Original Notice.

     Preproposal statement of inquiry was filed as WSR 11-10-045.

     Title of Rule and Other Identifying Information: WAC 16-560-06001 Assessment rates.

     Hearing Location(s): W. L. Hansen Building, 105 South 18th Street, Yakima, WA, on Wednesday, July 27, at 1:00 p.m.; and at the Washington Apple Commission, 2900 Euclid Avenue, Wenatchee, WA, on Thursday, July 28, at 6:00 p.m.

     Date of Intended Adoption: October 7, 2011.

     Submit Written Comments to: Kathleen Schmidt, 1719 Springwater Avenue, Wenatchee, WA 98801, e-mail Kathy@treefruitresearch.com, fax (509) 665-8271, by August 4, 2011.

     Assistance for Persons with Disabilities: Contact receptionist by July 21, 2011, TTY 1-800-833-6388 or (360) 902-1976.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: Establishment of an additional assessment for special projects on all commercial tree fruit produced in this state, pursuant to RCW 15.26.150. Establishment of the assessment requires approval by a majority of the tree fruit producers voting and will be conducted by the Washington state department of agriculture (WSDA). The assessment will terminate after a total of $32 million is collected, or eight crop years, whichever occurs first.

     Reasons Supporting Proposal: The assessment for special projects would provide funding for the establishment of contractual endowments with Washington State University to permanently expand and enhance the institution's capability to conduct research of specific interest to tree fruit producers in Washington state.

     Statutory Authority for Adoption: Chapters 15.26, 34.05 RCW.

     Statute Being Implemented: RCW 15.26.150.

     Rule is not necessitated by federal law, federal or state court decision.

     Name of Proponent: Washington tree fruit research commission (WTFRC), governmental.

     Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: James McFerson, 1719 Springwater Avenue, Wenatchee, WA 98801, (509) 665-8271.

     A small business economic impact statement has been prepared under chapter 19.85 RCW.

     The proposed rule change will impose an assessment of $4 per ton on cherries and $1 per ton on all other tree fruit. Revenues from this assessment will be expended on a specific crop in proportion to the assessment collected for that specific crop. The assessment will affect four groups of tree fruit producers: Apple, cherry, pear, and soft fruit.

     SMALL BUSINESS ECONOMIC IMPACT STATEMENT: Chapter 19.85 RCW, the Regulatory Fairness Act, requires an analysis of the economic impact proposed rules will have on regulated small businesses. Preparation of a small business economic impact statement is required when proposed rules will impose more than minor costs for compliance or have the potential of placing an economic impact on small businesses that is disproportionate to the impact on large businesses. "Minor cost" means a cost that is less than three-tenths of one percent of annual revenue or income, or one hundred dollars, whichever is greater, or one percent of annual payroll. "Small business" means any business entity that is owned and operated independently from all other businesses and has fifty or fewer employees.

     INDUSTRY ANALYSIS:

     The WTFRC is empowered to:

•	Promote and carry on research and administer specific industry service programs which will or may benefit the planting, production, harvesting, handling, processing or shipment of tree fruit of this state.
•	Collect assessments on tree fruit in this state.
•	Coordinate its research efforts with those of other state, federal, or private agencies doing similar research.

     The WTFRC assesses approximately three thousand one hundred existing small businesses that fall under Sector 1113 (Agriculture, Forestry, Fishing and Hunting: Fruit and Tree Nut Farming) of the North American Industry Classification System. The WSDA has analyzed the proposed rule amendments and has determined that some costs are considered more than minor and will have an economic impact on regulated small businesses.

