Monday, April 27, 2015

PhillyDeals: Soda's only virtue: It makes money - so tax it

EMILE WAMSTEKER / Bloomberg News
EMILE WAMSTEKER / Bloomberg News
EMILE WAMSTEKER / Bloomberg News Gallery: PhillyDeals: Soda's only virtue: It makes money - so tax it

You can buy three liters of cola - 101 ounces - for 99 cents at our local ShopRite.

It's cheaper than seltzer water, which shows the syrup and dye bottlers add are worthless.

Mayor Nutter's proposed 2-cents-an-ounce sugar-drinks tax would triple that price.

Works for me. I do the weekly grocery buy for my family of eight. Our budget's $150. Meat, dairy, eggs, beans. Fruit, vegetables, spaghetti, crackers.

But no sugar water, even though it's the cheapest thing in the store. "Soda," I tell my kids, "is for sick people." Tap water's even cheaper, and less bad for you.

Why not tax soda? It's easier than solving the pension mess, or paying off the stadium debt, or laying off reliable voters. And better than taxing something that's good for you.

Of course, I'd feel different if I sold colored sugar water for my living.

 

Sugar-water fortunes

"It's really a very onerous tax proposal. It's hitting at a very difficult economic time," Hank Lieberman, vice president and general counsel at Rose Group in Horsham, owned by New Hope-area resident Harry Rose, told me.

"Restaurants are already struggling with the city's new menu-labeling mandate," which shows how much fat, sugar, and salt go into prepared food.

Rose Group runs 59 Applebee's Neighborhood Grill & Bar restaurants and six Corner Bakery stores in Pennsylvania and neighboring states. That includes six Applebee's and a bakery in Philadelphia.

No other town in Rose's market area is pushing a soda tax, Lieberman told me. "My presumption is we would have to collect it from the consumer at the time of sale."

Lieberman worries, for instance, that the Applebee's on the Philadelphia side of City Avenue could lose business to rival Bala Cynwyd chain restaurants that wouldn't face the tax.

It's not just the cost. "This is going to stigmatize the product. It's like what they've called a sin tax. Is this the equivalent of smoking a cigarette?"

Lieberman takes comfort in the fact that, as my colleague Jeff Shields noted in yesterday's Inquirer, lobbyists for soda vendors, including the Pennsylvania Restaurant Association, "will be fully engaged in fighting this proposal."

Nutter is trying to solve tough problems for all the people. But some people's livelihoods, and some fortunes, depend on selling lots of soda cheap. So, as Lieberman says, "This is going to be a battle."

 

Heading east

Business consulting firm LECG Corp., Emeryville, Calif., yesterday completed its $33 million stock acquisition of Smart Business Advisory & Consulting L.L.C., the largest independent accounting firm in the Philadelphia area, and said it would put its corporate headquarters here.

"We're moving it to Devon, and the reason is strategic: 65 percent of our combined business is on the East Coast or in Europe," Steve Samek, the former Smart chief executive officer who will head the combined company, told me.

A Chicago native, he has leased an apartment in Wayne, "but I'm on the road 22 days a month" visiting the group's 39 U.S. and foreign offices, which serve legal and corporate clients.

As part of the deal, Smart shareholder Great Hill Partners L.L.C. has invested $25 million in new preferred shares of the firm, which is being called LECG Smart, for now.

The consulting business "took a major haircut" in last year's recession, Samek said.

Revenue at LECG's economics-consulting, litigation-support, and business-consulting units has fallen to $21 million a month, from $30 million in early 2008. Accounting, tax, risk, and business-consulting revenue for Smart, which is less than half LECG's size, has fallen less.

The combined companies employ 1,450, down from 1,700 before the merger. A few dozen more will lose their jobs as the firm shuts duplicate offices.

Samek expects a slow U.S. recovery. "We're winning more work," but legal work, for example, faces long delays. "Partly it's the economy, partly it's the new way companies are managing" their legal, technology, and consulting contracts, after a couple of years of tough times.

 


Contact staff writer Joseph N. DiStefano at 215-854-5194 or JoeD@phillynews.com.

 

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