October 6, 2009
Water World:
Will the new expanded bottle deposits mean more money flooding into the state? Critics doubt it.
Starting last week, the soft gurgling of the estimated 561 million bottles of water sold every year in Connecticut was supposed to translate into the sweet clink of millions upon millions of nickels rolling into the threadbare pockets of state government.
Oct. 1 was the trigger date for expanding Connecticut’s long-standing system of requiring 5-cent deposits on beer and soda bottles and cans to include all those plastic water bottles.
Unfortunately, a combination of consumer sticker shock and money-grubbing by folks living near our borders could put a serious crimp in the cash flow Connecticut government is counting on from this fiscal ploy. If that happens, it would mean even more headaches for officials trying to manage a brand-new state budget some experts say is already $500 million in the red.
“The state won’t get the money it thinks it will,” predicted Stan Sorkin, president of the Connecticut Food Association, which represents many major supermarket chains. “This is not going to be a fun situation for anybody.”
Theoretically, the bottle-and-can deposit system ensures beverage containers are recycled, thus keeping them out of landfills and incinerators and off the streets, because consumers return them all to supermarkets or redemption centers to get all their deposits back. But lots of people don’t bother to redeem their containers and just throw them away.
The financial windfall for our impoverished state is supposed to come from those unclaimed deposits.
Attempting to gauge how the new deposits will affect sales of bottled water (and thus how much the state will reap in unclaimed deposits) is going to be tough. A lot will depend on what supermarkets decide to charge.
A day after the new deposits hit, prices for a 24-pack of Poland Spring ranged from $3.99 at the Wethersfield Price Rite, to $5.49 at the Big Y in Ellington, to $6.99 at the Rocky Hill Stop & Shop. Sorkin said those pricing decisions are made by individual stores for reasons that could include a local sale, efforts to use up water that was delivered before wholesale prices rose, and possibly an effort to temporarily ease sticker shock for consumers.
The battle over who should get those millions in unclaimed deposits has been raging for years. The original Bottle Bill, which took effect in 1978, didn’t put deposits on water bottles because so few were sold here in those days.
Beverage distributors hired high-powered lobbyists like Pat Sullivan and Jay Malcynsky to convince lawmakers to let the industry keep the estimated $24 million in annual unclaimed deposits. They insisted they needed the money to cover beer and soda container handling and recycling costs, and their arguments and influence worked for a long time.
The turning point came late in 2008, when the recession’s brutal impact on state revenues started to become painfully clear. Lawmakers desperate for money to cover gaping holes in the budget saw those unclaimed deposits as “low-hanging fruit,” a revenue source that was a lot less painful than things like tax increases. (The tax hikes would come later, when things got really ugly.)
So the General Assembly agreed to rip the unclaimed deposits away from distributors and stick them in the state’s treasury.
One of the ironies of this recession is that it’s also responsible for getting Connecticut’s deposit system expanded to cover water bottles.
Environmentalists had warned for years that the mountains of plastic water bottles being thrown away here were choking our landfills and polluting our air through incineration, littering our streets, and increasing our dependence on foreign oil. (The plastics used in most water bottles are petroleum-based.)
Susan Collins, executive director of the California-based Container Recycling Institute, says putting deposits on bottles and cans is “by far the way that has been most effective” in getting containers out of the waste stream and into recycling.
The departure of James Amann, who left his post as state House speaker in order to run for governor, removed one major roadblock to deposits on water bottles. Amann was opposed because his wife hated the idea of bringing their empty water bottles to those messy, smelly redemption rooms at the local supermarket.
It was the need for more quick cash, however, that was the deciding factor that pushed the General Assembly toward approval of water bottle deposits. More bottles in the system means more deposits being paid, which should mean more unclaimed deposits for the state, to the tune of an extra $17.1 million annually.
“Essentially, what we’re doing is using the Bottle Bill to help our fiscal situation,” said state Rep. Dick Roy, a Milford Democrat who is co-chairman of the legislature’s Environment Committee. “If the economy was still strong, I don’t know if we would have gotten [placing deposits on water bottles] passed this year.”
Republican state Rep. Pamela Sawyer of Bolton is disgusted that lawmakers would use this kind of scheme at a time when people are being hammered by the recession. “I think it’s a money grab,” she said. “And you’re penalizing people financially.”
Roy doesn’t believe the optimistic estimates about the money that’s supposed to pour into the state via unclaimed water bottle deposits. “I don’t think they’re going to make the whole $17 million,” he said.
The primary reason for such doubts are fears about “cross-border redemptions” by our clever neighbors in Rhode Island and Massachusetts, who may bring thousands of water bottles sold in their states into Connecticut to get the 5-cent-per-bottle deposits they never actually paid.
Big distributors like Nestle North America, which produces that top-selling Poland Spring brand, normally put the same label on all the water sold in a particular region like New England. Bottles with labels notifying consumers they can redeem their 5-cent deposit in Connecticut and Maine, which has a similar system, are likely to be sold all over this region, including Rhode Island, Massachusetts and New York.
