Date Requested:February 24, 2005
Time Requested:01:55 PM
Agency: Natural Resources, Division of
CBD Number: Version: Bill Number: Resolution Number:
2005R580 Intro SB273
CBD Subject: Recyclable Containers Required
FUND(S)
Sources of Revenue
Special Fund
Legislation creates:
A New Program

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

    According to the WV Citizens Action Group approximately 700 million beverage bottles are sold in West Virginia each year.
    
    
    During the start up phase of this program, revenues generated from this program are expected to range from $10,000,000 to $20,000,000 annually, depending on the consumer redemption rate. Once the program has been established and the redemption rates start to exceed 77%, the State’s annual liability to the redemption centers for handling fees are expected to exceed annual revenues.
    
    
    Costs associated with ensuring compliance and accountability of the redemption centers through audit procedures are expected to be $500,000 annually. This is primarily additional audit staff and related overhead costs of employing new auditors.
    

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2005
Increase/Decrease
(use"-")
2006
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 370,000 500,000 500,000
Personal Services 310,000 420,000 420,000
Current Expenses 30,000 75,000 75,000
Repairs and Alterations 0 0 0
Assets 30,000 5,000 5,000
Other 0 0 0
2. Estimated Total Revenues 10,360,000 19,950,000 -4,620,000
3. Explanation of above estimates (including long-range effect):
    Additional staff of six to ten employees will be required to ensure compliance and deter false reporting by conducting quarterly audits on the reports submitted by the redemption centers. Current expenditures include additional office space, office supplies, utilities, travel, and other costs related in carrying out these duties. Equipment, specifically computer equipment, will be required to efficiently conduct the audits.
    
    During FY2005, an estimated 80% of the deposits paid for bottles are not expected to be redeemed by consumers. After the handling fees are paid to the redemption centers, approximately $10,360,000 will remain in the Treasurer’s account. FY2005 redemption rates and bottle sales are based on a quarter year’s program operation and minimal public awareness of the program at this point. FY2006 is expected to show an increase in the redemption rate to as high as 55%. Causing approximately $19,950,000 (for a full year’s program operation) of net deposits to remain in the Treasurer’s account. However once the program is fully implemented and the public is made aware of it, redemption rates are expected to parallel other states with similar programs, in which the redemption rate exceeds 80%. Once the redemption rate reaches 77%, due to the additional $.03 processing fee, the State begins losing money annually, creating a liability owed to the redemption centers. (See Attached Spreadsheet).
    
    EXPLANATION OF CALCULATIONS
    
    FY2005 (partial year) Deposits Collected From Public ($.10 per bottle) $ 14,000,000.00
    
    Total Number of Bottles Sold by Retailers 140,000,000
    
    Expected Redemption Rate 20%
    
    Total Bottles Expected to be Redeemed 28,000,000
    
    Amount Per Bottle Paid to Redemption Centers $ 0.13
    
    Amount Owed to Redemption Centers $ 3,640,000.00
    
    Amount Remaining in Treasurer's accounts $ 10,360,000.00
    
    FY2006 Deposits Collected From Public ($.10 per bottle) $ 70,000,000.00
    
    Total Number of Bottles Sold by Retailers 700,000,000
    
    Expected Redemption Rate 55%
    
    Total Bottles Expected to be Redeemed 385,000,000
    
    Amount Per Bottle Paid to Redemption Centers $ 0.13
    
    Amount Owed to Redemption Centers $ 50,050,000.00
    
    Amount Remaining in Treasurer's accounts $ 19,950,000.00
    
    FY2007 (Full Implementation) Deposits Collected From Public ($.10 per bottle) $ 70,000,000.00
    
    Total Number of Bottles Sold by Retailers 700,000,000
    
    Expected Redemption Rate 82%
    
    Total Bottles Expected to be Redeemed 574,000,000
    
    Amount Per Bottle Paid to Redemption Centers $ 0.13
    
    Amount Owed to Redemption Centers $ 74,620,000.00
    
    Amount Remaining in Treasurer's accounts $ (4,620,000.00)
    
    BREAKEVEN POINT Deposits Collected From Public ($.10 per bottle) $ 70,000,000.00
    
    Total Number of Bottles Sold by Retailers 700,000,000
    
    Expected Redemption Rate 76.923%
    
    Total Bottles Expected to be Redeemed 538,461,538
    
    Amount Per Bottle Paid to Redemption Centers 0.13
    
    Amount Owed to Redemption Centers $ 69,999,999.98
    
    Amount Remaining in Treasurer's accounts $ 0.02
    
    The Breakeven Point would allow the handling fees to be paid to redemption centers but would not provide any funds toward the other programs listed in the bill.
    
    
    
    
    
    
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Memorandum
Person submitting Fiscal Note:
Keith Wilson
Email Address:
kwilson@dnr.state.wv.us
    This bill is designed for self depletion. The more successful this program becomes, less revenue is diverted to the State to operate the intended programs and at the same time causes a significant liability to the State to the redemption centers.
    
    
    The bill does not indicate whether the funds accumulated in the Community Litter Control Fund can be used to cover future liabilities incurred due to a high redemption rate.