California Integrated Waste Management Board

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CIWMB Board Meeting - Item 12(Presented at the Strategic Policy Development Committee)

Consideration Of Adjustments To The Electronic Waste Recycling Fee To Maintain The Solvency Of The Electronic Waste Recovery And

Recycling Account

June 17, 2008www.eRecycle.org

California Integrated Waste Management Board

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This item will cover:

• Recap of program statistics to date• Analysis of fund condition & financing models • Overview of future uncertainties• Staff recommendation

• Q & A

California Integrated Waste Management Board

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Electronic Waste Recycling Act

• System to pay for the recovery and recycling of covered electronic waste (CEW)

– Only CEW from CA sources are eligible– Must be recycled (cancelled) in CA– CIWMB sets payment rates to cover average net costs

• System is funded through a fee paid by consumers of new covered electronic devices (CED)

– DTSC determines what constitutes a CED– CIWMB determines fee structure to maintain solvency

California Integrated Waste Management Board

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CEW Payment SystemCaliforniaConsumer

RetailerFee Paidat Purchase

Remits Fee

Deposits Fee

CEW SystemAdministration

Inspections &Compliance

Activities

Fee CollectionServices

CombinedRecycling

& RecoveryPayment

Recovery Payment

CIWMB

DTSC

BOE

Recyclers Collectors

CED Discarded

(CEW) by

California Source

New CEDPurchased

CEW &Documentation

Payment Claim

Electronics

$$

Electronic Waste Recovery and

Recycling Account (EWRRA)

CED: Covered Electronic DeviceCEW: Covered Electronic Waste

California Integrated Waste Management Board

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Revenue, Payments & Volumes•FY 2004/05 - $31 million

–$11.4 million claimed (~24 million lbs)

•FY 2005/06 - $78 million –$45.9 million claimed (~95 million lbs)

•FY 2006/07 - ~$78 million– ~$75 million claimed (>150 million lbs)

•FY 2007/08 - ~$83 million projected*– ~$105 million projected (>210 million lbs)*

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(Note that 2nd quarter 2008 quantities represent only a portion of anticipated claims. Recyclers may submit a claim up to 45 days after the end of a reporting month.)

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Financial Considerations• Fund Condition:

–At current rates, EWRRA depletion in FY 08/09–CIWMB has authority to make adjustments

• Revenue Source:–Current $6, $8, or $10 fee on retail CED sales

• Cost Demands:–CIWMB, DTSC, BOE operations–Recovery and Recycling Payments

•$.48/lb $.43/lb $.39/lb

California Integrated Waste Management Board

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Revenue Considerations• CIWMB has obligation to adjust fee to ensure fund solvency

–Statute provides adjustment direction–CIWMB must act on or before August 1st –New fees take effect on January 1st

• Degree and structure of adjustment is dependent on need and trends

–Program growth, payment rate affect need–Evolving mix of CED, total units sold

California Integrated Waste Management Board

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Revenue Considerations• Historical total CED sales:

–2005 – 9.9 million units–2006 – 10.6 million units–2007 – 10.1 million units

• Allocation of CED sales in size categories:–2005 – 23% 72% 4%–2006 – 24% 67% 8%–2007 – 25% 64% 11%

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Model Assumptions• Loan dependent on CEW volumes

– Repaid by late 2010

• Target average revenue per CED sold – Current average revenue is ~$7.64 per CED

• CED sales volume and size distribution – Assume approx. constant at 2007 levels

• Aiming to remain solvent for two-plus FYs

California Integrated Waste Management Board

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Model 1: • Assumes no program growth (volume flat at ~50 M pounds per quarter) • $6.6 M loan to EWRRA• Target $10.00 average revenue per CED sold

Possible fee structures to achieve average per device revenue of $10.00:

