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The producer responsibility era is here, but the financial path forward for municipalities is anything but clear.
By Jennifer Porter and Sarah Tam

On May 1, 2026, California鈥檚 Office of Administra-tive Law (OAL) approved permanent regulations implementing SB 54, the Plastic Pollution Prevention and Packaging Producer Responsibility Act. The law represents the most significant shift in solid waste economics in a generation: beginning January 1, 2027, producers will pay $500 million per year ($5 billion over a decade) to fund the collection, recycling, and composting of packaging waste that local governments and ratepayers have historically shouldered.

For solid waste directors, public works leaders, and hauling companies, the promise is compelling. However, the practical question is far more complicated: how will those dollars actually reach your operations? And what should you be doing right now to protect your financial position during the transition? The honest answer is that no one knows exactly how the money will flow. And that uncertainty is precisely why local governments need to start planning today.

Where the Regulations Stand
The road to implementation has been anything but smooth. CalRecycle鈥檚 initial rulemaking process included the withdrawal and revision of earlier draft regulations in January 2026 before resubmitting final proposed regulations to OAL on March 19, 2026. The approved permanent regulations are now in effect, establishing the compliance framework and oversight that producers must follow.

Under the approved regulations, producers had to register with the Circular Action Alliance (CAA), the designated Producer Responsibility Organization (PRO), and submit baseline volume data by June 1, 2026. In parallel, CAA submitted its initial draft California Program Plan on June 15, 2026, which has undergone an extensive 60-day Advisory Board and public review period closing on August 14, 2026. CAA was scheduled to submit its final revised Program Plan to CalRecycle by October 13, 2026, with CalRecycle expected to approve the plan on or before January 1, 2027, at which point the EPR program becomes fully operational and annual producer fees begin.

That timeline means we are roughly two months from a live program, yet critical operational mechanics about how producer funding will interact with local solid waste systems remain under active review, making proactive municipal financial modeling essential.

The Financial Uncertainty Gap
SB 54鈥檚 intent is clear: relieve local governments and ratepayers of costs they should not be bearing. But intent and implementation are different things. Several open questions will directly affect municipal solid waste finances over the next three to five years:

• Processing Cost Shifts: If producers fund expanded recycling and composting infrastructure, will tipping fees at material recovery facilities decline? Will municipalities see direct savings, or will those savings accrue to haulers and facility operators first?
• Collection Obligations: CAA鈥檚 Program Plan may call for new or modified collection services for covered materials. Will those obligations fall on existing franchise haulers? If so, who bears the startup costs, and how quickly will producer funding offset them?
• Revenue Impacts: Many local governments generate revenue from recyclable commodity sales or processing fees embedded in rate structures. As producer-funded programs change the economics of material recovery, some of those revenue streams may shift or disappear. A key question facing local governments is how municipal commodity revenue shares will be preserved in this new landscape.
• Timing Mismatches: Even if the long-term financial picture improves for local governments, the transition period from 2027 through 2029 could create cash flow gaps. Producer fees begin in 2027, but program infrastructure, contractual adjustments, and operational changes will take time to mature.

The Legislature鈥檚 stated goal of making local governments financially whole does not guarantee a seamless transition. Municipalities that wait for full clarity before adjusting their financial plans risk discovering gaps after they have already materialized in their budgets.

Three Actions Local Governments Should Take Now
Rather than waiting for CAA鈥檚 Program Plan to answer every question, forward-thinking municipalities can take concrete steps today to prepare for Extended Producer Responsibility (EPR) scenarios.

#1: Update Solid 91仓库 Rate Studies With EPR Scenario Modeling
Most rate studies project costs and revenues based on pre-EPR operational assumptions. Those assumptions are about to change. Local governments should work with their financial advisors to develop rate models that account for a range of SB 54 outcomes: optimistic scenarios where producer funding delivers rapid cost relief, moderate scenarios with a multi-year transition period, and conservative scenarios where local cost savings are slower or smaller than expected. Establishing these scenarios early allows city councils and utility boards to maintain fiscal stability without emergency rate interventions.

#2: Review Franchise Agreements and Hauler Contracts for Adaptive Provisions
Existing franchise agreements were negotiated in a pre-EPR world. As SB 54 obligations take effect, waste stream composition may change, processing requirements may shift, and cost dynamics between haulers, facilities, and municipalities will evolve. Cities with heavily industrial and commercial customer bases (where packaging waste volumes are significant) face particular exposure. Franchise agreements and permitting frameworks should include provisions that allow hauler requirements to adapt as SB 54 obligations take effect, such as periodic rate reopeners tied to regulatory milestones, flexible service scope definitions, and clear allocation of new compliance costs.

