How airport vendors could use Philly's soda tax to hike prices

Travelers at the Philadelphia International Airport.

When it came time to implement Philadelphia’s tax on soda and other sweetened beverages in January, only some of the vendors at the city’s airport had to deal with it.

But those who did not — the vendors on the Tinicum Township, Delaware County, side of the airport — also now charge more for soda.

Soda prices on the Philadelphia side of the airport — Terminals B, C, D, E, and F —  were an average of 1.39 cents higher per ounce in February than December, according to a new study by a Cornell University professor. Meanwhile, average prices in Terminal A, which is in Tinicum and not subject to the 1.5-cents-per-ounce tax, also increased.

Researchers found that the Tinicum vendors raised their soda prices by an average of 0.56 cents per ounce between December and February.

The city regulates airport concession prices through a contract that requires vendors to have pricing comparable to those in the surrounding area. They can choose Philadelphia or six other counties in Pennsylvania and New Jersey to demonstrate comparable pricing.

So as Philadelphia merchants — including those in the airport terminals that are within the city’s boundaries — raised soda prices due to the new tax, airport merchants that are outside the city had the option of doing the same.

Camera icon Staff graphic
Philadelphia International Airport map shows border between Tinicum Township and Philadelphia.

John Cawley, a professor of policy analysis and management and of economics at Cornell University, said his research included talking to officials at MarketPlace PHL, the city’s contractor that manages airport concessions, about their efforts to notify vendors of the beverage tax.

“They told us in no uncertain terms that they made sure everybody in the airport knew what the tax was, who was subject to it,” Cawley said. “What we found happening on the Tinicum side wouldn’t be due to confusion.”

But Mike Dunn, a spokesman for Mayor Kenney, said Friday that vendors on the Tinicum side who have raised their prices since Jan. 1 did so for a different reason. Three out of the 37 vendors in Tinicum received permission to change prices this year, Dunn said, and all did so as part of a voluntary program that allowed them to raise all prices by 10 percent in exchange for paying their employees more.

All airport merchants will be required to pay a minimum hourly wage of $12.10 when they enter new concession contracts, Dunn said, but three vendors on the Tinicum side elected to begin early.

“The price increases applied to all products, not just sweetened beverages,” Dunn said.

Although the city said the increases in soda prices on the Tinicum side should not be viewed as an effect of the tax on sweetened drinks, vendors still could raise soda prices and cite the increased prices in Philadelphia as justification for doing so.

Dunn said the decision to raise drink prices — at the airport or elsewhere — is “a private business decision and not mandated by law.” Beverage distributors must pay the levy on drinks distributed in Philadelphia, and can choose whether to pass it onto retailers. Retailers, in turn, can choose whether to pass it onto consumers.

Cawley’s study, published last week in the Journal of the American Medical Association, suggested that even airport vendors within Philadelphia’s borders did not pass on 100 percent of the tax. The average price hike between December and February at Philadelphia airport stores was 1.39 cents per ounce, Cawley found. That difference accounts only for 93 percent of the 1.5-cents-per-ounce tax.

Cawley said he did not ask vendors about soda price changes when he visited the airport to purchase 20-ounce bottles or fountain drinks of Pepsi or Coke, because he wanted to make sure vendors didn’t adjust prices just because he was studying them.

He said he got the idea to track the prices after reading a December news story explaining that only part of the airport would be subject to the new beverage tax.

It was a “natural experiment,” said Cawley, who made several trips to the airport.

He documented prices in December, and again in January and February, at 10 stores on the Delaware County side of the airport and 21 on the Philadelphia side. The researchers used retail chains, including bakeries, restaurants, and newsstands, that had locations on both sides.

Cawley’s research also found that vendors raised their prices slowly after the new tax went into effect. In January, the vendors on the Philadelphia side had raised soda prices 0.91 cents per ounce, on average, and vendors on the Tinicum side had raised prices by an average of 0.41 cents per ounce since December. By February, the average price had increased again.

Meanwhile, the city said this week that the beverage tax brought in $7.4 million in September — the largest monthly collection to date, and the closest that collections have come to the $7.7 million monthly average needed to meet the revenue goal.

In its first nine months, the tax has raised about $60 million; it will pay for pre-K, community schools, and improvements to parks, libraries, and recreation centers.

Cawley said the study, conducted with David Frisvold of the University of Iowa and Barton Willage of Cornell University, was not funded by any local group involved with the controversial beverage tax. He received funding from the Global Obesity Prevention Center at Johns Hopkins University and from the Robert Wood Johnson Foundation, which advocates for taxes on sugary drinks.

Staff writer Linda Loyd contributed to this article.