Hawaii consumers and businesses could see a 100% spike in the cost to discard beverage containers via curbside recycling, the trash and other means outside of a state redemption program.

State lawmakers are considering a bill that proposes doubling the deposit fee on beverage containers to 10 cents from 5 cents under a 20-year-old program that has accrued a record $67 million special-fund balance.

Senate Bill 184 was advanced by a committee Jan. 27 after an initial public hearing with fairly evenly divided testimony for and against the measure.

Proponents of the bill claim that the current 5-cent deposit isn’t enough for many consumers to redeem containers for deposit refunds at a relatively small number of redemption centers and that the proposed fee increase would boost recycling of glass, plastic and aluminum containers.

Opponents contend that a 5-cent increase would further penalize people who can’t or prefer not to take containers to redemption centers for refunds, including households and business owners who recycle through county and private services.

SB 184 was introduced by Sen. Henry Aquino (D, Pearl City-Waipahu-West Loch), but not at the request of the state Department of Health, which manages the program.

At a Jan. 24 hearing held by the Senate Agriculture and Environment Committee, three people along with Reynolds Recycling Inc. and a Kauai County solid-waste management official testified in favor of the bill.

Reynolds, the largest redemption center operator under the program, said in written testimony that a 5-cent deposit is too low to motivate many consumers to haul containers to sites for deposit refunds.

Company President Terry Telfer noted that a Hawaii glass bottle return law in the 1960s used 5-cent deposits and that the diminished value of a nickel today is one reason the state’s current Hawaii Deposit Beverage Container program had a 54% redemption rate in 2023.

”In consideration of the decline of the value of that nickel deposit in the past 60 years, it would make sense to bring the deposit value to an appropriate ‘modern’ level,” Telfer said in written testimony.

Telfer also said 60% of states with beverage container deposit programs charge 10 cents on some or all items.

Allison Fraley, Solid Waste Division chief for the Kauai County Department of Public Works, submitted written testimony that called the state program “one of the most effective waste diversion programs in Hawaii” and that it can be enhanced by doubling the deposit fee.

“We believe that increasing the refund rate to 10 cents per container will significantly increase participation in this program,” Fraley said, estimating that recycling on Kauai could increase by hundreds of tons and millions of containers annually with such a change.

Fraley added that Oregon implemented such an increase in 2017, and its program redemption rate has risen to 90.5% from 64%, though she noted that Oregon also streamlined options and technology to increase the convenience of redemption.

Angela Melody Young, a former candidate for the Legislature on Oahu, told the committee in person that she supports the bill.

“Whatever we can do to help with this recycling process will help with pollution and then also cleaning up the environment,” she said.

Nickel or less

Natalie Iwasa, a former candidate for the Honolulu City Council, opposed the bill in written testimony in part because plenty of beverage containers get recycled outside redemption centers.

“All counties in Hawaii have recycling programs,” she wrote. “There is no longer a need to ‘motivate’ people to recycle beverage containers by charging a fee.”

The Hawai‘i Food Industry Association proposed that the deposit fee be reduced and eventually eliminated as curbside recycling becomes the primary method for recycling beverage containers.

“While the intent to improve recycling rates is commendable, this proposal would entrench the limitations of the current redemption system and impose additional financial burdens on residents,” the trade association said in written testimony. “Redemption centers often require travel and operate on restricted schedules, making them inconvenient for many residents, especially working-class residents who don’t have time to use redemption centers. This inequitable system penalizes those who rely on curbside recycling, which is already paid for through other means.”

Through curbside recycling on Oahu, the city collects containers in blue bins, and a contractor, RRR Recycling, redeems deposit fees under a city recycling contract.

Tom Yamachika, president of the Tax Foundation of Hawaii, suggested that lawmakers spend the fund’s balance instead of increasing fees paid by taxpayers.

“We question why it’s an appropriate time to raise the redemption price,” he said at the hearing.

Yamachika also said fraud, which has been documented in program audits, should be mitigated more before increasing the deposit fee. Doubling the fee stands to make fraudulent fee claims more lucrative.

The state Office of the Auditor has repeatedly raised concerns that the Health Department’s reliance on self-reported information from beverage distributors and redemption centers is a fraud risk, and has identified fraudulent activity.

For instance, in 2018 an auditor who redeemed 5.1 pounds of glass bottles for 61 cents found that the transaction was later altered on Reynolds paperwork to reflect being paid $69.92 for about 45 pounds of plastic and aluminum containers, according to an audit published in 2021.

Program finances

The Legislature established the Hawaii Deposit Beverage Container program under a law enacted in 2002 with a goal to raise Hawaii’s recycling rate to about 80% from 20% for what was then estimated to be 800 million bottles and cans sold annually in the state.

The program created by the “bottle bill” began operating in 2005. After then its redemption rate rose from 68% in the 2006 fiscal year and peaked at 79% in the 2009 fiscal year. Since then the rate has fallen to 54% for the fiscal year that ended June 30, 2023, in part because the number of redemption centers has declined over the past two decades.

A separate bill pending at the Legislature, SB 724, would require retailers to establish redemption operations to provide consumers with more options to redeem deposits and recycle.

Falling redemption rates have been adding to surplus program finances, as deposit payments plus a 1-cent handling fee per container exceed redemption payments and other costs.

According to the most recent audit for the fiscal year ended June 30, 2022, the program took in $33 million in revenue and had $27.7 million in expenses. The $5.3 million surplus pushed up the program’s special fund balance to $57.1 million from $51.8 million the year before. The fund at the end of 2024 reached roughly $67 million.

Under state law the Health Department can spend the excess revenue on a limited number of things, including recycling education and to support the handling and transportation of beverage containers to end-markets.

The agency said in written testimony on SB 184 that doubling the deposit fee would significantly increase container redemption and generate additional revenue of about $48 million based on $58 million received in the fiscal year ended June 30, 2024, for total revenue of about $106 million.

The agency did not express support or opposition to the fee-hike bill, but said the proposed change could have several consequences, including reduced beverage sales and challenges for retailers and manufacturers synchronizing changes by Jan. 1, 2026, as proposed by the bill.

There also could be a period where container packaging includes 5- and 10-cent redemption values that lead to 10-cent refunds on 5-cent containers or vice versa, the agency said in written testimony.

Committee members voted 4-1 to advance the bill for consideration by the Senate Ways and Means Committee. Sen. Brenton Awa (R, Kaneohe-Laie-Mokuleia) cast the opposing vote, and two of the supportive votes were made with reservations by Sens. Tim Richards (D, North Hilo-Waimea-North Kona) and Lynn DeCoite (D, East and Upcountry Maui-­Molokai-Lanai). Ways and Means has not yet scheduled a hearing for the bill.