September 06, 2017
Philadelphia's controversial sugar-sweetened beverage tax will be put under the microscope in an upcoming economic impact survey of local businesses, the Office of the Controller announced Wednesday.
The 1.5-cents-per-ounce tax, implemented at the start of 2017, serves as a major revenue stream for public initiatives led by Mayor Jim Kenney, who has also defended the policy's public health benefits. Critics argue the tax is regressive, harms local businesses and threatens jobs in the bottling and transport industries.
City Controller Alan Butkovitz called the tax a "multimillion dollar burden" earlier this year when he highlighted revenue shortfalls against the city's first six-month projections for the tax. Finance director Rob Dubow countered that the data set was too limited to account for the seasonality of the tax and existing inventory that initially escaped the price hike.
On Wednesday, in a letter to Commerce director Harold Epps, Butkovitz said revenues for the first month of Fiscal Year 2018 fell $1.2 million short of projections. Total collections for the first six months of the tax at the end of Fiscal Year 2017 were $7 million below the budgeted projection.
"In order to gain a better understanding of the effects the new tax is having on our local economy, my office will be conducting an economic impact survey of the Beverage Tax," Butkovitz wrote. "We will be analyzing if there has been any impact to businesses' revenues, sales, changes in regular operations such as order quantities and types of items being ordered and the future outlook."
In March, after months of contention and protests outside City Hall, Teamsters Local 830 linked the soda tax to Pepsi's layoff of about 100 workers, as well as plans for similar moves by Coca-Cola and Canada Dry. In its own press release, the city touted new jobs created through the universal pre-K program, one of the main recipients of soda tax revenue.
"We welcome any scientific survey of the impact of the beverage tax, and we would hope that the survey would take into account the clear, economic positive benefits that have already come as a result," said Mike Dunn, a spokesman for Mayor Kenney. "We are, however, skeptical as to whether the survey will be impartial. The Controller has been very open about the fact that he intends to use his remaining months in public service to partner with the beverage industry to paint the tax in a negative light and to advance his own political career."
Butkovitz, who lost his re-election bid earlier this year, campaigned as a vocal opponent of the soda tax.
A recent study on the effects of Berkeley's penny-per-ounce soda tax, collected since March 2015, found that sales of taxed drinks fell by 9.6 percent. Shops in the Bay Area without the tax saw a 6 percent increase in sales of the same group of beverages.
The analysis, released in April by the University of North Carolina and the Oakland-based Public Health Institute, also found that overall beverage sales increased in Berkeley, decreasing the likelihood of job loss. While chain grocery revenues dropped in the Bay Area as a whole, Berkeley's chain grocery revenue fell by 18 cents less than non-Berkeley stores. That same measure demonstrated consumer grocery bills had not increased as a result of the tax.
Independently, the University of Pennsylvania and Harvard University are nearly one year into a three-year study that will assess the impact of the Philadelphia Beverage Tax on beverage sales, customers’ purchases and consumption habits. Researchers have collected data from more than 180 stores and received over 8,000 customer receipts from food and beverage purchases in Philadelphia, surrounding counties and Baltimore to compare areas with and without the tax.
The first round of findings from that study are expected late in the coming fall.
A legal challenge to the Philadelphia Beverage Tax, led by the American Beverage Association and other organizations, fell short before a panel of Commonwealth Court judges but was appealed to the state Supreme Court in July.
"Our office will be reaching out to businesses small and large in commercial corridors throughout the city as well as conducting the survey online," Butkovitz said. "All business-specific information provided will be kept confidential."
Findings from the survey will be released to the public following an analysis of the information collected.