Audit HI-5 program before raising fee

Too many questions are still outstanding on the management of the state’s HI-5 deposit redemption program to justify boosting the handling fee, passed along to consumers, that helps pay the costs of running the recycling scheme.

At issue is whether the state health director will decide to increase the per-container charge by a half-cent to 6 1⁄2 cents. Of that amount, 1 1⁄2 cents are for the administration of the program, including the contract payments to recyclers to handle the redemption work. But it’s anything but clear that the state has made the case to increase the costs of beverages for consumers, which in the end is what will happen.

At the very least, the state has not yet demonstrated that some of the accounting problems identified early on in the program have been corrected. In particular, the state needs a better means of rechecking that the amount of materials that are shipped out equals claims by recycling firms.

On the whole, HI-5 is a popular program with participants, who diligently sort beverage containers to recover a nickel deposit on each bottle and can they redeem. Arguably it’s what helps to encourage a recycling ethic among people statewide; on the neighbor islands especially, it’s the principal consumer incentive for keeping materials that have a market value out of the waste stream.

Even on Oahu, where most single-family homes have curbside pickup of recyclables available, many people decide to turn in their containers to one of the recycling centers available.

This, apparently, causes a problem for the sustainability of the program. Officials of the state Department of Health, which runs HI-5, have maintained that if 70 percent or more of the containers are redeemed, funding becomes tight.

Of course, one of the operational problems is that the program’s special fund has been raided twice to help the state balance its budget, and its interest revenues have been diverted to the general fund. The unintended consequences of such siphoning can be seen here.

And if the goal of HI-5 is to incentivize recycling, the business model for the program ultimately needs to be fixed so that the state can accommodate a high recycling rate.

But for the short term, the problem is one of oversight. Since 2005, that element has been missing.

That year was when state Auditor Marion Higa issued her most recent audit of the program, even though the so-called "bottle bill" statute requires such reviews for every even-numbered fiscal year. It’s unacceptable that Higa’s office should be this late with the 2008 and even the 2010 biennial reports and should be forthcoming with an explanation to the Legislature, and to taxpayers generally.

Within the local beverage bottling and retail industries, there is concern about the upheaval the proposed change would create in the program, particularly given the short notice, and on the added burden on consumer’s pocketbooks. According to the Retail Merchants of Hawaii, the program collects $50 million annually from consumers.

Lawmakers seem equally concerned. Last session, House Resolution 156 passed, pointing out that an increase in fee would add at least $5 million to beverage costs in Hawaii. In the measure, state representatives urged the auditor to complete the management and financial report on the program before any change in the fee is merited.

It’s hard to argue with that. Passing on costs to consumers, absent critical facts, is not sound government practice, and some of the facts in this case have been absent for years.