Recyclers End Up in Financial Heap, Put Blame on State
There has been no shortage of business critics of California’s recycling program.
But few have been as dogged as Vicki Sutton, co-owner of the tiny Tin Can Alley recycling center in Quincy, a town of 7,000 tucked into Northern California’s Feather River Canyon.
Sutton and co-owner Lynn Sevy say they were put out of the recycling business by internal blunders at the state Department of Conservation’s Division of Recycling. Sutton has compiled damningly detailed notes of phone calls, applications and other transactions to prove her charge.
Worse, she says, even though the division now admits the errors of its ways, it contends that it can’t legally redress them.
“They don’t really care. We’re just some people who live up in the mountains,” Sutton says.
“There has been a misdeed done to Tin Can Alley,” agrees Pat Macht, a spokeswoman for the recycling agency. “But we don’t have the authority to do what they want us to do.”
What Tin Can Alley wants is money--payments its owners say state recycling administrators promised they would get.
Larger recycling businesses are also frustrated by the administration of the state subsidy payments. While the state’s 4-year-old recycling program generally gets good marks these days, even from long-time critics, long-simmering complaints are getting hotter about the subsidies, called convenience incentive payments, that are at the core of the program.
Recycling companies that run the 2,000 centers around the state grumble about late CIP payments, mistaken certification of rival centers for the same CIP payments and a lack of current information about each center’s status with the state agency.
Most, dependent as they are on the state payouts, sympathize with the difficulties of administering such a complicated program.
Running the CIP subsidies “has got to be a nightmare,” concedes Kim Narcisso, vice president of finance for Environmental Products Corp. The firm’s subsidiary, Envipco California Inc., operates more than 440 of the state’s vending-machine-style recycling centers. “With the many changes in the law, every six months they change the CIP, how they calculate it.”
Yet problems administering subsidies only make matters worse. Narcisso estimates that they cost his company at least $50,000 a year in false start-ups of centers.
“They keep saying, ‘We’ll straighten it out; we’ll straighten it out,’ ” Narcisso says. “But sometimes you feel like you shoot a bullet into a tin room, and it ricochets around for a while.”
The subsidies are given out because entrepreneurs do not always jump at the chance to set up recycling operations in areas where profits aren’t certain. Particularly in rural areas, the seasonal nature of can and bottle returns along with high transportation costs reduce potential profit compared to most urban centers. Yet rural residents clamor for recycling opportunities as loudly as do their urban counterparts.
To encourage recycling in marginal areas, the state program offers the CIP subsidies, which are paid out of a fund collected from beverage distributors. By some estimates, as many as 95% of new centers in marginal parts of the state depend on these payments, particularly in their first few months of business. Payments vary with each center’s financial condition but can range up to $2,000 a month.
“By definition, most of the small recycling centers aren’t going to be economically viable without that CIP,” says A. Lee Johnson, a vice president of 2020 Recycle Centers, a Corona-based chain of 300 facilities.
“But the whole administration of the CIP is a difficult issue for all parties,” Johnson says. “I appreciate the division’s concerns. But certainly from the operators’ point of view, when a major source of funding can change every time the wind changes or at the whim of the Legislature or whenever another recycler shows up, it makes it difficult to do business.”
Sutton and Sevy felt an unfair shift of wind themselves, they say.
Quincy is north of the beaten path between Reno and San Francisco. When Sevy and Sutton applied for state certification, there was no permanent recycling center for 40 miles in either direction along the Feather River Canyon.
But just as Tin Can Alley--Sutton and Sevy’s dream--was qualifying for the state program, another arm of the state Division of Recycling quietly decided that the area really didn’t need such a center.
“The left hand didn’t know what the right was doing,” admits Macht.
Tin Can Alley opened in October. In January, Sutton and Sevy applied for the CIP subsidy. They received their first check--covering the month of December--in mid-February. A few days later, however, they got a notice from the agency that they were not eligible for the subsidy after all--that their area had been exempted since September from state requirements to have a recycling center.
The dispute rests on what happened next.
Sutton and Sevy say they were told that they would at least get CIP payments for the months of January and February--before they learned of the state’s mistake. State administrators now deny this.
Sutton routinely takes notes on a computer of all business phone calls. Her entry for March 5, from a conversation with Norman Lee, a division recycling specialist, is at the heart of the argument.
According to Sutton’s log, Lee returned a call for a colleague and “said Gene (Harm) felt really bad after looking into my complaint. . . . I would be receiving a letter from Gene any time noting the error . . . a kind of letter of apology if you will. I would need to make a copy of the letter and send it to Norman Lee with (another form). . . . I would then receive payments for both months.”
“I never said anything about a January or February payment,” Lee now insists. Nor does he say he mentioned any letter of apology. “She might have misinterpreted” his comments, he says.
“If he hadn’t told me that, we wouldn’t have gone on,” Sutton says. Without the $2,000 monthly subsidy for which Tin Can Alley had originally qualified, she explained, the business operated at a significant loss.
In any event, no such letter arrived. Sutton says Lee and Harm stopped returning daily phone calls about the time that the Tin Can Alley partners took out their third loan to keep the business afloat. Lee insists that he received no calls from her during this period.
Tin Can Alley ran out of money and closed in May.
“They fell through the cracks,” admits Macht. She stressed that since the incident, the division has put in “new controls to make sure that this doesn’t happen to recyclers again.”
New rules include stipulations that notices be issued of all recycling-division actions that could affect a center’s business and that complaints will be responded to within 30 days.
But Macht says the division can’t pay retroactive subsidies. Tin Can Alley has been urged to appeal its case to the State Board of Control, the last administrative remedy short of a lawsuit.
Meanwhile, the state has proceeded to certify Tin Can Alley’s business rival, a firm called Feather River Disposal, which plans to open a recycling center in Quincy on Tuesday.
