 the comments that was made was, "They're fine, but 9 they're so uncontrollable." Well, that's exactly the 10 problem with them, but that's exactly why they're so 11 effective. 12 A second major roadblock has to do with our 13 understanding of the effectiveness of these various 14 market-based approaches, and it's very poor. It's 15 evident in the fact that there are three programs that 16 are in the '94 AQMP, and they are in there as 17 placeholders. There is no credit taken for any of those 18 from the sense of emission reductions, and the fact that 19 they are there represents really a great progress over 20 the past several years, but at this point we do not 21 understand them well enough to be able to define the 22 emissions reductions and to take the appropriate 23 credit. 24 The three that are in there are the VMT 25 registration fees, at-the-pump pricing, and congestion 327 GILLESPIE REPORTING SERVICES 1 pricing. And now if you go back and talk to the 2 business community about these, one of the attitudes 3 that you get is, did some of these sneak in here 4 disguised as market-based programs? Because you really 5 have to differentiate between an incentive and a 6 disincentive and whether or not it meets a bunch of free 7 market kinds of requirements. 8 Specifically, as it is in the '94 AQMP 9 at-the-pump pricing seems to designed to generate money, 10 but it does not know how to use the money nor how to 11 quantify the emissions. That's the actions that have 12 yet to be taken, and we hope that they can be taken in 13 the next three-year time period so that they can 14 actually be put in place to replace command and control 15 measures. 16 If you apply that as a disincentive to 17 driving, it certainly will do that if you make the price 18 high enough; but it does not recognize the fact that 19 what you really need to do in a free market is that 20 you must provide -- allow the individual to meet his 21 personal objectives in an environment that lets him make 22 the best economic choice. You've got to get -- give him 23 the choice. 24 Congestion pricing continues to confuse us, 25 and I hope Lynn Scarlett is going to qualify that this 328 GILLESPIE REPORTING SERVICES 1 morning. It is hard to tell whether it's emissions 2 reduction strategy or a congestion strategy. Is it 3 both? It may very well be. 4 The ambivalence that we see comes now from 5 meetings with the district which indicate that, "Well, 6 we're going to change our philosophy from VMT to VT 7 control," and the rationale for that is in the basin one 8 cold start is equal to the average emissions that you 9 get on an average vehicle trip. 10 So which of these two things are going to be 11 controlling? John made the point that maybe a VT 12 approach is self-defeating from a market standpoint. 13 Those issues are not yet resolved. 14 For the emissions, VMT, and registration 15 fees, this is the one I think we see as having the 16 greatest potential to become a really market-based 17 program. 18 The third obstacle is the lack 19 of understanding of the economic impact of these 20 methods. We need to understand it very specifically, 21 all the way from the impact on the poor to the economy 22 in general. It seems to me that the impact on the poor 23 is something that is more easily addressed than the 24 latter. And the reason is that most of these, or many 25 of these, as you begin to implement them, are going to 329 GILLESPIE REPORTING SERVICES 1 be enormous generators of money. I think the money is 2 going to be there. My concern is that I have -- is 3 whether our legislature is going to use the money 4 wisely, not whether we can use it to offset the impact 5 of the disadvantaged. 6 In general, we seem to be unable to deal with 7 the economic impact. There is no study which shows what 8 the economic impact on the South Coast Air Basin is, and 9 there should be. Prudence would seem to indicate that 10 you should understand that. 11 Our legislators continue to believe that 12 there is such a study done. And the problem is that the 13 district conducts a socioeconomic impact analysis which 14 is misunderstood to be the instrument that tells you 15 what the economic impact is. What that study does is to 16 estimate the cost burden on a business, on the economy, 17 and trade that off against the societal benefits that 18 come from reduced public health, increased visibility, 19 corrosion, materials, maintenance, those sorts 20 of things. 21 But that impact has nothing to do with the 22 business decision that has to deal with what my balance 23 sheet and what my profit-and-loss statement is like. It 24 has no effect on whether I stay in the valley or whether 25 I move. It has no effect whatsoever. 