Debate emerges over Seattle’s extra soda tax money

With nearly $7 million in excess soda tax revenue, should Seattle still spend the money on what it initially promised? Or should officials use the extra cash for other needs?

That was the focus of Wednesday’s Seattle City Council Finance and Neighborhoods Committee meeting as members debated a proposed ordinance. The effort is spearheaded by Councilmember Mike O’Brien and aims to create a dedicated fund for soda tax revenue.

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The fund would limit the use of soda tax money, including excess revenue, to specific uses – which the soda tax ordinance requires. This would ensure all of money, including any excess, would not end up in the general fund where it cannot be tracked. It is believed that much of the excess funds were used to address the homelessness crisis.

The Council approved the Sweetened Beverage Tax in 2017. It was sold as an effort to improve health by discouraging consumption of soda and other sweet drinks. It remains to be seen if that is the result.

One of the major criticisms of the tax was that it was a regressive tax which disproportionately effects low-income consumers, especially communities of color.

Council members countered that criticism within the legislation – directing the soda tax revenue back to communities hit hardest by the tax. The money was to be used to expand access to healthy food and support childhood and educational programs.

“We said to communities, yes, to the extent that you’re consuming beverages you’re going to pay more for those because of this tax we’re implementing, but the programs you’re getting access to – whether its Fresh Bucks or preschool program – there will be more spots [in those programs] because we’re adding money to that and that’s not – that is not what happened,” O’Brien said during Wednesday’s discussion.

The soda tax was expected to bring in about $15 million in its first year. Instead, it produced more than $21 million in 2018 – about $7 million more than expected. But the city diverted much of that extra money into the general fund, away from the intended use.

“My perspective of what happened last year is that we chose to raise additional revenues and we raised those additional revenues by using the sweetened beverage tax which we knew was a disproportionate tax on low-income communities and communities of color and that’s the heartburn that I have,” he said. “The people who are consuming more Coke and Pepsi because they’re marketed to or live in neighborhoods that don’t have access to healthy alternatives shouldn’t be disproportionately responsible for solving the homeless crisis.”

Councilmembers Sally Bagshaw and Lorena González echoed these concerns.

Soda tax budgeting

But creating the dedicated soda tax fund could lead to additional budgeting problems. Since the excess funds were slated for other programs, those programs could be suddenly shorted.

“That’s what I think we’re asking the mayor to do here today,” O’Brien said.  “’As you’re forming your budget for 2020, don’t take from the sweetened beverage tax; figure out other sources. If you have to make cuts here and there to do that and that’s what you want to propose to us then we’ll consider that, if you want to find additional revenues somewhere else we will also consider that.’”

“I will say right now, if those revenues are disproportionately falling on low-income people to fund broad, citywide initiatives, I’m unlikely to support that,” he added.

The committee is expected to vote on the proposal July 10. If passed, it will move on to the full council for consideration.

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