The Honorable Kenyan R. McDuffie, Chairperson
Committee on Business and Economic Development
Council of the District of Columbia
1350 Pennsylvania Avenue, NW
Washington, DC 20004
Dear Chairperson McDuffie and Councilmembers Allen, Bonds, Felder, and Pinto:
On behalf of National Taxpayers Union (NTU), America’s oldest taxpayer advocacy organization, and its supporters in the District of Columbia, I write to offer our comments regarding Bill 26-58, the Recycling Refund and Litter Reduction Amendment Act of 2025 and its underlying concepts, both of which we understand will be topics in the Committee’s hearing today. The fact that Bill 26-58 has the sponsorship of so many Councilmembers underscores its potential for rapid passage and the importance of making sure the details of the bill are thoughtfully vetted through the hearing process.
If properly structured to maintain and stress fiscally responsible, free-market principles, this legislation could save taxpayer dollars, improve waste management and recycling efficiency, create or support jobs, and strengthen the local economy. Doing so will entail diligence to ensure the taxpayers of the District of Columbia, NTU’s home, are first in line to benefit from Bill 26-58.
Bill 26-58 would combine the twin concepts of Extended Producer Responsibility (EPR) and a Recycling Refund program (RR) in a single package. Under model versions of the RR program, consumers would pay a deposit fee when purchasing beverage containers from commonly recycled materials such as plastic, aluminum, or glass. Consumers would then return the containers to the place of purchase and receive their full refund. The program would be managed and paid for by a private sector entity, therefore not adding to the District’s budget. The private sector entity would provide day-to-day management to ensure the program operates properly and efficiently.
As a pro-taxpayer advocacy organization, NTU is especially sensitive to several concerns over Bill 26-58 that we believe can and should be addressed as the legislation is modified through your Committee in preparation for consideration with the full Council. These include:
Maintaining the PPP model. The most attractive structural feature of a sound EPR/RR bill is its creation of a Public-Private Partnership (PPP), which brings together business acumen, cost efficiency, risk transfer from taxpayers to investors, the potential for greater transparency, and more nimble management. Committee members should be wary of proposals that would skew the balance of Bill 26-58 away from the PPP model in favor of one where government is the dominant actor. It is vital to ensure the business functions of the two EPR and RR entities are the responsibility of the private sector (through the creation of a nonprofit beverage container stewardship organization) so that the public sector role is more properly limited to oversight and environmental safety.
If anything, our experience with other PPP proposals would recommend that the language of Bill 26-58 be tightened to clarify the limits of the Department of Energy and Environment’s (DOEE’s) discretion over practices of the PPP. For example, lines 311-312 of the bill text state that, in setting the fee structure for distributors, the beverage container stewardship organization will, among other criteria, consider “any other factor DOEE determines is necessary to support the program.” The language should at minimum require DOEE to justify to the Council (and through public notice and comment) any such factor based on the strict fiscal needs of the program as it is structured in statute. “Mission creep” that redefines the function of the stewardship organization and then hastens more fees should be avoided at the outset.
Remaining focused on businesslike practices. An EPR system should be able to cover producers of all or most recyclable materials, provided that each producer fee is set by market principles. These include a fee mechanism consisting of net recycling costs for each distinct material after scrap value is accounted for, as well as properly apportioned refusal rights for recycled materials. The fee must be periodically evaluated and adjusted for market conditions. Bill 26-58 should maintain or strengthen these principles as the legislation advances.
Protecting against deposit fraud. In California, Connecticut, and other states with deposit programs, policing fraud (especially attempts to redeem out-of-state containers for refunds) has required several responses from law enforcement authorities. District policymakers should carefully study these responses to avoid problems with fraud from the outset, so that the program’s finances remain sound and taxpayers are protected from potential bailouts. Bill 26-58 provides proper recognition of the need to reduce and control fraud, but one important consideration is the deposit rate itself: it must be sufficient to recover program costs and incentivize redemptions of materials, but not so generous as to invite arbitrage activity from neighboring states.
