Looming soda tax draws scrutiny

Some businesses feeling sour on sweetened beverage tax

Seattle shoppers will soon pay more for a range of sweetened beverages as a new tax goes into effect, but a group of neighborhood businesses and local residents are lobbying elected officials to repeal the measure.

The 1.75-cent-per-ounce tax passed by the city council in June will be levied on distributors starting Jan. 1, and includes soda, sports and energy drinks, sweetened teas and juices, and pre-made coffee beverages.

It does not affect diet soft drinks, alcoholic beverages, 100-percent fruit and vegetable juices with no added sweetener, or drinks in which milk is the primary ingredient, among others. The city expects to generate $15 million in revenue in the first year.

In response to the looming tax, the Keep Seattle Livable for All coalition of more than 200 local businesses and community organizations — with support from the American Beverage Association — launched what it calls a, “public education campaign,” earlier this month, with signs warning of “higher taxes ahead,” in stores throughout the city. Those notices say the cost of one gallon of sweetened tea will go up more than $2, and a 12-pack of 12-ounce soft drinks will increase over $2.50 at the start of the year. In all, the group suggests that more than a thousand beverages could be affected.

Among those to sign on to the effort opposing the tax is Darren Straley, who owns three convenience stores in the city, including a 76 station in lower Queen Anne. He said the city has fallen short in educating both retailers and the public on how they’ll be affected.

“I don’t think that the customers are really going to be aware of this until they see the actual price change, and they have the sticker shock,” he said.

Straley called the tax, “fairly regressive,” and used the example of a parent tasked with providing Gatorade for their child’s Saturday morning soccer game. A 24-count of 20-ounce sports drinks will cost nearly $9 more than it currently does.

He’s also made the decision to remove fountain drinks from his locations, anticipating he’ll no longer have the customer base for them because of the cost. Whether restaurants continue to offer free fountain refills, or keep fountains altogether, is another point of interest, he said.

Joe Arys of Fishermen’s Green Market and Deli in Fishermen’s Terminal is another backer of the effort, and said the tax is just another thing to deal with in the face of rising labor and supply costs.

Over the past three years, he said he’s seen his supply costs go up approximately 20 percent, and he questioned if the new tax was, “as carefully thought out as it could be.”

“We’re right on the edge of trying to stay competitive on price, but trying to be sustainable and viable and stay alive, so it’s always a tight rope,” he said of balancing the costs of doing business in the city.

He too believes there will be “sticker shock,” on the part of customers come Jan. 1.

But proponents of the tax say the cost increase will lead to better health outcomes, both in terms of curbing consumption of sugary drinks and directing revenue to programs that promote healthy eating.

Vic Colman, a member of the Seattle Healthy Kids Coalition — a group in favor of the tax — and the executive director of the statewide Childhood Obesity Prevention Coalition, said research shows that products like sweetened beverages are price-sensitive. When the cost of those drinks reaches a critical mass point, people stop purchasing them, and there’s a corresponding drop in health-related issues. That’s a history that already exists with tobacco and alcohol.

“Pricing is probably the most powerful policy lever you can pull,” Colman said.

Meanwhile, of the $15 million expected to be generated in its first year, more than $2.5 million is already earmarked for an expansion of the Fresh Bucks program and the implementation of the Seattle Food Action Plan, and nearly $1.5 million for the 13th Year Promise Scholarship, which allows local graduating seniors to attend South Seattle College tuition-free for one year. Local food banks are also slated to receive funding, while an expansion of the Farm to Table program, which provides food stipends and nutritional education to nearly 2,000 children, is proposed as well.

Straley, however, sees an inherent contradiction between discouraging consumption and planning for additional dollars. He wonders how the city will respond to the ensuing revenue dip if the tax is ultimately successful in curbing the purchase of sweetened drinks.

“If the city is successful in doing what it is they intend to do by this tax, which is to change consumer behavior — move them away from more caloric and sugary beverages into diet beverages, into water — where is the city then going to generate the revenue for the money that this tax has been earmarked for?” he said.

That financial uncertainty is something Colman believes the city will account for moving forward.

“It will drop, for sure, and I think that’s important for the decision makers at the city not to rely on the money to be a sustainable revenue source, but to look to invest in programs in communities focused on food access, but not just backfill,” he said, noting the importance of tying those dollars to public health efforts and nutrition programs.

Success, in terms of less and less revenue from the new tax, wouldn’t be a bad thing.

“We’d love to put ourselves out of business in a way; as folks who work in prevention,” Colman said. “If we see no new revenue, that means consumption is very, very low. But that’s not reality.”

Colman also noted the accountability measures in place with the tax. Along with a Sweetened Beverage Tax Community Advisory Board that advises the mayor and city council on programs to fund with the new revenue, he noted that researchers from the University of Washington will complete an annual evaluation of the tax’s impacts.

That includes economic outcomes for both households and businesses, and health behaviors and outcomes, something Colman said is unique to Seattle’s effort, compared to other cities across the country that have enacted similar measures like Philadelphia, Oakland, and Boulder, Colo.

“We haven’t seen this story of strength in evaluation in those that have passed to date,” he said.

For more information on the Keep Seattle Livable for All coalition, visit www.keepseattlelivableforall.com. For more information on the Seattle Healthy Kids Coalition, go to www.seattlehealthykidscoalition.org. To comment on this story, write to QAMagNews@nwlink.com.