Iowa consumers throw away millions by forsaking nickel deposit on empty bottles

DES MOINES — Maybe unbeknownst to many Iowans, they have been discarding tens of millions of dollars one nickel at a time.

For decades, Iowans have been paying a 5-cent deposit on alcoholic and carbonated beverages sold in cans and bottles under a system designed to hold down litter and encourage recycling. But growing hurdles — some brought on by the COVID-19 pandemic — have slowed the recovery rate of containers from 93 percent in 2005 to about 71 percent in 2018, according to state calculations.

While data is sketchy at best, a 2018 report prepared for the Iowa Department of Natural Resources using waste studies at municipal landfills, beverage sales obtained from the Container Recycling Institute and solid waste tonnage data determined that Iowa consumers collected $57.1 million in deposits from returned containers and “lost” $32.3 million on containers that were not recycled.

Under Iowa’s system, distributors charge an extra 5 cents for each container delivered to retail businesses that sell beverages covered by the 1979 deposit law. The retailers add a nickel charge per container at the point of sale, after which the money is refunded by a retailer or redemption center when a consumer redeems empty containers and the “empties” are picked up by the distributor. The distributor then pays a nickel plus a 1-cent handling fee for each container received.

The 2018 study found distributors paid out $68.6 million to retailers and redemption centers and collected $89.4 million in deposits — which meant they pocketed about $20.8 million before costs and before sales of the recycled material, which pushed that total profit to nearly $30.7 million, the study found.

Dermot Hayes, an Iowa State University professor of economics and finance who wrote the 2018 “Modernizing the Iowa Bottle Bill” report, said no similar survey since has been conducted. But he noted Iowa’s recycling rate has declined by about 2 percent annually so that consumer “loss” likely is closer to $40 million on unredeemed containers — with a similar rise in the net “windfall profits” to distributors.

Groups including the Iowa Wholesale Beer Distributors Association and the Iowa Beverages Association challenged the study data, saying it was several years old and disputed whether the numbers truly reflected the investments, insurance, transportation and labor that goes into the process of redeeming and recycling containers.

Also, David Adelman, executive director of the Iowa Wholesale Beer Distributors Association, said the data doesn’t capture deposits paid in border areas for products not sold in Iowa, which he said is a growing problem.

He said referring to the unredeemed deposits as “lost” money “is kind of an unfair word because everybody knows that when they buy a container with a deposit, they are providing that 5 cents for the recycling opportunity and it’s their decision whether they want to claim that rebate or not.”

Iowa DNR officials say distributors are in the best position to calculate an actual redemption rate because they have both beverage sales data and an accurate count of the number of unredeemed containers. However, Adelman said such information is proprietary to each private business and as such is not available, saying “no other industry is asked by government to open up their books, so I think that’s why there’s that hesitation there with some of those numbers.”

Jon Murphy of the Iowa Beverages Association said disagrees with the assessment that distributors were reaping a “windfall,” given the “considerable” costs associated with their participation in the process.

According to the 2018 report, the number of glass, plastic and aluminum refundable carbonated containers sold in Iowa was pegged at about 1.79 billion with slightly more than 1.14 billion returned for deposit.

Iowa DNR officials report the percent of deposit beverage containers found in the waste stream at landfills during the 2017 Iowa Waste Characterization Study more than doubled from 2006. Also, the overall sales of deposit beverage containers in Iowa decreased in 2017 (1.842 billion) when compared with 2006 (1.923 billion), according to numbers obtained from the Container Research Institute.

At the time of his writing, Hayes said eroding elements of the law were causing “major distortions” and adversely affecting redemption centers and retailers “who have become increasingly opposed” to the law.

“Looking forward, the system is no longer sustainable,” he observed, noting there was an unanticipated “surge” in the sales of non-carbonated drinks like bottled water, sports drinks and flavored teas not covered by the deposit law that were being recycled at a rate of 26 percent.

Against that backdrop, state lawmakers again tried but failed during the 2021 session to make changes to the bottle deposit law — with proposals ranging from repealing it, to creating a comprehensive single stream recycling system, to revamping current provisions in various ways, to expanding it to cover more containers and raising the deposit to 10 cents to boost handling fees to make redemption centers more profitable.

Now, with an uneasy status quo that has seen some grocery, convenience and other retailers refusing to take returns and directing consumers instead to travel to redemption centers, donate containers to nonprofit organizations or toss them in their curbside recycling or garbage bins, some key players are warning the system is in danger of collapse without changes soon or tougher enforcement for scofflaws refusing to follow the statute’s requirements.

“You’ve got to have the will to make the changes and it doesn’t appear to be there,” said Sen. Pam Jochum, a Dubuque Democrats who has worked on the issue as both a House and Senate member since first arriving at the Iowa Statehouse in 1992.