330 GILLESPIE REPORTING SERVICES 1 What we need to understand from the economic 2 impact is what the impact on our competitive position is 3 and what the impact on jobs and prices is. 4 Now, this is a continuing discussion that we 5 have had with the district over the past. And there was 6 a Senate Bill 803 that was introduced this last year to 7 require that, and the Natural Resources Committee 8 decided that it was not needed. 9 When you look at that economic impact -- 10 you're talking now in '94 AQMP plan at $5.3 billion or 11 more, with a cost benefit of public health kinds of 12 benefits of something like 9 billion, with only 46 13 of the hundred-plus measures in there having been 14 quantified. So the number's got to get bigger. 15 And things like Regulation XV have never been 16 included in any effective analysis that the district has 17 done. It has not dealt with -- the cost-effective 18 analysis, it was done completely outside. And that's 19 going to run on the order of 200 million. When Alaskan 20 Oil was done, it was 160 to 250. So you're still 21 talking a very big number. 22 That's in addition to whatever -- competitive 23 analysis impact is in addition to the 60,000 jobs to be 24 foregone already defined in the socioeconomic impact 25 report. So that's the tip of the iceberg. 331 GILLESPIE REPORTING SERVICES 1 In trying to look at the combined costs of 2 the AQMP and the FIP, recognizing the FIP costs are 3 really major wags at this point, you're talking about a 4 number that comes close to 2 percent or more of the 5 region's domestic product. 6 It doesn't sound like a very big number, but 7 when you realize that that is the after-tax profit level 8 of a large number of businesses, it now suddenly becomes 9 a big number. So you're going to reach a point where 10 these kinds of expenditures are going to be questioned 11 as they continue to escalate. 12 The fourth obstacle is political and 13 legislative. Clearly, some of these are going to be 14 more politically viable than others for a variety of 15 reasons. 16 Regressive impact on the poor. It looks a 17 lot like taxes in some places. Clan warfare between 18 environmental and business groups and internecine 19 arguments within the regulated community. 20 I suspect you understand this, the will to 21 begin to -- to identify the legislative hurdles in 22 enough detail that we can get over them is what we have 23 to do next. 24 And a word of caution about -- concerning 25 these market-based strategies. John mentioned ideas. 332 GILLESPIE REPORTING SERVICES 1 The ideas have to be quantified in some way before we 2 can begin to deal with them. There are a lot of 3 intuitively satisfying ideas out there, which in 4 Regulation XV's case, have been presented with almost a 5 religious fervor. And the idea if you get people out of 6 their cars, you will reduce emissions, it's great. I 7 mean, if it weren't for gravity, I could fly. 8 The problem is that the alternatives are 9 lacking. The trips have to go away. And we not only 10 don't provide those alternatives, but we also don't have 11 the right set of expectations for what can be 12 accomplished. 13 The trips that are assumed to be capable of 14 elimination are double-counted. And as long as that 15 exists and you don't consider how many trips really go 16 away, and just simply don't get moved, and how many 17 trips that are time moveable -- once you understand 18 that, you can start with the real numbers, and the 19 expectations are going to be different. We can't afford 20 to repeat the mistakes, intuitively good ideas that do 21 not have the quantification that is required. 22 So I think that before we -- we really take 23 the steps to begin to implement any of these, there are 24 three steps that we need to do. The first is, I want to 25 see that list, with another column that says, these are 333 GILLESPIE REPORTING SERVICES 1 the emission reductions. And if you have to put in a 2 trip reductions or VMT or AVR or anything else, then you 3 really ought to question what that measure is for. If 4 you can't put your trip reductions, you're headed 5 towards a mistake. 6 The second thing I'd like to see go on 7 that list is that the cost of the measures should be 8 understood in three different forms, in existing 9 socioeconomic -- you need to understand that, but 10 you also need to understand what those benefits are, 11 and you need to understand what the costs are in terms 12 of competitiveness, prices, and that sort of thing. 13 Those define the economic impact. 14 And then you need to look at the list from 15 the standpoint of the economic -- or the political and 16 legislative viability of it. We're going to have three 17 different lists, but that's the only way we're going to 18 have enough information to make the right set of 19 selections, because we need to select the ones that are 20 most effective in emission reductions, least 21 economically damaging, and most cost-effective. 