1. 1 Status of the Used Oil Recycling Program (Allocation for FY 04/05)

2. 2 Objectives of Agenda Item Overview of Used Oil Recycling Program (UOP) Theory and Impact of the UOP Fund New Direction of UOP based on Cal Poly Assessment Allocation for Statewide Education and Outreach ($752,000) Proposal to Increase Available Resources

3. 3 Goals of the California Oil Recycling Enhancement (CORE) Act Implement Recycling Incentive Program Implement Recycling Incentive Program Establish a network of Collection Centers for Used Oil Establish a network of Collection Centers for Used Oil Implement Grant Programs (5) Implement Grant Programs (5) Promote Statewide Education and Outreach activities Promote Statewide Education and Outreach activities

4. 4 Revenue & Total Resources Available resources for expenditure from the Used Oil fund are generated from: Available resources for expenditure from the Used Oil fund are generated from:  Oil manufacturer fees  Interest earned on cash in the fund  Unexpended funds from prior years (fund balance) PRC §48653 authorizes resources available to the IWMB to be continuously appropriated PRC §48653 authorizes resources available to the IWMB to be continuously appropriated  Adjust spending authority annually for certain Oil programs to meet the statutory prescribed funding formula

5. 5 The Statutory “Formula” Prescribed in statute and establishes for Oil programs: Prescribed in statute and establishes for Oil programs:  Funding order  Amount available The statutory formula trends Used Oil fund allocations to a point where annual expenditures equal annual revenue The statutory formula trends Used Oil fund allocations to a point where annual expenditures equal annual revenue Attachment 3 describes the formula based on 5 categories of expenditure: Attachment 3 describes the formula based on 5 categories of expenditure:  Category 1-3:Primary Expenditures  Category 4-5:Competitive grant and Education/Outreach programs

6. 6 UOP Fund Allocation Priorities According to Statute First Category $.16/gal recycling incentive $.16/gal recycling incentive DTSC investigation DTSC investigation Program/Board Administration Program/Board Administration Reserve Reserve$3.3M$343,000$3M$1M Second Category Block Grants Block Grants $ 10M Third Category Budget Act Farm and Ranch Farm and Ranch DTSC enforcement DTSC enforcement Contaminated Oil Payments Contaminated Oil Payments Program/Board Administration Program/Board Administration OEHHA direct OEHHA direct CalEPA Direct CalEPA Direct$333,000$250,000 $ 10,000 $1.27M$487,000 $ 30,000 Fourth Category Competitive Grants (60% annually-two year cycle) Non-profit Non-profit Research, Testing and Demonstration Research, Testing and Demonstration$1.13M$1.13M Fifth Category Statewide education and outreach $752,000

7. 7 Example: Expenditures = Revenue (dollars in thousands) Resources: Beginning Balance 1,250 Revenue20,000 Total Resources 21,250 Expenditures: Primary Costs (Cat. 1-3) 15,000 Net Resources 6,250 80% Competitive Grant/Ed Programs (Cat. 4-5) 5,000 Total Expenditures 20,000 20% Ending Fund Balance 1,250

8. 8 Example: Expenditures Exceed Revenue (dollars in thousands) Resources: Year 1 Year 2 Beginning Balance 10,0003,000 Revenue20,00020,000 Total Resources 30,00023,000 Expenditures: Primary Costs (Cat 1-3) 15,00015,000 Net Resources 15,0008,000 80% Competitive Grant/Ed Programs (Cat. 4-5) 12,0006,400 Total Expenditures 27,00021,400 20% Ending Fund Balance 3,0001,600

9. 9 Current Fund Status (dollars in thousands) Resources:2004/05 Beginning Balance 2,112 1 Revenue20,672 Total Resources 22,784 Expenditures: Primary Costs (Cat 1-3) 19,023 1 Net Resources 3,761 80% Competitive Grant/Ed Programs (Cat. 4-5) 3,009 Total Expenditures 22,032 20% Ending Fund Balance 752 1 1 does not include $1m reserve for contingencies

10. 10 The Statutory Formula: Annual Expenditures = Annual Revenue UOP must operate within the amount of annual revenue collected UOP must operate within the amount of annual revenue collected When allocations for expenditures equal annual revenue, the following is true: When allocations for expenditures equal annual revenue, the following is true:  Projected Annual Revenue – Primary Expenditures (Category 1-3) = Allocations for competitive grant/education programs (Categories 4-5)  ($20.6M - $19.0M = $1.6M) Two important factors have affected allocations for Competitive grants and Education/Outreach programs: Two important factors have affected allocations for Competitive grants and Education/Outreach programs:  Fund balance has diminished per the statutory formula; supplemental funding by the fund balance is temporary and should not be considered available on-going  Over time, the difference between annual revenue and primary costs has decreased, leaving less available for Competitive grant and Education/Outreach programs

