Chairman Voinovich, thank you for the invitation to present testimony today. My name is Michael Fisher and I am the President and CEO of the Greater Cincinnati Chamber of Commerce. It is an honor to have the opportunity to speak to the Subcommittee this morning. The issues on which you are deliberating – on which many Americans, in the public and private sectors, are deliberating – are issues critical to Greater Cincinnati – its people, its environment and its economic prosperity.

Our Chamber is one of the largest such business organizations in the country. We have more than 6000 business members ranging from global companies like Procter & Gamble, Toyota and GE Transportation to strong privately held middle market companies to sole proprietors. Eighty percent of our members have fewer than 50 employees. The number of manufacturing companies in our membership approaches 1000. Our region includes 15 counties in Southwestern Ohio, Northern Kentucky and Southeastern Indiana.

Importantly, I want to stress that our Chamber’s interests are aligned with the larger community interests. I mention this because the topic and process of attaining and maintaining environmental quality – especially air quality – has a common bottom line for our region – undoubtedly for every region in America. That is: we want to achieve and exceed clean air standards – for ozone, particulates and regional haze. We want healthy citizens in healthy communities in a clean environment.

The Greater Cincinnati Chamber has a long-standing commitment to clean air and a strong history of engagement in this issue. The Chamber played a lead role in local cooperative efforts to reduce ozone-levels while minimizing potential adverse economic consequences (government-mandated pollution-control measures and penalties that would curtail regional economic development). The Chamber was a co-founder of the Regional Ozone Coalition in 1994 and continues to participate with this group. The first such partnership among local government, business and community organizations in Ohio, Kentucky and Indiana, the Coalition works to prevent ozone levels from threatening the region's future. Coalition efforts resulted in redesignation of our region to "attainment" of the federal ozone standard in early 2000. More recently, the Coalition has awarded financial incentives covering the incremental cost difference between a traditionally fueled vehicle and an alternatively fueled vehicle that creates less pollution. The Chamber has also encouraged businesses to participate in the Coalition directly.

More recently, we also began collaboration with OKI (Ohio- Kentucky-Indiana Regional Council of Governments), our local metropolitan planning organization, to work with the state EPAs in our region on managing the impact of new regulations forthcoming as a result of the April 2004 attainment designation announcement.

Before I share with you my thoughts on the business impacts of the current clean air standards, I would like to offer some personal context for my comments. First, I may be somewhat unique as a Chamber President. This is my first position as a civic leader. After building a manufacturing support service business that started with one customer and fifty employees to a substantial enterprise with eighty locations in 11 countries and 2500 employees, I stepped into my new community role three years ago. I am a fourth-generation, life-long resident of Cincinnati with a deep interest in improving not only the region’s business climate, but its quality of life. I am also a parent of four children ages 8 to 15. For all of these reasons, I believe in improving our region’s air quality: for my family, for the two million residents of our region and for the long-term economic attractiveness and competitiveness of Cincinnati USA.

I am also very proud that we will be named one of America’s Most Livable Communities at a National Press Club ceremony here in Washington in just a few weeks. But I find it ironic, and a bit frustrating, to be here today acknowledging that our community is also considered in non-attainment status by US EPA ozone standards.

Air Quality Is Improving

Of course, it is important to celebrate real progress. Like many of our nation’s urban areas, our region has made great strides in improving local air quality. Greater Cincinnati meets all air quality standards except for ozone – and as I will point out later, our problem with the ozone standard does not result from monitoring data, but because, at the state level, certain control policies were improperly credited by Ohio EPA. In particular, the good news for Greater Cincinnati is that large particulate matter (PM10) has decreased by 33% since 1988. Fine particulates (PM2.5) have decreased 12% since 1999. In 2001, sulfur dioxide was measured at .005 parts per million, against a standard of .09. Nitrogen oxides are down from .035 parts per million in 1994 to .02 in 2002.

Clearly, this demonstrates significant advances, even as our economy increased, energy consumption increased and vehicle miles traveled increased. But the work is not finished. We are committed to continuous improvement.

The Greater Cincinnati Chamber of Commerce seeks continued air quality improvements and predictable regulatory and legislative requirements for business. Our members and our broader region are interested in a clear and comprehensive approach to air quality.

Currently, our businesses face a confusing series of environmental laws and regulations that often lead to miscommunication, regulatory uncertainty, lost business investment and even higher energy costs. Hopefully, Congress will help by identifying improvements focused on results and predictability.

Business Impact of Non-Attainment Designation

Simply stated, conducting business in an area designated as non-attainment is more complicated, more time-consuming and more costly. In addition to the incremental burdens that are placed on the businesses already located here, the non-attainment designation is a disincentive for new business investment into our region.

First and foremost, the consequence of regulatory uncertainty and the corresponding concerns over investment in non-attainment areas is job loss. A 1995 study conducted by NERA (National Economic Research Associates) Economic Consulting concerning the economic impact of ozone non-attainment in Greater Cincinnati projected job losses of 14,000, including both manufacturing and spin-off jobs, for the period1995 until 2000.

In 1995 Greater Cincinnati was home to 162,000 manufacturing jobs according to state employment data. By 2003, that number had fallen to 127,000. While it is difficult to discern the specific number of job losses attributable to the non-attainment designation, it is clear that the 35,000 workers were displaced and the non-attainment status was at least one contributing factor.

The fact is, job growth and capital investment for existing operations in our region have been hindered by the non-attainment designation. This point is critical as one considers that 80 percent of a region’s job growth stems from expansion of resident companies, not new business attraction.

