Taxed 

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Bags and bags filled with recyclables were piling up in Kathy Hutchinson’s shed. She had been waiting for the Eureka Recycling Center to resume paying for California Refund Value bottles and cans after it closed in March due to COVID-19 restrictions, but the eagerly anticipated reopening was short lived.

The center briefly resumed its CRV redemption services last September but an overwhelming demand caused traffic congestion and hazards on Broadway, which caused Humboldt Waste Management Authority to discontinue the service, which wasn't penciling out financially anyway.

In 2010, Humboldt County had a total of 10 CRV redemption centers but at the beginning of last year only five remained. Now there are none, as centers in Fortuna, McKinleyville and Redway all closed their CRV programs in 2020, which partially led to the flood of demand that prompted the Eureka Recycling Center to follow suit in September.

Soon after the Eureka Recycling Center's program closed, Hutchinson said she realized she couldn't continue hoarding her CRV recyclables. But her only options were to put them into her curbside recycling pickup bin, forfeiting her deposits, or take them to the nearest CRV redemption center, Hambro's Recycling Center in Crescent City, a nearly two-hour drive north.

"I was on my way to Brookings when I made a stop at the recycling center in Crescent City and turned in five big bags of cans," Hutchinson said. "The money paid for my gas, some snacks and goodies, so it wasn't too bad."

But relying on someone to drive more than 80 miles to do their recycling isn't sustainable and is a sign that California's once landmark CRV Bottle Bill has become outdated, filled with inequities for rural, underserved areas like Humboldt County. Those flaws, coupled with changes in the global market for recyclables, have combined to leave most local residents paying what is now more of a tax than a deposit and most local grocery stores facing tens of thousands of dollars in new fees. The only fix, meanwhile, lies in the hands of the state Legislature.

California lawmakers enacted the Bottle Bill 33 years ago to reduce litter by incentivizing recycling and, for decades, it did just that until the value of commodities plummeted due to domestic and international trade policies.

California consumers who buy a bottled drink pay a 5- to 10-cent deposit (depending on the container's size) that they can then redeem at a CRV redemption center.

Collected at the point of sale by the grocer or retailer, the deposit is then handed off to the beverage distributor, who gives it back to the beverage manufacturer, which pays it to the California Department of Resources Recycling and Recovery (Cal Recycle). The department then distributes it to CRV buyback redemption centers in subsidies and deposit returns, which then go back to consumers.

Besides the Cal Recycle subsidies, redemption centers generate revenue by selling recyclable materials to a global market. But in 2017, China, which had long been the world's largest purchaser of recyclables, instituted its "National Sword Policy," which imposed broad restrictions on the types of materials it would accept. The move sent the value of recyclable materials — including those with Bottle Bill deposits in California — plummeting, putting a huge strain on California's CRV services.

The market shift exposed flaws in the formula the Bottle Bill uses to determine the amount of subsidies paid to recycling centers, which has now created problems throughout the CRV system, impacting everything from redemption centers to grocers.

Jeff Donlevy, general manager at Hayward-based Ming's Resource who also sits on the state's commission on recycling but made clear he was speaking to the Journal in his capacity at Ming's Resources, said the state's formula is one-size-fits-all, meaning subsidies are the same for recycling centers in Southern California as for those in Northern California and the Bay Area.

"[The formula] is not equitable because the cost of doing business in an urban area is much different than the cost of doing business in a distant rural area," Donlevy said. "[The Legislature] made some adjustments but, for the most part, it hasn't helped maintain the recycling centers, especially in the rural areas or high-cost areas like the Bay Area or coastal communities."

Donlevy said he'd like to see the Legislature change the formula to meet regional costs and needs, which can differ based on the cost of land the redemption center sits on, labor, shipping costs and the volume of materials collected.

The current formula works well for centers in Los Angeles, where land, labor and transportation costs are relatively cheap and the volume of recyclables is high. Land in the Bay Area, meanwhile, is so expensive it doesn't make up for the high volumes of recyclables there, while lower land costs often don't make up for the low volume and high shipping costs in rural areas.

In Humboldt, where land and labor are cheaper but the volume of materials coming through the redemption center is significantly lower, the cost of running the center and transporting the material hundreds of miles to market is extremely high, meaning the subsidies aren't enough to make operating redemption centers revenue-neutral. This forces recycling centers to choose between taking money from other operations to balance the cost of running a CRV redemption center or shuttering CRV buy-back programs entirely.

