Meet the Dark Money Forces Behind Philly’s Soda Tax

A dark-money nonprofit helped Mayor Kenney get the soda tax passed. Here's why that's troubling for future policy battles.

Philadelphia Mayor Jim Kenney speaks during a news conference on Tuesday, March 8, 2016, at the Rising Stars APM Preschool Center in Philadelphia. Kenney in his first budget is asking for a soda tax to help fund initiatives including universal pre-K. The William Penn Foundation announced grant to increase the availability and accessibility of high-quality early learning opportunities throughout the city. (AP Photo/Matt Rourke)

Mayor Jim Kenney speaks during a news conference at a city preschool in March. | Photo by Matt Rourke/AP

Mayor Jim Kenney defeated Big Soda this month, successfully convincing City Council to pass an historic tax on sugary drinks and diet beverages that will enable thousands more kids to attend pre-K.

Dozens of other cities and states had previously tried to enact soda taxes, only to be shellacked by the deep-pocketed beverage industry that vehemently opposes them. Some argue that Philadelphia prevailed where they didn’t because Kenney is a skilled politician who used his honeymoon phase and close relationships with Council members to his benefit. Others believe it was because Kenney pitched the soda tax as a way to raise money for popular programs like pre-K instead of as a nanny-state health initiative.

All of those things certainly played a role. But an organization founded by Kenney’s allies to promote the soda tax was just as critical to his victory, if not moreso. Known as Philadelphians for a Fair Future, it aired TV ads, funded polls, and partnered with an army of volunteers to help persuade lawmakers to support the tax. On one hand, the group’s experience gives other cities a much-needed guide to fighting off super-rich business lobbies. On the other hand, Philadelphians for a Fair Future is a 501c(4) — essentially a dark-money nonprofit — that can raise unlimited amounts of money without needing to disclose anything about some of its donors.

On March 16th, just two weeks after he first proposed a soda tax, Kenney stood in a recreation center to announce the kickoff of Philadelphians for a Fair Future. He knew the American Beverage Association would do everything it could to defeat him: Five years ago, when then-Mayor Michael Nutter proposed a sugary drinks tax, the soda industry flooded the airwaves with commercials, packed City Hall with lobbyists, and partnered with hundreds of small businesses and union members to kill the proposal. “There’s going to be an air war, there’s going to be a ground war, and there’s going to be lobbyists out the wazoo,” Kenney said at the event.

Philadelphians for a Fair Future, Kenney said, could give him a fighting chance against the all-powerful soda lobby: “I don’t think I can fail, based on the people who are standing behind me.”

The group ended up doing exactly what the mayor hoped. By spending $1.4 million to air ads that touted the benefits of the soda tax, Philadelphians for a Fair Future was able to partly counteract the whopping $5 million spent by the American Beverage Association on advertisements. “We didn’t match it. We didn’t come close,” Kenney said recently in an interview with Philadelphia magazine. “[But] I think it’s part of what made a difference.”

In fact, the organization used the soda industry’s own playbook to defeat it. In addition to airing ads, Philadelphians for a Fair Future paid five consultants who worked around the clock lobbying lawmakers, placing op-eds in news outlets, commissioning polls, and acting as spokespeople for the cause. The nonprofit also partnered with more than 80 outside groups that backed Kenney’s tax, including civic organizations, labor unions, private companies and health experts. “Our coalition partners were incredible. They were very aggressive. They met with Council members. … They also came out in droves to testify in City Council hearings,” said Kevin Feeley, a spokesman for Philadelphians for a Fair Future. “The truth is, they were pretty much our secret weapon.”

As valuable as its volunteers were, though, Philadelphians for a Fair Future couldn’t have done much of its work without money. Feeley said the group raised roughly $2 million, but “the final tally isn’t available yet because a few checks came in very late.”

Michael Bloomberg, the billionaire who tried to ban big sodas as mayor of New York, was the biggest contributor, providing about $1.5 million to $1.6 million, according to Bloomberg adviser Howard Wolfson. Though Philadelphians for a Fair Future voluntarily said in March that he gave money to the campaign, Bloomberg didn’t reveal how much he donated until after City Council passed the soda tax. Philadelphians for a Fair Future also acknowledged during the soda tax debate that another contributor was the Action Now Initiative, an anti-obesity nonprofit funded by Texas billionaire/former Enron trader John Arnold and his wife. But as with Bloomberg, it was only after the tax’s passage that Action Now Initiative revealed the amount of money it gave: $400,000.

There are other donors, Feeley said, including some who provided smaller amounts of funding, such as $5,000. So far, though, Philadelphians for a Fair Future has not said who they are.