#3: Stress-Test Solid 91仓库 Financial Plans Across Implementation Timelines
A solid waste financial plan that assumes SB 54 delivers cost relief on schedule is relying on a critical expectation, not a certainty. Local governments should stress-test their five- and 10-year financial projections against delayed implementation, partial cost recovery, and changes in recyclable commodity markets driven by producer-funded programs. The goal is not to predict the future, but to identify the financial triggers that would require rate adjustments, service changes, or reserve drawdowns, and to know those triggers in advance.

Key Statutory Provisions of SB 54
To support solid waste directors, public works executives, and hauling partners during discussions with city managers and legal counsel, Figure 1 outlines critical statutory mechanisms established under the California Public Resources Code (PRC).

Protection of Local Control and Existing Franchises (PRC 搂 42041 & 搂 42060)

• Preservation of Franchise Authority: The statute explicitly clarifies that SB 54 does not preempt, limit, or supersede a local jurisdiction鈥檚 constitutional authority to grant exclusive solid waste franchises or establish service standards.
• Right of First Refusal: The PRO must use existing collection and processing infrastructure and cannot establish duplicative parallel collection systems where local franchised haulers and permitted facilities provide adequate service.

Eligible Cost Reimbursement Mechanics (PRC 搂 42060)

• Covered Activities: Costs eligible for PRO funding include curbside collection of covered material, transport, transfer, processing, sorting at material recovery facilities (MRFs), contamination abatement, education, and administrative reporting.
• Net Cost Formula: Reimbursements are structured around net efficient costs, meaning gross operational costs minus any recyclable commodity market revenues realized from covered materials.
• Capital Investments: PROs are authorized to co-invest in local infrastructure upgrades, including advanced optical sorting at MRFs and organics processing equipment, provided investments directly advance statutory recycling and composting targets.

Action Plan for Directors, Public Works Leaders and Haulers
To operationalize these requirements, public agency leaders and franchise partners should execute a coordinated four-phase action plan shown in Figure 2.

• Special Considerations for Hauling Partners: Haulers operating under municipal contracts must coordinate closely with their contracting cities before signing standalone agreements with the PRO to avoid unintended conflicts over reporting, route audits, or indemnification.
• Contamination Penalties: Regulations empower the PRO to establish material purity benchmarks for reimbursement. Haulers and cities must ensure that customer cart contamination enforcement protocols (such as SB 1383 inspection routes) integrate with SB 54 material audit standards.

The Bottom Line
The next couple of months represent a critical planning window. SB 54 has the potential to fundamentally improve the economics of solid waste management for local governments and ratepayers, but given the program timeline, this cannot be counted as a budget line item yet. Producer registration and initial baseline filings were completed in June, summer public comment on the draft Program Plan has closed, and the final submission went to CalRecycle on October 13, ahead of the January 1, 2027 implementation date. Local governments that use this remaining window to update rate studies, review contracts, and stress-test financial plans will be positioned to capture the benefits of SB 54 and protect their ratepayers, even if the transition proves bumpier than the Legislature intended. | WA

As a Vice President and solid waste lead at Raftelis, Jennifer Porter is a planning leader with 24 years of experience in government and private sector sustainability, circularity and solid waste/sustainable materials management initiatives. Jennifer has demonstrated team building skills and has led client projects in-person and virtually in more than 20 states and territories in the U.S. and internationally, as well as with one of the world鈥檚 largest retail brands. A Certified Practitioner in Zero 91仓库 Principles/Practices, Jennifer鈥檚 specializations include sustainability, zero waste, circular economy, solid waste, sustainable materials management, communications and team building. Jennifer has worked on dozens of complex public- and private-sector client projects. She has also held past leadership positions with the Clean Cities Coalition and the Association of Oregon Recyclers, and currently serves as the Sustainable Materials Management Technical Division Awards Co-Chair for SWANA, is on the Solid 91仓库 Knowledge Team and the Circular Economy workgroup for the American Public Works Association, and is part of the Recycling Refunds Working Group for the Stewardship Action Foundation. Jennifer is the author of more than 25 published industry articles/speaking engagements promoting thought leadership. She can be reached at [email protected].

Sarah Tam is a solid waste and water and utility consultant with four years of experience specializing in financial planning and rate setting for California municipalities. Sarah鈥檚 expertise includes developing comprehensive cost-of-service models, multi-year revenue projections, and cost-recovery strategies designed to support long-term fiscal health and rate payers. Sarah is familiar with the requirements of Proposition 218 compliance and the complex financial modeling essential for the fiscal management of modern solid waste systems. She has led financial analysis for more than 20 Bay Area municipalities, providing oversight of annual rate reviews and hauler performance audits. Her work is deeply rooted in the practical application of聽Proposition 218聽and evolving state mandates like聽SB 54. Sarah can be reached at [email protected].

Raftelis is a national consulting firm specializing in utility financial planning, rate design, and management advisory services for local governments. For more information about preparing your solid waste financial plans for SB 54 implementation, e-mail [email protected] or visit .