BILL ANALYSIS Ó
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Wieckowski, Chair
2015 - 2016 Regular
Bill No: AB 1108
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|Author: |Low |
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|Version: |5/5/2015 |Hearing | 6/8/2016 |
| | |Date: | |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Rebecca Newhouse |
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SUBJECT: Beverage containers: recycling.
ANALYSIS:
Existing law, under the California Beverage Container Recycling and
Litter Reduction Act (Bottle Bill):
1) Requires beverage containers, as defined, sold in-state to have
a California redemption value (CRV) of 5 cents for containers
that hold fewer than 24 ounces and 10 cents for containers that
hold 24 ounces or more, and requires distributors to pay a
redemption payment to the Department of Resources Recycling and
Recovery (CalRecycle) for every beverage container sold in the
state. These funds are continuously appropriated to CalRecycle
for the payment of refund values and processing fees. The Act
also:
2) Requires CalRecycle to certify recycling centers and promulgate
regulations establishing a procedure for certification of
recycling centers.
3) Prohibits a certified recycling center or processor from paying
or claiming any refund value, processing payment, or
administrative fee on beverage containers if the center or
processor knew, or should have known, that the containers were
from out of state.
This bill prohibits certified recycling centers from paying the CRV
to a consumer for more than 50 pounds of aluminum beverage
containers or plastic beverage containers, or any combination
AB 1108 (Low) Page 2 of ?
thereof, or 500 pounds of glass beverage containers, during a
24-hour period.
Background
1) Background on the Act. 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
California Redemption Value (CRV). Consumers pay a deposit, the
CRV, on each beverage container they purchase. Retailers collect
the CRV from consumers when they buy beverages. The dealer
retains a small percentage of the deposit for administration and
remits the remainder to the distributor, who also retains a
small portion for administration before remitting the balance 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.
2) Structural deficit. 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 recycler and 2)
program expenses, including administration, grant programs,
education and outreach that are funded by unredeemed CRV. Higher
recycling rates reduce the amount of unredeemed CRV to fund
program expenses. The "breakeven" recycling rate where
expenditures equal revenues is about 75%.
CalRecycle's most recent quarterly report projects an average
structural deficit of $75 million from 2015-16 to 2017-18. This
revenue-expenditure imbalance is primarily due to historically
high recycling rates, and supplemental program costs including
statutorily mandated program payments. Illegal redemption of
beverage containers also contributes to the structural deficit.
When the Act 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.
3) Fraud. The BCRF is currently operating at a recycling rate of
greater than 80%, but it is known that there is some level of
fraud within the program that artificially elevates the
recycling rate and, as noted earlier, contributes to the
structural deficit. A significant type of fraud is the
AB 1108 (Low) Page 3 of ?
importation of out-of-state beverages.
Pursuant to AB 1933 (Gordon, Chapter 540, Statutes of 2012),
CalRecycle adopted regulations in 2013 to require anyone
transporting into California a load of empty plastic or aluminum
beverage containers weighing 25 pounds or more, or 250 pounds or
more of glass, to pass through a California Department of Food
and Agriculture (CDFA) quarantine inspection station and obtain
and carry proof of inspection. A form documenting the source
and destination of the material must also be completed.
Other recent changes CalRecycle has undertaken to prevent fraud
include training requirements for operators of recycling centers
and processing facilities, and revised regulations that reduce
the number of containers individuals can redeem in a single day
from 500 pounds of aluminum or plastic to 100 pounds, and from
2,500 pounds to 1,000 pounds of glass.
AB 1108 aims to expand on CalRecycle's ongoing efforts to
eliminate fraud in the program by making it more difficult for
individuals to fraudulently redeem large quantities of
out-of-state beverage containers. Specifically, AB 1108 would
cut current redemption weight limits to 50 pounds for plastic
and aluminum beverage containers, and to 500 pounds for glass
beverage containers. AB 1108 also specifies that a recycling
center is prohibited from paying CRV refunds on "any
combination" of plastic or aluminum beverage containers over 50
pounds. For glass, 500 pounds comes out to roughly 940
containers. Fifty pounds of aluminum and polyethylene
terephthalate (PET) plastic beverage containers equates to about
1,450 aluminum containers, and about 1,000 PET containers.
Fraud enforcement. In recent years, CalRecycle and the
Department of Justice (DOJ) have increased Bottle Bill fraud
enforcement efforts, which have resulted in numerous arrests and
several high profile prosecutions. In February 2015, a Los
Angeles-area recycling business agreed to pay $1.8 million in
restitution to the state's Bottle Bill Program as part of a
settlement agreement resulting from illegal claims for refunds
on out-of-state bottles and cans. In November of 2014, five
people were arrested in the Turlock area on charges of
conspiracy, grand theft, and recycling fraud after investigators
found 250,000 pounds of beverage containers (22 truckloads)
unauthorized beverage containers and $125,000 cash. Also, in
May of 2015, CalRecycle announced indictments of five
AB 1108 (Low) Page 4 of ?
Californians on grand theft and recycling fraud charges in Kern
County. CalRecycle and DOJ conducted an investigation spanning
nearly two years that revealed a complex scheme involving
out-of-state used beverage containers, 24 Southern California
recycling centers, and $14 million worth of fraudulent
California Redemption Value claims.
Comments
1) Purpose of Bill. According to the author, "The Bottle Bill
Program is a victim of its own success. While the intention of
the beverage program was to be self-sustainable, in recent years
the beverage program has not regenerated enough revenue to cover
expenditures. One of the contributing factors of the deficit
has been the importation of out-of-state beverage containers.
According to CalRecycle, lowering the limits is a significant
way to reduce fraud in the program. AB 1108 helps address the
fraud in this well intentioned program by limiting how much a
certified recycling center can accept from one consumer in a 24
hour period."
The author also notes that "According to CalRecycle, lowering
the limits is a significant way to reduce fraud in the program.
As a result, importers of out-of-state containers, which are not
eligible for CRV refunds, and scavenger fleets illegally
removing the contents of residential curbside recycling bins
will find it considerably time-consuming and risky to reap any
fraudulent gains."
Related/Prior Legislation
AB 1846 (Gordon, Chapter 596, Statutes of 2014), authorizes
CalRecycle to suspend or revoke the handling fees from a recycling
center or centers if these are found to be committing fraud or
deceit.
AB 1933 (Gordon, Chapter 540, Statutes of 2012), reduces the
amounts of beverage container material that can be imported into
the state without notice to CalRecycle and requires specified
documentation for loads exceeding those limits.
SOURCE: Author
SUPPORT:
AB 1108 (Low) Page 5 of ?
None received
OPPOSITION:
Association of California Recycling Industries
Camarillo Recycling, Inc.
2 Individuals
ARGUMENTS IN SUPPORT: None received.
ARGUMENTS IN OPPOSITION: The Association of California Recycling
Industries states that AB 1108 would force consumers to make
numerous trips in order to collect their pre-paid deposits, and
that AB 1108 will benefit illegal operators by establishing a
revolving door of illegal transactions. They also argue that
CalRecycle's reduced load limits for recyclable materials should
first be evaluated before additional steps are taken. They further
note that AB 1108 treats all recyclable materials the same, and
specifies "any combination thereof" when relating to different
types of recyclable materials, which are currently prohibited from
being co-mingled. Camarillo Recycling states that there are many
legitimate types of consumers that collect larger quantities of
beverage containers, and reducing the redemption limits will hamper
their ability to redeem their containers.
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