22 And I'd like to make some specific 23 suggestions to you at this point, remind you, first, 24 that business decisions are based on profit-and-loss 25 statement and the balance sheet, and if you impose an 334 GILLESPIE REPORTING SERVICES 1 additional incentive, it usually winds up as a cost of 2 some sort and it either comes out of profitability or 3 gets added to overhead. 4 If you're going to change it, you've got to 5 apply some kind of a market force, and the best kind of 6 a market force is a pull. The market is like a rope. 7 It's a lot easier to pull on it than it is to push on 8 it. 9 And all of these issues, as we have presently 10 been discussing them, and they're included in the plan, 11 are more on the disincentive side, more on the push side 12 than the pull side. 13 So let's make an assumption that we can do 14 some things that -- from the pull side and look at what 15 happens. 16 A tax credit is a good way to begin to think 17 about a pull that is really important to business. We 18 build a whole industry in the solar energy based on tax 19 credits. And if you simply take that as an example -- 20 and look at the telecommuting, for example. The focus 21 in the plan is on more telecommuting and teleconferences 22 and is based on the assumption that people do not 23 telecommute because of the cost of computers and 24 facilities are too expensive, and that's absolute 25 hogwash. 335 GILLESPIE REPORTING SERVICES 1 The problem is that middle management in the 2 majority of the companies has to have their culture 3 changed from the idea that "If that employee is not 4 sitting here from 8:00 to 5:00, he's not working. I 5 want him where I can see him." That's the big problem. 6 In no company that I know of nor have I been 7 associated with has telecommuting ever been questioned 8 if it makes business sense. If it doesn't make business 9 sense, it doesn't work. 10 And things like a tax credit can now begin to 11 pull you in the direction of that. As long as the R&D 12 tax credits were in, while I was a CEO, I never lost a 13 R&D tax credit. They dropped straight to the bottom 14 line. It is enormously motivating to business. 15 It's unrealistic to assume that you can -- 16 assembly line workers can telecommute, but in fact, in 17 reality, there are many businesses for which there are 18 performance-based jobs which can be done equally well at 19 home. And if you provide the incentive, then you are 20 going to get the cooperation of the businesses. 21 Another example is in the ride sharing. Any 22 costs there are clearly nonproductive overhead. If you 23 change that to give the employers either credit for the 24 dollars that were spent under Regulation XV or a tax 25 credit that allows them to look at real emissions 336 GILLESPIE REPORTING SERVICES 1 reductions from whatever control they might have over 2 mobile sources, you're going to change that direction 3 also. 4 So thinking in a tax credit kind of approach, 5 if you provide them with something which is measurable, 6 and that's the emissions reductions, something which is 7 attainable and something which is cost-effective, and 8 you give them the tax credit to accomplish it, that's a 9 step in exactly the same direction. 10 A similar kind of example could be obtained 11 from the private transit. The deregulation of private 12 transit is one up there. John covered a part of that 13 issue. The Smart Shuttle is going to be able to deal 14 with part of it, but you've still got a major problem 15 for employers that you can't get from wherever the rail 16 stop is to the office. And the bus system and Smart 17 Shuttle are not going to help that problem. They're 18 going to take over a part of it but not the whole 19 problem. 20 During the gasoline shortage in the 21 mid-seventies, I ran a shuttle to pick up the employees 22 at the Santa Ana station to get to work. It was simply 23 a part of the normal use of the vans. When the 24 motivation went away, we got gasoline back, then that 25 died. There's no incentive to do that sort of thing 337 GILLESPIE REPORTING SERVICES 1 now, because the money is being spent on traffic 2 coordination for Regulation XV. 3 But if you take that same concept and ask 4 now, how can I provide the incentive to the employer? 5 You may be able to come up with another kind of tax 6 credit. But thinking about tax credits in the sense now 7 of pull motivations for businesses, and now expanding it 8 to pull motivations for the public, the retail centers, 9 the sport event centers, it's a different philosophy. 