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Bottle Bill: Innovative in Its Time but Outdated Today

 

In 1979, Iowa’s Container Redemption Law (a.k.a The Bottle Bill or Bottle and Can Tax) was an innovative and progressive way to reduce roadside litter.  Over the years, the other benefit of the bill was a robust recycling system for containers throughout the state of Iowa.  

Today though, that recycling system is breaking down and disappearing.  Redemption centers are closing rapidly, and more and more consumers are choosing to put their cans and bottles in curbside recycling or trash.  The 1970s economic model of the bottle bill is no longer sustainable.  

How Is the Bottle Bill Supposed to Work
Ideally, the bottle bill law was set up to operate on its own, starting with the beverage distributers and ending with the beverage distributers (Figure 1).  Other than the Iowa Department of Natural Resources’ approval and monitoring of redemption centers and opt outs by retailers, it is completely self-funded by the private sector.  This minor state oversight costs much less than roadside cleanup or the economic impact of a dirty state.

Here’s what was intended and what should happen under a perfect system:

Step 1:  The distributor delivers the redemption-eligible beverages to the retailer.  The retailer pays the distributor 5 cents for every container.  
Step 2:  The retailer sells the beverage to the consumer.  The consumer pays the retailer 5 cents, keeping the retailer whole.  
Step 3:  The consumer consumes the beverage and returns the empty container to the redemption center or the retailer.  The retailer and/or redemption center pays the consumer 5 cents, keeping the consumer whole.  
Step 4:  The beverage distributor collects their containers from the redemption center and/or retailer, and pays them 5 cents plus a 1 cent handling fee.  The 1 cent handling fee is intended to keep the retailer/redemption center whole.  
Step 5:  The beverage distributor sells the scrap plastic and aluminum to a recycler, making them whole for the 1 cent handling fee.  

How Does the Bottle Bill Actually Work
After nearly forty years in existence, the system is breaking down. First, consumers are unpredictable and are prone to finding the easiest and fastest way to accomplish something.  The nickel redemption was a way to incentivize them to stop throwing away their cans and bottles, particularly out the window of their vehicles, and instead return them for the money.  In the first 20 years of the bottle bill, that incentive was enough.  Plus, redemption centers were abundant and easy to use.  

Today, that picture is very different (Figure 2).  The value of a nickel in 1979 is now worth less than 2 cents.  Consumers are pressed for time, and do not find it worth their effort to stand in lines for self-serve redemption options or options where the number of containers you can redeem is limited.  It is much easier to throw the containers in the recycling bin, trash or litter so they can forego the 30-45 minute hassle it takes to get $6 back for their bag of containers. 

This fact is confirmed by data collected through waste audits.  Recovery rates for containers under the bottle deposit law have dropped from 86% in 2007 to 71% in 2018, according to a new Waste Characterization Study by the Iowa Department of Natural Resources.  These recovery rates are significantly down from the 93% rate in 2000.  This trend is consistent with recovery in other states that have a similar law. 

The second factor in this broken system, which is even more relevant to convenience stores, is the lack of redemption centers.  The 1 cent handling fee has not increased, while costs of labor and operations have increased significantly over the past four decades.  The original thought was that increased volumes of containers being redeemed would cover the increasing costs of operations.  While that held true in the early years, it is not holding true today. 

The most recent nail in the coffin for many redemptions centers was the Workforce Innovation and Opportunity Act passed in 2014 that went into effect in 2017. Redemption centers throughout the state were primary employers of the mentally challenged.  They provided a safe and consistent place of employment for individuals with disabilities.  In return for the employer’s extra time to manage these teams, the cost of labor was lower.  But the Federal government passed legislation that requires all employees to be paid the federal minimum wage.  Several redemption centers simply have been forced to close their doors. 

