Survey begins, study released on Philly soda tax impact

After citing reports of layoffs and reduced hours for employees in the beverage industry, Philadelphia City Controller Alan Butkovitz announced Wednesday that he will survey businesses in the city to assess the economic impact of the city's tax on sweetened drinks.

"We will be analyzing if there has been any impact to businesses' revenues, sales, changes in regular operations, and the future outlook," Butkovitz said in announcing the survey, which will involve 1,000 businesses of different sizes.

Mike Dunn, a spokesman for Mayor Kenney, said he was skeptical about the survey's impartiality. He said he hoped the study would take into effect the positive effects of the tax, including a possible reduction in health-care costs as less soda is consumed, the pre-K program funded by the tax that has created new jobs, and the benefits for parents who are able to return to work because their children are enrolled in pre-K.

The controller notified Commerce Director Harold T. Epps about the survey in a letter Wednesday that cited reports of layoffs and reduced hours for employees in the beverage and grocery industries.

"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," Dunn said.

Butkovitz lost his reelection bid in May when Rebecca Rhynhart, a former aide to Kenney, defeated him in the Democratic primary. He also met with the American Beverage Association before the primary race, and has been critical of the tax on sweetened beverages.

Butkovitz said he would share the survey results and analysis with other city officials when it is complete.

His announcement came as a St. Joseph University professor released a study funded by the American Beverage Association. John Stanton, a professor of food marketing, compared sales of five stores inside Philadelphia and four outside the city — all  part of the same unnamed supermarket chain — before and after the tax went into effect.

The study found that both beverage sales and total store sales declined inside the city after the tax went into effect in January. All stores were also already experiencing declines in sales before the tax, Stanton wrote. But by comparing November 2016 sales to February 2017 sales, Stanton concluded that the stores inside the city had a much greater loss in sales than those outside the city after the tax went into effect. The declining sales outside the city slowed during that time, he found.

Stanton said the average monthly loss in sales per Philadelphia store — in addition to the loss they were already experiencing — after the tax went into effect was $304,322.

"There is almost no scenario that would lead one to believe that the Philadelphia beverage tax will permit supermarkets to maintain existing labor forces," Stanton wrote.

Stanton also found stores in the city sold an average of $101,589 less in taxable beverages in February 2017 than they did in November 2016, the study found. Stores outside of Philadelphia, meanwhile, had an average net gain of $17,562 in that sector for the same time periods.

The mayor's office was critical of the study and questioned its credibility because it was funded by the beverage industry, Dunn said.

Anthony Campisi, a spokesman for the Ax the Philly Bev Tax Coalition, said Stanton developed his own methodology and did not give the beverage association access to his raw data.

"It's time for the city to stop burying its head in the sand and repeal a tax that is costing local supermarkets hundreds of thousands of dollars a month – threatening efforts to expand grocery access in food deserts and putting hundreds of jobs at risk," Campisi said. "The mayor needs to finally admit that this tax is having severe negative consequences."

Supermarkets, which were the only stores included in the study, account for less than half the beverage sales in Philadelphia, he said. The mayor's office projected a 27 percent decline in consumption in the first year of the tax, he said, and expected to recoup some of that decrease as shoppers who drive over the city line to purchase beverages "realize the cost of gas or the pure inconvenience doesn't make it worth it."

Other researchers are studying the tax as well. The mayor's office said the University of Pennsylvania and Harvard University are conducting a three-year study on the impact of the tax on sales, purchases, and consumption habits. Initial results are expected later this year.

The city's 1.5 cents-per-ounce tax on sweetened beverages went into effect in January. Its revenue fell just short of revised projections for its first six months, raising $39.3 million to go toward expanded prekindergarten, community schools, parks, recreation centers and libraries, and other city budget programs.

In July, the tax raised $6.5 million, falling short of the $7.7 million monthly average needed to raise $92 million in projected revenue for fiscal year 2018.