The Proposed Tennessee
Deposit-Return Legislation

Note: The legislation described below is a working draft only and cannot be considered "official" until its sponsors formally introduce a final version in the legislative session that begins January 8, 2019. In the meantime, advocates will be working to educate legislators and legislative candidates, enlist business, organizational, local government and individual support, talk to potential redemption center owners (especially nonprofits), and otherwise ensure that when the bill is ready for hearings, the votes will be there. Please go to our Get Involved page to join that effort.

TITLE

"The Tennessee Deposit Beverage Container and Community Recycling Act of 2019" 
 

CHIEF SPONSORS (2018)

In the Senate
Prime sponsor Sen. Frank Niceley (R-Strawberry Plains)

In the House
Prime sponsor Rep. Bo Mitchell (D-Nashville)
 

TO READ THE LATEST DRAFT

NOTE: The attached PDF is a working draft only. The legislation to be filed in January 2019 will look similar but there may be additional changes in the meantime.

 

Key Features of the Proposed 2019 TennCan Bill

•    The deposit for all covered beverages is 5 cents and is fully refundable. 

•    The deposit applies to most beverages in sealed containers made of glass, plastic or aluminum / metal, regardless of size, containing soft drinks, beer and other malt beverages, plain, flavored and enhanced water, energy and sports drinks, enhanced drinks not marketed as nutritional supplements, iced teas, iced coffees and juices. It does not apply to milk/dairy, wine or liquor. Here in Tennessee, that amounts to more than five billion cans and bottles every year.

•   Returns are to redemption centers. Unlike in the old days (and unlike deposit programs today in some other states), Tennesseans won't redeem their empties at the corner market or grocery store (unless these places choose to open or host their own redemption centers). Instead, we'll take them to any of hundreds of mostly small, independent operations across the state known as certified redemption centers. The role of the redemption center (and its expanded version, the redemption center depot) is to accept all containers on which the Tennessee deposit has been paid (indicated by TN5¢ on the label); calculate the quantity (by hand-count, weight or electronic scan); sort them by material and/or color (not by brand); issue the appropriate refund (by cash, redeemable credit slip or donation to a designated nonprofit or community cause); compact them (if authorized); and put them in a secure location to await purchase and transport by a participating scrap processor, who also reimburses the 5-cent refunds paid out by the center. (Note: Some redemption centers will be dual-certified as scrap processors.) In return for performing these services, redemption centers keep the revenue they earn from selling the sorted glass, plastic and aluminum, plus they receive an "overhead allowance" of one cent per container to defray operating costs. The allowance comes out of the unclaimed deposits and moneys accrued in the program fund.

•    Bottlers have nothing to do with handling the empty containers. Unlike in some deposit programs, beverage distributors under the Tennessee bill have no role whatever in picking up, transporting, recycling or otherwise handling redeemed beverage containers. This is done by "certified processors" (scrap buyers, material recovery facilities, curbside recyclers and the like) who have been certified by the program to handle this phase of the deposit-return system. The role of certified processors is to visit area redemption centers on a regular or as-needed schedule, accept all of their redeemed containers, verify quantities and compliance , issue payment within ten business days (deposit + overhead allowance + scrap value), submit to the program fund an invoice that includes a transaction report; and ensure that the processed (baled, crushed, etc.) containers are sold to willing buyers. The program fund has ten days to pay the invoice along with an "administrative allowance" of one-tenth of a cent per container to defray bookkeeping costs.

•    Redemption centers may be owned by any entity meeting certification requirements, including individuals, nonprofits, businesses, scrap yards, processors, manufacturers, MRFs, curbside recyclers and local governments, including the county convenience centers where many Tennesseans already take their household recyclables.

•    Every redemption center in Tennessee must either be a nonprofit entity, or it must have a "beneficial relationship" with at least one such organization or local cause. "Beneficial relationship" will be defined during rulemaking, but it can range from sponsoring donation bins for the library or animal shelter, to hosting bottle drives for the Little League or school marching band, to offering supervised work opportunities to individuals with special needs. 

•    The program will give particular assistance to nonprofit groups wishing to open and operate redemption centers.

•    Redemption centers may be supercenters known as depots. "Depots" are enhanced redemption centers that have been approved to accept nondeposit glass (at a minimum) and other recyclables such as milk jugs or cardboard. Such centers will coordinate with, and may receive assistance from, local, state or private recycling programs.

•    Management by a third-party contractor is possible. Under the proposed legislation, TennCan will be managed as follows: Overall management lies with the Department of Environment and Conservation (TDEC); day-to-day operations are overseen by TDEC's Division of Solid Waste Management; accounting functions, including management of the program fund, are the responsibility of the Department of Revenue; and rulemaking authority is shared between the Department of Revenue and the Underground Storage Tanks and Solid Waste Disposal Control Board. However, the bill also provides that one of more independent third-party agents may be contracted to carry out these functions, with expenses paid by the program fund.

