City’s sweetened beverage tax upheld in court, but revenue projections fall far short for FY17

Two major developments occurred last week concerning Philadelphia’s sweetened beverage tax. On June 14, www.billypenn.com reported the city is forced to lower its projections for the tax revenue this fiscal year because the tax will net far less that had been anticipated. The next day, Pennsylvania Commonwealth Court, in a 5-2 vote, upheld a lower court decision by ruling the tax legal under state law.
The 1.5-cent-per-ounce on sugar-sweetened beverages has been in effect since January. According to the city, it collected $25.6 million, far short of the $46.2 million it had projected for fiscal 2017, which ends June 30. Despite this, the city has not lowered its anticipated $92 million revenue projection for 2018.
This brought a sharp exchange between City Controller Alan Butkovitz and Mayor Kenney’s office. Butkovitz accused the administration of budgeting with inaccurate figures, and a spokesperson for the mayor countered that the city controller is partnering with the beverage industry to further his political ambitions.
Philadelphia City Council approved the controversial tax last year and later it was signed by Kenney to fund projects like universal pre-kindergarten, community schools, and a plan to rebuild the city’s libraries, parks, and community centers.
The city’s Ax the Philly Bev Tax Coalition, backed by the American Beverage Association that filed the lawsuit last year, criticized the court ruling but promised to appeal. A spokesperson also said the shortfall in revenue projections is evidence the tax will not fund the projects the city has promised. Butkovitz underscored that by charging the administration is creating a shortfall based on faulty assumptions.
“Two courts have now considered the arguments of the beverage industry and both are certain that the Philadelphia Beverage Tax stands on solid legal grounds,” Kenney said. “As I stated when the beverage tax was upheld in Common Pleas Court, the children of Philadelphia are waiting for the opportunities that the tax can provide. Our entire city desperately needs us to be able to move forward with the programs funded by the tax and we will be unable to do that in full until full legal action is resolved. The beverage industry needs to see this ruling for what it is – a clear statement Philadelphia has the right to try to provide for its own – and cease the legal and public relations battle to which it has devoted millions. The beverage industry should not ask our children to wait another minute.”
Last May, the Board of Directors of the Greater Northeast Philadelphia Chamber of Commerce voted to oppose the tax.