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

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

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

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

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

(iii) A grant for a schoolbus project shall not exceed the cost caps established in the Lower-Emission School Bus Program and consistent with Section 44299.901. The cost-effectiveness value for these projects shall be set forth in the guidelines issued pursuant to Section 44287.

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

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

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

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

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

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

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

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

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

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

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

(Amended (as amended by Stats. 2013, Ch. 401, Sec. 23) by Stats. 2015, Ch. 610, Sec. 10. (SB 513) Effective January 1, 2016. Repealed as of January 1, 2024, by its own provisions. See later operative version, as amended by Sec. 24 of Stats. 2013, Ch. 401.)