The organization has to file its first lobbying expense report by July 30th, which could reveal more details about its contributors. But even then, the identities of donors other than Bloomberg and the Action Now Initiative may remain under lock-and-key. Under the city’s lobbying law, Philadelphians for a Fair Future only needs to disclose the names of individuals and groups that gave more than 10 percent of the total funding it receives it each quarter. Let’s assume that the group indeed raised at least $2 million: That means that if someone donated less than $200,000, Philadelphians for a Fair Future doesn’t have to reveal anything about them whatsoever. (And even in cases in which contributors gave more than $200,000, the nonprofit doesn’t need to state the exact amount of money the contributors provided — just their names.)

That bears repeating: A group could give Philadelphians for a Fair Future 17 times the amount of money that it is allowed to donate to candidates in a city election — Philly’s campaign contribution limit for organizations is $11,900 per year — all under cloak and dagger.

To be sure, there’s a difference between giving money to a candidate and giving money to a nonprofit working to advance an elected official’s cause. Kenney did not launch Philadelphians for a Fair Future himself. And when asked earlier this month if Kenney knew all of the donors or how much they contributed, mayoral spokeswoman Lauren Hitt said, “Not really. … He’s never even talked to Bloomberg, though I’m sure they’ll connect soon.”

However, there’s no denying that Kenney and his administration worked alongside Philadelphians for a Fair Future — and that if Kenney wants to know who helped his cause, as any savvy politician would, he can likely easily find that out. While candidates and 501c(4)s are prohibited from coordinating during an election, there’s no law barring them from working together on a policy issue like this. In addition to the fact that the mayor and his aides attended press conferences organized by Philadelphians for a Fair Future, Kenney also asked donors to contribute to the group. “I don’t know how much I raised,” said Kenney. “I know a couple people spent $5,000 or $10,000. But I wasn’t a big fundraiser.”

Additionally, Philadelphians for a Fair Future’s founding chairperson is Andi Perez of the 32BJ Service Employees International Union, which endorsed Kenney in the mayoral primary. The Philadelphia Federation of Teachers, one of Kenney’s most prominent backers in the election, also played a role in forming the group, along with the Philadelphia Parks Alliance, Public Citizens for Children and Youth, and others. And Ken Snyder, a top strategist for Kenney’s mayoral campaign, was a consultant for Philadelphians for a Fair Future.

In other words, this is yet another way that powerful interests can attempt to influence the mayor, and they can throw a lot more money around in this scenario than they can in elections.

As an individual, Bloomberg would only be able to donate $3,000 annually to a candidate running for office in Philadelphia. He gave Philadelphians for a Fair Future 500 times that. How could Kenney not owe Bloomberg a political debt after that? And when other cities look at Philly’s soda tax, will they try to replicate it not necessarily because they think it’s the best tax out there, but because they believe Bloomberg will finance its PR campaign? Bloomberg gave $657,000 to the soda tax drive in Berkeley, California, and Wolfson said he will help finance the push for soda taxes in San Francisco and Oakland as well.

David Thornburgh, president of the good-government group Committee of Seventy, thinks the city should require organizations like Philadelphians for a Fair Future to disclose more information about donors — and sooner. “These things ought to be reported completely and instantaneously,” he said. “Then you bring the spending into the light as close to the point where it’s actually useful.” Under the city’s current lobbying law, we don’t find out who opened the barn door until a month after the horse is out.

Asked if he would provide more information about the group’s supporters, Kenney said, “I have no problem with disclosing the donors — all of them — but I would also argue that the soda companies should disclose who they gave money to. Did they pay people to be on television to do commercials? Did they pay people to write op-eds?” (A spokesman for the American Beverage Association-funded No Philly Grocery Tax Coalition said it has done neither.) Feeley, however, has only said that Philadelphians for a Fair Future “will make any necessary disclosures about donors as the rules require.” He has declined to say whether it will go above and beyond the law in its expense report.

It’s an important distinction, not only because the public ought to see who tried to influence the Soda Wars, but also because Philadelphians for a Fair Future may have a role in future policy battles. Kenney says he may call on the group for help in pushing for legislation in upcoming years. Everyone from New York Mayor Bill de Blasio to New Jersey Gov. Chris Christie to Michigan Gov. Rick Snyder has used 501c(4)s to advance their policy proposals. “Hopefully we won’t have this big of a policy fight in the future, but we may [utilize them],” said Kenney, “and if people feel strongly about it and want to help us, we’re happy to have them on board.”

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