April 27, 2006

Redemption centers, state battle over can refund

Iowans who redeem bottles and cans are likely to have fewer places to make returns if the Department of Natural Resources strictly enforces the state's 5-cents-per-container law, redemption center owners are warning.

The DNR sent a memo last week aimed at redemption centers that have been charging some customers a penny-per-container service fee, effectively reducing the return to 4 cents per container.

The memo, sent to 5,000 grocers, convenience stores and redemption centers, told businesses "not paying the full refund amount'' that they are subject to criminal penalties.

"I cannot stay open based on this rule," said Kathryn Russell, who owns R&R Redemption in Winterset with her husband, Oliver.

David Jones, owner of MCF Can Redemption Center in Atlantic, said he planned to ignore the memo.

"Screw the DNR," he said. "What is that going to do to us? Nothing."

On April 1, Jones started charging a penny for cans and bottles that customers don't sort by distributor into cardboard flats. It's the only way he can stay in business, he said.

Jones said that his redemption center was operating at a $10,000 annual loss, but that he can break even by keeping 1 cent from each refund. He hopes the partial-refund policy buys enough time for legislators to increase the handling fees distributors currently pay redemption centers before he has to close his business.

About 20 redemption centers in Iowa have gone out of business in a little more than a year, said Jeff Geerts, a program planner for the Iowa DNR. If the remaining 155 centers close, Iowans would have fewer places to redeem cans and bottles. Currently, consumers are able to redeem containers at many grocery and convenience stores, as well as redemption centers where they are less likely to deal with long lines and finicky reverse vending machines.

Since 1978, Iowans have paid 5 cents for each redeemable container and received 5 cents when returning the container.

In the past few years, more redemption centers have begun to give customers the same kind of choice as Jones in Atlantic - either sort and/or stack cans in containers or pay a penny per container for the center to do the sorting and stacking.

Russell in Winterset said it should be up to the customer to decide whether to pay the service fee.

"It is not my choice. It is not the DNR's choice. It's the customer's choice," she said.

Last week's DNR memo represents an abrupt turnaround for department officials, who had tacitly approved of redemption centers charging a service fee, said Dewayne Johnson, the former executive director of the Iowa Recycling Association.

The DNR said this week that it would be too cumbersome to allow some businesses to refund less than the full amount.

"Redemption centers have placed more and more hurdles in front of customers to get the full 5 cents," said Jon Tack, a lawyer for the Iowa DNR. "We've decided they can't do this anymore."

Officials have been receiving more complaints from people who aren't getting back the entire 5 cents, the DNR officials said.

"Unfortunately, redemption centers are still operating on that penny per container, and they've found some creative ways to get some more income," Geerts said. "But they've made it inconvenient for customers to get their full refund amount."

However, redemption center operators complain that the handling fees haven't increased since the bottle bill's inception nearly 30 years ago.

"The 1-cent handling fee . . . is far below what it should be," said Jenny Gitlitz, research director for the Container Recycling Institute in Washington, D.C. She said Iowa has had one of the lowest handling fees of the 11 states and one city with bottle bills.

Gitlitz said a study done years ago showed that for a redemption center to meet its costs, a handling fee of 2.57 cents was needed. It takes about 3 cents in today's money to equal the value of a penny in 1978, according to inflation index studies.

"A 3-cent handling fee is about right," Gitlitz said. "The state should be updating the handling fee to keep up with inflation."

However, the redemption centers should not be withholding any of the refund from customers, she said, even if they call it a service fee.

Johnson, the former recycling association executive, said he wasn't surprised DNR decided to once again strictly enforce the law.

"I think the DNR started out trying to help one of their constituents, but then heard from another one that was even more impacted, which was the general public," he said.

Redemption centers are convenient for some consumers, especially in rural areas, but Julie Freimuth of Des Moines, who was bringing cans back to Dahl's Food Mart on Ingersoll Avenue on Tuesday morning, said she wouldn't take her cans to a place that didn't pay the full 5 cents.

Distributors argue that an increased handling fee would significantly impair their ability to compete with businesses across the state border. No state adjacent to Iowa has a deposit law.

"A 1-cent-per-container increase is . . . a $15 million-per-year tax. That could have a significant impact, especially on the border communities," said Bill Wimmer, a lawyer who represents the Iowa Beverage Association. "A 2-cent handling fee is 48 cents a case. People will go across the border for less than that for a gallon of gasoline."

Redemption centers approved by the Department of Natural Resources to take back bottles and cans for nearby grocers could be fined or lose that state approval if owners don't comply with the law.

Jerry Fleagle, president of the Iowa Grocers Association, downplayed the situation.

"It really doesn't have much affect on us. Not any grocers have paid less than 5 cents," he said.

Read the Memo here [PDF, 92kb]

Copyright © 2006, The Des Moines Register.
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