Lincoln Plaza
Auditorium, First Floor
400 "P" Street
Sacramento, CA

May 12, 1989
8:30 a.m.



89-9-1 Report on Pollution Control Financing for 001
Small Business.

89-9-2 Public Meeting to Consider Approval of a Suggested 004
Control Measure for Emissions of Volatile Organic
Compounds from the Application of Architectural


ITEM #89-9-1

Pollution Control Financing for Small Business.


The staff is reporting on a small business assistance program
which would enable small businesses to more readily obtain
financing for pollution control equipment. The program is being
developed jointly by the Air Resources board (ARB), the
California Pollution Control Financing Authority (CPCFA), and the
Office of Small Business (OSB), based on a concept to extend the
scope of an existing CPCFA program so that smaller businesses may
quality for CPCFA loans.



Small businesses, including facilities such as service stations
and metal plating shops, are increasingly having to comply with
environmental regulations. However, the need to comply with such
regulations can put very small businesses at an economic
disadvantage. Such businesses are frequently unable to finance
pollution control equipment through conventional lenders or
existing pollution control financing programs, which are set up
to finance larger projects.

CPCFA currently makes financial assistance available to small
businesses under its Small Business Assistance Program. However,
CPCFA is limited by regulation to financing loans of not less
than $200,000. This restriction eliminates the availability of
financial assistance to most of the facilities affected to date
by the ARB's legislatively mandated toxic air contaminant control
program. The staff estimates that the first two air toxics
control measures adopted by the ARB will require the financing of
over 500 projects ranging from $15,000 to $200,000.

Expansion of Small Business Assistance Program

The proposed program would involve three different agencies;
CPCFA would generate loan funds through the sale of bonds, OSB
would administer the loans, and the ARB and other agencies would
review the loan applications to ensure that the appropriate level
of control and technology is applied.

CPCFA believes it regulations can be amended to accommodate the
financing of smaller loans, within the standard financial "due
diligence" requirements applied by CPCFA to all of its
transactions, without the need for additional legislation. If
the current $200,000 minimum were lowered to $15,000 to $20,000,
financial assistance would be more widely available. The key to
this proposal is the regulatory change allowing the use of
CPCFA's reserve funds to pay bond issuing costs and a credit
enhancing loan guarantee fund. If the regulations are changed
and the bond market accepts the partial guarantee and/or
financing cost assistance made by CPCFA, substantial funds could
be available for small business loans. Very small businesses
would then have access to the type of financing currently
available only to larger businesses, that is, favorable interest
rates and long term financing.

CPCFA anticipates that the program would be financed through the
sale of taxable bonds. The sale of taxable rather than
tax-exempt bonds, while resulting in a higher interest rate,
would involve fewer restrictions (lower bond sale costs of
issuance) and would still allow for long term (10-15 year) loans
at competitive rates.

Because CPCFA does not make direct small loans to businesses, OSB
would contract with CPCFA to provide loan processing services.
The funding for the loans would come from proceeds of individual
bond issues sold by CPCFA. The appropriate regulatory agency
(ARB, State Water Resources Control Board, California Waste
Management Board, etc.) would review the loan applications for
technical feasibility and to ensure compliance with existing
regulations. In this respect, the program would operate
similarly to that established by SB 788, in which OSB administers
loans for hazardous waste reduction and the Department of Health
Services reviews the technical feasibility of the project

Because legislation would not be required, we anticipate that the
program could be in place by the end of 1989. this would allow
small businesses which are affected by the ARB's first two air
toxics control measures, retail service stations and chrome
platers, to obtain financial assistance through the program.


The program described above would lessen the financial hardship
on small businesses faces with environmental regulations and, in
some cases, would prevent them from being driven out of the
market. Because the program would be broad in scope, it would
apply to facilities which emit criteria pollutants as well as
toxic air contaminants. Lastly, in reducing the need for
regulatory exemptions, the program would enable greater
protection of public health and the environment.

ITEM #89-9-2

Technical Review Group's Proposed Architectural Coatings
Suggested Control Measure.


The staff recommends:

1. That the Air Resources Board approve the Technical Review
Group's proposed Suggested Control Measure for architectural

2. That the Air Resources Board direct the Executive Officer to
transmit the suggested control measure to districts and
strongly urge the districts to adopt uniform regulations
consistent with the suggested control measure.


The Technical Review Group (TRG) has approved proposals for
amendments to the existing architectural coatings model rule and
has renamed it a Suggested Control Measure. The TRG's
architectural coatings committee developed the proposed
amendments in a process which included three public workshops.
The committee also consulted by telephone and in person with both
manufacturers and applicators of coatings, and with specifiers of
coatings for government agencies.

In developing the proposed SCM, the committee had five principal

To improve the clarity and enforceability of the
architectural coatings rules;

To provide a basis for uniformity among the architectural
coatings rules of California air pollution control districts
and air quality management districts.

To encourage the development of new technology or practices
which might yield a reduction in overall emissions from
architectural coatings; and

To reduce emissions from specialty coatings by taking
advantage of new developments in technology;

The proposed amendments to the architectural coatings rules focus
on specialty coatings categories. They include 20 new or revised
definitions, new solvent-content standards for 17 categories of
coatings, elimination of 5 special categories of coatings and the
corresponding solvent-content limits, and 9 administrative

Implementation of the proposed amendments will yield emission
reductions of almost 9 tons per day in 1990, with additional
reductions to follow as standards with future effective dates are

Implementation of the proposed changes will result in no increase
in cost for most coatings. For those coatings where costs are
affected, the staff estimates the cost of the proposed changes is
from $-4.30 to $6.40 per pound of volatile organic compounds

Some coating limits are technology-forcing and have proved to be
controversial during the development of the proposed amendments.
Chief among these are: clear wood finishes, semi-transparent
stains and wood preservatives, quick dry enamels, quick dry
primers, sealers and undercoaters, and swimming pool coatings.

The staff will conduct regular surveys of coatings sold in
California to assess the effectiveness of the architectural
coatings rules, to identify potential opportunities for future
emission reductions and to identify areas where there might be a
need for further work.

The staff will work with the TRG and with CAPCOA to ensure timely
adoption of the suggested control measure, to avoid the problems
associated with lack of uniformity.

The staff has also committed to work with the TRG to develop
further revisions to the architectural coatings rules. These
goals are:

Further emission reductions in coatings categories which
show the potential for reductions but where the technology
for the reductions is not yet available.

Developing the suggested control measure to address
emissions of substances which deplete stratospheric ozone.
This might be done in the definition of "volatile organic
compounds", or elsewhere in the rule.

Developing the suggested control measure to address
emissions of toxic air contaminants from the application of
architectural coatings.

Develop proposals for the use of economic incentives to
reduce the emissions from the application of architectural