The lack of redemption centers has had a two-fold impact on convenience stores.  First, these centers were typically located in rural areas.  When they close, the next most convenient choice for consumers to redeem their containers becomes the local convenience store.  While convenience stores have space for a few redemption containers, they were never equipped to handle the volumes that are now being brought to their stores.  Furthermore, the same convenience store employee making pizza or coffee and handling money should not be handling and counting used beverage containers in the back storage room or shed.

The second impact to convenience stores is the lack of a nearby location for them to send their containers for redemption and recycling.  While the law never intended for retailers to have to pay for these containers to be recycled, mom and pop and small-chain convenience stores had been paying local redemption centers up to 3 cents per can to pick up and manage their redeemables.  With so many redemption centers closing, these small businesses now have no outlet for getting rid of the bottles and cans.  Retailers must accept the bottles and cans under the law, but they have no place to store them and no place within a reasonable distance to recycle them. Some have been forced to construct out buildings just to store the containers.  

What Changes are Considered?
Every year, an effort is made at the statehouse to update or replace the bottle bill.  But these efforts are always thwarted.  There is a great emotional tie to the bottle bill.  Bottles and cans have been used for fundraising for local charities.  If the bottle bill goes away, what will replace these fundraising efforts?  Farmers fear an increase in litter in ditches across Iowa; a problem they do not want to manage.  Environmentalists fear people will revert to throwing their containers in the garbage, filling up landfills more quickly across the state and losing the opportunity to recycle the material.

Expansion Options
There is also an economic impact with any change.  Let’s first discuss some of the expansion options for the bottle bill.  Expansion proposals are supported primarily by large-scale recycling businesses and environmental groups. If the handling fee is increased, beverage distributors will see a decrease in their profits.  If the redemption amount is increased from 5 cents to 10 cents, retailers on Iowa’s borders will lose sales as more people will cross the border to buy their beverages and/or they will inadvertently pay out redemptions on beverage containers from out of state. Beverage distributors fear an increase in redemption of cans bought outside the state that would have them paying out more than is put into the system.  If the bottle bill is expanded to include other bottles and cans (water, sports drinks, etc.), then residential recycling systems will lose revenue and the very few places to redeem cans and bottles will be overwhelmed and incur even more costs.

Recycling Options
The other option debated is replacing the bottle bill with curbside recycling.  This option is led primarily by the grocery industry.  In this case, the recyclers stand to lose.  Recycling centers that receive bottle bill containers can command premium prices for the scrap material.  If this material is put into recycling containers with other plastics and metals, the market value of the scrap goes down due to contamination and the cost to sort it goes up, leaving recyclers with a loss of revenue.  Cities and counties also bear a burden.  They now will have to set up more recycling options, whether that’s curbside or drop off.  Rural landfills with space constraints get nervous because they believe the cans and bottles will end up in the trash, filling up their landfill faster and causing them to have to raise rates to keep up.  While funding it proposed to offset these costs, this funding is not forever.

Who Wins from No Change
There is a winner in this breakdown.  That winner is the beverage distributor.  Beverage distributors benefit from two revenue sources.  The first is the scrap value of the recyclables.  The second, but more lucrative amount per container, is the revenue they keep from unredeemed containers.  The average scrap value of a container in 2012 was estimated between $0.01-0.02/cents according to a study by ISU.  The kept redemption value is $0.05 per container.  As redemption rates continue to rapidly decline, this sum of money continues to increase.  

Where Should Our Industry Stand
PMCI is working with members to determine our best advocacy position moving into the 2019 legislative session.  Historically, our position has been to modernize the bottle bill, whether that’s expanding it to make redemption centers feasible again or replacing it with residential recycling options.  We now are considering other options.  Our goal is to seek relief for convenience stores that have other redemption opportunities in their community. Convenience stores should not have to construct out-buildings to hold cans due to the lack of space or incur handling fees three times what was intended while beverage distributers make more money on the unredeemed containers.  The PMCI Member Insight Meeting on Fuel and Retail Issues is coming up November 14. All members are invited to participate and help formulate advocacy recommendations. Register Now!

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