10 I want to make one last comment on a totally 11 different subject. The FIP is going to impose punitive 12 fees to encourage many engine users and manufacturers to 13 comply with the standards. That's basically what 14 they're trying to do. I would suggest a better approach 15 would be to establish a credit trading market for mobile 16 sources much like RECLAIM, and that the EPA delegate 17 that responsibility to the state to begin to identify it 18 and set it up. 19 The idea is very simple-minded, and any 20 manufacturer who can exceed those standards, that's tax 21 credits that can be sold. A trucker who cannot meet the 22 requirements, because it's not on the schedule for his 23 engine replacements, can buy those credits and use them 24 to cover the period while he's in default. 25 It meets all the requirements of a free 338 GILLESPIE REPORTING SERVICES 1 market: It's got a willing buyer and seller. It has 2 the pull that is necessary, and it's got the choice. 3 Thank you very much for the opportunity to 4 speak this morning. 5 CHAIRWOMAN SCHAFER: Thank you very much, 6 Dr. McDonald, for a very lucid and helpful 7 presentation. 8 Supervisor Wieder. 9 SUPERVISOR WIEDER: Thank you very much, 10 Madam Chairwoman. 11 John, in your typical erudite, 12 thought-provocative way of thinking, you made a great 13 contribution to this board. In fact, I'd like to pose a 14 question to staff, or maybe to you, Madam Chairwoman, 15 who is -- who runs the staff. 16 Much as ARB has had a Scientific Review 17 Committee and Scientific Research Committee, along the 18 lines of what has been generated, what we've heard and 19 hopefully learned from the testimony these past few 20 hours, then maybe we need some -- a group to guide us 21 towards making some changes, people -- if I may, without 22 embarrassing you, John, people like Dr. John McDonald, 23 in a truly consultant capacity, zeroing in on how best 24 to implement, I think, what we've heard in a manner in 25 which it is possible. 339 GILLESPIE REPORTING SERVICES 1 So I'm reacting to what I'm hearing you say, 2 Dr. McDonald, as to really where we would go with some 3 of your thought-provocative ideas -- for what it's 4 worth. Okay? 5 So thank you, John. 6 DR. MC DONALD: Thank you. 7 CHAIRWOMAN SCHAFER: Well, I think that 8 all of us, working together, is the mechanism that gives 9 guidance to the staff to fully develop the policy and 10 direction we're going. And what Dr. McDonald just did 11 was provide us with a set of absolutely sterling 12 approaches and ideas that we can begin to develop, and 13 he did it for free. 14 DR. MC DONALD: Well, wait a minute. 15 CHAIRWOMAN SCHAFER: I think what we 16 need to do, regardless of mechanism, organizational 17 mechanism, which is to begin to do some of the 18 estimating that you're suggesting, some of the 19 prioritizations that you're suggesting. And I think 20 you have given us a lot of food for thought and some 21 direction, practical direction that we can move in, and 22 I appreciate it very much. 23 Yes, Mayor Hilligoss. 24 MAYOR HILLIGOSS: I would just like to 25 find out how you made the calculation that 2 AVR takes 340 GILLESPIE REPORTING SERVICES 1 in 100 percent of the employees. Would you tell me. 2 DR. MC DONALD: Yes. It's the fault of 3 a simple calculation. If you look at the number of 4 vehicles that are involved, and like -- I could send it 5 to you in detail a little bit later, if you like -- but 6 if you look at the number of vehicles involved, and what 7 it means, if you take 10 percent of your employees 8 ride-share, there is one sharing and there is one who is 9 driving, and that's one vehicle that's eliminated. And 10 then all you do is look at the fraction of your 11 employees -- 12 MAYOR HILLIGOSS: Some of them, you know, 13 are in vans, and they have six and eight people in 14 them. 15 DR. MC DONALD: That's wonderful. 16 MAYOR HILLIGOSS: So there would be other 17 people that would drive alone still. 18 DR. MC DONALD: Yes. A vanpool does help 19 that quite a bit. But it doesn't change the number at 20 2.0 from a hundred percent below about 80 percent. 21 We're still never going to see that number. 22 There's no manipulation of the numbers that 23 you can do that makes it realistic at 2.0 unless 24 everybody rides the train and the bus. It's that kind 25 of an extreme situation. But it will -- I'll send up 341 GILLESPIE REPORTING SERVICES 1 the calculation, if you like. 2 MAYOR HILLIGOSS: Thank you. 3 CHAIRWOMAN SCHAFER: Any more questions 4 from the board? 5 If not, I would like to propose taking about 6 a three-minute break, and we'll be back at 11:20 to 7 resume with the first panel. Thank you. 8 (Brief recess was taken.) 9 CHAIRWOMAN SCHAFER: I'd like to get 10 started again, if everyone will take their seats. The 11 next will be Steve Heminger. 12 Mr. Heminger is manager of Legislation and 13 Public Affairs for the Metropolitan Transportation 14 Commission. MTC is the regional transportation planning 15 and finance agency for the San Francisco Bay Area. 16 Mr. Heminger also directs MTC's state and 17 federal legislative advocacy as well as its public 18 outreach and informational activities. 