Bottle tax drives sales down, city retailers complain

No plans to repeal 'solid revenue stream,' city says

December 02, 2010|By Julie Scharper, The Baltimore Sun

City grocers are asking officials to repeal a 2-cent tax on bottled beverages, saying that sales have dropped since the tariff was imposed four months ago.

Rob Santoni, who lobbied against the bottle tax when it was considered by the City Council, said year-over-year sales at his East Baltimore store have fallen 3 percent since the tax was first collected in late July, and 600 fewer customers are entering each week.

"They've taken away that competitive edge," Santoni said Thursday at a news conference in the beverage aisle of the store that bears his name. He has chosen to keep his beverage prices flat and absorb the cost of the tax himself, but says word of the tariff has been enough to chase customers over the city line to Baltimore County.

Sandy Vary, owner of Bel-Garden Bi-Rite Supermarket in Northeast Baltimore, said beverage sales have dropped 7 percent and overall sales have declined nearly 5 percent at her store, leading her to lay off five of her 90 employees.

"We had to raise our prices" to pay the tax, Vary said. "It's quite surprising how many customers actually talk about it."

Santoni said smaller stores, especially those near the city-county border, feel the loss in sales more sharply. Four grocers attended the news conference; the retail and beverage lobbying groups pledged to make the tax an issue in next year's mayoral race.

A spokesman for Mayor Stephanie Rawlings-Blake said it was "utterly absurd" to discuss repealing a tax which is set to sunset in three years.

The tax, which was part of a package of new fees intended to help close a $121 million hole in the city's $1.2 billion budget, is a "solid revenue stream," spokesman Ryan O'Doherty said.

"It's a tax that I don't think a lot of people have felt because we put in the exceptions for milk, juice and larger containers," O'Doherty said. Milk, including soy and nut milks, natural juices and beverages in 2-liter bottles or larger are exempt from the tax.

The tariff has not generated the revenue that city officials anticipated when they approved it. Initial projections indicated it would pump about $5.8 million into city coffers during the current budget year, but figures for the first few months have prompted finance officials to decrease their annual projections by 9 percent.

In August, bottle tax revenue was about 18 percent below projections; the figure climbed in September, but was still about 6 percent less than expected.

O'Doherty said officials attribute the lower figures to the complications of implementing and enforcing the new tax, but added that some distributors might have not yet paid the tax.

Finance officials are slated to begin enforcing the tax more aggressively this month, with plans to review remittance records and visit stores and beverage distributors to inspect documents, O'Doherty said.

The beverage tax proved one of the most contentious elements in Rawlings-Blake's plan to close the city's spending hole. Council members approved hikes to parking, parking fines, income taxes and energy and telecommunications tariffs with little complaint, but balked at the bottle tax, which was fiercely opposed by retail and beverage lobbyists.

Baltimore became the only city to impose a bottle tax this year after similar measures in Philadelphia and New York were defeated.

The city collected tax at a higher rate on bottled beverages in the mid-1990s but repealed the measure after a few years because of an outcry from business owners.

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