Nutter expected to tax sugary drinks, set trash fee

Mayor Nutter, balking at cutting "core services" and running out of ways to raise money, is expected to balance next year's budget with a steep tax on sugary drinks and a $300 annual residential trash fee, sources familiar with the plan said yesterday.

City Councilman W. Wilson Goode Jr. said he anticipated a 2-cent-per-ounce tax on sweet drinks as part of Nutter's 2010-2011 budget, to be presented tomorrow. That's $2.88 on a 12-pack of soda cans.

In addition, the nearly $4 billion budget is expected to include a fee of about $300 annually for trash service. Lower-income residents could qualify for an annual fee of about $200.

Though the administration could change its plan before tomorrow's budget address, the mayor is scheduled to brief City Council and the media on the budget today.

Nutter would not comment on details of the budget yesterday, but did say: "The major tax sources are not really available."

That's because the property tax still relies on notoriously inaccurate and inequitable assessments that are at least two years away from being fixed; the city raised the sales tax 1 percentage point last year; and Nutter and others remain opposed to increases in income or business taxes, whose receipts have plummeted in the slow economy.

Combined, the trash fee and soda tax likely would raise enough revenue to wipe out the city's 2010-2011 deficit, which has been projected at $125 billion to $150 million.

The garbage levy would generate a little more than $100 million annually, while the excise tax on sugary drinks would raise $30 million to $77 million a year, according to sources, who said they had seen widely varying estimates.

It was not clear how quickly the soda tax could be enacted, meaning the city likely would not collect a full year's worth of revenue on the new levy in fiscal year 2010-2011.

Neither the trash tax nor soda fee looks to be temporary. Both new revenue sources appear in all five years of the administration's tentative five-year spending plan, sources said.

The city will directly bill property owners for the trash fee, and only households that are under the federal poverty line will be eligible for the reduced rate of about $200 a year, said a source familiar with Nutter's proposed budget.

In return for that new fee, Nutter is proposing that the city slightly beef up its sanitation services by resuming leaf collection – a victim of earlier budget cuts – and expanding the Community Life Improvement Program (CLIP), whose staff cleans up empty lots. CLIP was most recently in the news when nine of its workers were charged with theft. They face trial in the fall.

Both CLIP and leaf cleanup are popular programs in City Council.

The soda tax will technically be part of the business privilege tax, a 2-cent-per-ounce levy on the distribution of sugary drinks, sources said. They likened it to an excise tax or the 10 percent liquor-by-the-drink tax.

City Controller Alan Butkovitz, who earlier had worried that a soda tax might require preapproval from the state legislature, said the administration "appears to have resolved that problem" by including the levy in the business privilege tax. But the mechanism raises fresh questions about whether the new levy would pass state constitutional muster, Butkovitz said.

"Can you set up a tax that applies only to merchants of sugary drinks? Or must it be all carbonated drinks? Or all drinks?" asked Butkovitz, citing the uniformity clause of the state Constitution.

On the spending side, Nutter reportedly won't slash libraries, recreation, or public safety; last year, he proposed library, pool, and fire company closures.

"We are at a stage where preserving core services is critical," Nutter said.

"I'm willing to support the soda tax, even if it is 2 cents," said Goode, a proponent of lowering business taxes. It would boost the cost of the 23-ounce Arnold Palmer Half & Half Lemonade and Iced Tea drink on his desk yesterday from 99 cents to $1.45, presuming merchants passed on the full cost of the tax to consumers.

"I believe we have to stay competitive in terms of the economic environment, and there are taxes we simply cannot target," Goode said.

Goode said he was opposed to the garbage fee because it was more regressive and hurtful than a property tax, especially to low-income taxpayers. It also is not deductible.

Councilman Bill Green would not confirm the details of Nutter's plan, but suggested that the tax on sweet drinks might fly with the public.

"If you were going to go out on the street and ask, 'Would you pay more per ounce of soda so you can have your street plowed?', I think people would say, 'Yes,' " Green said.

Though otherwise mum about budget details yesterday, Nutter did indicate that he would increase capital investment in the city's technology, and the $2.5 billion capital budget is expected to stress improvements in information technology.

"The dire condition of many of our IT systems is, frankly, unbelievable," Nutter said.