CRI submits comments to CalRecycle on CRV handling payments

The Container Recycling Institute (CRI), based in Culver City, California, has submitted comments to CalRecycle regarding the agency’s requirement to adopt emergency regulations by July 1, 2026, under S.B. 156 “that establish the methodology described [within the statute] … to establish a handling fee calculated pursuant to the methodology.”

The handling fees apply to beverage containers covered by the California Beverage Container Recycling and Litter Reduction Act. CRI notes that the purpose of the handling fee, per the statute, is to reflect “the cost of providing and maintaining recycling in convenience zones by handling fee recipients, including transportation, labor, volume, consumer convenience and increasing recycling rates.”

S.B. 156 is an omnibus budget bill that was signed by Gov. Gavin Newsom in July.

In a Dec. 9 letter from Susan Collins, president of the CRI, to CalRecycle, she writes that the “handling fee” payment “was established to provide funding, in addition to scrap value, processing payments and administrative fees, to recycling centers (RCs) that are located very close to where consumers shop for groceries. There is a recognition that these sites are often lower-volume sites or higher-cost sites and therefore need additional funding to operate.”

CalRecycle commissioned studies of these RCs show that handling fee sites have lower volumes, on average, than nonhandling fee sites, Collins notes, as well as that, on a cost-per-container basis, handling fee sites are more costly to operate than nonhandling fee sites, thereby justifying the handling fees. “Without these additional fees, many handling fee sites would not have enough money to operate,” she adds.

RCs across the state have been closing given their inability to make a profit under current economic conditions, Collins notes, adding, “The public’s reduced access to redemption opportunities as a result of more than 1,300 RCs closing their doors (over a 50 percent loss since 2013) has led to sharply declining redemption rates.”

The CRI letter notes that RCs have closed in part because “the payment formulas for redemption centers did not proactively take into account the multiple increases in California’s minimum wage over the last several years.”

Regarding CalRecycle’s proposed “handling fee concept,” CRI says it is in favor of using a fixed handling fee as the floor. That floor is proposed at 1.25 cents to be adjusted annually for cost of living, which is 7.7 percent higher than the handling fee calculated using the current survey method (1.16 cents). However, CRI proposes a higher baseline for a number of reasons:

1. The handling fee portion of RC costs has never been adjusted upward to include a “reasonable financial return,” which it says has been “an oversight for many years,” given that “the processing payment recognizes the need for a reasonable financial return (RFR), but the handling fee portion of RC costs has not, and this is a flaw. A significant portion of the cost of operating handling-fee sites has been reimbursed at straight cost, with no allowance for profit.” 
   CRI says an 11 percent RFR would adjust the handling fee to 1.29 cents, which it says is “the bare minimum needed to offer an equivalent profit percentage for handling fee sites as compared to nonhandling fee sites.”
   

2. The baseline handling fee should be further adjusted upward if the cost of living adjustment percentage is lower than the known projected increase in minimum wage because roughly 50 percent of RC of costs are labor-related.

3. A higher baseline fee would address the “race to the bottom” or “death spiral” aspect of the cost survey results, CRI says. “There were also more than 1,300 centers that have gone out of business over the years, and the cost of operating in those locations is likely higher than most of the sites that are captured in the cost survey,” Collins writes. CRI suggests adding another 30 percent to the handling fee, which would increase it to 1.68 cents.

4. CRI also suggests that CalRecycle identify the geographical regions that have been “recycling deserts” in the last four to five years and create an increased payment formula or amount to address those areas. “For example, perhaps an extra half-cent in those designated areas will work to attract recycling centers.”

Collins also writes that CRI believes it could be “risky” for CalRecycle to create tiered handling fees based on either volume or location as any decrease to an existing handling fee could result in causing recycling centers to go out of business, citing cost survey results that have shown many factors affect a recycling center’s operating costs, not just a single factor such as location or volume. “A tiered formula would have to be more nuanced than just using a single factor to determine the amount of the payments,” CRI says.

The nonprofit says S.B. 353’s approach to identifying RCs that have unusually large expenses related “such as the need for rural RCs to transport glass hundreds of miles to get to market” provides “a targeted, fact-driven way to offer additional funding where it is needed, without creating overpayments throughout the entire system.”

S.B. 353 expands the California Beverage Container Recycling and Litter Reduction Act to include any size container of 100 percent fruit juice and any size container of vegetable juice, beginning Jan. 1, 2024, and addresses the per-ton “processing payments” redemption centers receive from CalRecycle to supplement the revenues they earn from polyethylene terephthalate (PET), glass and aluminum scrap values. When the legislation was signed into law in late 2023, CRI said it would provide fairer compensation to redemption centers.

“We applaud decision-making that is directed and driven by data from CalRecycle’s multimillion-dollar cost surveys," Collins concludes. "The published results of the cost surveys inform us that there are hundreds of recycling centers that operate at a cost level that is above the average handling fee that they are paid, and we know from history that many recycling centers used to operate at a cost that was even higher. We also appreciate that it is a difficult job to design a payment formula (or formulas) that will provide enough consumer convenience while also avoiding overspending.”