The initial rate envisioned in Bill 26-58 should not be increased in the current legislative language; other sections of the proposal allow enough flexibility for a rate increase should experience in meeting program objectives recommend it. Furthermore, line 290 describes “incentives for distributors to use a District-specific UPC barcode to reduce fraudulent redemption,” while other sections describe the need for distributors to police fraud. Absent here is language encouraging District law enforcement authorities to accept their role in working with the stewardship organization to develop early lines of communication and best practices for fraud prevention. This clarification should be added.
Reducing the overall burden on taxpayers. According to Tax Foundation’s State Tax Competitiveness Index, the District of Columbia ranks 48th out of 51 on a variety of tax-related factors. The DC Office of Tax and Revenue offers a different perspective through an excellent research series on regional and national state and local tax burdens, generally noting that a hypothetical household in the District with less than $150,000 of income tends to pay a lower tax burden than in most other neighboring jurisdictions, and in most income categories closer to the middle for major cities nationwide. Regardless of which source one wishes to consult, however, the District’s fiscal competitiveness should always be foremost in leaders’ minds. Accordingly, the Committee should consider additional provisions to provide taxpayers with greater assurance that the net impact of Bill 26-58 will shift the burdens of environmental and waste management programs away from them.
One practical step in this regard would be to align the District’s 8.0% retail soft drink tax with either the rate of general sales tax (6.0%) or the exemption for most groceries not sold for immediate consumption. Adjusting this tax would not only modestly ease the heavy financial burden of government on residents, but it would also lighten the compliance costs that small and large businesses currently face in collecting and reporting the levy to the District. To be clear, NTU does not believe that Bill 26-58 creates a new tax; but it can be amended to remove any doubts from taxpayers who have been disappointed by past fiscal legislation.
Encouraging voluntary participation in the program. A key to ensuring that businesses of all sizes participate enthusiastically in RR is to minimize coercive regulatory or financial mandates. Making the program compulsory will create a top-down system that prevents businesses from devising the best solutions to provide container deposit points that fit the unique needs of their premises and their customers. Lines 447-450 articulate the beginnings of a fair retailer compensation structure that is adaptable to providing sufficient cost recovery to reach program goals. Retaining such structures is important in any bill sent to the full Council for approval.
Reducing extraneous goals that could impede the programs’ function and create risks for taxpayers. From NTU’s perspective, Bill 26-58 must continue to focus foremost on the economically efficient operation of an EPR/RR partnership. For this reason, we urge the Committee to ensure that all fees collected via the PPP remain available for investing in the EPR/RR program, thereby avoiding undesirable pressure for infusions of taxpayer resources. For example, lines 583-584 allow unclaimed deposit remittances to assist with lead service-line remediation products, while additional diversions would be allowed for “water bottle refill stations” and “other programs to increase beverage container refill and reuse.” Even though the Council may deem these goals worth funding from other resources, they are not, and should not, be conditional for the success of an EPR/RR program. Indeed, omitting this language from Bill 26-58 could also bolster public confidence that the program will strive to avoid consumer or taxpayer burdens to the highest degree.
For the same reason, we would urge careful oversight of the mayoral prerogative provided in lines 509-517 to grant eligibility for certain curbside recycling to receive processing payments for sorted and bundled materials. As we outline in these comments, curbside recycling and conventional trash pickup operations have often resulted in unnecessary cost inflation for taxpayers. The goal of any authority granted under this subsection should be to get more bulk materials into the EPR/RR program that will increase its financial viability while decreasing the net expenses of curbside recycling to taxpayers (e.g., hauling and landfill overhead). As stated in the previous paragraph, the goal should not be to simply divert any savings into additional or unrelated spending programs that will over time consume more resources from taxpayers.
