Philadelphia’s tax on sweetened beverages has been in effect for 2½ years, withstanding legal challenges, continued opposition by the beverage industry, and Democratic primary challenges to Mayor Jim Kenney as he seeks a second term.
The amount of money it will raise has also been a bit of a moving target, as the city has made a few reductions to its revenue estimates.
The latest adjustment is reflected in the city’s preliminary total for fiscal year 2019: $76.9 million, a revenue official said last week. That amount is a bit less than the $78 million that the city had initially budgeted for the year — an estimate that Kenney’s administration adjusted down before the year ended, attributing the difference to a lack of available data about similar taxes and a decline in soda consumption.
Meanwhile, the programs that the tax funds — pre-K, community schools, and improvements to parks, recreation centers, and libraries — are growing.
Here’s an update on the tax, the money it has raised, and where that money is going.
How much money has the tax raised?
The 1.5-cents-per-ounce tax raised $191.7 million in its first 2½ years, between January 2017 and this June, according to city revenue data.
In the current 2020 fiscal year, the city expects to raise an additional $75.9 million. The city expects revenue to decline 1% each year.
The city has adjusted revenue estimates a few times since the tax took effect. In March 2018, officials announced a 15% reduction in those projections and a corresponding adjustment to the scale of the programs the tax funds.
Another, smaller adjustment came this year when Kenney proposed his fiscal 2020 budget.
“This is actually a relatively small adjustment given that the [beverage tax] remains a new tax, with limited historical experience to base projections on, especially against the backdrop of national declines in sweetened beverage consumption,” said Deana Gamble, a spokesperson for Kenney.
Some studies on the tax — including one released in May by researchers from the University of Pennsylvania, Harvard, and Johns Hopkins University — have found that beverage sales in Philadelphia have decreased since it took effect.
How has the money been spent?
Gamble said $67.9 million has been spent from the city’s general fund through June. Of that, $56.8 million has gone to pre-K, $8.1 million has been spent on community schools, and $3 million has gone to the Parks and Recreation Department for the Rebuild program for libraries, recreation centers, and parks.
During the current fiscal year, the city is increasing the number of community schools from 12 to 17 and adding 1,050 preschool seats, expanding that program to a total of 3,300 slots.
The first bond for the Rebuild program, totaling $86.5 million, was issued last fall. Rebuild has spent $4.7 million in bond funds and has started 41 projects at 30 different sites, Gamble said.
The rest of the revenue remains in the general fund. The city had put a hold on spending some of the revenue until last year, when the Pennsylvania Supreme Court upheld the tax and ended a legal challenge against it.
What is the tax’s future?
The tax remains controversial, but Kenney’s victory in the Democratic primary in May helped secure its future. As he runs for reelection, he defeated two opponents who opposed the tax, the signature achievement of his first term.
But opposition from the beverage industry is not expected to end, especially as other cities consider or implement taxes on soda. Philadelphia was the first major U.S. city to pass a tax on soda, and other cities are watching how it plays out.
“It is clear that this tax continues to hurt Philadelphia’s working families, small local business and their employees,” Anthony Campisi, a spokesperson for the American Beverage Association-backed Ax the Bev Tax Coalition, said in a statement Tuesday.
The Kenney administration has pushed back on the coalition’s opposition and criticized the beverage industry for pouring millions of dollars into fighting a tax that funds city programs.
City Council voted in March to commission an independent study of the tax’s impact.
“We are using internal as well as external options to do this analysis and will release results upon completion later this fall,” Joe Grace, a spokesperson for Council President Darrell L. Clarke, said in an email Tuesday.
Councilwoman Maria Quiñones-Sánchez, who introduced the resolution for the study, also introduced a bill in March that could phase out or significantly change the tax.
The tax also faces challenges from Harrisburg, where a bill introduced in the state legislature this spring would preempt and eliminate the city’s tax. A similar measure failed to gain enough support to pass last year. The current bill is being pushed by Wakefern Food Corp., a retailer-owned cooperative of grocery stores that includes Jeff Brown’s ShopRite and Fresh Grocer Stores in Philadelphia.