     INVOLVEMENT OF SMALL BUSINESSES: The WTFRC has solicited input from small businesses over a six-month period to develop the proposed rule. This was accomplished via presentations and discussions with leadership of the two relevant Washington state commissions: The Washington apple commission (WAC) and the Washington state fruit commission (WSFC). We also engaged four dues-paying member organizations representing tree fruit growers and shippers (Grower's Clearinghouse, Washington State Horticultural Association, Wenatchee Valley Traffic Association, Yakima Valley Growers & Shippers Association). Approximately two hundred fifty visits have been conducted since January 2011, with individual business owners and industry organization leadership throughout the commercial production areas of the state. A work group of ten affected business owners representing both small and large businesses and different production regions provided specific guidance on the proposed rule as well as direction on the subsequent use of the additional assessment funds. Feedback obtained through this effort indicated nearly unanimous agreement that the proposed rule change was a fair and transparent approach and would not have a significant disproportionate impact on small businesses.

     In order to provide a more quantitative assessment, the WTFRC developed and utilized a cover letter and survey instrument (see Appendices 1 and 2) to solicit further input and examine the impact of the proposed rule on small businesses. Four separate surveys were conducted for each of the four affected tree fruit producers: Apple, cherry, pear, soft fruit.

     The survey was mailed to a random sample of affected producers, including five hundred apple producers, and a combined total of one thousand five hundred pear, cherry, and soft fruit producers. The sample was taken from assessment records provided by the WAC and the WSFC. A mail-in survey with prestamped return envelopes was conducted from April 1, 2011, to May 7, 2011. A complementary on-line survey was conducted on the WTFRC web site (www.treefruitresearch.com) during the same time period as above, and a survey was e-mailed to those on the WHICH commission committee lists. A total of one hundred sixty-one surveys were returned for a response rate of 8.4 percent. We also received seven responses on-line or via e-mail. The total number of responses by group was: Apple (74); cherry (59); pear (29); soft fruit (5).

     Results from the survey were similar to those obtained through direct interaction with business owners in the rule development process. We therefore conclude the proposed rule will not cause a significantly disproportionate impact on small businesses. More detailed analysis is provided in subsequent sections.

     COST OF COMPLIANCE: The rule change will not require any additional costs for equipment, supplies, labor, professional services, and administration for either a small or large business. Assessments are currently being collected through the WAC and WSFC and the additional assessments will be remitted as part of an existing process. No new requirements or professional services relative to recordkeeping or filing will be incurred by a small or large business to comply with the proposed rule.

     Analysis of Cost of Compliance: The surveys specifically requested feedback on potential loss of sales, loss of revenue, and additional costs. Across the four groups of affected business owners, results indicate most respondents do not feel the proposed rule will result in a significant loss of sales, loss of revenue, or additional costs per employee. The responses were similar for both large and small business (see Appendix 3). The cost per $100 sales for the proposed rule is the same whether a business is large or small and since the rule will require no additional administrative, reporting, or record-keeping tasks, the cost of compliance will be identical for both large and small business. It should be noted that a sunset clause is built into the proposed rule change. The additional assessment will no longer be collected when the total assessment goal of $32 million is met, or eight crop years have passed, whichever occurs first.

     Analysis of Disproportionate Economic Impact: While costs associated with proposed rules are more than minor as defined by the WSDA, there is no indication costs to small businesses are any different than those to ten percent of the largest businesses in the regulated industry. Thus, there is no action suggested to mitigate disproportionate cost to address such issues as substantive regulatory requirements, excessive record-keeping or reporting, frequency of inspection, compliance timetables, or fines.

     Mitigating Disproportionate Costs (include this section only if costs are disproportionate): None suggested.

     JOBS CREATED OR LOST: We conclude the rule will have no impact on jobs created or lost.

     CONCLUSION: To comply with chapter 19.85 RCW, the Regulatory Fairness Act, the WTFRC has analyzed the economic impact of the proposed rules on small businesses and has concluded there is no disproportionate impact. Thus, there is no need to mitigate costs of compliance with the proposed rule.

     Please contact James R. McFerson if you have any questions at (509) 665-8271 x1 or mcferson@treefruitresearch.com.