Sen. Ken Rozenboom, R-Oskaloosa, who made a push in the Iowa Senate last spring for changes to the deposit law, came away disappointed that no compromise could be struck and that interests profiting from the status quo “are going to protect that until the cows come home.”

“My role in this was to try to get us off dead center and fix this thing instead of just talking about it,” he said, “to recognize the obvious weaknesses of that ancient policy and fix it.”

Rozenboom’s bill would have allowed grocery stores and other retailers to opt out of state requirements to accept empty, nickel-deposit beverage containers they sell effective July 1, 2022, if an authorized redemption center was within 20 miles of the business.

The measure also would change the redemption process for cans and bottles and would have the state's Alcoholic Beverages Division — rather than the distributors — oversee the redemption center reimbursements. Distributors opposed the provision, with Adelman and Murphy contending private companies are much more efficient and effective than government in running the operation.

“I think we’re the only state that has allowed the distributors to retain the unredeemed refunds,” said Jochum, who noted other states generally direct that into the general fund.

Rozenboom said his bill attempted to establish a separate fund administered by the Alcoholic Beverages Division to reimburse redemption centers and return proceeds of unclaimed containers to taxpayers. Senate File 470 called for changing the redemption process for cans and bottles by temporarily doubling the handling fee to 2 cents per container and then, starting in 2023, lowering it to 1.5 cents but allowing the centers to keep the scrap recycling value.

Jochum said she and other legislators have received complaints from Iowans frustrated that some businesses have refused to take empties, some citing COVID-19 even though Gov. Kim Reynolds’ proclamation temporarily suspending the program was lifted months ago.

“I would hope that perhaps the governor would remind all of these grocery stores and others that her proclamation was lifted almost a year ago and they really need to be taking the cans back if they’re going to sell the product,” she said.

Michelle Hurd, president of the Iowa Grocery Industry Association, said her members who are trying to maintain clean stores were frustrated that health and safety concerns over bringing unsanitary containers onto their premises was not addressed and that the law has not been uniformly applied and enforced — given that all dealers that sell covered beverages must redeem them but some have not — without consequences.

Also, she said there is supposed to be a crushed-can location in each county, but that’s not happening.

“You have a broken system. It needs to be decided if it’s the best system for Iowa,” Hurd said. “The bottle deposit law was put in place as a litter control measure and now we’re trying to make it be a recycling solution and that’s difficult.”

Most Iowans have access to recycling options, and a growing number of consumers is choosing the convenience of throwing cans and bottles into recycling bins, which she said could provide a funding solution to remove redemption from inside stores and help build a robust network of redemption centers across the state.

Back in March, Polk County District Judge Jeanie Vaudt tossed a challenge brought by the Iowa Grocery Industry Association to an Iowa DNR rule requiring retailers to redeem the nickel deposits on pop and beer containers. The association argued the agency did not have authority to require retailers to redeem deposit containers, but the court found the grocers' request would directly harm consumers and that such a significant change to the deposit law would be best left to the Legislature.

The trade group filed suit after the Iowa DNR rejected its petition to remove a consumer convenience standard. The rule requires that stores wanting to refuse to redeem the beer and pop cans and bottles they sell must sign an agreement with an approved redemption center no more than a 10-minute drive away.

Removing that standard would “essentially gut the consumer convenience standard,” according Cleaner Iowa, a group representing redeemers and recyclers.

Jessica Mazour of the Iowa chapter of the Sierra Club said she is concerned there are “recycling deserts” in parts of Iowa because retail stores have been refusing to take empties as the law requires and have been using the pandemic as a “false reason” after they’ve advocated for years to opt out of the process.

“If they were really concerned about COVID, they would still have their mask mandate requirements in their stores,” she noted.

While legislators have pushed tougher penalties and strict enforcement when it comes to protests, Mazour said, it is “kind of interesting” how they “pick and choose” to grant “wiggle room” in calling out businesses for failing to follow the bottle-deposit statute.

“I think it shows that our Legislature has lost touch with what Iowans want,” she said.

Jessica Reynolds, executive director of the Iowa County Attorneys Association, said “we’re back to the status quo before COVID about accepting bottles”: Iowa businesses that sell containers covered by the deposit law are required to redeem them unless they have made alternative arrangements that comply with Iowa DNR criteria.

Adelman said his association has proposed innovative recycling opportunities that could address retailers’ concerns, such as placing large containers in the parking lots of grocery stores where consumers could place bottles and cans subject to deposits and be provided a delayed reimbursement.

Murphy expressed hope that more talks would lead to some common ground next legislative session, adding “I don’t think that the bottle bill is in danger but certainly there’s room for improvement and we’ve been working on trying to be positive, constructive parts of that improvement.”

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