By HUNTER BISHOP
By HUNTER BISHOP
Tribune-Herald staff writer
An extra half-cent fee for beverages bought in redeemable cans and bottles will create an “accounting nightmare” for retailers, an industry spokesperson said Friday.
The half-cent increase is set to begin in September because consumers are recycling so many bottles and cans that the state deposit fund is being depleted and could run dry by 2014, the state Department of Health announced on Wednesday.
Each year, more than 900 million beverage containers are sold in Hawaii, according to the DOH, and as an incentive to recycle, its Hawaii Deposit Beverage Container Program places a 5-cent redeemable deposit on each beverage container sold which consumers get back when they return the containers to a redemption center. The state also collects an additional, nonrefundable 1-cent container fee for administration costs of the program.
The state law establishing the beverage container program allows the DOH to raise the administrative portion of the fee when consumers turn in more than 70 percent of all the redeemable cans and bottles that were sold. The 12-month period ending in June saw a 77 percent redemption rate, up from 76 percent in the previous year.
After using reserve funds to avoid an increase in each of the past four years, DOH officials said they could no longer risk the possibility of running out of money.
“The special fund is now too low to continue the program through 2014, and the current fee is not enough to build critical program reserves necessary to conduct essential operations,” said DOH Director Loretta Fuddy.
Beginning Sept. 1, the container fee will be 1.5 cents for administrative costs, boosting the entire fee on redeemable cans and bottles to 6.5 cents per beverage.
Therein lies the problem, said Lauren Zirbal, director of the Hawaii Food Industry Association, a Honolulu-based advocacy group for retailers statewide.
The extra half-cent will play havoc with retailers’ accounting, she said, and members are peppering her office with questions about how to charge their customers for it.
Small retailers and others who sell large quantities of canned or bottled beverages one at a time will be most affected, Zirbal said. Either the retailer charges 7 cents to cover the new fee, which would allow the retailer to pocket the difference at the consumer’s expense, or the retailer continues to charge 6 cents and finds another source of revenue to make up for the half-cent lost on the single-container transaction.
“Ultimately, the cost has to be passed on,” she said. “But it’s an accounting nightmare.” Most grocery stores operate on a one percent profit margin or less and cannot afford to absorb the cost of the increased fee, she said. “I don’t know how they’re going to account for it. How do you pass on a nonexistent currency?”
While consumers can expect to pay a little more for beverages beginning in September, recyclers should not be affected. Consumers will still be getting a minimum of 5 cents back for each can or bottle they redeem for recycling. Redemption centers are permitted to pay more than the minimum 5 cents to compete and encourage recycling.
Zirbal said the HFIA is disappointed that the DOH raised the fee. “I think there are other ways,” she said. Zirbal added that the DOH has not released results of audits that could help explain the shortfalls that are creating the current need for an increase.
More than 4.7 billion beverage containers have been recycled since the program began in January 2005, according to the DOH.
Email Hunter Bishop at hbishop@hawaiitribune-herald.com.