Updated: Nov 8, 2019
One of the many ways Nishna Productions, Inc. has tried to serve the community and provide employment for its individuals has been through the operation of the redemption center. In recent weeks, the redemption center, located at 210 Broadway St. in Red Oak, has had to close its doors during normal operating hours on several days. There has been an influx of redeemable items over the summer that has exceeded the volume the current employees can efficiently process while maintaining normal operations.
This is not the first time the redemption center has had to close to handle the volume of cans and bottles that have been turned in; it was closed for nearly a month last fall.
There is a very strong possibility the redemption center will soon close permanently. It is hard to conceive how closing is an option given how busy the redemption center always is. The tendency of the general public is to fault the workers at the center for not being capable of managing the work there because it is a known fact that NPI employs individuals with disabilities. This is absolutely not the case.
The actual reasons are fairly straightforward and are the same reason most businesses close: lack of human resources and money. It is hard to find workers willing and able to work there, and the center is costing NPI more money to keep open than what it is bringing in.
Just HOW is that possible? Allow me to elaborate with the following example:
On a recent Saturday, two volunteers spent two and a half hours sorting 3,960 cans. At one cent per can (see below), NPI will receive $39.60 for those 3,960 cans. If those volunteers had been paid minimum wage ($7.25/hour), they would have been paid $36.25 of the $39.60 received. Once FICA, Workers’ Compensation (WC) and Unemployment Compensation (UC) - all required taxes – are factored in, NPI would have paid out $39.88 for $39.60 worth of cans (see table).
However, Nishna Productions does not operate their redemption center on volunteers. There are currently three regular workers employed at the Redemption Center who earn between $8.50 and $9.74 an hour. Wages paid to workers with disabilities are based upon a prevailing wage obtained through surveying wages paid in other redemption operations. The current prevailing wage is $9.63. At that rate, NPI will pay out $52.97 for $39.60 worth of cans.
But NPI does not just process 3,960 cans a month. In fact, in June of this year, NPI processed 315,000 redeemable items. That is $3,150 worth of items. If it takes two workers two and a half hours to process 3,960 cans, it would take approximately 398 manpower hours to process the number of items NPI had in June. At the prevailing wage, that is $3,830.11 in wages plus $383.01 in taxes (FICA, WC and UC) for a total of $4,213.13, a loss of $1,063.13 for the month. That still does not include utilities, property and liability insurance and mortgage payments.
At that rate, it is clear the redemption center is costing NPI to remain open. If the redemption center does close, it will join the ranks of nearly 200 other centers in the state that have closed in the past decade. Redemption centers in rural Iowa are struggling to stay open, including nonprofits that collect cans to help employ developmentally disabled workers. Quite simply, they are losing money at only a penny a can. The failure of Iowa’s bottle bill, according to ISU economist Dermot Hayes, “is that it wasn’t indexed for inflation. If it was, the nickel deposit on alcoholic and soft drink beverage containers would be 17 cents and the one-cent handling fee would be three cents.”
But why? I did a little digging into the history of Iowa’s Bottle Bill, its successes and its challenges. I needed to understand how all the pieces fit together and how they impact NPI.
From the Legislative Guide, published by the Legislative Services Agency:
Beverage container deposit laws, also known as “bottle bills,” require a refundable deposit to be paid on certain beverage containers. The laws are designed to encourage a high rate of recycling of beverage containers. The frequently cited purposes for such laws include reducing beverage container litter and conservation of natural resources. Iowa is one of 10 states that has a bottle bill law in effect. (2010)
For the most part, Iowa’s bottle bill has achieved its objectives. Two years after the bill took effect in 1978, the Iowa Department of Transportation reported a 77 percent decrease in beverage container litter and a 38 percent decrease in total litter (Iowa DOT, Highway Division, April 1980, “Litter Survey”). On average, Iowans redeem 71 percent (1.28 billion) of our cans and bottles, which is far above the national average of 29 percent (http://www.iowadnr.gov/Environmental-Protection/Land-Quality/Waste-Planning-Recycling/Bottle-Deposit-Law). “For decades, evidence has shown that bottle bills are the single most effective form of litter control worldwide.” said Susan Collins of the Container Recycling Institute.
