If there ever was a good time to increase the bottle tax in the city of Baltimore, this is not it.
The 2-cent-per-container levy was imposed in 2010 out of desperation by a municipal government searching for new revenue anywhere it could find it other than the property tax – already the highest in the state by far.
The City Council cut the mayor’s initial proposal in half before passing the tax and also imposed a sunset provision that would make the tax go away in 2013. The city’s new casino was supposed to open that year, spewing money into municipal coffers, and there was much hope that economic recovery would be in full swing by then.
But here we are in 2012, and things have changed. Construction on the city casino hasn’t begun, and the license to operate it hasn’t been awarded. Economic recovery is underway but nowhere near full speed. And now comes Mayor Stephanie Rawlings-Blake with a proposal not to end the bottle tax in 2013 but to increase it to 5 cents at that time.
While we don’t agree with the mayor’s budget calculus, her political calculus is shrewd. She wants to use the bottle tax money – estimated at $23.8 million a year (more on that later) – to help finance $324 million in bonds for badly needed renovations of city schools.
By framing the battle in these terms, the mayor created a powerful constituency for the bottle tax increase – parents, students, teachers and their unions. Opponents of the bottle tax increase have been painted as opponents of city schools.
Would that life were so simple. It’s not.
It’s quite possible to be an opponent of increasing the bottle tax and a proponent of making physical improvements to crumbling city school buildings. The disagreement can be over the means to achieving the end result, not the end result itself.
In fact, opponents of the bottle tax increase are citing alternate methods used by other cities to raise money for school construction, such as public-private partnerships, greater contributions by the state, sale of city properties and creation of nonprofit real estate development entities.
City fiscal analysts initially projected that the 2-cent bottle tax would raise $5.8 million a year. But first-year proceeds were only $4.7 million, probably due to economic factors and to Baltimore residents buying their drinks at stores outside the city, where there is no bottle tax.
Some city merchants say their beverage sales have plummeted since implementation of the tax. One is Rob Santoni, CFO of Santoni’s Super Market, who says his store has lost $438,000 in total sales – 37 percent in beverage sales – and he has eight fewer employees now than when the tax took effect.
So there is reason to doubt whether the 3-cent increase would generate the desired $23.8 million.
Also, after the first tax was implemented, Pepsi stopped bottling operations at its Hampden plant, eliminating 77 jobs.
So there is a cost to pay for implementation of the tax. We think that cost is too high.
There is also the matter of a stable tax structure, which was identified by a series of statewide focus groups conducted by the Greater Baltimore Committee as an important component of a good business climate. This exercise is hardly an example of that.
Two years ago, we didn’t like the original bottle tax, but we did not oppose it when it was cut in half and given a three-year life span. We saw that as an undesirable but temporary bridge to get the city to new revenue sources.
But the mayor’s proposal to abolish the sunset provision — a year before it takes effect — and increase the tax is a bridge too far.
The City Council should reject the extension of the bottle tax and let the levy expire as planned in 2013. Meanwhile, city leaders should go back to the drawing board for better ideas for funding needed school renovations that won’t damage the very economy they are trying to rebuild.