Finally, NTU wishes to offer the attached analysis from our Senior Vice President of State Affairs to aid you in your deliberations over the best design of a container deposit program involving a PPP. We are hopeful that, guided by a thoughtful legislative process, the final version of Bill 26-58 will continue to incorporate and reflect best practices for EPR/RR. NTU looks forward to engaging on this and other bills of interest to the Committee in the days ahead.
Sincerely and Respectfully,
Pete Sepp
President
Not Your Father’s “Bottle Bill”: Taxpayers Await New, Better Recycling Programs
By Leah Vukmir, Senior Vice President of Government Affairs
National Taxpayers Union
Having served 16 years as a state elected official, I heard a common refrain from local government officials in my district: “Please send us more money so we can provide property tax relief to our residents!” Finding ways for government at all levels to be more efficient should be the goal of lawmakers everywhere – and one opportunity that’s been coming to prominence recently has to do with recycling beverage containers.
For more than 50 years, National Taxpayers Union (NTU) has been tracking, analyzing, and advocating for good ideas to reform local government services so that they work better and cost taxpayers less. All the way back in 1976, NTU published “Cut Local Taxes – Without Reducing Essential Services,” authored by local government finance expert Bob Poole at the Reason Foundation.
Poole noted at the time that municipal garbage collection had long been a leading field where contractors operated in place of government agencies. In fact, according to a Columbia University study Poole explained extensively, private firms had already provided garbage collection in three times as many cities as public entities. In addition, the study found, the typical government-run trash collection operation was 68 percent more expensive than a contracted company’s service, due to many factors: larger crews, poor route design, and inefficient maintenance all made the government-provided garbage pick-up more expensive.
While private-sector-driven trash collection was firmly embedded in 1976, non-industrial recycling of certain throwaway materials was a much newer development. During the 1970s several states began adopting “deposit return systems” (DRS), or “bottle bills.” These are laws whereby the price of a recyclable product (such as glass soda bottles that were popular at the time) reflected an embedded charge, determined by a state or local government, that consumers could recover if they returned the empty containers to a retail outlet or other approved facility. While consumers could simply choose to pay the difference instead of redeeming deposits to get their money back, in general these bottle bills were intended to provide sufficient incentives that would meet certain recycling targets.
But changing times require changing laws – and a new generation of bottle bills is up to the challenge of providing effective recycling that serves taxpayers, consumers, and businesses better than before. This framework has been developed not only by think tanks but also industry experts who’ve learned about the successes and failures of past efforts to encourage recycling of valuable materials cost-effectively.
Elements include:
- A scale of deposit values a consumer can receive per container, depending on the volume it holds. All containers, aside from those containing drugs, baby formulas, or special medically prescribed foods, could be eligible under the program.
- A non-government entity (e.g., a nonprofit organization) would manage the activities program’s industrial participants, primarily distributors of eligible products. The organization would also be in charge of collecting fees (set to cover the collection costs of each type of material) on distributors and other participants in the system, as well as deciding where and how to most efficiently sell the materials collected. Unredeemed consumer deposits could be reinvested in the organization’s management operations.
- The organization would, at its own expense, provide and maintain container collection and processing machines (and in some cases parking) for consumer use at selected retailers. The space that retailers provide for these collection points would depend upon the size of the establishment.
- Appropriate oversight of the organization would be provided by a government agency (compensated by the organization rather than funded by taxpayers), while other recycling performance targets and ongoing progress reports would be required.
This model, which could be described as a form of Public Private Partnership (PPP), has a number of parallels in the policy world. At the federal level, for example, NTU has long supported transitioning the U.S. air traffic control system, currently operated by the Federal Aviation Administration and funded by several specific taxes, into one funded by user charges. Embraced by dozens of countries around the world, such as Canada and the UK, this structure utilizes a non-governmental entity with a board of directors consisting of airlines, airports, union leaders, and others concerned with the quality of air traffic control service. The government then retains the role of safety regulator over this service providing organization. The results from abroad generally show that the PPP running the taxpayer-funded air traffic control system is more responsive and less expensive than the government-run entity it replaced, without compromising public safety.
