Some inconvenient facts on Philly's beverage tax

Founding Father John Adams referenced facts as stubborn things, and no matter what people wished or wanted to dictate, they cannot alter the state of facts and evidence.

This is true when reviewing the many sides that have presented their claims and messages regarding the impact of the new beverage tax. A range of voices have been heard, including the mayor’s office, elected officials, local businesses, national industries, and the media.

Pause. Take a breath. Let’s look at the facts regarding this new Philadelphia tax.

Revenue collections. When the beverage tax was presented to City Council and eventually passed, the mayor’s office said it would generate $92 million annually, or about $7.7 million every month. In the first six months of collections, the monthly average was $6.5 million. Since then, monthly revenues have continued to fall short, and at this rate the city will be almost $15 million below budgeted projections by June 30, 2018.

A recent Inquirer editorial stated, “There is some evidence that collections will eventually rebound to the $7 million a month projected by the mayor’s office.” First, the city needs to collect $7.7 million every month, which is the amount projected in the city’s latest five-year budget plan. Second, there have been no collection data to support the theory that revenues will increase, especially since the summer months did not produce additional tax revenues from sweetened beverages.

Businesses losing revenue. Almost everyone agrees the beverage tax has had a negative impact on Philadelphia’s local businesses. As indicated in my office’s recent economic impact survey, hundreds of businesses said they are realizing revenue losses. Of those incurring a loss from the tax, 60 percent reported their losses at more than 10 percent. Some of the poorest neighborhoods have been impacted the most, making it almost impossible for many to keep their doors open.

The city should not be in the business of putting specific businesses out on the street to fulfill an agenda or legislative priority. By sustaining the wage tax at its current rate — not increasing it — the city would have more than $300 million over the next five years. This would be enough to pay for pre-kindergarten as well as contribute to community schools and other neighborhood projects. Instead of the bait-and-switch with taxes, the necessary funding is available and it does not include harming any businesses.

Rebuild Project. The Rebuild Project was created to make repairs to parks, recreation centers, and libraries. Again, this is an important initiative to pursue as our children, families, and all residents and visitors need safe, secure sites for recreational activities. However, the devil lies in the details.

As the independent auditor for the project, I expressed initial concern that the city was utilizing the Mayor’s Fund for Philadelphia as a fiscal agent to maintain almost $5 million from the William Penn Foundation. This is the same Mayor’s Fund that is under investigation by the Pennsylvania Attorney General’s Office after several investigative reports issued by our office. Additionally, the Rebuild financial oversight responsibilities between the city and my office have not been finalized, along with any plans for the types of projects that will be funded or where the improvements will occur.

In summary, these are the facts that we know so far. The beverage tax is negatively impacting small businesses by generating new tax revenues that have not met promised projections. There are still many unknown factors, such as how the money is being used and how it is being stored in the general fund along with the other billions of dollars in other tax revenues. Our current audit of pre-kindergarten revenues will shed some light in this area.

I firmly believe in, and will always support, increasing pre-kindergarten seats and repairing our parks and recreation centers. However, the city could have pursued another funding avenue, such as sustaining the current wage tax rate, rather than hurting hundreds, if not thousands, of businesses around the city.

Plain and simple. These are the facts.

Alan Butkovitz is Philadelphia city controller. Alan.butkovitz@phila.gov