Michiganders passed up $108 million in bottle deposits amid COVID closures

Michigan beer and pop drinkers missed out on $108 million in bottle deposit money last year, as pandemic safety policies shuttered bottle return rooms and forced people to toss empties into garbage or recycling bins, or stash them away to return later.

The numbers, released Tuesday, reflect a steep downturn in Michigan’s bottle bill recycling rate and a huge one-time revenue boost for a state environmental cleanup fund and beverage retailers, which split the money from those unclaimed dimes.

Now, the question becomes: How to spend the extra cash? 

Related:

• Beverage companies want cut of Michigan bottle bill windfall during COVID
• Michigan businesses want cut of millions from uncollected pop returnables
• Michigan may get through COVID-induced bottle backlog sooner than expected

State environmental officials say it’s too early to call it a windfall. That’s because some portion of the money that showed up on the state’s year-end balance sheet will likely be offset by lower-than-average revenue next year, as Michiganders liquidate stockpiles of empties that they didn’t get around to returning in 2020.

The glut of bottle bill revenue comes as a GOP-majority House budget recommendation proposes slashing the Michigan Department of Environment, Great Lakes and Energy’s overall budget by nearly 70 percent — a move that is unlikely to gain approval from Gov. Gretchen Whitmer, a Democrat.  

Under current law, 75 percent of revenue from unredeemed bottles — which in 2019 totaled $43 million — goes to the state Cleanup and Redevelopment Trust Fund, where much of it supports EGLE’s efforts to clean up and redevelop contaminated sites. The other 25 percent goes to retailers who sell bottled drinks to offset their cost of collecting returns.

Last year, the state’s cut amounted to $32.2 million. This year it’s more than double that, at $81 million.

But EGLE Deputy Director James Clift said this year’s big number is deceiving. 

It’s anybody’s guess how many Michiganders still had stockpiles of cans in their garages at year’s end, then chose to return them this year, Clift said. If significant numbers of people return bottles in 2021 that they bought in 2020, it will drive next year’s revenue from unclaimed bottles well below average, leaving the state short on money to pay for cleanup efforts and staff salaries. 

“We’re worried that people will see that large amount of money (this year), try to spend it, but then we’ll be left with nothing next year,” said James Clift, deputy director of the Michigan Department of Environment, Great Lakes and Energy.

But beverage industry officials question that logic.

Michiganders had more than six months to return bottles they had stashed away while Michigan retailers were banned from accepting empties at supermarket redemption machines and party store return windows, said Derek Bajema, president of the Michigan Soft Drink Association. Given that, Bajema said, anyone who wanted to redeem their deposit has probably done so.

“Can you imagine what kind of critters you were inviting, if you still have those (empty bottles and cans) in your garage or your basement?” Bajema said.

Still, the combined uncertainty caused by COVID bottle bill revenue quirks and proposed budget cuts has Michigan environmental regulators urging a cautious approach to spending the extra cash.

If the budget were to pass as written, Clift said it would result in “devastating” staff cuts throughout EGLE, including in the contamination cleanup program. Overspending the COVID-19 revenue windfall would make matters worse.

As a result, EGLE officials want to set the extra cash aside in case it’s needed to offset a funding shortage next year.

But beverage industry groups and their allies in the legislature favor a different approach. They are pushing a two-bill package that would allow the state treasury department to use some of the COVID-19 windfall to compensate beer and pop distributors for their role in the bottle and can recycling program.

The first bill in the package, sponsored by Rep. Jim Lilly, R-Park Township, would amend the state Income Tax Act to give distributors a half-cent-per-bottle tax credit for every returnable container they sell. The House Fiscal Agency estimates that would reduce state general fund revenue by $20 million per year.

A second bill, sponsored by Rep. Kevin Hertel, D-St. Clair Shores, would allow the treasury department to divert money from the cleanup fund to pay distributors through 2022, if total revenue from unredeemed empties surpasses $50 million in any of those years.

House lawmakers passed both bills Tuesday, which tees up additional scrutiny in the Senate. Industry groups lauded the passage.

Environmental groups and the Whitmer administration oppose the legislation. In an interview with Bridge Michigan on Tuesday, EGLE Senior Deputy Director Amy Epkey said money from the bottle bill makes up about a third of the department’s cleanup budget.

Michigan already has far too little money to clean up all of the state’s roughly 24,000 contaminated sites, which range from the infamous “green ooze” at Oakland County’s Electro-Plating Services, to the Allied Paper site that has tainted the Kalamazoo River with PCBs, to chemical contamination at old gas stations and dry cleaners across the state, Epkey said.

“We just really are concerned about making sure we're addressing those sites in communities and protecting public health,” she said.

Industry representatives have said beverage distributors collectively spend $60 million per year to administer the recycling program, including operating and maintaining the trucks and machinery to collect empties from grocery stores, crush them to bits, and cart them off to recycling plants. But unlike groceries and other retailers, they don’t get paid for their efforts.

They argue the COVID-19 windfall presents an opportunity to cut them in without reducing budgets for state cleanup programs.

“Our members have spent millions of dollars to purchase large, expensive equipment — which takes up valuable warehouse space — to process returnables without seeing a dime from the state,” Michigan Beer & Wine Wholesalers Association President Spencer Nevins said in a statement. “It’s time to right that wrong to ensure Michigan’s bottle deposit program remains a model for other states.”

But environmental groups note that bottle distributors can, and likely already do, factor those expenses into the cost of a bottle of pop.

“Essentially what they’re asking for is $20 million to say ‘good job, you're following the law as written,’” said Sean Hammond, policy director with the Michigan Environmental Council. 

The disagreement over how to spend the windfall comes amid longstanding political debate about the future of Michigan’s bottle bill. 

In addition to the industry-backed bills, Sen. Sean McCann, D-Kalamazoo, and State Rep. Christine Morse, D-Portage, are sponsoring bills that would expand the bottle bill to include water bottles and other non-carbonated beverages. Those bills would also create a mechanism to pay distributors, and would dedicate a portion of revenue from unredeemed deposits to investigating bottle return fraud.

State Reps. Mike Mueller, Tim Sneller, Andrew Fink and Tyrone Carter plan to file a separate bill package that would ramp up enforcement of bottle return fraud. That fraud, made infamous in an episode of the TV show Seinfeld, often occurs when people smuggle cans in from other states, hoping to cash in on Michigan’s highest-in-the-nation deposit.

As of Tuesday, McCann and Morse’s bills were still in committee. The fraud bills are currently being circulated with potential co-sponsors.

Hammond, of the environmental council, expressed frustration with the flurry of one-off bills, and said his group is instead advocating for a comprehensive effort to reform the bottle bill, tackling issues such as compensation, fraud and which bottles are considered “returnable” in one legislative package instead of a series of individual bills.