Major Recycler Sues Over Beverage Container Fund Insolvency

California’s largest single recycling services provider sued the state November 9 claiming $416 million in so-called loans made to the cash-starved general fund from the Beverage Container Recycling Fund are illegal and must be repaid.

In a lawsuit filed in Alameda Superior Court, Tomra Pacific Inc., which operates nearly one-third of the state’s 1,200 supermarket parking lot recycling centers, claims the loans have driven the recycling fund into insolvency, causing the state Department of Conservation to eliminate payments to recyclers and irreparably harming the state’s 23-year-old effort to reduce can and bottle waste.

“The continued effect of the (department’s) funding cuts to the key participants in the recycling program will have a direct and unavoidable consequence,” the lawsuit says.

“If (small) recyclers and processors throughout the state have to drastically scale back operations, if not close entirely, literally billions upon billions of used bottles and cans in the state will go unrecycled.

“The entire purpose of the recycling program will be thwarted, as beverage containers that would otherwise be recycled will be left on public beaches, streets and highways or discarded in landfills.”

Tomra says it has laid off 45 of its 700 employees in California and closed 32 of its recycling sites because of the reductions in payments from the department. Another four sites are slated for closure, the company says.

A copy of Tomra’s lawsuit was e-mailed to the department’s press office seeking comment.

Should Tomra prevail in court, it would add $416 million to the state’s mounting budget shortfall which Gov. Arnold Schwarzenegger told the Fresno Bee November 9 was likely more than $14 billion over the next 19 months, rather than the $7.4 billion estimate offered by his administration in July.  

Californians recycled a record 16.1 billion beverage containers in 2008. The state’s bottle and can recycling program, created in 1986, touches numerous entities – glass manufacturers, beer and soft drink makers, wholesalers and grocers, among them. Money deposited in the recycling fund pays for its activities.

Three loans to the general fund have come from the recycling fund since 2002 – starting with a $218 million one, followed by a $98 million loan in 2003. Those loans were to be repaid on June 30, 2009. But lawmakers postponed payback until June 30, 2013.

Gov. Arnold Schwarzenegger borrowed another $100 million for the general fund in this year’s budget.

However, the GOP governor has also taken another $67 million from the recycling fund to pay for the initial costs incurred by the Air Resources Board to begin implementation of AB 32, the landmark greenhouse gas emissions reduction measure.

The air board is supposed to reimburse the fund through revenue from imposing fees on polluters. No fees have been assessed.

Borrowing from the recycling fund since 2002, general fund or otherwise, totals more than $567 million.

Revenue in the recycling fund comes from the nickels and dimes California assesses on cans and bottles and fees imposed on the makers of aluminum, glass and plastic beverage containers.

Formulas dictate the annual level of these “processing fees” but, generally, the more flush the recycling fund, the lower the fees assessed against manufacturers.

At current recycling rates, nearly $1.2 billion in recycling fees pass through the state fund each year.

Money from the fund subsidizes recyclers like Tomra and the processors of the cans and bottles collected at smaller recycling centers, which account for roughly one-third of the state’s recycled cans and bottles.

Tomra operates 382 small recycling centers and also processes the recycled cans and bottles.

Recyclers receive two types of payments from the state. One is a set, per-container handling fee. The other, a processing payment, is designed to cover the difference between the market value of scrap material and the costs of transporting it to a processor.

“Without these recycling program payments, the operation of (small) recycling centers is a money-losing proposition in California,” Tomra’s lawsuit says.

In June, the department announced that the recycling fund was insolvent.

Nowhere in the announcement did the department note that at least a contributing factor for the insolvency was money raked out of the fund to pay for other state purposes. A higher level of recycling – a record 74 percent in 2008 — plus the state’s economic downturn caused increased level of payments, the announcement said.

“The dramatic increase in the recycling rate, coupled with a flattening of container sales due to the downturn in the economy, has resulted in increased pay-outs without a commensurate rise in previously expected revenues,” the department said.

As a consequence of the insolvency, handling fees and processing payments would be reduced by 85 percent and 27 percent respectively. 

Cities and counties, which receive subsidies from the fund to support local curbside recycling efforts, saw their payments fall from $10.5 million to $1.5 million.

Grants to local conservation corps fell from $19.5 million to less than $3 million.

Again citing the “lack of monies in the fund,” the department announced on October 20 that handling fees would not be paid at all and processing payments would be reduced an additional 5 percent.

Money for local conservation corps dropped to less than $1 million. Cities and counties saw their $1.5 million cut to $525,000.

Tomra contends that if the rake-offs to the general fund had not occurred, the recycling fund would still have been able to cover its normal level of payouts.

The lawsuit argues that the three loans must be repaid because their effect violates the express requirements placed on each of the loans by lawmakers: “Repayment shall be made so as to ensure that the programs supported by the California Beverage Container Recycling Fund are not adversely affected by the loan.”

The department is working on a one-time accounting change in how payments are made to the recycling fund, which would bring in an additional $100 million during this fiscal year.  

Payments to the state of the California Refund Value – the nickels and dimes assessed on bottles and cans — are not due until 90 days after the month of sale.

The department is developing emergency regulations to accelerate those payments by shortening the deadline to 60 days. In effect, that would create a year in which 13 monthly payments are received instead of 12. 