$6 / $10 / $20 $6 / $9 / $26 $7 / $9 / $24

FiscalYear Revenues

RetailerAdmin Fee

PoundsRecycled

RecyclingPayments

All OtherExpenditures

Loan Payments

Yr End Balance**

FY 2008/09* $ 105,378 $ (2,758) 200,000 $ (80,000) $ (17,664) $ (1,700) $ 3,257

FY 2009/10 $ 104,550 $ (3,137) 200,000 $ (78,000) $ (17,664) $ (5,099) $ 3,907

FY 2010/11 $ 104,550 $ (3,137) 200,000 $ (78,000) $ (17,664)   $ 9,657

*Revenue in the 2008/2009 fiscal year includes loan amount. ** Includes a 3% prudent reserve provided for by the Act

California Integrated Waste Management Board

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Model 2: • Assumes moderate program growth of ~2 million pounds per quarter• $11.5 M loan to EWRRA• Target $12.25 average revenue per CED sold

Possible fee structures to achieve average per device revenue of $12.25:

$6 / $13 / $22 $6 / $12 / $28 $7 / $12 / $26

FiscalYear Revenues

RetailerAdmin Fee

PoundsRecycled

RecyclingPayments

All OtherExpenditures

Loan Payments

Yr End Balance**

FY 2008/09* $ 121,771 $ (3,102) 220,000 $ (87,880) $ (17,664) $ (2,969) $ 10,155

FY 2009/10 $ 128,074 $ (3,842) 252,000 $ (98,280) $ (17,664) $ (8,908) $ 9,535

FY 2010/11 $ 128,074 $ (3,842) 284,000 $ (110,760) $ (17,664)   $ 5,342

*Revenue in the 2008/2009 fiscal year includes loan amount. ** Includes a 3% prudent reserve provided for by the Act

California Integrated Waste Management Board

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Model 3: • Assumes historical program growth of ~4 million pounds per quarter• $15.6 M loan to EWRRA• Target $15.00 average revenue per CED sold

Possible fee structures to achieve average per device revenue of $15.00:

$6 / $16 / $30 $7 / $16 / $27 $8 / $16 / $25 $8 / $15 / $31

FiscalYear Revenues

RetailerAdmin Fee

PoundsRecycled

RecyclingPayments

All OtherExpenditures

Loan Payments

Yr End Balance**

FY 2008/09* $ 139,952 $ (3,524) 240,000 $ (99,854) $ (17,664) $ (4,041) $ 14,870

FY 2009/10 $ 156,825 $ (4,705) 304,000 $ (118,560) $ (17,664) $ (12,123) $ 18,643

FY 2010/11 $ 156,825 $ (4,705) 368,000 $ (143,520) $ (17,664)   $ 9,579

*Revenue in the 2008/2009 fiscal year includes loan amount. ** Includes a 3% prudent reserve provided for by the Act

California Integrated Waste Management Board

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Staff RecommendationSet new fee structure at $8 / $16 / $25

– Provides for better economic equity across CED categories than current fee

– Keeps lowest rate low and highest rate below $30

– Moderate fee on CED category with largest sales volume, stabilizing revenue and reducing risk of volatility

California Integrated Waste Management Board

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Future UncertaintiesImpacts of DTV Broadcasting Transition

– Consumer Electronics Association estimates DTV transition will result in 15 million TV discards thru 2010

– Only 48% of OTA households surveyed plan to get converter box and use existing TV

– Direct replacement only one source of CEW; obsoletes in storage will emerge

California Integrated Waste Management Board

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Future UncertaintiesContinuing Growth of CEW Volumes?

– Growth flattened in 3rd, 4th quarters 2007 and 1st quarter 2008

– Pace has stalled before, only to pick up

Large volumes of CEW still to recover– More CEDs sold than CEW recovered– Collection infrastructure robust, growing

California Integrated Waste Management Board

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Summary• Several key factors to consider

–Looming fund depletion–Program growth: may be slowing? –Future discard rate unclear; huge volumes in use–DTV impacts not yet fully felt

• CIWMB has authority to make adjustments•Fee adjustment must ensure EWRRA solvency•Structure of adjustments can provide equity and stability•Ability to adjust annually allows flexibility and prudence

• Staff recommends adjusting fee to $8 / $16 / $25

www.ciwmb.ca.gov