FISCAL NOTE
FUND(S):
Sources of Revenue:
Special Fund
Legislation creates:
A New Program,A New Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
Based on the assumptions detailed below, the proposed legislation would result in a net increase to State revenues amounting to about $6 million annually. However, if the redemption rate of returnable containers substantially exceeds estimates, a net loss to the State could result.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2009
Increase/Decrease
(use"-") |
2010
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
47,130,000 |
47,110,000 |
47,110,000 |
| Personal Services |
2,100,000 |
2,100,000 |
2,100,000 |
| Current Expenses |
900,000 |
900,000 |
900,000 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
30,000 |
10,000 |
10,000 |
| Other |
44,100,000 |
44,100,000 |
44,100,000 |
| 2. Estimated Total Revenues |
53,000,000 |
53,000,000 |
53,000,000 |
Explanation of above estimates (including long-range effect):
A minimum of 30 additional employees will be required to ensure compliance with the proposed legislation, to administer collections, to issue payouts, and to issue and administer grants. Current Expenses account for additional office space, supplies, utilities, travel, and other associated costs. Computer equipment and systems will have to be purchased and periodically replaced. These administrative costs will total about $3 million annually.
Moving on to the redemption process itself, the following assumptions inform our calculations: (1) there are approximately 1 billion qualifying beverage containers sold in West Virginia annually; (2) according to a recent study by the Beverage Packing Environmental Council, about 6% of containers are used for on-premises consumption in businesses such as hotels, bars, and restaurants, on which the higher .10 deposit will be collected, as opposed to the .05 deposit imposed on consumers purchasing beverages from retail dealers; and (3) the overall redemption rate in jurisdictions with similar laws has proven to be in the neighborhood of 70%. For simplicity's sake, we have assumed a constant redemption rate from Day One, though it may be the case that the true rate will be somewhat lower the first year or so as the public becomes fully aware of the law. We have also assumed that the redemption rate will not vary between "consumer" containers and "business" containers. Although this latter assumption may not be realistic (businesses will probably be more efficient at redemption and the higher deposit will doubtlessly translate to more containers being returned), the bottom line is unlikely to be significantly affected given the relatively small number of business containers in relation to the total. The probable difference would be difficult to quantify in any event. Thus,
TOTAL ANNUAL NUMBER OF CONTAINERS: 1,000,000,000
OFF-PREMISES CONTAINERS: 940,000,000
(x .05) $47,000,000
ON-PREMISES CONTAINERS: 60,000,000
(x .10) $ 6,000,000
GROSS ANNUAL COLLECTIONS FROM DEPOSITS $53,000,000
OFF-PREMISES CONTAINERS RETURNED
(x .70) 658,000,000
(x .06) (including .01 handling) $39,480,000
ON-PREMISES CONTAINERS RETURNED
(X .70) 42,000,000
(X .11) (including .01 handling) $ 4,620,000
TOTAL ANNUAL RETURNS/HANDLING: $44,100,000
ANNUAL NET DEPOSIT INCOME: $ 8,900,000
Under this model, the State would not suffer negative cash flow in the redemption process until and unless the overall redemption rate exceeds 84%. However, taking into consideration the $3 million annual administration costs, the State would sustain a small net operating loss at a redemption rate just in excess of 79%.
Memorandum
Person submitting Fiscal Note: Raymond S. Franks II, DEP General Counsel
Email Address: Raymond.S.Franks@wv.gov