At the local level, PPPs have been successfully employed here and abroad to complete infrastructure projects like roads and bridges more quickly and cost-effectively than traditional procedures where a government agency is in charge of all contracting and accepts the risks of delays or ownership of defective products. Under a PPP, a private entity can become the total contract manager – from designing, to building, to maintaining the structure. In other countries, this concept has also been applied to “vertical infrastructure” such as schools and government office buildings. In the U.S., NTU-backed legislation called the Public Buildings Renewal Act (PBRA) would have made key changes to federal tax policy that would allow local PPPs for vertical infrastructure to be more commonplace. A study NTU commissioned from the Beacon Hill Institute found that “every dollar of investment enabled by PBRA would boost the economy by $2.80, all while saving taxpayers an average of 25 percent over the lifespan of each project.”
Recent bottle bills would harness these powerful, pro-taxpayer precepts on behalf of an area of public policy that could definitely stand greater fiscal discipline: recycling.
As of 2023, 10 states had created “bottle bill” programs which have yielded significantly higher recycling rates across a variety of containers. Changes in Chinese recycling policies in 2018 collapsed the recycling market in the United States. China stopped taking foreign materials, dramatically worsening a trend of rising costs for local curbside programs in the United States. Without these exports, the price per ton that can be recovered from most types of curbside recyclables is often dwarfed by “tipping fees” and the additional expense of maintaining special vehicles and other facilities for pickup and processing.
As a recent Manhattan Institute study pointed out, the economics of curbside recycling for most governments are likely to remain poor or at least tenuous from a taxpayer’s standpoint unless municipalities significantly rethink how they deliver the services.
The addition of a statewide recycling program has the potential to save significant taxpayer dollars, by taking some of the pressure off the local programs and directing them to the statewide program. Also, by establishing a private-public partnership relying on fewer collection points (retail instead of residential), more efficient pickup and transport, and more selective sorting as opposed to “single streams” of recyclables that tend to contain less valuable or contaminated materials, the economics of recycling in general may be less vulnerable to market shocks such as China’s decision.
Taxpayers have a major interest in efficient, effective government -- innovating the way city-county-state level services are delivered can help to keep property taxes under control while conserving precious dollars for other budget priorities. It will also lead to higher recycling rates which can be a plus for the environment, if coupled with more effective systems for financial oversight.
As legislative sessions continue across the U.S., NTU will be seeking opportunities to advance the right kind of legislation to reform recycling programs, alongside numerous other projects to ensure that taxpayers come first. Here are some principles that taxpayers are looking for in ideal DRS legislation:
1) Net Cost Reductions for Taxpayers. For all the reasons above, one important goal of the new DRS approach must be to relieve some of the financial pressure of conventional curbside recycling on taxpayers and ratepayers. NTU recommends that legislation should contain statutory language affirming this objective in the design of the program alongside other more obvious ones such as benefits to the environment. The performance goals of the non-governmental entity in charge of administering the program should include not only measurements such as percentage rates of recycling particular materials, but also cost-per-ton comparisons with the curbside program and any resulting savings.
2) Transparency. Consumers should understand the deposit on each container, with clear labeling indicating the amount that can be redeemed (typically 10 cents on a container of 24 ounces or less, 15 cents on bigger containers). However, labeling should also ideally indicate more clearly that the deposit has already been embedded in the price of the product the consumer has purchased. This will have the salutary effect of incentivizing more consumers to participate in recycling.
3) Robust Risk Transfer. Whether they involve air traffic control, facilities maintenance, toll roads, or recycling, all well-designed PPPs should involve a significant (or total) degree of financial risk transfer from the government to a private entity. This greatly reduces potential balance sheet liabilities for taxpayers, who in the past have been stuck with tremendous bailout costs when public projects owned or operated solely by the government fail to perform as advertised. A non-governmental recycling entity, not a municipal agency, should be specifically named in any DRS legislation as the financially responsible party.