•    The program ensures the uninterrupted, undiminished funding of Tennessee's existing litter program. Since 1981, Tennessee's beer and soft drink industries have been paying a pair of "litter taxes" (proposed by them in lieu of a deposit on beverage containers) that together raise between $5 million and $6 million a year to fund Keep Tennessee Beautiful as well as county litter education efforts and litter crews from the county jails. Collectively known as the "county litter grants," the program has become extremely popular over the years, putting school kids and communities to work on beautification projects and using inmate labor to clean more than 20 million pounds of litter annually from hundreds of miles of county roads. However, due to a poison-pill provision in the 1981 law, the taxes that fund the program will automatically be revoked should Tennessee pass a mandatory container deposit. To keep the program going, the TennCan legislation stipulates a new "litter-grants fee" of 1/8 cent per container, which is equivalent to what the state collects now via the two existing taxes. (The beer companies pay 50 cents per 31-gallon barrel of beer and the soft drink bottlers pay 0.4 percent of gross receipts.) Everything else about the program will stay the same: The Beautification Division of the Tennessee Department of Transportation will continue to administer it; the funds will be turned over to TDOT every fall as they are now; and moneys will be distributed to the counties and to Keep Tennessee Beautiful according to the same formula and schedule as they are now. 

•     An advance on the litter grants fee pays for start-up costs. In order to make the annual litter grants payment to TDOT during the start-up period, as well as to cover TennCan's other start-up costs, the legislation requires distributors to pay an advance on the litter grants fee. The advance is 1/4 cent per container sold for nine months starting on October 1 after passage, after which it drops to 1/10 cent for the next three fiscal years, at the end of which the advance will have been fully recouped by the distributors and the litter grants fee will stabilize at 1/8 cent.

•    The program may accept and actively pursue outside grants and donations. The bill allows the fund to accept and pursue donations from public and private sources—for instance, a manufacturing trade group or the EPA. This provision allows recycling advocates and beneficiaries of the program to support its operations and keep fund levels healthy without mandating user fees. It also ensures the program can seek special funding for a variety of program enhancements, from market development for recyclables, to training programs for nonprofits. 

•    The program is almost entirely self-supporting. The costs of TennCan, including the costs of administering the program, operating hundreds of independent redemption centers and compensating processors for acting as pickup agents and bookkeepers, will come almost entirely out of two main sources of revenue: the scrap value shared by the redemption centers and the processors; and the roughly 15 to 20 percent of unclaimed deposits used mainly to pay the 1-cent overhead allowance to redemption centers.  The scrap revenue, of course,  two sources, supplemented by interest, grants, donated refunds and other incidental sources, should allow the program to cover its expenses for at least the first five years, including paying redemption centers their e. However, if Tennessee's collective redemption rate surpasses 80 percent, the unclaimed deposits alone won't be able to fully cover the one-cent overhead allowance that provides redemption centers with a reasonable profit while cushioning them against fluctuations in commodity prices. Therefore, the 2019 TennCan legislation requires that beverage distributors may periodically have to supplement the fund with an "overhead support fee." The amount of this fee is as follows: If the redemption rate in the previous quarter was more than 80 percent (but less than or equal to 85 percent), the fee for the upcoming quarter will be 1/4 of a cent per container. If the redemption rate was more than 85 percent, the fee will be 1/2 of a cent. If the redemption rate was more than 90 percent, the fee will be 3/4 of a cent. And if it was more than 95 percent, the fee will be one cent. For the record, very few 5-cent deposit programs achieve even 80 percent redemption. It's entirely possible that in many quarters, Tennessee's beverage distributors will pay no fee at all. But if they do, surely the case can be made that recovering and reusing more than 80 percent of their packaging is worth it—if not to them, then to their consumers, 80 percent of whom support a deposit law.

•    The bill ensures a variety of redemption options. In addition to storefront redemption centers, the bill authorizes "reverse vending machines," mobile redemption services, "drop-and-go" satellite kiosks (which funnel empties to a centralized automated processing site) and "microsites" (attended rolloff trailers typically located outside grocery stores or other retailers). Every redemption center must meet various criteria for location, hygiene, hours of operation, etc., in order to become and remain certified by the program.

•    The bill contains innovative penalties for cheating and rewards for being honest. Fraud has never been a major problem with bottle bills, probably accounting for less than 2 percent of the roughly 45 billion containers redeemed across this country each year. Nonetheless, the Tennessee bill takes some innovative steps to minimize cross-border returns and other fraudulent activity. For instance, the fine for knowingly trying to redeem more than 24 noncompliant containers (e.g., containers purchased before the law went into effect) is a whopping $25,000 or $100 per container, whichever is greater. And if a redemption center or processor detects the fraud and the case is successfully adjudicated, the vigilant party is "rewarded" with half of any fines collected, less court costs.

•    The bill makes provisions to assure coverage. In the event an area is deemed "underserved" by redemption locations (as defined during the rulemaking process), the bill stipulates that the program is responsible for seeing that one or more redemption centers be established in the area. Microsites (attended redemption trailers that fit into a single parking space, typically outside a host grocery store) are a good option in such situations.

•    The bill may provide extra money for recycling and litter control. The bill stipulates that any moneys in the program fund that are not required to fund the program may be used to provide grants to local governments for solid waste management, recycling, litter control and related activities. At no point may program funds revert to the state's treasury (general fund).