Council gives initial approval to a 1.5-cent beverage tax
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City Council gave its initial stamp of approval to a 1.5-cent-per-ounce tax on sweetened drinks and diet beverages Wednesday night, paving the way for Philadelphia to become the very first big city in the country to impose a soda tax.
Council gives initial approval to a 1.5-cent beverage tax
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Graphic: A Tale of Two Beverages
After months of negotiations and a turbulent day that spread into the evening, Council President Darrell L. Clarke said members backed a proposal Council had twice before rejected because of the programs it will fund – including the sweeping expansion of prekindergarten Mayor Kenney has pitched as an antipoverty initiative.
“We hope that the outcome is one that will obviously benefit pretty much every citizen in the city of Philadelphia,” Clarke said just before the vote was taken. “The act that we will take will very likely have some people with a sour taste in their throats.”
If the tax gets final approval by the utter Council next week, as anticipated, it could have nationwide reverberations – or at least give legislators in other cities another reason for considering it. The seventeen members voted by voice vote, not a roll call, but will be polled at the final vote.
The levy, which is expected to face legal challenges from a beverage industry that has spent millions fighting it, would hit thousands of items, including all sweetened beverages, whether sugar-based or diet. That includes bottled or fountain sodas, teas, sports drinks, flavored waters, and energy drinks, among other products.
Exempt products include baby formula and beverages that are more than fifty percent fresh fruit, fresh vegetables, or milk. Beverages for which customers request sweetener or add it themselves (such as at a coffee shop) are also exempt.
The tax would be levied on distributors and add eighteen cents to the cost of a 12-ounce can, $1 to the cost of a 2-liter container, and $Two.16 to the cost of a 12-pack. Still unknown: how much of that cost would be passed on to consumers.
While brief of the 3-cent-per-ounce tax that Kenney originally sought, the tax would bring in $91 million annually.
“We originally desired $95 million,” Lauren Hitt, Kenney’s spokeswoman, said. “We’ll have to make some cuts, but you don’t always get everything you ask for. That’s the meaning of compromise.”
The money would pay for pre-K expansion; the creation of community schools; improvements to parks, recreation centers and libraries; and a tax-credit program for businesses that sell healthy beverages.
But in a curveball, Kenney’s administration said $41 million of the revenue raised through two thousand twenty would go into the city’s fund balance, which has dropped rather dramatically from $150 million last year to $70 million this year. Fund balances – the difference inbetween what a city spends and what it brings in – are closely followed by rating agencies.
In 2018, $30 million, about a third of the tax’s revenue, would go to the fund balance.
The switch caught some Council members off-guard.
“We heard it was all about the kids, all about the kids,” Councilman Bill Greenlee told Finance Director Rob Dubow after Dubow acknowledged the administration should have mentioned that part of the plan earlier. “Sometime this afternoon, we heard it’s also about the fund balance.”
Clarke said the shift made some members more convenient with the levy, due to concerns about the city’s low fund balance.
Anthony Campisi, a spokesman for No Philly Grocery Tax Coalition, which is funded by the American Beverage Association, said the fund-balance issue should have been disclosed sooner. In a statement, the coalition called the tax “discriminatory.”
“This tax will fall hardest on those who can least afford it, hurt petite businesses, and is an unsustainable way to pay for significant programs,” the group said.
Fresh York Mayor Michael Bloomberg has helped fund a TV and radio ad campaign to attempt to drum up public support for the tax in latest weeks.
Nationally, the beverage industry has succeeded in fighting the tax in most places it’s been raised.
Berkeley, Calif., is the only city with a tax on sweetened drinks: a 1-cent-per-ounce tax was passed by voters in November. Similar measures are being considered in San Francisco, Oakland, Calif., and Boulder, Colo.
Locally, Council has seemed for weeks to be moving toward passing some kind of fresh tax to fund Kenney’s initiatives. But at times Wednesday, it seemed like the plan might run off the rails.
Hours before the vote was scheduled, opponents blanketed City Hall’s northern apron for a rally as 18-wheel Coca-Cola trucks rounded the building, horns blaring. Inwards, preschoolers packed Council’s hallways for a read-in that digressed into a dance party when the tots tired of the initial plan.
The tone among the pro-tax side was celebratory – and not just among the kids.
But then the scheduled two p.m. commence of Council’s meeting came and went. And six more hours passed with Council members, beverage industry lobbyists, and members of the administration huddling in the halls and going in and out of offices, brokering the deal.
When the vote came, Clarke, who strongly opposed sugary beverage taxes when Mayor Michael Nutter twice proposed them as health initiatives, was not the loudest to say, “Aye.”
But he did say it.
On his way out of Council’s chambers, Clarke passed bottler Harold Honickman, a known ally and political donor. Clarke paused shortly, then patted Honickman once on the shoulder. Honickman patted Clarke twice on the back before both parted without telling a word.