11. 11 Factors Impacting Revenue and Expenditure Revenue: Decrease in interest rate and earnings Decrease in interest rate and earnings Projected flat oil revenue Projected flat oil revenue Refund and exemption claims to manufacturers Refund and exemption claims to manufacturersExpenditure: Increase in Administrative cost Increase in Administrative cost Direct appropriations to other agencies Direct appropriations to other agencies

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13. 13 Direction for Second Decade Cal Poly Assessment (July ’03) Cal Poly Assessment (July ’03) Transition from “getting the money out” to “Promoting Program Improvements” Transition from “getting the money out” to “Promoting Program Improvements” Analysis of recommendations led to 7 strategies Analysis of recommendations led to 7 strategies

14. 14 Proposed Implementation Plan for Used Oil Program: Strategies 1. Maximize Effectiveness of Used Oil Collection Infrastructure 2. Promote Source Reduction & P2 3. Promote Highest & Best Use of Used Oil 4. Enhance UOP Visibility & Image 5. Improve Effectiveness & Efficiency of Program (streamlining) 6. Seek Public/Private Partnerships 7. Promote Program Improvements thru Transfer of Best Management Practices

15. 15 Strategy 1: Maximize Effectiveness of Used Oil Collection Center Infrastructure Expand Certified Collection Center Program Expand Certified Collection Center Program Expand Used Oil Filter Collection Expand Used Oil Filter Collection Strategy 2: Promote Source Reduction and Pollution Prevention Generate List of Policy Options for Source Reduction (oil change intervals, etc) Education re: used oil impact on stormwater

16. 16 Strategy 3: Promote Highest & Best Use of Used Oil Encourage blending of used oil, re-refining or use as asphalt flux Encourage blending of used oil, re-refining or use as asphalt flux Re-refined Oil Use by Fleets Re-refined Oil Use by Fleets Strategy 4: Enhance UOP Visibility Evaluate effectiveness of existing local & statewide used oil recycling message Spotlight programs on CIWMB website

17. 17 Strategy 5: Continuously Improve Effectiveness & Efficiency of Program (grant process streamlining) Strategy 6: Seek Opportunities for Public/Private Partnerships Strategy 7: Promote Program Improvements Thru Transfer of Best Practices (conference)

18. 18 Statewide Education and Outreach (Category 5)Description Proposed $ Annual Used Oil/HHW conference $100,000 Outreach (ads, printing) $ 80,000 Certified Collection Center $ 25,000 DMV handbooks $106,000 Partnerships/Sponsorships $ 15,000 Contract Concepts Extended oil change Extended oil change Grantee publicity and education analysis Grantee publicity and education analysis Blending of used oil Blending of used oil Other Board Activities Student Assistance Student Assistance Recycled Product Trade Show Recycled Product Trade Show $ 85,000 $ 90,000 $165,000$36,000$50,000

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21. 21 Contract Concepts (Category 5) Extended Oil change: examine the feasibility of an outreach campaign as a source reduction promotion. Extended Oil change: examine the feasibility of an outreach campaign as a source reduction promotion. Publication and Education Analysis: identify “best practices” and determine if regional or statewide oil recycling message is recognizable. Publication and Education Analysis: identify “best practices” and determine if regional or statewide oil recycling message is recognizable. Blending Used Oil: determine if the blending of used oil back into the crude oil refining process is marketable, environmentally friendly and economical. Blending Used Oil: determine if the blending of used oil back into the crude oil refining process is marketable, environmentally friendly and economical.

22. 22 Statewide Education and Outreach (Category 5) Other Board Activities Student Assistance (non UOP) Student Assistance (non UOP) Recycled Product Trade Show Recycled Product Trade Show

23. 23 Proposal to Increase Revenue Increase Revenue: Eliminate advances on Block Grants Eliminate advances on Block Grants Verify revenue and exemption claims from oil manufacturers Verify revenue and exemption claims from oil manufacturers Decrease Expenditure: Reevaluate the DOF audit contract Reevaluate the DOF audit contract Reassess support to: Reassess support to:  CalMax/WRAP program  Recycled Product Trade Show  Farm and Ranch grant

24. 24 Proposal to Increase Available Resources for the UOP (Worksheet)ProposalsYesNo Re- evaluate Discuss To Increase Revenue 1. Eliminate Advances (Block Grant) 2. Verify claims from oil manufacturers (audits) To Decrease Expenditures. 3. Re-evaluate DOF contract 4.Determine level of funding for on annual basis for: a. CalMax/Wrap 4b.Recycled Trade show 4c.Farm and Ranch

25. 25 Request Board Approval Staff Recommends: Approval of the proposed Allocation and Contract Concepts for FY 2004/05 and direction on the proposals to increase resources for the Fund for FY 2005/06 and beyond and adopt Resolution number 2004- 314. Approval of the proposed Allocation and Contract Concepts for FY 2004/05 and direction on the proposals to increase resources for the Fund for FY 2005/06 and beyond and adopt Resolution number 2004- 314.