19 Prior to joining MTC, Mr. Heminger was Vice 20 President of Transportation for the Bay Area Council, a 21 regional public policy group, and has also served as a 22 staff aid in the California State Legislature and U.S. 23 Congress. 24 He has had extensive experience in the field 25 of transportation and air quality, and he's a parking 342 GILLESPIE REPORTING SERVICES 1 commissioner for the San Francisco Parking and Traffic 2 Division. 3 Mr. Heminger, thank you very much for joining 4 us today. 5 MR. HEMINGER: You give your tickets to me 6 and I'll make sure you pay them. 7 I'm here to tell you about a demonstration 8 project for congestion pricing on the Bay Bridge, which 9 is from Oakland to the San Francisco Bay area. We've 10 been awarded a $25 million grant for this project, the 11 only grant so far awarded by the Federal Highway 12 Administration. We're using about a million and a half 13 of those dollars this year in planning for the project. 14 The rest of the money is contingent upon the legislature 15 next year approving, authorizing us to change the 16 tolls. 17 The chairwoman asked us to comment about what 18 you could do to help us. What you could do to help me 19 is that next year you can support our bill, and that 20 will allow this project to go forward. The project -- 21 the planning phase of the project is the old cliche, a 22 public/private partnership. 23 (Overhead presented.) 24 I don't think we're going to have a tribal 25 warfare with the business and environmental community, 343 GILLESPIE REPORTING SERVICES 1 because they're both part of the project and both sit on 2 the management board for the project. We also have a 3 close working relationship with our air district and 4 Caltrans in planning the project and, we hope, 5 implementing it. 6 And we're planning the project more or less 7 like a political campaign, because that's what we think 8 we have ahead of us. It's our view, especially with 9 congestion pricing in the Bay area, that the primary 10 obstacle for us is political, it's not technical, and so 11 we're organizing the project accordingly. 12 We are running focus groups, we're doing 13 opinion polls, we're meeting with legislative staff, as 14 well as doing a considerable amount of analytical work, 15 some of which I'll share with you this morning. 16 I think most of you are familiar with the Bay 17 area. There are a couple of things I think, off the 18 bat, that make the Bay Bridge a good place to do this 19 kind of project. First of all, it's a bridge. And one 20 of the problems with congestion pricing -- for example, 21 if you did it on a freeway down here in L.A. -- is you 22 price the freeway, and then folks will go to the 23 arterial or go to the next freeway, so you've got to 24 price everything in order to deal with the spillover 25 effect. In the case of the Bay Bridge, the spillover 344 GILLESPIE REPORTING SERVICES 1 would be fairly literal, and you'd have to -- 2 (General laughter.) 3 -- you'd have to go quite a distance to get 4 to the next crossing -- to get to the next bridge. 5 A second thing is that all of those bridges 6 you see on the map are toll bridges already. And I 7 think it's considerably easier to introduce congestion 8 pricing and the notion of a higher -- and maybe I 9 should -- I'm assuming you're all familiar with the 10 concept. 11 It's basically the idea of taking 12 Mr. Fitzmaurice's phone system rates and putting them on 13 the road system, so that during the peak period the 14 ratings are higher and during the off-peak they're lower 15 in order to encourage use during the off-peak, as well 16 as in the case of transit where we can do Pacific Bell 17 one better, encouraging the use of alternatives like 18 transit and carpooling. 19 So the fact that these are all toll bridges 20 already, the tolls have been collected for years, I 21 think makes it easier to introduce it. We don't have a 22 technological problem, even though as part of our 23 project, or rather at the same time frame as our 24 project, all of these bridges are going to get 25 electronic toll collection, as well, which comes in 345 GILLESPIE REPORTING SERVICES 1 handy for us in a way. 2 A third thing that I think helps us with this 3 project is the little blurry writing that you have a 4 hard time seeing at the top. Right now going through 5 the Bay Bridge corridor -- the BART 2 is under that 6 corridor, and we consider it part of it. 7 Right now 70 percent of the people use 8 commute alternatives during the morning peak, which is 9 an extraordinarily high number. So that tells me, first 10 of all, that it's not impossible. You know, there's a 11 lot of moaning about "Gee, there's no alternative. Gee, 12 people will never use them." In this corridor people 13 use them a lot, and there are a lot of them already. 