Hawaii’s recycling incentive program that pays consumers a nickel for each drink container redeemed has begun losing millions of dollars every year, likely leading to an increase in government-imposed costs of every can, plastic drink container and beer bottle sold in the state, The Associated Press has learned.
The program’s expenses surpassed its revenues in both the 2009 and 2010 fiscal years, according to government documents obtained by AP through an open records request.
As a result, the state may raise the fee it charges to run the program from 1 cent to 1.5 cents for each of the 900 million recyclable drink containers sold each year. That means every can or bottle of beer, cola, juice or water would carry a 6.5 cent total fee, which includes the 5 cents that can be refunded for recycled containers.
So recycling fees on a 24-can case of Pepsi or Coke, for example, would add up to $1.56 instead of the $1.44 currently charged. The few extra cents would result in millions for the state.
A decision on increasing the fee could come as soon as next month.
"The penny and a half is likely, if not this year, then next year," said Gary Gill, deputy director for environmental health in the Hawaii Department of Health, which operates the recycling program. "We’re going to try to avoid it."
Program costs jumped because redemption rates rose, processing and shipping payouts to recycling centers were increased, lawmakers raided savings accounts, and exemptions from paying state accounting fees expired.
Combined, these expenses caused the program to go into the red for the first time in each of the last two fiscal years.
Expenses outpaced revenues by more than $3 million in the 2010 fiscal year, and by $6 million in the previous year, Department of Health documents show.
"We will be continuing on this trend of our expenses exceeding our revenues," said Jennifer Tosaki, the department’s recycling coordinator. "We’re still trying to figure out how these raids and adjustments will impact us."
The 2002 law creating the recycling program allowed the Department of Health to raise its per-drink fee when redemption rates exceeded 70 percent, which first happened in 2008. Redemption rates rose to 79 percent in 2009 and dipped to 76 percent in 2010.
But health officials decided not to hike the fee during those years because the program’s savings could sustain it while they remained at high levels, which are now rapidly shrinking. The deposit beverage container special fund had $21.5 million saved as of June 30, 2009, and savings shrunk to about $14 million by June 30, 2010, according to the department’s annual reports.
Business owners said they would feel the pinch if the state charges them another half-cent per bottle.
"It’s nothing more than a tax in disguise because we were recycling before they even put that bill into law," said Fred Remmington, president for the Hawaii Bar Owners Association who operates four bars in Honolulu. "People will say, ‘You know what, I’ll buy a six pack and drink at home rather than go to a bar.’"
Hawaii is one of 11 states that collects a charge from customers when they buy aluminum, plastic or glass containers at stores. The up-front cost is reimbursed to the consumer at redemption centers.
Opponents of these laws say they’re expensive and complicated, with little real impact on the environment because bottles make up a small part of total waste.
"These bottle bills are an inefficient and ineffective way to approach comprehensive recycling," said Christopher Gindlesperger, spokesman for the Washington-based American Beverage Association, which represents bottlers and distributors nationwide.
Hawaii’s largest new recycling expense started in July 2009, when legislators ended exemptions from the program having to pay fees to the state’s Department of Accounting and General Services and the Health Department’s Administrative Services Office, respectively worth $4.5 million and up to $2 million a year.
Lawmakers also took another $1.3 million from the program’s reserve fund to help balance the state budget.
Lastly, the Health Department in 2008 increased its payments to recycling companies for glass containers, causing those costs to increase about $2 million in each of the following two years.
The payment rose to offset recycling companies’ costs of shipping glass to buyers in California instead of allowing bottles to pile up in Hawaii, where there’s little demand for used glass, Tosaki said.
One option under consideration that could help hold down the container fee would be to reduce payments to recycling companies for aluminum cans, which would generate savings of about $4.5 million a year, she said.
Department officials plan to evaluate whether to raise the fee in August, after it adds up the previous fiscal year’s redemption rates.
If approved, a higher container fee would take effect Sept. 1.
Hawaii Beverage Container Deposit Program: http://hawaii.gov/health/environmental/waste/sw/hi5/