Item No. 9.
TO:HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM:OFFICE OF THE CITY MANAGER
BY:MATTHEW BAUMGARDNER, DIRECTOR OF PUBLIC WORKS/CITY ENGINEER DATE:MAY 12, 2026
SUBJECT:DISCUSSION REGARDING THE CITY OF DOWNEY CONSTRUCTION AND DEMOLITION
DEBRIS DEPOSIT
EXECUTIVE SUMMARY
Similar to the majority of cities in California, Downey collects a Construction and Demolition debris deposit for projects built in the City. Downey currently charges three (3) percent of the valuation of the project or a $2,500 minimum deposit, whichever is higher, which is in line with many other cities. However, the City has received feedback from applicants that the current deposit model has created a financial burden. As such, staff has provided discussion on the enforcement models through deposits that are employed throughout the State and recommends adjustments to the current deposit structure that enables the City to still align with regional norms; provides incentive for compliance; and limits the burden on smaller projects.
RECOMMENDATION
That the City Council:
1. Discuss the current method for calculating Construction and Demolition debris deposits in the City;
2. Consider staff recommendations to reduce the percentage used in the calculation from 3 percent to 1.5 percent; reduce the minimum amount from $2,000 to $500; and create a maximum amount of $25,000 for deposits; and,
3. Direct staff to return with an ordinance to amend the Downey Municipal Code to reflect these changes.
BACKGROUND
In the State of California, the California Green Building Standards Code (CALGreen) requires all construction and demolition (C&D) projects to divert at least 65 percent of generated debris from landfill disposal. This requirement applies statewide and is intended to support California’s broader waste‑reduction and climate goals.
CALGreen establishes the diversion requirement but does not prescribe how cities must enforce it. As a result, local jurisdictions adopt their own compliance mechanisms. Common approaches include, but or not limited, to the following:
Refundable C&D deposits
Waste Management Plans (WMPs)
Hauler/franchise reporting requirements
Final inspection holds
Administrative penalties
Cities select enforcement tools based on staff capacity, local hauler systems, and the desired level of project‑specific accountability.
Downey currently requires a refundable C&D deposit for projects, which is collected at permit issuance and refunded when the applicant submits documentation demonstrating compliance with CALGreen's 65% diversion requirement and the project has passed a final inspection. CalRecycle, the State agency that oversees the program, measures compliance at the Citywide level through Athens annual report on waste diversion. The City's effort to enforce compliance through refundable deposits contributes to meeting the successful diversion metrics reported each year by Athens. If the City were to fail to meet this requirement, it would face up to $10,000 a day in penalties. Therefore, this program helps to ensure that C&D materials are properly recycled by contractors working within the community, preventing the potential State penalties.
Current Practice in California
Cities in the region generally fall into one of three enforcement models:
Model A — Published, Formula‑Based Refundable Deposits: Cities publish clear formulas (e.g., % of valuation, tiered fees). Examples: Long Beach, San Bernardino, Norwalk, Bellflower. Downey follows this model by charging 3 percent of the project valuation.
Model B — Deposit Required, Formula Not Published: Cities require a deposit but do not publish the calculation method. Examples: Anaheim, Irvine, Riverside, South Gate, Lynwood.
Model C — No Deposit Program: Cities rely on CALGreen compliance and hauler/franchise reporting only.
Examples: Whittier, Bell Gardens, Paramount.
These models reflect different enforcement philosophies: project‑level accountability (Models A/B) versus system‑level compliance (Model C).
ANALYSIS
Downey currently requires a refundable C&D deposit for projects that is based on the overall valuation multiplied by 3 percent. This is issued at the time of permit issuance and the applicant receives these funds back after it has been determined that the project has passed its final inspection and the applicant has submitted all disposal and recycling receipts. Staff also reviews a waste management plan to verify that the required diversion has been met.
Once this has been satisfied, staff signs off on their initial deposit slip, which is turned in to the Finance Department to process a check request for the return of their deposit.
Refundable deposits are widely used throughout California because they:
Create a clear incentive: Contractors understand that failure to divert or document results in forfeiture of the deposit.
Shift risk from the City to the contractor: the City does not need to rely solely on hauler reporting; each project is accountable for its own diversion.
Improve documentation quality: Contractors are more likely to submit complete and verifiable receipts when money is at stake.
Work well for medium and large projects: Larger projects generate more debris and have the capacity to manage documentation.
Limitations of Deposit Programs
Deposits can be less effective when:
Deposit amounts are unclear or inconsistently applied
Staff capacity to review documentation is limited
Refund timelines are slow
Deposits are too small to influence behavior
Deposits are too large and create equity concerns for small contractors These considerations inform the recommended update to Downey’s program.
Enforcement Options:
Option 1 — Percentage-of-Valuation Deposit (currently used by Downey) Pros: Scales with project size; aligns with common Statewide practice; strong behavioral incentive.
Cons: Requires clear minimum and maximum thresholds to avoid disproportionate impacts Option 2 — Eliminate Deposits and Rely on Hauler/Franchise Reporting (Model C) Pros: Lower administrative burden.
Cons: Weak project‑level accountability; reduced diversion documentation.
Option 3 — Adopt a Tiered Flat Deposit Structure
Pros: Simple to administer.
Cons: Less proportional to project size; may under‑ or over‑charge relative to debris generated.
After evaluating the City's current process, staff is recommending the following for City Council consideration:
Continue with the Percentage-of-Valuation Deposit, but adjust the percentage, reduce the current minimum of $2,500, and create a maximum amount.
The current percentage used is 3 percent. Staff recommends reducing this to 1.5 percent.
The current minimum deposit amount is $2,500. Staff recommends reducing this amount to $500.
Create a maximum amount. The City does not currently have a maximum amount. Staff recommends creating a cap of $25,000 to the C&D deposit amount.
The rationale behind this includes:
Aligns with regional norms (1–3% is typical)
Provides meaningful incentive without being punitive
Protects small contractors through the cap
Simple to calculate and explain
Supports consistent enforcement of CALGreen’s 65% requirement Ensures deposits remain proportional to project size
It is important to note that the C&D deposit is fully refundable and is not considered City revenue. Funds are returned upon verification of CALGreen compliance. Projects that fail to provide documentation or fail to meet diversion requirements forfeit deposits. This is infrequent, as deposits that are typically left unclaimed are a result of contractors failing to return after a 3-year period.
If the City Council chooses to adopt the staff recommendations or make other changes to the deposits, staff will return at a future date with an ordinance to amend the Downey Municipal Code to capture these adjustments.
FISCAL IMPACT
There is no net revenue impact because deposits are refundable.
CITY COUNCIL PRIORITIES
Efficiency and Adaptability