Nutter proposes soda tax or higher property tax to aid schools

Mayor Nutter presented Council with two options Thursday to raise money for the School District: a 10 percent property-tax increase and a 2-cents-per-ounce soda tax.

Nutter said he preferred the tax on sugar-sweetened beverages because it "affects fewer people."

"It's paid for by people who access a certain product, versus real estate, which is virtually everyone," he said. "We are in at least the aftermath of a recession. . . . People are still hurting, and these are still tough economic times."

The soda tax would go into effect Oct. 1 and raise $60 million for the remainder of the district's fiscal year, $80 million for an entire year. If the tax is cobbled together with a potential hike in hourly parking rates, help from SEPTA to fund student Transpasses, and a state block grant, Nutter said, the city could fulfill his pledge to raise $75 million to $110 million for the schools without raising property taxes.

He said he offered the $95 million property-tax hike so there would be "a range of options" for Council.

The mayor's gambit sets the stage for an intense two weeks of backroom negotiations before Council's final hearing and summer recess, scheduled for June 16.

Since School District of Philadelphia officials asked last week for help closing a $629 million budget gap, Council members have shown little willingness to raise taxes.

"I don't know anybody who's interested in raising property taxes at this time. And as far as the soda tax goes, I don't know where we are on that," Council President Anna C. Verna said Thursday. "This is a mess. I don't know what alternatives we really have."

The mayor also proposed the soda tax last year, but the measure faced such strong opposition that Council never brought the bill for a vote.

Danny Grace, secretary-treasurer of Teamsters Local 830, helped defeat the 2010 bill. He argued that the tax would cost jobs for half of his 2,000 members who haul soda and other drinks.

"I never believed he would bring it back this year," Grace said soon after finishing a conference call with other opponents of the bill. "We're already mobilized, and we'll defeat it once again."

The Teamsters, the beverage industry, and local retailers are part of a coalition that lists 621 members at a site created last year, www.savephillyjobs.com.

Last year's proposal included $20 million annually for new programs promoting healthful eating and exercise; this year's bill has no such trimmings.

Larry Ceisler, spokesman for the coalition, repeated last year's mantra that the proposal was simply a "revenue grab."

"A tax is a tax is a tax," he said. "A year ago it was a tax based on the pretense of an antiobesity campaign. Today, there is no pretense."

The 2010 soda tax would have been collected at points of sale, which raised concerns about its enforceability and legality.

The new proposal would collect the tax from distributors, who would have to be licensed by the city. The city Law Department has vetted that method and found no objections.

Council members have noted that a soda tax is likely to be challenged in court, and once the city passes a revenue stream for the schools, state law says that money must be provided every year.

"Relying on a sugar-sweetened beverage tax is very dangerous," Councilman Bill Green said. "We'll be required to come up with that money even if a sugar-sweetened beverage tax is struck down" in court.

Several members said they realized something must be done for the schools, but they still have reservations because the district is controlled by the state and doesn't answer to Council.

Nutter said the extra city revenue would save full-day kindergarten, transportation for students, and alternative schools, and would keep class sizes small.

The exact amount needed to achieve those aims remains unknown and dependent on how much help the district can get elsewhere - another element giving Council pause.

"I do believe at the end of the day there will be some need for some revenue for the School District," Majority Whip Darrell L. Clarke said. "At this time, I'm not comfortable with signing off on any level of contribution until we get an accurate accounting of what is actually needed."

Clarke also introduced a measure on Thursday that would authorize the city to raise $44 million for the schools from a one-year property-tax hike and would be distributed as an "accountability grant."

Administration officials said the measure would violate the state law requiring the city to continue the funding year after year.

Nutter also seems poised to raise about $6 million for the schools by hiking parking rates at meters and kiosks. He has the authority to raise rates in Center City to $3 an hour and in University City to $2 an hour.

Councilwoman Jannie Blackwell, chair of the Education Committee, who represents University City, objected Thursday. "I think it's unfair at the last minute with no notification," she said. "I hope the administration will reconsider this."

Nutter said he hoped to resolve "all these budgetary matters" by June 16, but several Council members have noted that the recess is an arbitrary date.

"If we have to stay here until the 30th, so be it," Verna said.

The mayor's proposals must pass through a committee vote and readings at two Council meetings. A committee hearing on the measures has been set for June 10, seemingly making it impossible for two readings before June 16.

But through a bit of legislative jujitsu, Council could recess the June 9 meeting, then reconvene on June 10 after the committee meeting. It could give the mayor's proposals a first reading then and consider them for final passage on June 16.

Majority Leader Marian B. Tasco said she didn't know whether Nutter could garner the nine votes necessary to pass either measure by then.

"This stuff is fluid. It moves every minute, so you can never say definitely what's going to be the case in a legislative body," she said. "You put the bill in, and then the negotiations begin."