Top aides to Mayor Nutter today said the proposed trash fee and soda tax in the mayor's budget plan would stave off service cuts and improve quality of life in the city.
City officials today laid out the details of the $3.87 billion budget plan for the 2011 fiscal year, which starts July 1. As first reported by the Daily News, the plan will contain a trash fee and a tax on sugary drinks. Here are the details:
The trash fee would be $5.77/week or $300/year for property owners and would be placed on your real estate tax bill. Some low income households will qualify to pay a $200 fee instead. This fee would be effective July 1 and is expected to bring in $108 million annually.
The sugary drinks tax would be 2 cents per ounce of soda, juice and other sugar beverages. That tax would be charged to retailers, as part of their business privilege tax. Presumably they would pass the charge on to consumers. It will yield $77 million a year, but because it won't start until January 2011, this tax would generate $39 million in the 2011 fiscal year.
Officials said these new charges mean they will not have to make any major service cuts to close a projected budget gap of up to $150 million in the 2011 fiscal year. Over five years, that number will grow to $500 million to $700 million. That's due to lower than expected tax revenues, coupled with some unplanned expenses, like the cost of snow removal.
"The budget was designed to avoid more service cuts," said city Finance Director Rob Dubow. "When we looked at the budget this year there were two things we didn't want to do: service cuts and we didn't want to increase the rates of any of our existing taxes."
Last year the mayor had to close two budget gaps in several months, slashing $2.4 billion from the city's five-year financial plan and drawing community outrage over his proposals to close libraries and cut services. This year's budget plan -- which the Mayor will formally unveil in his budget address tomorrow -- must now go to City Council for approval.
Nutter officials said the two new charges – which they said would be permanent -- would help them combat obesity and clean streets, in addition to generating revenue to balance the budget. A small amount of revenue from the charges would go to anti-obesity programs and street cleaning efforts. Mechanical leaf collection will be restored in the neighborhoods.
But some questioned the new charges. Brett Mandel, former head of the tax-reform organization Philadelphia Forward, said the trash fee would disproportionately affect those with lower incomes. The proposed trash fee is structured differently than in many cities, which use a "pay as you throw" model, meaning the fee is based on how much trash you put out.
"It's a horribly regressive thing to do," Mandel said. "It would be applied equally to folks regardless of their means. Even worse, if you're going to make this a charge based on trash, it should be a charge based on what you throw out."
Deputy Mayor for Transportation and Utilities Rina Cutler said the city chose a flat trash fee for the simplicity. She also said that citizens can get a financial boost through the Recycling Rewards Program, which provides coupons to neighborhoods with high recycling rates.
Tony Crisci, general counsel for the Pennsylvania Beverage Association, slammed the soda tax, saying it would cost jobs in Philadelphia, where there are two soda bottling companies.
"What ends up happening there, is there will be a reduction in sales. If there's a reduction in sales, there will be a reduction in production. If there's a reduction in production, there's a reduction in jobs," Crisci said. "This is clearly a grab for money."
Deputy Mayor for Health and Opportunity Don Schwartz said a soda tax would help Philadelphia, which has the highest obesity rate of the top ten cities in the nation.
"We expect that over time, this will provide a good revenue source for obesity prevention," Schwartz said.