Big Soda’s big play to block more taxes on sugary drinks

In a devious political move, the beverage industry is leveraging California’s new initiative rules to extract legislation banning more cities from taxing soda pop.

The scheme has left taxpayer groups that had lent support to an initiative campaign sitting on the sidelines, the League of California Cities reluctantly conceding defeat and health advocates who back soda taxes furious.

It’s not a done deal yet. Ongoing delicate negotiations must be completed by today’s deadline. But if, as seems likely, the Legislature and Gov. Jerry Brown capitulate, it will be a sweet deal for the beverage industry.

The industry has spent millions of dollars during the past decade campaigning against taxes on sugar-sweetened beverages. Voters in four California cities — Oakland, Berkeley, Albany and San Francisco — have nevertheless passed such taxes. Other cities were expected to try this fall, including Richmond for the second time.

Rather than continue fighting cities individually, the soda industry is trying to block them in one fell swoop. That’s where the initiative gambit comes in.

The American Beverage Association has poured $7 million into a signature-gathering drive for an initiative that would severely tighten the rules for passage of a variety of local tax measures.

Specifically, it would expand the definition of taxes and make more taxes subject to two-thirds voter approval rather than a simple majority. As a result, local governments would have a much harder time raising new revenues.

As of Tuesday, the Secretary of State’s Office was still tabulating the signatures, but the measure was expected to have enough to qualify for the November ballot.

Seeing the havoc the measure could wreak on local governments, which are desperate for new money because of soaring pension costs, labor unions, cities, counties and the governor’s office engaged in negotiations with initiative backers that began Friday.

Under the proposed deal, the initiative would be withdrawn from the ballot in exchange for legislation setting a moratorium on new soda taxes until 2031. The legislation, Senate Bill 872, would leave in place soda taxes in the four cities that already have them.

The deal must be wrapped up by this evening, when the Secretary of State’s Office finalizes the list of measures for the November ballot.

Using the threat of an initiative to extract favorable legislation is not new in California. But under rules that started with the 2016 election, backers of initiatives can withdraw their measures even after signatures are submitted to be counted.

What makes this deal especially unusual is the big gap between the initiative’s overarching tax law changes and the singularly focused soda tax moratorium in the legislative compromise.

On Monday evening, Carolyn Coleman, executive director of the League of California Cities, issued a statement effectively admitting her organization was cutting its losses.

“While many aspects of

SB 872 are distasteful because it would preempt the ability for cities and other local agencies (to levy) any new tax, fee or assessment on groceries and soda for 12 years,” she said, “we recognize that the legislation must be compared with the potential passage of the more onerous initiative.”

Make no mistake, says Rob Lapsley, president of California Business Roundtable, if the initiative goes to the ballot it will pass. He says his polling clearly shows that.

Lapsley is the official sponsor of the initiative and, consequently, he holds the authority to pull it back before the deadline. He says he’s prepared to move forward with the campaign if the deal falls apart.

But he’s also willing to compromise. “When there are discussions and there is an opportunity to create certainty on products that matter to every Californian that has to buy groceries, and we’re able to limit taxes on those products, that is what we would consider a win.”

While the beverage association has thus far bankrolled most of the costs for the initiative, the coalition behind it included Lapsley’s business roundtable and taxpayer groups that thought they were fighting for a more broad-based outcome.

“We support the initiative, but we aren’t running the campaign,” said David Kline, vice president of communications and research at the California Taxpayers Association.

“Some of the coalition partners behind the effort were taken by surprise at the potential arrangement,” adds Jon Coupal, president of the Howard Jarvis Taxpayers Association.

On the other side, leaders of the American Heart Association were similarly surprised. The ban on soda taxes “will only create a roadblock to a generation of healthy Californians,” they wrote in a letter to the editor printed Wednesday morning.

However meritorious their concerns are, that’s probably not what will carry the day in Sacramento. By tonight, we’ll know whether the soda industry got its way.