4) Proper Compensation for Participants. Retailers will be providing in-store or front-of-store space for the recycled material collection and processing points. The non-governmental entity operating the program can provide impartially determined compensation to the retail entity, based on fair market value of the space for sales displays or other retail uses. Governments could also provide property tax abatements, again determined impartially using the local prevailing assessment method, to ensure that participants’ costs are adequately offset.
5) Financial Guardrails. A redesigned DRS program should not be misused as a way to subsidize other environmental programs or goals – or worse, totally unrelated government services. NTU has witnessed numerous cases where taxes or user charges – ranging from Superfund excises to Passenger Security Fees on airline tickets – wind up being siphoned into spending schemes that have nothing to do with their original purpose. A PPP, being differently structured from a purely governmental program, should be better insulated from these problems, but well-drafted DRS legislation can provide extra insurance. Windfalls from unredeemed deposits should go toward recycling program administration, then fee reductions for operators and finally, additional offsets to other taxes or costs associated with waste management above and beyond the reduced demand and costs for local curbside programs (see above).
6) Consistent Oversight. While the new DRS model does call for consistent performance evaluations and governmental oversight, I know from experience it is all too easy for a program to fly on autopilot and for mandated progress reports to gather dust on a shelf. State lawmakers and executive branch officials must fulfill their end of the PPP, by utilizing performance and oversight data to make informed decisions on the future direction of the program.
Fiscal conservatives may be skeptical of the value of curbside recycling, but should withhold such a judgment for reformed DRS programs. The reality is that public officials everywhere are proposing tax hikes, spending subsidies, and regulatory mandates, all in the name of radical environmental policies. These include, but are not limited to, increases in corporate and small business tax rates, complex tariffs, complex and unadministrable electric vehicle credits, more green energy loan programs (remember Solyndra?), and draconian emission targets on electricity generation. Market-based, pro-taxpayer alternatives are needed now more than ever, and if well-designed, DRS programs can fit the bill.
ConservAmerica, which approaches environmental and energy policy from just such a market-based perspective, had this to say, from Senior Advisor Robert Dillon:
Plainly speaking, the economics of many municipal recycling programs don't pencil out. Recycling can increase the cost of trash collection for cities that must commit personnel and equipment to separate recyclables from non-recyclable materials and must often pay companies to cart off materials that cannot be recycled profitably. … The solution to these and other challenges facing the recycling industry shouldn’t require an extensive government program to force people to change their habits, though. …It’s an elegant solution to a long-standing problem.
The R Street Institute, a market-oriented think tank, agrees. An analysis from the Institute’s Senior Fellow, Philip Rossetti, noted:
There are potentially good reasons for why policymakers may want to improve recycling rates, be it in pursuit of environmental reasons or to reduce materials reliance on foreign sources. For beverage containers, there is strong evidence to support several claims:
1. DRSs are more effective at inducing recycling behavior than curbside programs, affirming economic theory that financial incentives are a better motivator for recycling behavior than mandates.
2. The value of the deposit matters; states with higher values for redeeming beverage containers have higher recycling rates, indicating that should it be necessary to ensure higher recycling rates for specific materials or containers, a larger deposit will increase recycling rates…
If policymakers do adopt recycling focused policies, they would be better served by pursuing market-based mechanisms over increased regulation.
NTU agrees, and policymakers in both parties should devote considerable, careful deliberation to designing just the right kind of DRS program that will benefit their states and localities. The principles above, combined with the research and expert evaluations cited here, provide a good start to what should be an ongoing conversation.
Recycling can and should be all about reducing waste — both the material kind and the monetary kind. NTU looks forward to engaging on this issue in the future.