BILL ANALYSIS                                                                                                                                                                                                    Ó




           ----------------------------------------------------------------- 
          |SENATE RULES COMMITTEE            |                       AB 1005|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
           ----------------------------------------------------------------- 


                                   THIRD READING 


          Bill No:  AB 1005
          Author:   Gordon (D) and Levine (D), et al.
          Amended:  8/15/16 in Senate
          Vote:     27 

           SENATE ENVIRONMENTAL QUALITY COMMITTEE:  6-0, 6/8/16
           AYES:  Wieckowski, Gaines, Bates, Hill, Leno, Pavley
           NO VOTE RECORDED:  Jackson

           SENATE APPROPRIATIONS COMMITTEE:  5-0, 8/11/16
           AYES:  Lara, Beall, Hill, McGuire, Mendoza
           NO VOTE RECORDED:  Bates, Nielsen

           ASSEMBLY FLOOR:  75-1, 1/25/16 - See last page for vote

           SUBJECT:   California Beverage Container Recycling and Litter  
                     Reduction Act:  market development payments


          SOURCE:    Californians Against Waste

          DIGEST:   This bill extends the sunset for plastic market  
          development payments from 2017 to 2018.
          
          ANALYSIS:   Existing law, under the California Beverage  
          Container Recycling and Litter Reduction Act (Act):
          
          1)Requires beverage containers sold in this state to have a  
            California redemption value (CRV) of five cents for containers  
            that hold fewer than 24 ounces and 10 cents for containers  
            that hold 24 ounces or more and requires a distributor to pay  
            a redemption payment to the Department of Resources Recycling  
            and Recovery (CalRecycle).  These funds are continuously  
            appropriated to CalRecycle for the payment of refund values  
            and processing fees.  








                                                                    AB 1005  
                                                                     Page 2




          2)Requires CalRecycle to certify recycling centers and  
            processors that participate in the program. 

          3)Authorizes CalRecycle to award up to $10 million annually for  
            market development payments for empty plastic beverage  
            containers to certified entities and product manufacturers. 

          4)Defines "certified entity," for purposes of the plastic market  
            development payments, as a recycling center, processor, or  
            dropoff or collection program certified by the department, and  
            defines "product manufacturer" to mean a person who  
            manufactures a plastic product in the state.

          5)Authorizes CalRecycle to allocate an amount greater than $10  
            million after 2012, as prescribed. 

          6)Specifies that CalRecycle may set different payment amounts  
            for certified entities and product manufacturers, not to  
            exceed $150 per ton, according to the following  
            considerations: 

             a)   The minimum funding level needed to encourage in-state  
               washing and processing of empty plastic beverage containers  
               collected for recycling;

             b)   The minimum funding level needed to encourage in-state  
               manufacturing that uses empty plastic beverage containers  
               collected for recycling; and

             c)   The total amount of funds projected to be available for  
               plastic market development payments and the desire to  
               maintain the minimum funding level needed throughout the  
               year. 

          7)Sunsets the plastic market development payments on January 1,  
            2017. 

          This bill extends the sunset for plastic market development  
          payments from 2017 to 2018. 

          Background








                                                                    AB 1005  
                                                                     Page 3



          
          1) Bottle bill. The Act is designed to provide consumers with a  
             financial incentive for recycling and to make recycling  
             convenient to consumers.  The centerpiece of the Act is the  
             CRV.  Consumers pay a deposit, the CRV, on each beverage  
             container they purchase. Retailers collect the CRV from  
             consumers when they buy beverages and those CRV payments are  
             remitted to CalRecycle. When consumers return their empty  
             beverage containers to a recycler (or donate them to a  
             curbside or other program), the deposit is paid back as a  
             refund. 

             The Fund. Deposits on covered beverage containers are  
             remitted to CalRecycle and deposited into the Beverage  
             Container Recycling Fund (BCRF). The BCRF's expenditures fit  
             into two primary categories: 1) CRV reimbursements to  
             recyclers and 2) program expenses, including administration,  
             grants and incentive programs, and education and outreach  
             that are funded by unredeemed CRV. Higher recycling rates  
             reduce the amount of unredeemed CRV to fund program expenses.  


             Structural deficit. As noted in the background, higher  
             recycling rates reduce the amount of unredeemed CRV to fund  
             program expenses, such as the Plastic Market Development  
             Payments (PMDP). The "break-even" recycling rate where  
             expenditures equal revenues is about 72%. The current  
             recycling rate for the program is 82% exceeding the statutory  
             recycling goal of the program (80%).

             CalRecycle's most recent quarterly report projects the  
             structural deficit, over the course of 2016-17, at $54.2  
             million.  This revenue-expenditure imbalance is primarily due  
             to historically high recycling rates, and supplemental  
             program costs including statutorily mandated program  
             payments. 

             When the Bottle Bill does not have adequate funding,  
             CalRecycle is required to "proportionally reduce" many of the  
             program's expenditures evenly among program participants,  
             with the exception of CRV redemption for consumers. 









                                                                    AB 1005  
                                                                     Page 4



             According to the most recent Quarterly Report from CalRecycle  
             in July of this year, "[based] on this structural deficit,  
             and considering the current cash balance, the Department  
             estimates that in late Fiscal Year 2017-18, there will be  
             insufficient funds to fully support program payments and  
             maintain a minimal reserve for operations.  Should this  
             occur, the Department will be compelled to enter into  
             proportional reductions to best manage remaining financial  
             resources." 

