Philly’s Soda Tax: When Will Kenney — or Council — Fix This Hot Mess?

As much as three-quarters of the $85 million already generated by the beverage tax is just sitting in the city’s general fund. Philadelphians need to know once and for all where it’s going to go.

Photo by Marlith (license)

It’s hard to shake the feeling sometimes that Philadelphia’s beverage tax is the slowest governmental bait-and-switch in history.

Back in 2016, as the possible spoils of the tax were being flashed in front of a reluctant City Council’s eyes, Mayor Jim Kenney made a series of last-minute promises. One was earmarking $81.4 million (20 percent of the projected tax revenue) over five years for items that either Council members requested or that the administration favored. “These changes are the result of weeks of negotiations between City Council and the administration,” Kenney spokesperson Mike Dunn said at the time. But others took a more cynical view of the sudden offer: “City Council tends to get stuff when they give something,” said Sam Katz, former chairman of the Pennsylvania Intergovernmental Cooperation Authority, to the Inquirer. “It was probably part of the horse-trading to get the votes.”

Now fast-forward to last week, when the office of city controller Rebecca Rhynhart reported new data showing that only 26 percent of the revenue raised so far by the beverage tax is currently being used for pre-K and parks and rec — far lower than the 51 percent proposed for these programs. Based on information derived from the city’s general ledger system (known as FAMIS), the controller says the other 74 percent of the nearly $85 million collected since the tax’s inception has gone to the city’s general fund.

The Mayor’s Office was not pleased. “It is extremely disappointing that the controller chose to issue such misleading and inaccurate information,” Dunn said on Tuesday. “In short, all of the money that is in reserve is going to be spent on the programs. This was made clear when Mayor Jim Kenney proposed the tax two years ago, it was made clear during last year’s budget process, and it was made clear on March 1st of this year, when we announced to reporters the revised projections for the beverage tax.”

Now it’s true, as Kenney argues, that because of the city’s pending Pennsylvania Supreme Court lawsuit involving the tax, a major portion of that revenue has to be retained until the suit is over. And a spokesperson from the controller’s office told Philadelphia magazine that the controller does not suspect anything improper is going on with the money, but recommends that the funds at least be placed in a separate account where it cannot be spent on other items.

But, per Dunn, is all of the money raised from the soda tax is going to these programs, or — think back to 2016 — is some of it? And if it is just some, how much?

There’s no doubt that Kenney’s intentions are in the right place, but to make matters worse, the tax isn’t hitting revenue projections, to the point that the city must now reduce the projected number of community schools from 25 to 20 and the number of pre-K seats from 6,500 to 5,500. (There are currently nine community schools and roughly 2,000 pre-K seats.)

Meanwhile, Kenney is proposing that we pay higher property taxes to support public education — as if we just didn’t get sung the same song two years ago. If the underwhelming returns from the soda tax so far don’t concern you, imagine what will happen once new taxes get implemented. How much money are we going to be expected to keep raising for projects that remain in purgatory?

When will the mayor admit that this bold attempt to fund universal pre-K isn’t living up to the billing? Can he at least admit that having taxpayer dollars in a general fund layaway of sorts until the court’s decision hardly inspires confidence?

It’s time for City Council to step in and mandate that soda tax revenue goes into a separate account outside the general fund. After that, the city should await the results of the PA Supreme Court hearing and find other ways to raise that money without taxing Philadelphians in the event that we lose. Kenney knows there are other ways to raise money for schools without taxing the hell out of working-class people. Let’s just hope he’s willing to be just as fiscally responsible and progressive as he already is socially.