In HWMA's case, it operated the buyback program at its Eureka Recycling Center at a loss. In an Oct. 20 presentation to the Humboldt County Board of Supervisors, HWMA Executive Director Jill Duffy said that when the value of commodities went down, HWMA was not receiving enough money from the market to make up for the low state subsidies, so it offset the cost with a $9.64 fee on solid waste disposals that customers, both member agencies and self-haulers, pay when dumping garbage at the Hawthorne Transfer station. The fee brought in $673,000 annually to keep the center in the black.

But commodity prices have continued to go down drastically. The value of aluminum was at 69 cents per pound but has dropped to 42 cents per pound, while No. 2 plastic dropped significantly from 21 cents in 2019 to 12 cents.

"Some recycling centers have said, 'We're not going to subsidize it from other operations so we're just going to close,'" Donlevy said. "So, the lower volume recycling centers have a decision to make, 'Should we close or continue to subsidize it with other operations?' And most of them are closing."

And that's the choice all five of Humboldt's remaining CRV redemption centers made last year.

While having the Legislature simply change the Bottle Bill's subsidy formula is seen by many as the best possible solution for the state's CRV dilemma, the status quo is clearly working for some — most notably redemption centers in Southern California — so any proposed change would likely face opposition. And the Bottle Bill has many stakeholders, including curbside waste haulers and manufacturers, so any change would also have reverberating impacts.

California is unique in that curbside waste hauling companies like Recology are included in the Bottle Bill and allowed to receive CRV reimbursements for collected materials, meaning waste haulers could also lose revenue if there is a change in the formula, which could have significant impacts.

COVID-19 and the closures of most of the CRV redemption centers locally and statewide — including RePlanet, California's largest recycling business — have increased the amount of CRV materials waste haulers are collecting by 17 percent, according to preliminary data yet to be finalized.

Locally, Recology Eureka General Manager Linda Wise said that while 16 percent of a typical load was made up of glass, plastic and aluminum CRV containers prior to the pandemic and the closures of local buy-back centers, those materials now make up about 20 percent of the average load.

Statewide, the amount of CRV material collected at redemption centers has dropped 11 percent over the past two years while the amount going to waste haulers has risen 17 percent, according to preliminary data from Cal Recycle. But overall, the CRV beverage container recycling rate has dropped almost 10 percent over the past two years, meaning fewer residents have been recycling their CRV materials.

And as the pandemic has forced more people to stay at home, preliminary data shows that CRV beverage containers sales have increased about 7 percent over the past year. CRV beverage container deposit returns to consumers, meanwhile, have decreased by 3 percent, meaning there are increasingly more CRV containers sold than are coming back into the redemption stream.

Crunching numbers from Cal Recycle's Beverage Container Recycling Program Monthly Volume Report, Donlevy has seen the state's recycling fund increase by more than $120 million in unredeemed CRV deposits over the past year.

Cal Recycle uses these same funds for consumer redemptions, recycling center subsidies, curbside supplemental payments, payments to cities and counties, and program administration costs. However, the agency doesn't have the authority to increase subsidies to struggling recycling centers.

Though local redemption centers have closed, Duffy and Wise stressed that bottles and cans are still recyclable and can be turned into the Eureka Recycling Center or thrown into curbside pickup bins — though that would mean consumers relinquishing their deposits to the curbside waste hauler companies. Wise said all the CRV funds collected from curbside pickup are put back into Recology's curbside program to offset the costs of taking on additional material and subsidize customers' monthly bills.

Even with local buyback centers shuttered, Humboldt County residents like Hutchinson should have options other than forfeiting their deposits or driving to Crescent City.

The Bottle Bill provides that all grocers within a convenience zone — a half-mile radius in urban areas and a 3-mile one in rural areas created by CRV grocers/retailers who make $2 million or more in annual sales — must redeem CRV containers on-site if there’s no certified CRV redemption center, meaning anyone with a CRV container can go into the store to get their deposit back right then and there.