14 Secondly, it tells me that what we need to do 15 is make an incremental amount of improvement off a very 16 successful use of commute alternatives to try to reduce 17 congestion in the corridor. What we're left with, and 18 that's the bottom half of the little writing that you 19 can't read, is that of the remaining 30 percent who do 20 travel alone, they cause 75 percent of the traffic on 21 the bridge. 22 And that maybe is the fourth thing why this 23 is a good project. This is one of the most congested 24 places in the United States during the peak period. And 25 so if you want to do pricing of congestion, you go where 346 GILLESPIE REPORTING SERVICES 1 the congestion is. And we've got it in spades in this 2 corridor, and I think that makes it a good demonstration 3 path. 4 You can see the transit alternatives, you can 5 see the BART train, the BART 2. There are buses across 6 the bridge, there are ferries that parallel the bridge, 7 and there are also kinds of nontraditional things like 8 telecommuting and other sorts of things. 9 This just puts it in graphic form for you. 10 The fact that we have such a large share in the morning 11 peak -- the bigger pie at the top is the morning peak -- 12 using carpooling and vanpooling, using BART, and using 13 AC transit. 14 The toll structure right now is a flat $1 15 toll, all day long. During the peak periods, morning 16 and afternoon carpools -- that is, anything with three 17 or more people in it, including buses -- go for free, 18 and most of those folks are carpooling not because they 19 save a dollar, they're carpooling because they save 20 about 20 minutes getting through the backup, because the 21 carpool lanes come out through the approaches. And so 22 time savings is the big advantage. 23 There is also a fairly high use of commute 24 alternatives in the afternoon peak, but it's 25 considerably less because the toll is collected 347 GILLESPIE REPORTING SERVICES 1 westbound into San Francisco. There's not a comparable 2 advantage in terms of time savings in the afternoon. 3 (Overhead presented.) 4 One of the things we have a hard time telling 5 people about with this project is that we don't need to 6 get rid of all the traffic. We don't need to get rid of 7 everybody who is using -- who is driving alone right now 8 to make an appreciable difference with traffic 9 congestion. And we try to do it with this chart. And 10 what the chart shows is that all of the gray in here is 11 traffic that could be handled by the capacity on the 12 bridge. Where the peak commute period causes congestion 13 is this little bubble at the top, and what we need to do 14 is to try to flatten or eliminate that bubble. And if 15 we do -- and you can add it up yourself, I think, in 16 terms of the grid. It's about 3500 cars. 17 If we can make a dent on that 3500 cars, we 18 can significantly reduce the peak-period congestion. We 19 don't have to make an appreciable dent on the folks 20 below the line. And that, again, puts it in the 21 range -- in the realm of plausibility for people. And 22 that's half the problem with this project, is trying to 23 convince people that something like this might actually 24 work. 25 (Overhead presented.) 348 GILLESPIE REPORTING SERVICES 1 One of the issues, and to some extent, I 2 think, it shouldn't be as much of an issue as it is, 3 but it is, that is the so-called equity question with 4 pricing. So to see where we were in terms of a baseline 5 in the Bay Bridge corridor, we do have access through 6 the census to fairly sophisticated income information on 7 current users in the corridor. 8 And what this shows, if you look at the left 9 half of the graph, these are East Bay residents who are 10 traveling in the morning peak over to San Francisco or 11 San Mateo County. You can see -- first of all, if you 12 look at the average household in the East Bay, you're 13 talking about a household income of about $40,000. You 14 look at the commuters who are using that bridge during 15 the peak, and you'll see that their income is 16 substantially higher than the average income in the East 17 Bay. And you will also see something perhaps a little 18 surprising, that carpool/vanpool income is the highest 19 of all. And we attribute that, if you believe in 20 economics, to the fact that those folks value their time 21 more than anybody else, and the time savings of 22 carpooling is very high through that corridor. 23 You see a similar kind of pattern with the 24 West Bay residents. These are the folks who live in 25 San Francisco. They come to the East Bay to work in the 349 GILLESPIE REPORTING SERVICES 1 morning, and then they come back in the afternoon, home, 2 and they pay the toll on the way going home. 3 There is less of a disparity in the income 4 between the average and the commuters, but there is 5 still a significantly higher income profile among 6 commuters. 