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Philadelphia Unity Cup and Anna Orso/Billy Penn

Kenney’s $12 million gamble: Spending soda tax money as lawsuit ruling looms

The city has no alternative source of funding in place if the courts rule the soda tax unconstitutional.

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Philadelphia Unity Cup and Anna Orso/Billy Penn
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Attorney Shanin Specter glances at his IPhone constantly these days, waiting for an update. The update.

Specter is representing the American Beverage Association and a few local retailers who have sued to stop Philadelphia from enacting the soda tax. Judge Gary S. Glazer has said he will rule by the end of the year, and the order could come down at anytime. Thus, all the IPhone checking by Specter.     

The Mayor’s Office is waiting on the answer, too, but it’s not sitting still. Pre-K is happening, court ruling on Mayor Jim Kenney’s signature piece of legislation be damned. Classes begin in January, and they aren’t free. Without a guarantee of how the judge will rule or an alternative funding plan, the city has budgeted $12 million for Year One of Pre-K.  

Enrollment for the classes began in November. As of last week, according to the Mayor’s Office, 1,150 families were close to enrolling children, and up to 2,000 children can be accommodated.  

So far the city has only spent about $200,000 of that $12 million. Most of the costs will come into play from January to June, the period in which the Pre-K classes run.  

And should Specter and the plaintiffs prevail, those costs will be coming from something other than the soda tax.  

They have argued the tax is unconstitutional for a couple of major reasons: One, that it violates the state’s uniformity clause because certain beverages will be affected by the tax by disproportionate amounts (example: tax on a $2 two-liter bottle of soda will be around 50 percent of the cost; tax on a 16 oz. $5 Starbucks drink would be about five percent). Two, that it duplicates the Pennsylvania Soft Drink Tax, which charges 6 percent on the sale of soft drinks. The Sterling Act, the lawsuit argues, forbids cities from imposing a tax on the same subject as the state and the soda tax would be circumventing that rule.

The city has essentially argued those points are irrelevant because the tax is levied on the distributors, which are not taxed by the state, and that any changes to prices would be up to individual decisions by distributors and store owners.      

Specter is now attempting to cast the city’s decision to push forward with Pre-K regardless of whether the soda tax is ruled legal for his benefit — as a way of claiming inconsistency from the city. In a filing from early December, he wrote that the city is contradicting its expert’s report about the soda tax and a response it gave to the court by guaranteeing Pre-K for the spring without a guarantee of funding from the soda tax.  

“This is especially troubling,” the filing read, “as the City Administration represented to the public, City Council, this Court in multiple filings and the Pennsylvania Supreme Court that the Pre-K program was dependent on the tax.”