Filed under: State Agencies


  1. Great. Push another green bill, AB 32, and then use “green” loans from the bottle bill to pay for it. Ignore that fact that it bankrupts a green program that was already working.

    Go figure. Apparently the hypothetical green trumps the proven green.

    Comment by Missing the Point — 11.10.2009 @ 5:20 pm

  2. I’m comin back! Get the oourt order and get my body out this rotting casket. Taxpayers need me.. We take a fee use it for something else, then charge the smucks who paid once again to support the same program. Sounds like a duck to me The Hummer Bummer is the biggest tax spend Governor since Jerry was Gov the first time. Is it true he’s coming back? YOU ALL NEED ME!

    Comment by Howard jarvis — 11.11.2009 @ 6:58 am

  3. Please, Howard, stay where you are. You’ve done enough already.

    Comment by Jim Cassie — 11.11.2009 @ 8:31 am

  4. This is just the first exposure of what is really happening with our state finances and why Mike Genest wrapped up a career. Some months ago, I noted in your work Greg, or elsewhere in the media or state reports, that the State was in the hole to other funds to the tune of $40 billion, yes $40b. This was the only means the state had to continue to pay their bills. If other local governments in the state had borrowed against special revenue funds, for example gas tax revenues, they’d be hog tied and hung at high noon. Ah, the Golden Rule prevails, he who has the gold, and in this case the budget purse strings, can move money around without concern. Will we please get some adults in charge in the Governor’s Office and the Legislature.

    Comment by Jack Johnson — 11.11.2009 @ 9:29 am

  5. Nice article, but I would prefer to see more emphasis from it and other articles regarding the fact that this money belongs to the California consumers, NOT the State. It is held in trust by the State until the consumer returns the beverage container to a certified recycler when the deposit is returned. Unfortunately, the State can no longer be trusted on many levels.

    The duly-elected representatives of State of California have repatedly violated that trust by “borrowing” from the fund without, seemingly, any intention of ever repaying the debt. How they are allowed to borrow against this pool of money in the first place is beyond me.

    Kudos to Tomra for having the guts to stand up to the executive and legislative mafia in Sacramento. I can only hope the courts side with them and right quick.

    Comment by Anonymous Coward — 11.11.2009 @ 10:51 am

  6. One of the greatest scams the state runs.

    And they just recently INCREASED the container fee.

    Enuf so that at the NOIP household, we’ve started separating the fee containers out of the co-mingled city recycling bin.

    It’s not worth spending an extra 5-10-15 cents for a container just to throw it in the recycling bin. I’m happy to stand around with the homeless crowd for a few minutes to collect $5 or $10 bucks to spend in the grocery store.

    Comment by NoOneInParticular — 11.12.2009 @ 10:04 am

  7. I cannot beleive the State of California took a total a 567 million dollars from this fund and reduced fees payed to recyclers down to just scraps — pathetic. This fund is fueled by redeemable consumer purchases to BE REDEEMED! Is it me or is it just impossible for government to keeps their hands off of millions, even billions of dollars put away for a specific fund. Whether its social security, or native american funds, whatever the purpose may be at some point someone says the three most dangerous words on the planet “I don’t care” and the money is taken out. If all these recycling centers shut down, and there is no where to realisticly redeem your recyclables what then? This adds insult to injury. They took money from the fund, stoped payments to recyclers which then shut down, and yet will continue to collect 5cents and 10cents per container. In a poor economy and job market the bottle bill especially serves as a means to help low income families, unemployeed etc… bring in extra 10s of dollars and keeps containers out of landfills and the streets. Arnold Schwarzenegger was a hero of mine fueling my desire to compete in athletics and strength training as a youngster but the decisions he’s made the last year have been painfull to me.

    Comment by Stafford Brown — 11.12.2009 @ 11:04 pm

  8. This is almost conspiracy stuff! The government publically promotes programs that people generally support only to then confiscate and redirect the funds elsewhere. I don’t think anyone would provide a “loan” should it be to their own permanent irreverseable detriment anyway. This is call a “raid!” The raid is a strategy to quietly get funding for programs politicians can’t get public support for. They take it from the recyclers, the highways, etc… leaving actual infrastructure suffering in favor of thier own unpopular pet projects benefiting the influential few. CRV is my money! I guess they want to deprive me of convenient recycling centers so they can keep all of it. Thankfully the recyclers are able to fight this in court and showcase the financial abuse. Come to think of it, they took a “loan” from my paycheck as well last week. I guess the rest of us will just have to vote.

    Comment by Thinking About It — 11.18.2009 @ 11:54 am

  9. I always read blogs in similar topic, but I never visited your blog. bookmarked and i’ll be your constant reader. Thanks

    Comment by insolvency Ukraine — 1.20.2010 @ 1:02 pm

  10. Interesting stuff, thanks for sharing. I think it deserves further investigation.

    Comment by London dating — 4.17.2010 @ 3:22 am

  11. Ah, the Golden Rule prevails, he who has the gold, and in this case the budget purse strings, can move money around without concern. Will we please get some adults in charge in the Governor’s Office and the Legislature.

    Comment by ClubPenguinCheats — 6.02.2010 @ 4:56 pm

  12. he who has the gold, and in this case the budget purse strings, can move money around without concern. Will we please get some adults in charge in the Governor’s Office and the Legislature.

    Comment by tava tea — 8.17.2010 @ 12:47 pm

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