(New York, by the way, has approved its own 5-cent deposit for water bottles. But that is now hung up in court because the New York law required all the labels on bottles sold in that state to specify that they were for redemption only in New York. Brian J. Flaherty, spokesman for Nestle North America’s Greenwich headquarters, said the intent of the New York law was to prevent cross-border redemptions. He said the labeling portion of the law is expected to be ruled unconstitutional because it would restrict interstate commerce.)
The way the deposit system works is that distributors, when they deliver a beverage to retailers like your local supermarket, charge the retailer the cost of the product plus any deposits on the bottles or cans. The retailer charges consumers the deposits when the beverages are purchased.
Consumers are then supposed to bring the containers back to retailers and get their nickle deposits back. Retailers give the bottles and cans back to the distributors in return for the deposits on those containers. Distributors can then sell the bottles and cans to recycling companies to get some of their handling costs back.
The killer is when someone who’s never paid the deposit returns a bottle and gets 5 cents he or she doesn’t deserve. The retailer gives that bottle to the distributor, who pays the nickle to the retailer. The result is what’s called “over redemption,” and it screws up the system.
Distributors and the state end up losing money, because more bottles are being returned for redemption than were originally sold in the state. The state’s problem is that it only gets money from unclaimed deposits if fewer bottles are redeemed than were sold in Connecticut.
Flaherty said that when Maine went to a deposit system for water bottles, “We were over-redeemed by 112 percent.” Translated, that means that 12 percent of the bottles redeemed in Maine in 2006 had been sold in surrounding states without deposit systems.
The complexity of the distribution system means that it’s “very easy for bottles [sold outside of Connecticut] to bleed back into this state,” according to Flaherty. He said the system will need to be policed. The question is how.
“Cross-border redemption does not appear to be a significant factor with soda and beer,” said Dennis Schain, spokesman for the Connecticut Department of Environmental Protection. “We don’t expect it to become a major factor with water bottles.”
“Certainly, if cross-border redemption emerges as an issue and maintains itself as an issue over time, it’s something we would have to look at addressing in some manner,” Schain said.
There is also the issue of consumer sticker shock.
Flaherty said an average 24-pack of Poland Spring generally sold for about $4.99 in Connecticut before last week.
The new 5-cent-per-bottle deposits will add $1.20 to the cost of that same pack, and Flaherty said distributors are going to tack on another 3 cents or more per bottle, which could bring the total price jump for that 24-pack to $1.92.
So, many consumers may end up paying $6.91 for the same water that cost them $4.99 last month, and this is coming in the midst of the worst recession since the 1930s. “There will be some sticker shock and people will hesitate to spend that [extra] money,” Sorkin warned.
Flaherty said Nestle North America isn’t currently projecting a drop in water sales because of the increased costs. “There will be pressure on prices, moving them up,” he said. “What impact it will have [on sales] is hard to say.”
Collins said information collected by the Container Recycling Institute didn’t show any drop in California beverage sales after that state created its deposit system in 2000. But she acknowledges that, “The recession has created a different dynamic for all kinds of products.”
Connecticut consumers have also gotten used to paying deposits on beer and soda containers and many have bought into the concept of using deposits to help the environment.
Deposits on those millions of water bottles could also boost employment at a time when any new job is precious. More bottles mean more people needed to handle them at supermarkets and recycling centers, and more truck drivers to ferry the bottles around.
“Yeah, that’s a nice way to create jobs,” Sorkin snorted sarcastically. He says the cost of those jobs will be placed on the backs of consumers at a time when few can afford to pay anything more. Sorkin and other deposit-system critics note the increase in truck traffic will also produce more air pollution.
They insist a far more efficient and consumer-friendly method to get water bottles out of the waste stream is “single-source curbside recycling,” where all recyclable materials are put in a single bin. It’s a system now being tried in several Connecticut cities and towns.
Collins said curbside recycling can’t be the whole answer, if only because it wouldn’t solve the problem of water bottles used at work, in many apartment buildings, parks, etc. “Even at the very best, curbside recycling wouldn’t capture even half of the beverage containers sold,” she said.
States that have deposit systems enjoy a 61.4 percent recycling rate, according to Collins, compared to a 24.2 percent rate for non-deposit states.
There is also a possibility that putting deposits on water bottles could ultimately change consumer attitudes toward the whole bottled-water phenomenon.
“It’s stupid to buy bottled water,” Ben Evans, a shopper at a Wethersfield supermarket, said last week. He said the region’s water system “is known for providing very good-quality water.”
It’s enough to send chills down the profit-loving spines of corporate giants like Nestle, Pepsi and Coca Cola who have been swilling down the billions consumers spend to buy bottled water.
http://hartfordadvocate.com/article.cfm?aid=14810