          2) PMDP. PMDP were established by AB 3056 (Natural Resources  
             Committee, Chapter 907, Statutes of 2006) and are one of the  
             incentive programs paid for out of the BCRF from unredeemed  
             CRV.  The PMDP is designed to encourage in-state recycling of  
             plastic beverage containers to be used as feedstock for  
             manufacturing in California. 

             AB 1149 (Gordon, Chapter 486, Statutes of 2011) extended the  
             sunset of the PMDP program to 2017.

             Incentive payments through the PMDP are provided to certified  
             entities (recycling centers and processors that are certified  
             by CalRecycle) for the washing and production of plastic  
             feedstock, such as flake, pellet, or other forms of processed  
             plastics. 

             In order to receive payments under this program, the  
             processed plastic must be derived from redeemed empty plastic  
             beverage containers. 

             Product manufacturers are also eligible for these incentives  
             for the manufacture of plastic products in the state. 

             Existing law specifies that CalRecycle may expend up to $10  
             million annually for these payments, with the ability to  
             expend an amount greater than $10 million annually if  
             CalRecycle makes specified determinations.  Current law also  
             requires that payments under the program not exceed $150 per  
             ton, and specifies that CalRecycle must consider the amount  
             of funds projected to be available and "the desire to  
             maintain the minimum funding level throughout the year" for  
             the determination of incentive payment amount.








                                                                    AB 1005  
                                                                     Page 5




             Payments under the program were previously set at $150 per  
             ton until the annual expenditure cap for the program was  
             reached.  In 2014, CalRecycle capped the payments at $2.5  
             million per quarter, which averaged out to $47/ton payment.

             While the number of certified entities receiving payments has  
             remained fairly constant, the number of product manufacturers  
             has more than doubled since the beginning of the program.  In  
             2015, 10 certified entities and 33 manufacturers received the  
             PMDP.  

          Comments
          
          Purpose of Bill.  According to the author, "AB 1005 would extend  
          the sunset on California's successful plastic market development  
          program, which incentivizes reuse of California-generated  
          recycled beverage containers.  In my first year in the Assembly,  
          I authored the last measure on this program.  In years since,  
          there has been a significant increase in the in-state reuse of  
          California-generated material.  Reusing California-generated  
          material in California is not only environmentally beneficial;  
          it creates and maintains jobs in California.  The creation and  
          continuation of those green jobs can be traced back to our  
          support for policy such as the plastic market development  
          program."

          The author also states, "when the program was last reauthorized  
          and expanded, Californians collected more than 250,000 tons of  
          PET and HDPE plastic beverage containers for recycling, with all  
          but 25,000 tons exported overseas (primarily to China) for  
          processing and manufacturing.  The most recent figures show that  
          about half of the containers are now processed and  
          remanufactured in California." 

          Prior Legislation
          
          AB 1149 (Gordon, Chapter 486, Statutes of 2011) extended the  
          sunset of the PMDP program to 2017.

          AB 2467 (Nestande, 2014) would have authorized CalRecycle to pay  
          a market development payment to both certified entities and  








                                                                    AB 1005  
                                                                     Page 6



          product manufacturers for empty plastic beverage containers.  AB  
          2467 was vetoed. 


          FISCAL EFFECT:   Appropriation:    Yes         Fiscal  
          Com.:YesLocal:   No


          According to the Senate Appropriations Committee:




           $10 million annual appropriation (Beverage Container Recycling  
            Fund) to the PMDP.




           $173,000 per year (Beverage Container Recycling Fund) to  
            CalRecycle for program administration.




          SUPPORT:   (Verified8/11/16)


          Californians Against Waste (source)
          California Nevada Beverage Association
          California Resource Recovery Association
          CarbonLITE
          Central Contra Costa Solid Waste Authority
          Clean Water Action
          Ecopet Plastics, Inc.
          Epic Plastics
          Global Plastics
          Marin Sanitary Service
          National Association for PET Container Resources
          Northern California Recycling Association
          Peninsula Packaging Company  
           Peninsula Plastics Recycling, Inc.








                                                                    AB 1005  
                                                                     Page 7



          RePET Inc.
          rePlanet
          Repsco, Inc.
          Sonoma County Waste Management Agency 
          Talco Plastics, Inc.
          Tri-CED Community Recycling
          UPSTREAM
          Verdeco Recycling, Inc.
          Zanker Recycling


          OPPOSITION:   (Verified8/11/16)


          None received

          ASSEMBLY FLOOR:  75-1, 1/25/16
          AYES:  Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,  
            Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,  
            Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dahle, Daly, Dodd,  
            Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia,  
            Gatto, Gipson, Gomez, Gonzalez, Gordon, Hadley, Harper, Roger  
            Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey,  
            Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes,  
            McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte,  
            O'Donnell, Olsen, Patterson, Quirk, Rendon, Ridley-Thomas,  
            Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond,  
            Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins
          NOES:  Gray
          NO VOTE RECORDED:  Dababneh, Eduardo Garcia, Grove

          Prepared by:Rebecca Newhouse / E.Q. / (916) 651-4108
          8/15/16 20:10:02


                                   ****  END  ****


          











                                                                    AB 1005 
                                                                     Page 8