An 80 percent discount on fees charged to private companies that deliver recycling residue to the Waimanalo Gulch landfill would end under a proposal advancing in the City Council.

But while the Council’s Public Works Committee yesterday advanced the proposal to end the discount, the committee’s chairman said he plans to maintain some type of incentive program for those commercial businesses.

Councilman Stanley Chang said he was working with the city administration to draft a new bill that would "provide for a limited discount to recyclers that makes more sense for the city and for our taxpayers, while considering the needs of our recyclers and free enterprise."

Chang said he planned to introduce a bill establishing a modified incentive program when the full Council meets next month.

The subsidy has come under scrutiny at the Council as lawmakers and the city administration look for ways to raise revenues because of tight budgets in the coming fiscal year.

Tim Steinberger, city environmental serv­ices director, said the subsidy has cost the city more than $26 million since 1998, including $2.3 million last year. He said his department introduced the bill last year as it was examining cost-cutting moves while preparing its budget.

Bill 47-10 would do away with the 80 percent discount on "tipping fees" charged by the city when private companies deposit recycling residue at the landfill. The discount was first enacted in 1991 and revised in 2001 as a means to encourage recycling.

Nonprofit, charitable organizations would continue to be exempt from paying any tipping fees when they deposit residue, while the proposal also exempts from fees any one-day, noncommercial cleanup event organized for the benefit of the community.

Chang said the new incentive program could include a reduction of the tipping fee discount, a sunset clause or a cap on the amount of money that could be given to companies seeking the discount.

"All those are on the table at the moment, and that’s why we’re welcoming public input and the input of the other members of the Public Works Committee," Chang said.

The discount has been criticized by some as too generous to a single company: Schnitzer Steel Hawaii, which does the most recycling in Hono­lulu with more than 100,000 tons of metal a year from automobiles, appliances and other bulky metal items.

Since 1998, Schnitzer has received about $19 million in discounts, including $1.9 million last year.

Critics and competitors of Schnitzer have described the subsidy as "corporate welfare," arguing that Schnitzer should be compelled to open its books and demonstrate a need to continue receiving the subsidy.

Ian Sandison, Schnitzer’s Hono­lulu attorney, said the company has been a good corporate partner with the city through its establishment of recycling programs, adding that the discount is in line with the amount of recycling and waste disposal performed by the company.

"What Honolulu gets is it doesn’t have the buildup of cars it doesn’t have the waste stream it used to have," San­di­son said. "The other thing it really gets is less volume in the landfill. Those are the benefits that Hawaii gets."