7 What we've shown in the little hash-mark part 8 of the drive-alone and the people who have only two 9 people in the car, and those folks right now pay the 10 toll and presumably would pay the higher toll under 11 congestion pricing. 12 We used the income figure that PG&E uses and 13 that Pac Bell uses for their Life-Line Program, because 14 if we do some kind of mitigation strategy for low-income 15 folks, we'd probably model it after that, and that's 16 what we're looking at right now. And what we found in 17 the corridor is that those residents, those commuters 18 comprise, as you can see, about 4 or 2 percent of the 19 commute population that would be subject to a higher 20 toll in the peak period. 21 So that doesn't say the problem doesn't 22 exist. I mean, that's great if you're not one of those 23 2 or 4 percent of the population, but it does say that 24 it's manageable, and that I think we can design 25 strategies to deal with those folks, first of all, to 350 GILLESPIE REPORTING SERVICES 1 provide them better commute alternatives, and second of 2 all, if we need to, to do a direct kind of income 3 mitigation strategy, whether it's a toll discount or a 4 discount on transit fares or just dedicated transit 5 service. I think the low numbers make it manageable. 6 Now, this corridor, I think, is not unique. 7 I think, generally speaking, we do know that commuters 8 tend to have a higher income than noncommuters. The 9 people who drive alone tend to have a higher income than 10 transit users, and so forth. But it shows me in our 11 corridor, I think, that we have a manageable problem in 12 terms of any kind of low-income impacts. 13 (Overhead presented.) 14 The reason that we think pricing makes sense 15 in this corridor is maybe demonstrated in this graph. 16 The first column is the Bay Bridge toll expressed in 17 current dollars and then real dollars. And you'll see 18 that back when the bridge opened in '36, the toll in 19 current dollars was about 12 bucks, and right now it's a 20 dollar. This chart is a little bit old. So the real 21 dollar toll, the real value of the toll on the Bay 22 Bridge has declined substantially, whereas transit has 23 more or less kept pace with inflation. So I don't think 24 people -- you know, despite the fact that 70 percent of 25 the folks do take transit, the folks who don't are not 351 GILLESPIE REPORTING SERVICES 1 making economically an irrational decision. 2 This is our -- 3 (Overhead presented.) 4 -- estimate so far, and this is based upon 5 computer modeling of the kind that's going on for your 6 study of four metropolitan areas in the state -- in 7 fact, by the same person, Greg Harvey -- and this is his 8 estimate of what a peak-period toll would do to the 9 morning delay on the Bay Bridge toll plaza. 10 Right now it's a dollar toll, and we have 11 about a 20-minute backup on average during the weekday. 12 His estimate is that with a $5 toll, we would just about 13 clear out the cue; with a $3 toll, it would reduce it by 14 a little less than half. 15 CHAIRWOMAN SCHAFER: What happens if you 16 just remove the toll? 17 MR. HEMINGER: If -- what if you remove 18 the toll? 19 CHAIRWOMAN SCHAFER: Yes. 20 MR. HEMINGER: Well, if you remove the 21 toll, you probably wouldn't change congestion much at 22 all. Right now -- and I maybe should have mentioned 23 this. The collection of the toll does not cause the 24 delay on the bridge. The capacity on the bridge causes 25 the delay. And right now there are a row of metering 352 GILLESPIE REPORTING SERVICES 1 lights that are on in the morning and the afternoon, so 2 all that happens if you take the toll plazas out -- and 3 we hope to do that to some extent with electronic toll 4 collection -- is you'll get to the metering light a lot 5 faster, and then you'll stop. So the toll collection 6 isn't really affecting local traffic. 7 That's that estimate. Now, these estimates 8 are contestable, and I know there's been some 9 dissatisfaction expressed with estimates. What we'd 10 like to do is to try it out. I mean, this is a pilot 11 project, and that means you don't know all the answers 12 going in, but you try to know as much as you can, and 13 then you see if it works. 14 Now, I think we've talked about pricing -- I 15 have, at least, until I'm blue in the face, and I think 16 it's time to try out some of these strategies and see if 17 they work. 18 These are the kinds of things that we're 19 considering in terms of funding alternatives in that 20 corridor, both with the higher toll revenue as well as 21 with the federal money that is waiting