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In a move that members of the public called “confusing” and “wrong,” Honolulu City Council members went back on their decision to end a subsidy that saves for-profit recycling companies more than $2 million per year.

Council members on Friday voted 7-2 in favor of partially reinstating the subsidy.

The reversal comes three days after Honolulu Mayor Peter Carlisle signed into law a bill to eliminate the lucrative subsidy. Until earlier this week, companies got a break of 80 percent on the fees they would otherwise have to pay to dump non-recyclable waste in the city landfill.

Carlisle hasn’t said whether he’ll veto the new bill.

“Once I receive the latest version of Bill 36, I will review it then make the final decision,” Carlisle wrote in an email, via a spokeswoman, to Civil Beat.

If the mayor signs Bill 36 into law, it would restore a 50 percent discount for recycling companies, and reduce that discount to 35 percent then 20 percent in coming years.

At the center of the debate is Oregon-based Schnitzer Steel’s Oahu scrap yard, which gets the lion’s share of the discount: $1.9 million last year. Overall, the city saved private companies $2.1 million in 2010.

Many members of the public expressed outrage over the council’s decision, which came on the same day it approved a slew of hikes to taxes and fees that will cost the public more money. Critics — including some of the companies that benefit from the subsidy — call Bill 36 corporate welfare.

“Don’t you think there’s going to be some kind of taxpayer revolt?” said James Nutter, founder of Island Recycling. “If this bill passes, my company will make $50,000. I am in opposition to this bill because it is morally, ethically wrong.”

Council members who voted to pass the new bill, including Council member Tulsi Gabbard, characterized it as a “compromise.”

“Sometimes when you end up with a bill that neither side is very happy with, you know you’re in the right direction,” Gabbard said. “And I think that’s the case here.”

However, while Schnitzer Steel initially lobbied to keep the full 80 percent discount, the company also testified in support of the measure council members passed.

Schnitzer Steel’s government and public affairs manager, Jennifer Hudson, reiterated her support for Bill 36 on Friday, saying it “strikes a reasonable balance between recycling as a public policy priority and the city’s need to address its budget shortfall.”

Council members Ikaika Anderson, Stanley Chang, Ann Kobayashi and Ernie Martin echoed Gabbard’s statements before voting in favor of the bill. Chairman Nestor Garcia and Council member Romy Cachola also supported the bill but kept mostly quiet about their approval.

The two City Council members who voted against the bill — Tom Berg and Breene Harimoto — appeared disgusted with their colleagues.

“We didn’t phase out fireworks,” Berg said. “We said ‘Over with.’ There was no phasing out. We have Bill 47, and it passed. And it takes a stand! … We’re picking it apart without looking at the bigger picture.”

“Is it really good public policy for us to create a subsidy that so greatly benefits just one company?” Harimoto asked. “No evidence has been provided to show need for this subsidy… I really believe we need to let Bill 47 stand.”

Rowdy Opposition to Bill 36

On several occasions, critics who gave tough testimony against Bill 36 drew applause from people in the City Council Chamber. Adding to the controversy, the City Council twice delayed a vote on the bill when the chairman was alerted to flaws with the language of the measure.

Anthony Aalto, secretary of the Oahu chapter of the Sierra Club, slammed the City Council in he read to the council:

“To vote in favor of this proposition, less than 50 hours after the Mayor has signed a law banning such subsidies, would call into question the transparency of our political process and raise legitimate concerns that corporations with deep pockets and well-paid lobbyists can win favors at the public’s expense.”

Natalie Iwasa, a member of the public who regularly testifies at City Council hearings, raised her voice in frustration — a rarity for the soft-spoken Iwasa — during her testimony.

“This company, Schnitzer Steel, the primary benefactor of this discount, had revenue of $2 billion last year,” Iwasa said. “We’re talking about subsidizing their discount, the tipping-fee that they have to pay. This is wrong! … What reasonable argument is there to have this discount continue? I haven’t heard it. I haven’t read it. I haven’t seen it. This is bad policy.”

Schnitzer Steel’s former longtime general manager told Civil Beat in March that the company unfairly took advantage of the subsidy, and didn’t need it. Schnitzer Steel has said eliminating the discount hurts the company’s ability to continue recycling on Oahu, but refused to show any financial records demonstrating proof of need.

Many city council members said when they passed to end the subsidy that they did so only because they knew they might be able to go back on the decision.

“With regards to my vote on Bill 47, the only reason that I voted in support of that particular measure was that there were other bills forthcoming,” City Council member Ernie Martin said.

Kobayashi said she was troubled by the public outcry over the bill.

“I just don’t understand why we have so much negativity, threats, assaults on character,” Kobayashi said. “I’m glad that we’re almost nearing the end of this discussion so we don’t have to go through this again.”