Report: Philly Mayor Kenney’s office bottled up $134.6M in unspent soda tax revenue

PHILADELPHIA — Mayor Jim Kenney’s administration has yet to spend nearly 70 percent of the $193.8 million in revenue raised by the Philadelphia’s sweetened beverage tax, leaving $134.6 million sitting unused in the general fund, according to the quarterly data report on the tax from City Controller Rebecca Rhynhart.

The Democrat has has used some of the revenues, collected through June 30, to fund a city office previously paid for out of the general budget, according to a new report.

The 1.5-cent-per-ounce soda tax is supposed to pay for pre-kindergarten, Community Schools, and an infrastructure program to improve recreation centers, libraries, parks and other public spaces, known as Rebuild.

While the Kenney administration has spent the vast majority of the revenue on pre-kindergarten programs ($49.9 million), the administration has been funding the payroll of the Mayor’s Office of Education with soda tax revenue, according to the report.

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Rhynhart, a Democrat, said the use of soda tax revenue for the Office of Education raised flags about how the money was being spent.

“This is an example of using the soda tax for costs that already existed before [and] just supplementing the city’s general coffers with the tax,” she said in a phone interview on Friday.

The office existed before Kenney took office in 2016 and was previously paid for out of the general fund. The Office of Education has soaked up $1.8 million in beverage tax revenue, according to the report.

Deana Gamble, a spokeswoman for the Kenney administration, said in an email that Rhynhart’s report did not include costs associated with the programs and those related to enforcement of the tax. The direction of Office of Education has changed since the previous administration and now administered the pre-kindergarten program and Community Schools, she said.

“It is entirely appropriate that those salaries are funded by the tax, and we have been clear on that from the start,” she said.

The Kenney administration has spent the remaining soda tax revenue on Community schools ($4.9 million), debt service for the Rebuild program, ($1.7 million), and Philadelphia Parks and Recreation project’s associated with Rebuild ($956,000).

Rhynhart continued to call for segregating the revenue in a separate account to ensure the revenue is spent on the programs it was intended for, rather than lumping it into the general fund.

“There are suspicions about what it is being used for and I think putting it into a separate account is much more transparent,” she said.

Gamble said the recommendation to place soda tax revenue in a segregated account was a “red herring that plays into the beverage industry’s attempt to portray the use of the general fund as something nefarious.”

All taxes rest in the general fund, Gamble said, and are not generally segregated into their own funds. The administration tracks how much soda tax revenue is generated and spent to ensure it is spent as planned.

The new report details $23.4 million in new spending since October 2018, according to a report Rhynhart issued late last year. The administration had held back spending soda tax revenue as a court challenge progressed the state courts. The state Supreme Court upheld the tax in July 2018.

Gamble said the administration has maintained that revenues would outpace spending in the early years of the program, after which spending would eventually outpace revenues, which was expected to occur in fiscal year 2021.

The soda tax has paid for pre-kindergarten for 6,000 children to date and created 17 Community Schools serving 9,500 students. The revenue also has funded initial work at 60 parks, recreation centers and libraries through the Rebuild program.

The tax was expected to haul in $75.8 million this fiscal year, which ends June. 30.

The sweetened beverage tax is among Kenney’s top legislative achievements during his first term. Kenney was elected to a second four-year term earlier this month.

Michael D’Onofrio is a reporter for the Philadelphia Tribune, where this story first appeared.