In Southern California, many grocery stores have CRV redemption centers in their parking lots, making them convenient for consumers to redeem deposits on site. Such operations, however, aren't feasible for all grocers and the Bottle Bill allows them to opt out if they pay a fee of $100 a day or $36,000 a year, which goes into the beverage container fund with no designated purpose or use. According to Donlevy, in the past, the Legislature has used the compliance fee surplus for projects to support and promote the CRV redemption program through quality incentive payments and grants, among other things.

Complicating the decision facing grocery stores in such a situation is the fact that unlike certified redemption centers, the Bottle Bill doesn't give grocers subsidies to collect and process CRV materials unless they jump through all the hoops of becoming a certified center.

Cal Recycle spokesperson Lance Klug said there's nothing preventing a grocer from taking that step, though it would be up to the grocer to pay for all the operating costs of starting a recycling center before receiving any subsidies.

That's a problem, according to Donlevy.

"[The Legislature] needs to change the formula related to the involvement of grocers, what they can do and what they get paid to be a part of the program," he said.

The Bottle Bill does allow exemptions for some convenience zones. For example, stores within certain convenience zones can be exempt from offering redemption services if consumers can easily access a nearby redemption center, predominantly use curbside recycling or if the redemption centers in the area fail to meet a sufficient volume of CRV materials for "economic viability."

According to Cal Recycle data, the law allows exemptions in up to 35 percent of the state's convenience zones. There are 3,973 grocers that have been identified in the state's convenience zones, with about 25 percent exempted from offering redemption services and another 4.6 percent awaiting exemption status. Twenty-eight percent of the zones are served, meaning they have a redemption center within the limits, and 42 percent of the zones currently unserved, meaning stores there are either undergoing a 60-day grace period before they are required to redeem CRV containers in-store, are currently redeeming CRV containers in-store or are paying the daily fee instead of offering redemption services.

Right after the county's last CRV redemption service closed in October, 90 percent of Humboldt County grocery stores were exempted from taking back recyclables in-store, which left consumers with extremely limited options as to where to redeem their deposits. Cal Recycle has since changed the status of in-store redemption services for 37 grocers locally, and most of them aren't prepared or have yet to begin in-store redemption services.

In an interview with the Journal, Eureka Natural Foods Human Resources Administration Officer Graig Fillmore said Cal Recycle revoked the grocer's exemption in October, meaning its stores now must provide on-site redemption or pay a fee of $100 per day, $36,000 annually.

For corporate stores in the area, $36,000 is probably manageable but it could prove devastating for Humboldt's small businesses. Take for example a local grocer with five different small stores each facing fines, that would total $180,000 a year.

Fillmore said the fees have disproportionate impact on small, local companies compared to larger chains.

"Inevitably you're pushing away small businesses in Humboldt County because redemption services here aren't capable of being set up because those centers are already operating at a loss over the last several years," he said.

Fillmore believes the revocation of local exemptions is unfair and said that Eureka Natural Foods would not be able to handle the amount of CRV materials collected if it were to begin offering in-store redemption services, especially during the COVID-19 pandemic, which requires businesses to follow new rules and regulations to keep everyone safe.

"We would love to do the redemption services but, logistically, we're not set up to do that," Fillmore said. "We would like to participate but we just don't have the infrastructure."

In a way, the same could be said for HWMA's Eureka Recycling Center — even though it was built for redemption services, it wasn't able to handle the overwhelming demand of Humboldt residents trying to redeem their CRV deposits back in September.

After the failed re-opening attempt, HWMA asked Cal Recycle for permission to open the Eureka center on an appointment-only basis but was denied. HWMA then applied for a Cal Recycle pilot project grant that would have paid for reverse vending machines (where consumers would have been able to redeem their deposits on the spot), but HWMA wasn't among the selected applicants.

According to Klug, Cal Recycle doesn't have the authority to "alter CRV take-back and operational requirements established in state law. The law requires recycling centers to serve customers that come to their business during their hours of operation" and not through appointments, he said.

Fillmore believes the only solution to Humboldt County's CRV problem would be a collaborative effort with all parties, including Cal Recycle.

"There's no solving the redemption crisis in Humboldt County without Cal Recycle coming to the table with beverage dealers and local redemption centers to come up with a solution," he said. "Our hope would be that they'd allow the shut-down redemption centers to be able to open on an appointment basis. I feel that there's no single entity that's capable of solving this dilemma, that it's going to have to be in a group."