You have received this one-page survey as part of a request by the Washington Tree Fruit Research Commission (WTFRC) to conduct a referendum for a special project assessment. If you are NOT a Washington tree fruit producer, please ignore this survey.

The WTFRC is requesting a special project assessment pursuant to RCW 15.26.150 at the rate of $4 per ton on cherries and $1 per ton on all other tree fruit. This special project assessment will be expended on a specific crop in proportion to the assessment collected for that crop. That is, apple revenues will go to apple projects, and similarly for pear, cherry and soft fruit.

The assessment will begin in the 2011 crop year and be in effect until the total collection for all crops reaches $32,000,000, but in no case will it be in effect for more than eight crop years. If $32,000,000 is collected in less than eight crop years, this special project assessment will expire at the end of that crop year and no special project assessment will be collected subsequently.

This special project assessment would be collected in the same way as the current regular WTFRC assessment, at the point of first handling by the warehouse or processor. The current assessment is $4 per ton on cherries and $1 per ton on all other tree fruit, which is approximately equivalent to 6 cents/30 lb lug for cherry or 2 cents/40 lb box for apple, pear, and soft fruit.

All revenue generated in this assessment will be invested in endowments supporting tree fruit research as part of the Washington State University Tree Fruit Capital Campaign and be closely monitored by the WTFRC.

We are required by the state of Washington to conduct this survey to help determine how the special project assessment would have an economic impact on small businesses (defined by the state as less than 50 employees). Your responses are anonymous and confidential and will not be used for any purpose other than complying with this state requirement. Completing this survey does not indicate your support nor opposition to the upcoming referendum.

You may return the survey by surface mail in the enclosed envelope, or complete it online. Go to our home page at www.treefruitresearch.com and follow the instructions. Please complete the survey only once per crop, even if you receive multiple notifications, and return it by 30 April 2011.

Thank you for taking the time to help us conduct this survey. It is the shortest one you will ever get! If you have any questions or concerns, please contact me.

Jim McFerson, Manager

WTFRC

1719 Springwater St

Wenatchee, WA 98801

Ph: 509-662-7510

Mob: 509-669-3900

mcferson@treefruitresearch.com

o     0 - 50

o     More than 50

2. Please check the selection that best describes the total acres of tree fruit production (owned and leased) in your operation.

o     1 - 49 A

o     50 - 199 A

o     200 - 499 A

o     More than 500 A

3. Over the past three years, what do you consider your average annual yield for apples: _____ bins/A

4. If the special project assessment described above were implemented, what do you think would be the impact on your per acre cost of production?

     Examples:

     Apple @50 bin (900 lb bin)/A = 45,000lbs = 22.5T = $22.50/A assessment

o     Negligible

o     Increase by less than .5 percent

o     Increase by 1 - 2 percent

o     Increase by more than 2 percent

o     Decrease

5. If the assessment described above were implemented, what do you think would be the impact on your net farm income (gross revenues - total costs)?

o     Negligible

o     Decrease by less than .5 percent

o     Decrease by 1 - 2 percent

o     Decrease by more than 2 percent

o     Increase

6. If the special project assessment described above were implemented, estimate the additional annual cost incurred by your business: $________ /employee

Appendix 3: Summary of Survey Responses

Fig 1. Relative number of respondents classified as a small (0-50 acres) or large (>50 acres) business.

Fig 2. Number of respondents by size of operation across crops.

Fig 3. Number of small business respondents by average annual yield for apple and pear.

Fig 4. Number of small business respondents by average annual yield soft fruit and cherry.

Fig 5. Percentage of small business respondents indicating the effect of the proposed assessment on per acre cost of production across crops.

Fig 6. Percentage of small business respondents indicating the effect of the proposed assessment on net farm income across crops.

Fig 7. Percentage of small business respondents indicating the effect of the proposed assessment on additional annual cost ($/employee) across crops.

Fig 8. Number of large business respondents by average annual yield for apple and pear.

