The Honolulu City Council Budget Committee gave tentative approval Wednesday to a subsidy for recycling companies that would cost taxpayers more than $1.2 million annually, with nearly $1 million going to an Oregon-based scrap metal company.

Budget Chairwoman Ann Kobayashi said she didn’t want to pass the measure, but changed her mind under pressure from Chair Ernie Martin, who isn’t on the Budget Committee but sat in on its Wednesday meeting.

Martin suggested a new version of Bill 50 that would lower the proposed subsidy from a 65 percent discount on the disposal fee that companies pay when they deliver waste to the landfill to a 50 percent discount.

That would still cost the city more than $1.2 million each year. Most of that — $998,138.50 — would go to Schnitzer Steel, a multi-billion-dollar company based in Portland.

Honolulu City Council Chair Ernie Martin.  1 apr 2015. photograph Cory Lum/Civil Beat

Honolulu City Council Chair Ernie Martin introduced the subsidy measure.

Cory Lum/Civil Beat

Natalie Iwasa, an accountant and former City Council candidate who testified against the measure Wednesday, criticized the subsidy as “business welfare.”

“When does the public get a lobbyist?” she asked. “How can we protect what taxpayers are paying?”

But representatives from several small businesses argued that the discount is necessary even though they would receive relatively little compared with Schnitzer Steel.

Patrick Tocher from Cash 4 Cars testified that the bill would help small recycling companies like his weather the tough market.

Schnitzer Steel, which took in $363 million in third-quarter revenue from metals recycling this year, suffered an overall fiscal third-quarter loss of $9.6 million, partially due to low prices for metals.

Kobayashi initially said Wednesday that she wanted to defer the bill and wait to receive for more information from the city Department of Environmental Services and Schnitzer Steel.

She changed her mind after Martin encouraged her to amend the bill to lessen the discount. He said he wouldn’t put the measure on the full City Council’s agenda until October, after Kobayashi received the information she wanted.

Martin criticized the city Department of Environmental Services for failing to provide him with the financial analysis of the bill that he wanted. Mayor Kirk Caldwell’s administration has opposed the subsidy, calling it unnecessary.

“I think we’ve given the department ample time to come up with a financial analysis,” Martin said. “Given the lack of interest in the department in defending their position, I would recommend we move this forward.”

Martin also emphasized that the subsidy wouldn’t impact the city’s ability to update its sewer systems because the money for that comes from a different revenue stream.

Councilman Brandon Elefante said earlier this week he was worried the bill would take away money that is needed to fix sewers.

But Lori Kahikina, director of the Department of Environmental Services, testified that the subsidy money would impact the city’s general fund.

Kobayashi seemed confused about Martin’s suggestion to drop the discount to 50 percent, noting that she doesn’t know if that’s a fair number.

But she agreed to amend the bill and send it to the full Council at its Oct. 7 meeting at Kapolei Hale, with the expectation that she’ll receive more information about the discount before then.

“Should any of the material come out showing that this (subsidy) shouldn’t happen, then I’m sure the chair will be looking at all the material,” Kobayashi said.

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