January 3, 2009
Distributors aren't taking kindly to bottle-deposit plan
Legislature to reconsider using 'public's money' to help offset state's escalating budget deficit
For decades, beer and soft drink distributors in Connecticut have been allowed to keep the nickel deposit on containers that consumers fail to redeem.
Windfall, the governor's office exclaimed in November; it's the people's money - possibly more than $24 million dollars' worth every year, so give it back.
Not so fast, say the distributors. It doesn't even begin to cover costs to recycle empty cans and bottles. Their preference: Don't touch this money.
Unclaimed deposits on beer and soda bottles and cans for carbonated beverages became the target last month of a new accounting law administered by the state Department of Environmental Protection.
That law is likely just a precursor to further action.
Even though lawmakers scuttled a move in December to take the money and put it toward the state deficit, when they reconvene this month, they'll be considering such a step.
Gov. M. Jodi Rell's $350 million deficit-cutting plan includes six months' worth, or an estimated $13.8 million, in unclaimed deposits.
Distributors in New London County say the accounting law is burdensome. Worse, they argue, taking away that revenue, known as “escheats,” will force them to spend more than they do now on recycling, pushing up the price of products they distribute.
The state is scraping “for every penny they can get,” said Roark Levine, one of the owners of Levine Distributing Co. in Norwich, which distributes Anheuser Busch products. “Consumers need to know they're just taxing them another way” by demanding the escheats.
State Rep. Edward Moukawsher, D-Groton, agreed that while the plan does not directly cost the taxpayer or consumer, it would to add indirectly to their cost.
”To me, this was an injustice from the beginning,” said Moukawsher. “If it's a public issue, it should be something that is resolved by the public and by government without recourse to finding some patsy to bear the cost. It's unfair to single out a single business or industry. It's predatory.”
But that's not the way other state officials see it.
”It's something that distributors have been able to keep all these years and they don't want to part with it,” acknowledged Jeffrey Beckham, undersecretary for legislative affairs for the state Office of Police and Management. “But it's the public's money.”
Right now, the so-called bottle bill works this way: A distributor delivering a case of beer to a liquor store charges the retailer $1.20 in nickel deposits for 24 cans. The retailer then charges the consumer that added fee.
When and if the consumer brings back the case of empties, the retailer reimburses him or her a nickel for each can. The distributor then reimburses the retailer the $1.20, plus a one-and-a-half-cent handling fee apiece, which in this example would equal 36 cents.
That extra 36 cents, distributors explain, comes from the unclaimed deposit money.
Levine said the unclaimed deposits distributors keep now don't even cover the costs they incur to recycle the empties.
F&F distributors of New London, which distributes Miller and Coors, employs 60 people. Owner Eric Filardi said this proposal threatens their livelihood.
”If (lawmakers) think there is so much money in the unclaimed deposits, then let the state do all the work and take over the whole recycling process, and we'll give them the money,” he said.
When Filardi compared his company's recycling costs with the amount of unclaimed deposit money he received, he found he collected about $354,600 in unclaimed deposits annually.
However, F&F spends $319,410 in handling fees, and $404,000 to recycle, leaving an expense of approximately $368,810 (less about $40,000 he gets back for aluminum cans), he said.
Levine said he receives approximately half a million dollars in unclaimed deposits each year, and ends up paying that amount back to retailers in the handling fees. Recycling costs his company another $100,000, he said.
”If they're going to take (the unclaimed deposits), the entire cost of recycling is on us completely,” Filardi said. “It could put a guy my size out of business.”
Beckham counters simply, “This is a cost they've had for decades.”
Another problem, Levine said, is that the new legislation that requires distributors to put the unclaimed deposits aside in a special account stipulates the money must be placed there within three days of sale of the beverage to the retailer.
In practice, however, Levine said, retailers have up to 30 days to pay up, which means distributors have to put that money aside in the special account up front, from their own pockets.
Distributors might have to ask retailers for cash on delivery instead of credit, said Filardi, because “we can't afford to fund this out of our pockets.”
”Clearly the passage of the law will require them to make adjustments,” Beckham responded. “Businesses make adjustments in reaction to changes in the law all the time. They could change their business practices. The law doesn't tell them how to get paid by the retailer or dealer.”
The idea of using reclaiming unclaimed deposits is not new, Beckham said.
During the budget crises of 1991, under then-Gov. Lowell P. Weicker, and again in 2003 under former Gov. John Rowland, this very step was considered, he said.
According to the state Office of Fiscal Analysis' Web site, the estimates of $13.8 million for half the year and $24.4 million for 2009 were developed “using historical data from Massachusetts on revenue collected from unclaimed deposits.” The figures were adjusted for population and personal income differences between the two states.
The estimates do not include costs to administer the program.
Massachusetts, Michigan and Maine recover escheats now, and two other states besides Connecticut - Delaware and New York - are considering doing the same, Beckham said.
”It's in her plan,” Beckham said of the governor's proposal. “The legislature can accept it or not.”
As for the distributors? They're “lobbying anybody and everybody that'll listen,” Filardi said.
P.DADDONA@THEDAY.COM
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