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May 31, 2017

Philly's soda tax revenue dips in April, looks like city's projections off by millions

Mayor's spokesman says fluctuations are normal for a new tax

Revenue generated by the Philadelphia Beverage Tax fell in April, a decline that has opponents of the tax renewing their criticism.

The city brought in about $6.5 million in soda tax revenue, according to preliminary figures first reported by the Philadelphia Business Journal. That marked a 7 percent dropoff from March, when tax revenue peaked at $7 million.

The city projects the tax will bring in $46 million by June 30, the end of the fiscal year. To hit that figure, the soda tax would have to generate more than $20 million total in May and June.

"That just shows the flaws in this failed tax," said Anthony Campisi, spokesman for Ax the Bev Tax Coalition. "This tax is costing jobs. It's raising prices. It's hurting local business. It's not providing the stable source of revenue the mayor claims he needs."

Mayor Jim Kenney proposed the tax as a funding source for two of his administration's biggest priorities – universal pre-K and park improvements. Since taking effect in January, it has raised an estimated $25.6 million.

Tax revenue rose from $5.9 million in January to $6.2 million in February before hitting $7 million in March. Preliminary figures indicate April's numbers will dip.

City spokesman Mike Dunn said such fluctuations are not unusual.

"As independent economists have confirmed, fluctuations such as that seen in the first four months of the beverage tax are, in fact, the normal course for any new tax," Dunn wrote in an email. "We have seen three very good months of collections compared to one 'off' month, and we remain confident that we'll make our projections in the long term."

But Campisi notes the tax has not yet hit $7.7 million — the average monthly revenue needed to meet annual projections.

"This has never met a full collection," Campisi said. "Last month was the first month that they were supposed to get $7.7 million. They only got $7 million. Now, it's trending downward."

The Kenney administration contends the revenue from the first three months was in line with what it expected, noting monthly revenue figures likely will vary due to seasonal changes and variations in due dates.

The tax has enabled nearly 2,000 children to attend free pre-K programs, created more than 250 jobs and helped 4,500 public school students attend community schools, Dunn said.

Philadelphia is the first major American city to adopt a soda tax. 

The soda lobby continues to fight the tax in court, claiming the 1.5-cents-per-ounce tax on sweetened beverages is unconstitutional. 

A Philadelphia judge ruled against the soda lobby in December, allowing it to be implemented. But the decision was appealed.

In April, a panel of Commonwealth Court judges heard arguments over its legality. The judges have not yet announced their ruling.