City wins court victory in challenge to soda tax

A legal challenge to the Kenney administration’s landmark sugary drinks tax by the beverage industry went over like a can of warm, flat soda in front of a state court today, as Common Pleas Judge Gary Glazer dismissed the industry's suit in full.

"Today is much more than a simple vindication of the legal principles on which the tax is based,” Philadelphia Mayor Jim Kenney said, in a prepared statement. “It is a victory for Philadelphians, who have waited far too long for investment in their education system and in their neighborhoods. I urge the soda industry to accept the Judge’s ruling.”

The so-called “Philadelphia Beverage Tax” would fund many key elements of Kenney’s mayoral agenda, from expanded Pre-K programs to the Rebuild initiative aimed at repairing aging city buildings. 

"We are disappointed with today’s decision," said Anthony Campisi, a spokesman for the Philadelphians Against Grocery Tax Coaltion, an industry group. "We will continue to oppose this discriminatory and regressive tax, which is not a sustainable revenue source to support important initiatives, like pre-K programs. Philadelphia families will be shocked in January when prices jump."

While today’s ruling marks a victory for the mayor, Kenney’s own remarks hinted at a likely appeal from the industry. Reached for a comment, Shanin Specter, a lawyer from Kline Specter hired on behalf of the beverage Industry, was brief.

“We shall appeal,” he said.

But the decision is a blow to the plaintiffs – the American Beverage Association and other groups – that argued that the state sales tax legally pre-empted the levy. Although the PBT applies to soda distributors instead of directly to consumers, industry lawyers argued the tax was duplicative.

Specter had also argued that the tax violated the state uniformity clause, which mandates that similar classes of products must be taxed at the same rate. The judge dismissed both arguments.

Glazer wrote that the sales tax and PBT applied to “two different transactions” and that the latter was, indeed, a “non-retail tax.”

“We greatly appreciate the thorough and timely consideration that Judge Glazer gave to this matter. The Judge upheld the key points of our argument,” said City Solicitor Sozi Tulante, in a prepared statement.

The suit notably pitted former city solicitor Ken Trujillo and Mark Aronchick against Specter on behalf of the city. Trujillo and Aronchick, who both have connections to Tulante, were selected in a no-bid contract. Mayoral spokesperson Lauren Hitt said the city has paid out around $800,000 in legal fees to the two men, to date.

Prior to the court case, millions were spent by the powerful beverage lobby to kill off the initiative in City Council, with several million more spent by Kenney allies to save it. 

It would be a bitter, but ultimately victorious fight for the administration. Along with the enormous sums dropped on advertising campaigns, government emails that emerged last week revealed that the Kenney administration had directed protestors to picket Councilwoman María Quiñones-Sánchez, over her criticism of the tax.

Some, including Sanchez herself, had previously predicted that the city would fare poorly in the inevitable court battle over the tax. She declined to comment on the outcome of the case today.

Editor's Note: This article has been updated to include a comment from the Philadelphians Against Grocery Tax Coalition.