S.B. NO.














relating to the deposit beverage container program.





SECTION 1. The legislature finds that in 2005, the auditor conducted an audit of the deposit beverage container program. In that report, the auditor found that the department of health failed to verify that the payments made to the redemption centers coincided with the weight of recyclable materials that redemption centers sent to recyclers. Instead, the department was paying the redemption centers based upon the number of containers the redemption centers claimed to have accepted from consumers. In 2006, the department of health acknowledged the weakness and potential for abuse of this accounting system, and it proposed to reduce the possibility of over-paying redemption centers by switching to a back-end payment system where redemption centers would be paid based upon the weight of the recyclable material sent to recyclers.

The legislature further finds that in 2008 and in 2010, the auditor submitted second and third audit reports, respectively, of the deposit beverage container program. At the time of those reports, the deposit beverage container program had not yet implemented a back-end payment system. Those reports reiterated that payments to redemption centers were subject to fraud and abuse because they were based upon unverified or unsupported redemption numbers. In response to the second and third audit reports, the department wrote that it was considering implementing a back-end payment system.

In 2013, the auditor released a fourth audit report of the deposit beverage container program. This report found that, due to the department's failure to verify that redemption centers actually accept the beverage container to which they are seeking payment, the program made over-payments of $6,200,000 during fiscal years 2010 to 2012. Further, the department could not account for 7,500,000 pounds of recyclable material. The auditor again recommended that the department implement a back-end payment system, and the department again responded that it was considering implementing such a system.

The legislature finds that the deposit beverage container program's continuous failure to implement a back-end payment system has resulted in millions of dollars of waste.

Accordingly, the purpose of this Act is to implement the auditor's recommendation for the deposit beverage container program to use a back-end payment system.

SECTION 2. Section 342G-117, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) The handling fee shall be paid in addition to the refund value of each empty deposit beverage container. Payments for handling fees shall be calculated and paid by the department based on redemption center reports submitted to and verified by the department[; provided that there is no discrepancy in the reports.] pursuant to section 342G-119. The department [may choose to pay] shall calculate the payment of the handling fee and refund value on the basis of the total weight of the containers received by material type and the average weight of each container type[;], as demonstrated by documentation submitted to the department pursuant to section 342G-119(b)(4); provided that the deposit beverage container is physically received by the redemption center."

SECTION 3. Section 342G-119, Hawaii Revised Statutes, is amended to read as follows:

"342G-119 Redemption center reporting. (a) The

department shall pay certified redemption centers handling fees and refund values as described in section 342G-117, based on collection reports submitted by the redemption centers[.]; provided that if a report contains a discrepancy or conflict, or lacks the information required under this section, the department shall not make payment based on the nonconforming collection report until the discrepancy or conflict is finally resolved or the missing information required under this section is provided to the satisfaction of the department.

[All] (b) For each reporting period, each redemption [centers] center shall submit a collection report to the department that contains the following information on forms prescribed by the department[, which information shall include at a minimum]:

(1) The [number or] weight of deposit beverage containers of each material type accepted at the redemption center [for the reporting period];

(2) The amount of refunds paid out by material type;

(3) The [number or] weight of deposit beverage containers of each material type transported out-of-state or to a permitted recycling facility; and

(4) Copies of [out-of-state transport and weight receipts or] acceptance receipts from permitted recycling facilities[.] that indicate the weight of the deposit beverage containers of each material type. If the redemption center and the recycling facility are the same entity, copies of out-of-state transport and weight receipts, or documentation of end use accepted by the department, shall also be included.

(c) Any collection report submitted pursuant to subsection (b) that contains the information required by subsection (b)(1), (2), or (3) that conflicts with the information required by subsection (b)(4), shall include an explanation of the conflict.

(d) The department may deny payment for any collection report that contains a discrepancy or insufficient information as determined by the department.

(e) The requests for payment pursuant to this section shall be no less than two times per month."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on January 1, 2016.








Report Title:

Deposit Beverage Container Program; Payments to Redemption Centers



Requires the DOH to pay recycling redemption centers based upon only the weight of containers the redemption centers submit for recycling and not the numbers of containers the redemption centers report were redeemed by consumers.




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