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Recycling subsidy in danger

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The City Council is poised to eliminate a decades-old subsidy that supports recycling by private companies and nonprofits at a cost of about $2 million a year.

While lawmakers have said they want to do away with the subsidy in the interest of fairness — the bulk of the money goes to a single company — they also have said they want to continue to encourage recycling and have introduced other proposals that would restore the subsidy at a lower rate and cap the amount that a single company could claim.

All of the bills are scheduled to go before the Council at its regular monthly meeting tomorrow.

Only the proposal to end the 80 percent discount on “tipping fees” charged by the city when companies deliver recycling residue to the Waimanalo Gulch landfill is up for third and final reading, and is likely to pass based on the unanimous committee votes in support.

The subsidy, and all cost-related items, have come under intense scrutiny as lawmakers and the city administration look for ways to raise revenues because of tight budgets in the coming fiscal year. The budget gap got slightly larger last week after the state passed a bill to cap the amount of hotel-room tax going to counties at $95 million. Council Chairman Nestor Garcia estimated the loss to the city to be as much as $7 million.

The city says the tipping fee discount has cost more than $26 million since 1998, including $2.3 million last year. Environmental Services Director Tim Steinberger asked for the bill last year as his department was examining boosting revenues.

The tipping fee discount was first enacted in 1991 and revised in 2001 to encourage recycling in the private sector.

It has been criticized by some as too generous to a single company: Schnitzer Steel Hawaii, which does the most recycling in Honolulu with more than 100,000 tons of metal a year from automobiles, appliances and other bulky metal items. Since 1998 Schnitzer has received about $19 million in discounts, including $1.9 million last year.

Schnitzer has said that the discount is applied equally to all parties and that its reimbursement is commensurate with the tonnage it recycles each year. If the discount is to be eliminated, Schnitzer has asked that it be phased out over several years, to allow the company to make incremental adjustments to the amount of materials it processes.

“One thing is certain: We will have to take steps to decrease the amount of nonrecyclable materials passing through our yard,” Jennifer Hudson, public affairs manager for the company’s metal recycling business, said in testimony to the Council last week.

Opponents of eliminating the discount say it could lead to the recurrence of abandoned vehicles and bulky metal appliances being dumped on roadsides. Supporters say the recycling business in Hawaii and around the world is healthy, and the elimination of the discount could boost businesses such as auto strippers that remove rubber and upholstery from cars.

Critics and competitors of Schnitzer have described the subsidy as “corporate welfare,” arguing that Schnitzer should be compelled to open its books and demonstrate a need to continue receiving the subsidy. Schnitzer has refused, saying it would put the publicly traded company at a competitive disadvantage globally.

Meanwhile, the Council also plans to take up bills to restore the subsidy at a lower level to continue supporting recycling efforts by private companies and nonprofit groups. Bill 36-11 would provide a 40 percent tip fee discount, while Bill 37-11 would provide a 60 percent discount and cap the amount that companies could claim at $500,000 in the next fiscal year and $100,000 for every year thereafter.

Other proposals scheduled for discussion include a bond authorization for the city’s rail transit project and a proposal to amend the city’s ban on fireworks to allow for storage in Honolulu of consumer fireworks that may legally be sold on neighbor islands.

All of those bills, if advanced, would go back to committee for further vetting.

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