Bottle tax hurts sales for some city stores

January 08, 1995|By Harold Jackson | Harold Jackson,Sun Staff Writer

Five blocks may be costing John Rothenhoefer $50,000 a year. That's the distance between his West Baltimore beverage store and the county line.

Customers who cross into Baltimore County can pay less for their soda, beer and liquor by avoiding the city's beverage container tax -- a levy that will be the only such one in Maryland once Montgomery County abolishes a container tax in July.

"We used to sell 10,000 cases of beer, soda and liquor a month. Now it's about 5,000," said Mr. Rothenhoefer, who owns the Three Brothers grocery in Gwynns Falls. "We used to be open from 8 until 10, now it's from 9:30 to 8 and soon it's going to be from 10 to 6."

L The difference, he says, is about $50,000 in annual profits.

Many retailers, beverage distributors and bottlers say Baltimore stores are losing business to suburban competitors because of the 5-year-old tax, which exempts only milk and juice products. Mayor Kurt L. Schmoke agrees, but says the city can't repeal the tax because it needs the millions of dollars generated each year.

"If we could find an alternative that would bring in $6 million a year, we would like to pursue that, something that would be fair to everybody in town," Mr. Schmoke said. But eliminating the tax would force the city to cut services, he said.

The city established its tax -- 2 cents on disposable cans and bottles that are 16 ounces or less, 4 cents on anything larger -- in 1990. At the time, Baltimore County imposed a similar tax, insulating city merchants from competitive problems.

But when the county repealed its tax after only a year, the city didn't follow suit. Baltimore officials spoke generally about repealing the tax if an alternative could be found for a broader range of waste, but that never happened.

Revenue from the tax peaked at $7.2 million in 1991, and has slipped each year since, says city Budget Director Edward Gallagher. Asked about the trend, Mr. Gallagher said, "It could be a reduction in consumption. Or perhaps consumers are finding other places to buy."

The Coca-Cola bottler for Baltimore says Coke customers are finding stores outside the city. "There's no question we have seen a continuous decrease in sales since implementation of the tax and there's no question the sales decline is directly related to the tax in Baltimore City," said Kate Whiting, vice president for public affairs for Coca-Cola Enterprises Northeast. She would not reveal local sales figures.

Not every store in Baltimore has been hurt by the beverage container tax.

"We just had an excellent year," said Al Snyder, manager of Wells Discount Liquors on York Road near the county line.

The store, which has been in the same location for 57 years, has developed very loyal customers, especially for fine wines, Mr. Snyder said. He added that the store's high volume of business allows it to offer discounts that keep it competitive.

But other stores and distributors say city businesses are losing out to suburban competitors. James Gardner, president of the F. P. Winner Ltd. distributing company, said the tax had hurt his customers in Baltimore. "I've run into some of my good retailers outside the city buying soft drinks for their stores," he said.

Montgomery County passed its beverage container tax in 1974 to encourage recycling. But the levy -- 2 cents on 16 ounces or smaller, and 4 cents on larger bottles and cans -- will be abolished when the new fiscal year begins in July.

Montgomery County Councilwoman Marilyn Praisner said the tax was repealed partly because of retailers' complaints. "We heard from small businesses that said customers were buying beverages in large quantities outside the county to avoid paying the tax."

Montgomery County will lose more than $6 million in annual revenues by repealing the tax. But Ms. Praisner said the council felt that businesses would sell more beverages, offsetting the revenue loss over time.

Mr. Schmoke said Baltimore is in no position to follow the lead of its more affluent neighbors, even though the city tax may put an added financial burden on poor people who can't get to suburban stores and can least afford to pay more for beverages.

"We would prefer not to have the container tax because not only is it regressive, it's anti-competitive for businesses right on the fringe of the city, on the perimeter of the city," the mayor said.

Abolishing the container tax would lower city revenues as much as a 5- or 6-cent drop in the real estate tax, and the city needs that money, he said.

Baltimore's property tax -- now at $5.85 per $100 of assessed value -- has been reduced by a nickel three times since 1990. In fact, the first nickel reduction was linked to enactment of the bottle and can tax.

The City Council voted to repeal the bottle and can tax in 1991. But Mr. Schmoke vetoed that measure while the council imposed a landfill disposal surcharge that raised $2.7 million annually.

Now, Mr. Rothenhoefer of the Three Brothers grocery has a dire prediction: "In five years, the beverage business in Baltimore will dead."

Mr. Rothenhoefer, 62, had open-heart surgery last year and says he will retire soon. His brother, Tom, is 65, but still works long hours at the store. The third brother, George, died seven years ago.

John Rothenhoefer's son Mark, 20, works as hard as his father and uncle to keep the store profitable. But the bottle tax has made that more difficult, the family says.

"After you consider all the other overhead we have to pay, for property taxes and to pay BGE, we only make about 50 cents a case on any of the beverages we sell," John Rothenhoefer said. "It's hard for a business to make it on that."

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