Fig 9. Number of large business respondents by average annual yield soft fruit and cherry.

Fig 10. Percentage of large business respondents indicating the effect of the proposed assessment on per acre cost of production across crops.

Fig 11. Percentage of large business respondents indicating the effect of the proposed assessment on net farm income across crops.

Fig 12. Percentage of large business respondents indicating the effect of the proposed assessment on additional annual cost ($/employee) across crops.

     A copy of the statement may be obtained by contacting Kathy Schmidt, 1719 Springwater Avenue, Wenatchee, WA 98801, phone (509) 665-8271, fax (509) 663-5827, e-mail kathy@treefruitresearch.com.

     A cost-benefit analysis is not required under RCW 34.05.328. WSDA and the WTFRC are not named agencies in RCW 34.05.328 (5)(a)(i).

June 21, 2011

James R. McFerson

Manager

OTS-3885.2

AMENDATORY SECTION(Amending WSR 96-07-054, filed 3/19/96, effective 4/19/96)

WAC 16-560-06001   Assessment rates.   (1) There is hereby levied on all commercial tree fruit produced in this state or held out as being produced in this state for fresh or processing use, an assessment of one dollar per ton on all such tree fruit: Provided, That such assessment for cherries shall be four dollars per ton((: Provided, That such assessment for apples for fresh shipment shall be at the rate of two and one-half cents per hundred pounds gross billing weight for the 1992 crop year, three and three-quarters cents per hundred pounds gross billing weight for the 1993 crop year, and five cents per hundred pounds gross billing weight for the 1994 crop year and each year thereafter: Provided Further, That such assessment for processed apples shall be at the rate of fifty cents per ton for the 1992 crop year, seventy-five cents per ton for the 1993 crop year, and one dollar per ton for the 1994 crop year, and each year thereafter)).

     (2) There is hereby established pursuant to RCW 15.26.155 an additional assessment for an industry services fund for programs related to sanitation, planting, production, harvesting, handling, processing and shipping. The assessment shall be set annually by the commission, upon approval of two-thirds of the voting members of the commission, to create and maintain this fund at or near one hundred thousand dollars. If this fund should inadvertently exceed one hundred thousand dollars due to larger crops than estimated or the addition of interest earned, the excess shall be credited to the following year's fund.

     In consideration of maintaining this industry services fund, the commission shall annually consult with the affected industry and grower organizations.

     (3) There is hereby established on all commercial tree fruit produced in this state or held out as being produced in the state for fresh or processing use, an additional assessment pursuant to RCW 15.26.150 of four dollars per ton on cherries and one dollar per ton on all other such tree fruit as approved by referendum vote of affected producers, the results of which shall be retained on file in the board's administrative office. This additional assessment shall be expended on a specific crop in proportion to the assessment collected for the specific crop. The additional assessment shall be imposed beginning in the 2012 crop year and be in effect until the total collection for all crops reaches thirty-two million dollars but in no case will be in effect for more than eight crop years. If thirty-two million dollars in additional assessment is collected in less than eight crop years, this additional assessment will expire at the end of the crop year and no further additional assessment will be collected in the subsequent crop years.

[Statutory Authority: RCW 15.26.110(2). 96-07-054, § 16-560-06001, filed 3/19/96, effective 4/19/96. Statutory Authority: RCW 15.26.140 and 15.26.150. 92-01-009, § 16-560-06001, filed 12/5/91, effective 1/5/92. Statutory Authority: RCW 15.26.155. 86-14-066 (Order 8, Resolution No. 8), § 16-560-06001, filed 6/30/86, effective 8/1/86; 85-10-005 (Order 7, Resolution No. 7), § 16-560-06001, filed 4/19/85. Statutory Authority: RCW 15.26.140. 80-05-091 (Order 6, Resolution No. 6), § 16-560-06001, filed 5/1/80; Order 5, § 16-560-060 (codified as WAC 16-560-06001), filed 3/8/74.]

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