Philly soda tax brings in $6.4M in February, meeting city's target

Philadelphia's tax on sweetened beverages brought in $6.4 million in February, slightly more than it did in January and matching the city's projections for the month.

It was the second consecutive month the tax's revenue had met or exceeded projections, and Mayor Kenney pointed to the numbers to ask whether beverage-industry reports of sales declines as great as 50 percent in Philadelphia may have been overblown.

"It's a good thing. It kind of shows that sales maybe aren’t down as much as people argue," Kenney said. "We’re gratified that the way we figured the numbers out seem to be on target."

The city expected the 1.5-cent-per-ounce tax, levied on distributors, to result in less soda consumption. It built a 27 percent drop-off citywide into revenue projections.

In the first month of the tax, reports from retailers came in much higher. ShopRite and Canada Dry Delaware Valley bottling reported drop-offs as high as 50 percent in Philadelphia and a 15 to 30 percent loss in sales overall.

Anthony Campisi, a spokesman for the Ax the Bev Tax coalition, backed by the American Beverage Association, acknowledged that while some retailers might have experienced sales drops greater than 30 to 50 percent, “some might be seeing less.” He said the tax was hurting businesses and consumers, regardless of the size of any drop-offs.

“I’ve talked to bars who say alcohol drives our sales, so we’re OK, but a fast-food place like McDonald's is going to feel the tax more with free refills,” Campisi said. “I think it’s entirely possible that the city is meeting these revenue projections while there’s substantial pain being felt by these businesses. I think the truth is both are occurring.”

The city announced the preliminary figures early Thursday. Collections were due from distributors March 20. The city had projected that the tax would bring in $6.3 million for the month in its budget proposal to City Council.

The city brought in $5.9 million for January, the first month of the tax, more than double its prediction of $2.3 million.

The ultimate test will be whether the city can meet its goal of $46 million over the first six-month period and then $91 million annually. To hit that mark the city will need to increase its monthly intake to $7.7 million starting in April, and bring in about a further $7 million in unpaid taxes for the rest of the year.

The early returns challenge the beverage industry’s argument that the tax could be unsustainable. It is also good news for the programs the money pays for, including pre-K and upgrading the city’s parks and recreation centers.

Last month, Pepsi said it would lay off 80 to 100 workers. A spokesman for Pepsi declined this week to give specific figures. He said that the company was in discussion with its union and that the process would take several months. Canada Dry laid off 35 people in February.

ShopRite owner Jeff Brown, who operates seven stores independently in Philadelphia, and can speak more freely about his sales, said his revenue declined from January to February, as did the tax his distributor remitted to the city.

Brown said there are 300 fewer people on his payroll across six Philadelphia stores than before the tax passed. None of those people was laid off, he said.

“That was a last resort, and it wasn’t necessary,” he said. “People had their hours cut, and they left.”

Brown recently opened a seventh store in the city's Wynnefield Heights section. Workers there are represented by a different union, Brown said, so few people whose hours were cut were able to take advantage of the new job openings.

The Kenney administration said sales were expected to fluctuate throughout the year because of spikes and drop-offs in consumption due to holidays or weather. It credits its $1.8 million outreach and enforcement operation with reaching more than 5,000 retailers in the two months since the tax passed.

The tax, currently under appeal, will go before a Commonwealth Court panel in Pittsburgh on April 5 at 9:30 a.m.

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