The biggest problem, however, is that Cal Recycle does not have the jurisdiction or authority to make exceptions for appointments, changes to subsidies or its formula. It only handles subsidies, exemptions and certifications, according to the letter of the law, and the only entity capable of changing the Bottle Bill is the Legislature.

Donlevy said there is no short-term solution for Humboldt's CRV redemption problem and any real legislative change could take two to three years. Duffy, meanwhile, said there is no timeline as to when CRV redemption services will return to the Eureka Recycling Center.

The California State Commission on Recycling is, however, drafting a recommendation letter to send to the Legislature and Gov. Gavin Newsom by Feb. 3 requesting urgent action to give new Cal Recycle Director Rachel Wagoner the authority and funds to help open recycling centers in underserved and rural parts of the state like Humboldt County.

"As a body of 17 volunteer appointed commissioners from the entire state, we think that this will get to the governor's office, it'll get to all the Legislature and Senate, with a message from all of us saying these are urgent items that we need your attention on. Theses are fixes that will help open up or reopen recycling centers in the underserved, rural areas," Donlevy said. "As a commission appointed by Cal Recycle, they're looking to us a governing body to help highlight what's important, what they should be looking at. We're not lobbyists, we're not looking for our own interests we're looking out for the best interest for the residents of California."

The letter recommends things like assisting newly opened recycling centers in rural underserved areas with $10,000 per month or using the grocer's compliance fees of $100 a day to help pay for equipment that helps process CRV containers, among other things.

North Coast Assemblymember Jim Wood understands that Humboldt County and other rural areas have a CRV crisis, his communications director Cathy Mudge said, adding that he's been meeting with Wagoner in hopes of coming up with possible solutions. Wood has also been advocating for Humboldt County to be chosen for one of the Cal Recycle pilot projects grants, she said, and he'll also be meeting with Bottle Bill stakeholders soon, hoping to find a solution that works for everyone.

But for the foreseeable future, while the commission is working on the letter and Wood searches for solutions, CRV deposits have become more of a levy for Humboldt County residents.

"Without [CRV] recycling, [the deposit] just becomes a tax for consumers," Fillmore said. "If you want your deposit back, you have to make a two- to four-hour round trip either to Crescent City or Redding."

That's what Hutchinson did, as she's one of the few willing to travel to Crescent City to redeem recyclables.

In an informal poll on the neighborhood app Nextdoor, the Journal found that (out of 81 votes in mostly Eureka neighborhoods) 47 percent of people said they were choosing to save their CRV recyclables until the redemption centers return, while 40 percent were opting to throw their CRV recyclables into their curbside bins. Seven percent were choosing to travel to a CRV redemption center out of the area, and 6 percent were simply throwing their CRV recyclables into the garbage. (Duffy said HWMA hasn't seen an overall uptick in recyclable material entering the waste stream, though.)

Randy Scott, general manager at Hambro Forest Products, Inc. — which operates Hambro's Recycling Center in Crescent City — said in an email to the Journal that the redemption center estimates that more than half of its buy-back customers are from Humboldt County, coming from as far away as Garberville.

"We see a total of approximately 400 to 500 people per four-day week, 100-125 per day and some days 150," Scott wrote in the email. "We are happy to serve the folks from Humboldt."

But Scott is also warning customers of the possibility of the Hambro CRV Recycling Center's closure.

In an email, he attached a flier that reads, "Please help Hambro CRV Buy Back Center stay open. STATEWIDE CRV CRISIS. Scrap rate has fallen below a sustainable level. Hambro Operations at this level may be suspended. PLEASE CALL CAL RECYCLE."

Hutchinson, for her part, said she has lived in Myrtletown for 20 years and always redeemed her recyclables at the Eureka Recycling Center on Broadway. It was convenient, but now that its redemption service is closed, she's just stopped buying drinks that require CRV deposits until there's a place to redeem them.

"I don't think it's fair," she said. "The state shouldn't be allowed to charge me (a deposit) when I can't get it back."

Iridian Casarez (she/her) is a Journal staff writer. Reach her at 442-1400, extension 317, or [email protected]. Follow her on Twitter @IridianCasarez.

Editor’s Note: The story has been updated to clarify that Cal Recycle data is preliminary and not yet final and to correct which grocers must provide an in-store redemption service and how exemptions are granted by convenience zone, not stores.