A $25 million payment wasn’t enough to keep recycler open

A major California recycler that shuttered hundreds of centers this month, laying off 750 workers, went under despite receiving state payments of nearly $25 million last year, an internal state record obtained by CalMatters shows.

The closure of Ontario-based rePlanet, LLC, underscored — and exacerbated — California’s recycling crisis, which threatens a pillar of the state’s environmental agenda. The company cited insufficient state payments when it announced its 284 recycling centers would end operations.

In a statement, rePlanet blamed “the continued reduction in State fees, the depressed pricing of recycled aluminum and PET plastic, and the rise in operating costs resulting from minimum wage increases and required health and workers compensation insurance.”

In business in California since 2012, rePlanet was by far the state’s largest collector at grocery stores of used cans and bottles. Its closure came despite a decision by Gov. Gavin Newsom and legislators to include an extra $5 million in the 2019-20 budget to help such recyclers defray their costs. 

Company representatives have not commented beyond its Aug. 5 announcement. But a document obtained by CalMatters shows that the California Department of Resources Recycling and Recovery, also known as CalRecycle, made $25 million in payments to rePlanet in 2018, including $10.4 million in processing payments, $13.76 million in handling fees and $738,661 in administrative fees.

State payments to recyclers are funded by 5-cent recycling charges levied on consumers for redeemable cans and bottles.

CalRecycle refused to discuss rePlanet’s payout or the company’s claim that insufficient state support led to its closure. Agency spokesman Lance Klug said details about payments would divulge a company’s “proprietary” or internal information.

“That information should be public,” said Mark Murray, director of Californians Against Waste, the state’s leading nonprofit advocate for more recycling. Murray noted that the confidentiality requirement dates to the original recycling legislation in the 1980s, when scrap metal collectors insisted that their internal information be hidden from competitors and not be disclosed to the public.

Bulk numbers, however, show that rePlanet got nearly 16% of the $66 million in overall processing payments the state made in 2018, and 28.5% of the $48 million the state paid in handling fees to recyclers that operate in grocery store parking lots.

Murray said that while an annual payment of $25 million may seem to be a lot of money, it doesn’t match operating costs. The state should increase payments by at least 20%, he said, citing not only rePlanet’s struggle but that of hundreds of other facilities that have shut in recent months.

“The state program is not providing small recyclers with sufficient payment … and that is why 1,000 of them have closed,” Murray said.

In 2018, then Gov. Jerry Brown vetoed legislation by Sen. Steve Glazer, Orinda Democrat, that would have increased payments. Brown cited a need for “reforming and modernizing” California recycling program. Similar legislation by Sen. Henry Stern, Malibu Democrat, has stalled this year.