Sophisticated businesses carefully analyze the costs and risks associated with expansion in different locations. The increased scrutiny, potential for higher fines if permit violations occur, and the uncertainty over what the next round of regulations may bring; all serve as a disincentive for reinvestment and expansion of businesses, especially manufacturing operations, located in non-attainment areas like ours. Of course non-attainment areas are often urban areas – the very locations large metropolitan Chambers are frequently trying to revitalize.

Our Chamber’s internationally recognized and award-winning economic development team, the Cincinnati USA Partnership, has been told by national site location consultants that non-attainment areas are frequently not even included as potential locations for major new manufacturing projects. As a non-attainment area, Greater Cincinnati suffers in some cases because we never make it onto the prospect list.

This can be especially true of foreign investors who are highly sensitive to compliance costs, potential public relations problems associated with environmental concerns, and the quality of life perceptions of their executives soon to be relocated to the United States.

The tougher standards also add to the complexity. The Hamilton County (our major urban county) Department of Environmental Services strongly advises applicants for air permits to hire a consultant to assist in the development of information required for submission. While this is good for consulting businesses and for the applicant companies’ lawyers, these are not the growth industries in which we are most interested.

Air quality permits for companies in non-attainment areas are held to tougher standards and closer review. These stricter standards cost businesses time and money, and sometimes negatively impact the ability of a company to keep or win customers – especially when competitors, both domestic and overseas, are not held to the same standards.

One of the most important assets of Greater Cincinnati is our outstanding transportation system. Because we are located within a one-day drive of 60 percent of the North American population, our surface transportation infrastructure is an important selling point for our regional economic development efforts. The non-attainment designation even threatens the viability of this valuable asset, in part, because essential federal highway dollars are jeopardized in non-attainment areas. Our region’s metropolitan planning organization is required to demonstrate that its regional transportation improvement plan is consistent with the overall emissions budget for the region. Failure on this can also result in significant reductions in federal highway funding.

Process versus Results

I would like to share with you one example of the impact of confusing regulations – the designation of Greater Cincinnati as a non-attainment area.

Based on data from the 1980s, the Cincinnati area was classified as a moderate non-attainment area. After that designation, government, businesses and the community came together to develop a plan to reach attainment status. Following much work by a large and diverse group of stakeholders, and at substantial expense, the Greater Cincinnati region was designated as in attainment for ozone in 2000.

Our success was short-lived. An adverse 2001 court decision by the U.S. Court of Appeals for the Sixth Circuit ruled on a technicality that the Ohio EPA erred in its evaluation and approval of our region’s attainment plan, and the region was abruptly placed back in non-attainment. This re-designation happened in spite of the fact that the region’s air quality has not exceeded the current one-hour ozone standard since 1995 – not a single violation has been recorded! (A violation occurs when a high level -greater than 120 parts per billion, averaged over 1 hour- of ozone is recorded more than three times at a single monitor within a three year period.)

The 2001 ruling was a surprise and scuttled much hard work by our community. The case also illustrates a fundamental flaw with the current system – great emphasis is placed on the process, often at the expense of focusing on actual air quality results.

New Designations and Regulations on the Horizon

As you are well aware, the national business community is especially anxious about April 15th this year, and only not because it is “tax day.” In 2004 it is also “final designation” day. On that day, the US EPA is scheduled to issue its final designation of non-attainment areas under the eight-hour air quality standard for ozone, likely to affect thousands of communities across the country. For businesses and state EPAs alike, the permitting process has been challenging. We’re concerned it may become overwhelming beginning later this month as the new regulations draw in thousands more facilities including many mid-size and smaller businesses. These businesses will be newly subject to air quality permitting requirements and state agencies will be challenged to thoroughly, and expediently, review more applications. The early months of the new regulatory framework are critical as state EPAs prepare for an onslaught of applications from an entirely new group of businesses in need of permits.

In addition, the small and mid-sized businesses facing these new equipment and compliance costs have scant resources to allocate for expert consultant assistance when adding new equipment or expanding operations.

As a region and as a business community we need help. The current array of laws and regulations are difficult even for the experts to explain. The evolving standards challenge our businesses and ultimately cost us jobs. Strong businesses and strong regional economies are the result of good ideas, good planning, adequate resources and strong leadership – they succeed when they create a road map and follow it. We hope for a similarly focused approach from our very important partner, the federal government – development of a clear roadmap that provides certainty, and points business, and other sectors of the community, in the right direction to attain clean air compliance.

Recommendations

In that spirit, I encourage the Congress to consider several improvements to the current legal and regulatory framework:

1) Increase certainty and predictability in regulations and laws so businesses can first understand them, and then do what they do well - plan accordingly, make smart investments and adjust to market conditions and opportunities.

2) Allow ample time for businesses to evaluate emission reduction strategies and technology options in order to make the best decisions.

3) Be sensitive to the compliance costs – especially as they impact small businesses.

4) Balance the solutions between stationary and mobile sources – proportionate to the sources of the pollution.

5) Place emphasis where it belongs – on results, NOT process.

6) Remember that businesses respond to incentives – consider providing more incentives to encourage compliance, rather than emphasizing enforcement measures.

In closing, thank you for championing cleaner air, even as we all work hard together to build healthy communities and strong economies for the long-term.

Chairman Voinovich, again, thank you for the opportunity to visit with you. Members of the Subcommittee, I appreciate your attention and will answer any questions you may have about my testimony.