Interestingly, although created and regulated by the state legislature, no money is paid to or collected by government. A distributor sells product to a retailer, who pays the five-cent per item deposit to the distributor. The retailer then sells the product to a consumer, who pays the five-cent per item deposit to the retailer. The consumer, being environmentally-minded and wanting their money back, takes their empty container to a redemption center (or approved return center, such as select grocery stores), where they are refunded the five-cent per item deposit. Eventually, the distributor will collect the returned items from the redemption center and reimburse them the five-cent per item deposit the center paid the consumer. Additionally, the distributor will pay the center a one-cent per item handling fee. If that all just made your head spin, check out this illustration from the Iowa DNR:
If cans and/or bottles are not redeemed by the consumer, they are considered “unclaimed deposits.” In Iowa, unclaimed deposits are kept by bottlers and distributors. Using DNR’s recent statistic of 71 percent of redeemables actually being returned, the assumption is that the remaining 29 percent of containers (roughly 522 million) are NOT being redeemed – thus they are unclaimed deposits. A nickel each for those 522 million containers totals about $26.1 million. For repetition’s sake, that $26.1 million is not collected by the government, nor is it channeled into funding for the redemption program; it is retained by bottlers and distributors.
Among the ten states with bottle bills, seven have specific handling fees, ranging from one cent in Iowa to four cents in Maine and Vermont. What exactly does a “handling fee” cover?
The entire process can be a sticky, smelly mess. But it is much cleaner than it used to be and much cleaner for the state than the alternative of not redeeming.
Step 1: When a customer brings in a bag of 500 cans and bottles to the redemption center, what they see is a worker counting the items and sorting them between plastic and aluminum. The customer receives a check (or cash) for five cents per item and leaves the center. The actual process of recycling those items has just begun and the customer rarely sees all the steps that must be taken after they leave.
Step 2: Once a bag of sorted aluminum cans (or plastic bottles) is full, it leaves the counting area that the public sees and goes to the back area where it is dumped out and the cans (or bottles) are sorted. They are placed into cardboard flats based on brand (Pepsi, Coke, Budweiser, etc.) and by size (2-liter, 20-ounces, 12-ounces, etc.).
Step 3: When the flat is full, it is placed in a stack of matching flats on a table. Depending on the size of the item, a certain number of flats are required to fill a bag. For example, it will take more flats of 12-ounce plastic bottles than 2-liter plastic bottles to fill a bag.
Step 4: Once a bag is full, it is moved to the warehouse where it sits until the distributor picks it up.
That is a lot of work for a penny a can. Yes, one cent per can (or bottle) is what NPI receives from the companies that pick up the sorted bags. That rate was established by the state legislature in 1978 when Iowa’s Bottle Bill was passed. NPI (and every other company that takes in redeemables) pays out five cents an item. That means NPI is only gaining one cent for every item it takes in. Even with the large volume of cans (bottles) being taken in, NPI cannot make money at the redemption center, nor can it break even for that matter.
So, why haven’t the legislative changes been made? Bottle bills are introduced to the Iowa legislature nearly every session. Seven bills related to container redemption were filed during the 2019 Legislative Session alone; they rarely make it out of committee. Iowans overwhelmingly support the bottle bill. A 2017 poll conducted by J. Ann Selzer found 88 percent of active Iowa voters believe the bottle bill has been good for Iowa. A poll conducted in 2018 shows 30 percent of Iowans favor keeping the law the way it is, while another 27 percent want to expand it to include juice and water bottles. Again, why haven’t the changes been made? I can speculate, but that’s probably a topic for another blog.
Short of legislative changes, the only viable way to keep the redemption center open and available to the public at this time is to recruit volunteers to help offset the labor costs.
(If you want more information about Iowa’s bottle bill, visit www.iowabottlebill.com)