California Recycling Program is on The Rocks – WIH Resource Group

For years California has courted a reputation as an eco-friendly, green-minded leader, but the state now finds its most basic program of recycling beverage bottles and cans mired in debt and litigation.

Dozens of supermarket recycling sites have shut down recently as Gov. Arnold Schwarzenegger and state legislators spar over how to close a massive gap in the program’s budget.   California’s 23-year-old recycling program, managed by the Department of Conservation through fees charged to beverage buyers, has been hurt this year by recession, rising redemption rates and raids of its coffers to help ease the state’s budget woes.

Schwarzenegger and the Democratic-controlled Legislature concede that the program, which collected more than 16 billion beverage containers last year, is in fiscal distress – but each has rejected the other’s solution.  “This is an important program for California and we are currently looking at ways to improve funding in this down economy,” said Schwarzenegger spokeswoman Rachel Arrezola.

Mark Murray of Californians Against Waste, a nonprofit advocacy group, said consumers are going to find it increasingly difficult to recycle their beverage containers.  “The net result is likely to be a drop in the recycling rate,” he said.  Shoppers remain entitled to their nickel or dime deposits for returning glass, plastic or aluminum beverage containers, but many consumers could be forced to drive farther, wait longer or comply with shorter center operating hours.

The number of supermarket parking-lot recyclers has grown gradually in recent years to about 2,100. But two of the largest operators, Tomra Pacific and NexCycle, announced the shutdown of about 90 centers recently, laying off more than 100 workers.  Tomra, which projects losses of $9 million this year, has joined with two other firms to sue the state, seeking to “stop the dismantling” of the program. Exacerbating problems, the scrap value of aluminum cans has plummeted in the past year, and the market for other containers has struggled.

“If consumers can no longer find convenient outlets for recycling used bottles and cans, they are more likely to go back to their old ways of discarding them in landfills – or worse, on streets, beaches and other property,” the lawsuit said.  “This will essentially end the Recycling Program as we have known it,” the suit said.

By law, supermarkets not served by parking-lot recyclers are supposed to either pay the state $100 a day – only one store is doing so – or redeem the containers themselves, but many do not.  In a telephone check of 15 such supermarkets Friday, only six accept empty cans and bottles. 

Many supermarkets are not prepared to pick up the slack from closures of parking-lot recyclers because of the time it would take to count bags of containers and the health and safety implications of doing so where food is sold, said Dave Heylen of the California Grocers Association.

“It’s something that would be quite a hardship,” he said.

Department of Conservation officials declined to discuss Tomra’s lawsuit or allegations of harm. But state officials clearly are not trying to kill the program because both Schwarzenegger and the Democratic-controlled Legislature have tried to intervene, thus far unsuccessfully.

In May, state finance officials projected a $162 million deficit for the program by July 2010, which sparked across-the-board cuts that affected subsidies paid to collection centers but not to consumers who redeem beverages.

Schwarzenegger’s relief proposal focused on targeted cuts and on compressing subsidiary efforts, such as for public education and recycling incentives, into a new program of competitive grants.

The Legislature rejected Schwarzenegger’s plan during budget talks and crafted its own proposal, Senate Bill 402, which would have relied on expansion rather than contraction to bolster the program.

In vetoing SB 402, Schwarzenegger said that consumers would have been hurt by provisions to double the fee on 20-ounce sodas, from 5 to 10 cents, and to expand the kinds of beverages and types of containers accepted.

“I recognize that without this bill there is an immediate hardship,” his veto message said, but “the lasting effects of this bill are far worse.”

As a stopgap, Schwarzenegger said he would order emergency regulations to require beverage distributors to submit payments to the state every two months, not three, which is expected to generate a one-time infusion of about $100 million.

California’s recycling program partly has been a victim of its own success, because each redeemed container takes a nickel or dime from funds for subsidies, outreach or operational funds.

Redemption rates have risen from 67 percent in 2007 to 74 percent in 2008, and to 85 percent for the first six months of 2009.

Meanwhile, beverage sales from January to June were 325 million containers less – about 3 percent – than for the same time span in 2008.

Bottom line? Projected revenue has dropped by about $74 million the past year, from $1.15 billion to a projected $1.086 billion.

But Chuck Riegle of Tomra said the most painful blow was self-inflicted by the state: Politicians have raided recycling coffers, through loans, to help balance the state budget.

Tomra’s suit seeks to force repayment of about $415 million that otherwise would have been used for recycling.

Four times this decade, the state has borrowed beverage funds, most recently during the current fiscal year when more than $99 million was diverted to the state’s general fund.

The deadline for paying back $286 million borrowed in 2002 and 2003 initially was June 2009, but it was extended three years ago to 2013. Only $30 million has been repaid, records show.

In borrowing fee revenue, the state requires that no harm be done to the affected program, yet more than half of this year’s projected $162 million deficit consisted of the $99 million loan to bolster the state’s general fund.

Jon Coupal of the Howard Jarvis Taxpayers Association said the multiple raids on recycling funds, the lack of timely repayment and the harm caused to collection centers raise questions about whether fees were spent illegally.

“It changes what otherwise might be characterized as a legitimate fee into a tax of questionable legality,” Coupal said.

State finance spokesman H.D. Palmer disagreed, saying that the program was projected to have an $81 million balance when legislation was signed in February to borrow for the next fiscal year. Changing market conditions made the deficit evident months later, in a May budget revision, Palmer said.

“This is just one example of the dramatic fluctuations we’ve seen in the state’s fiscal picture as a result of the recession,” he said.

Schwarzenegger’s veto message for SB 402 said he supports repaying past loans and banning any future loans from recycling coffers to the state’s general fund.

Sources: Fresno Bee and WIH Resource Group

Should you have any questions about this news or general questions about our diversified services, please contact Bob Wallace, Principal & VP of Client Solutions at WIH Resource Group and Waste Savings, Inc. at admin@wihrg.com

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