Philadelphia's new tax on sugar-sweetened beverages will have little impact on city finances, according to Janney Capital Markets.
Janney municipal analyst Alan Schankel noted in a June 20 report that the 1.5 cent-per-ounce tax is expected to increase annual city revenues by $91 million and be used mainly for educational purposes including pre-kindergarten expansion. Schankel said that while some of the new revenue will be earmarked for pension contributions and other general fund ex¬penses, the increase is "mildly positive, but nothing to get overly excited about." The new tax will be imposed on distributors of soda as well as energy drinks, sports drinks, flavored water and pre-sweetened coffee.
Mayor Jim Kenney said after signing the bill Monday that revenue from the tax is projected at $410 million over the next five years. In addition to funding 6,500 new pre-k seats, Kenney said the revenue will also be used for debt service on $300 million in new borrowing that will allow the city to enhance parks, libraries and recreation centers.
Schankel said Mayor Jim Kenney's push for the tax emphasized the financial impact in contrast to other cities that have been unsuccessful in seeking soda taxes as a health issue such as New York City under Michael Bloomberg. He expects other cities to now try and follow Philadelphia's lead.
"Philadelphia's sponsors avoided the so-called nanny tax connotation, rather emphasizing revenue (and pre-k) enhancement over health benefits of reduced sugar consumption," said Schankel. "Philly's success will likely stimulate similar initiatives around the country, with supporters shifting emphasis to revenue increases rather than health benefits."
