Michigan businesses want cut of millions from uncollected pop returnables

As Michiganders continue to liquidate stockpiles of returnable bottles and cans amassed during the coronavirus shutdown, beverage industry officials are pushing for a cut of the deposits.

At a press event Wednesday, they advocated for legislation that would give beverage distributors a portion of the multimillion-dollar pool of uncollected returns that now goes mostly to state environmental programs.

Related:

• Michiganders passed up $108 million in bottle deposits amid COVID closures
• Beverage companies want cut of Michigan bottle bill windfall during COVID

Michigan retailers resumed accepting returns on June 15 after a shutdown aimed at preventing the spread of COVID-19. Since then, long lines and limits on per-customer returns have cropped at in-store recycling facilities.

Beverage distribution and processing industry representatives who hosted a call with reporters Wednesday estimated Michiganders stockpiled more than $80 million worth of returnable containers that will take six months to process.

They pushed for legislation that was moving in the House before the virus hit Michigan in March. The bills would change how Michigan spends the money it collects from beer and pop drinkers who never return their bottles to recoup their dimes.

Under current law, 75 percent of that pot — which last year totaled nearly $43 million — goes to the state Cleanup and Redevelopment Trust Fund, where much of it supports the Michigan Department of Environment, Great Lakes & Energy’s efforts to clean up and redevelop contaminated sites. The other 25 percent goes to retailers to offset their cost of collecting returns.

The legislation would dramatically tweak the formula, send 50 percent of the pool to the state, keep retailers’ share at 25 percent, give 20 percent to beverage distributors and allocate another 5 percent for law enforcement to combat recycling fraud.

The package of legislation would also increase criminal penalties for recycling fraud from $1,000 fines to up to $35,000 or higher fines and up to 20 years in prison for distributors engaged in fraud.

Speaking at a Zoom news conference Wednesday, industry representatives argued the system unfairly sticks them with the cost of implementing Michigan’s beverage recycling program.

“The current law doesn’t require [the state] to invest that money back into the infrastructure of the bottle bill,” said Spencer Nevins, president of the Michigan Beer & Wine Wholesalers Association, pointing to trucks that collect returned bottles from retailers and equipment that sorts and crushes them for recycling.  

The COVID-19 shutdown and resulting backlog in the recycling system, he said, has shown that “the infrastructure is not there to handle that large of an influx of containers.”

Officials within the Michigan Department of Environment, Great Lakes and Energy oppose the legislation, which they say would leave them with fewer resources and staff to clean up contaminated sites across the state.

“Michigan has approximately 24,000 contaminated sites, and resources to only fully address a small percentage of them,” a statement from agency officials to Bridge on Wednesday noted. “The loss of unclaimed deposit dollars will further diminish the state’s ability to protect the environment and keep Michiganders healthy.”

Environmental groups also oppose the package. 

Sean Hammond, policy director for the Michigan Environmental Council, said his group supports the general idea of providing funding for recycling infrastructure, but not if it strips money from the state’s cleanup program without a plan to backfill it. 

Citing the “green ooze” that seeped onto I-696 in Madison Heights from the closed Electro-Plating Services facility in December — an incident Gov. Gretchen Whitmer blamed in part on “critical underfunding” that has reduced the state’s ability to police industrial contamination — Hammond said the bottle return money is critical for cleaning up similar sites across Michigan. 

“We’re happy to talk about changes, but we need to make sure EGLE maintains the spending power of this money going forward,” Hammond said. 

The package’s supporters argued EGLE would recoup that lost revenue through new law enforcement efforts to address fraud that siphons untold dollars as some seek to cash in on Michigan’s highest-in-the-nation 10-cent deposit. 

Ten states nationwide have bottle returns, and those that do typically collect 5 cents per container although some collect 15 cents for liquor or wine bottles.

Bottle return fraud was made infamous in a “Seinfeld” episode where Kramer and Newman hatched a plan to transport cans from New York to Michigan, hoping to cash in on the state’s higher deposit.

Nevins could not quantify how much Michigan’s recycling system loses to fraud, nor how much more revenue Michigan stands to receive from unclaimed deposits by reducing fraudulent redemptions. But Derek Bajema, president and CEO of the Michigan Soft Drink Association, said Kramer-level fraud is "quaint" in comparison to today's fraud and abuse.

In one case that made headlines in 2017, a Flint man bought aluminum cans from Indiana, which has no bottle bill, and returned them to Michigan in a scheme prosecutors say netted him $10,000 over three years.

Some news sites have claimed returnables fraud costs Michigan $10 million per year, but the state itself has said the cost of fraud is unknown.

Hammond, of Michigan Environmental Council, said he wants to see an audit that quantifies fraud’s impact before diverting money.

“We haven’t seen numbers that would make us believe this fraud is so significant, it would change the [state revenue] numbers dramatically,” he said.

Separate legislation sponsored by Kalamazoo Democrats Rep. Jon Hoadley and Sen. Sean McCann would expand Michigan’s deposit to water bottles and other non-carbonated beverages. But Nevins argued the COVID-19 return backlog makes it clear that such an expansion would be impossible for current bottle return infrastructure to handle.

“Our view is, invest in the system, get the infrastructure built back up and healthy, get fraud under control, and then let’s sit down and have a discussion about expansion,” he said.

Neither piece of legislation has budged for months. It’s unclear whether either will regain traction as COVID-19 continues to dominate the legislative agenda.