Business-Labor Deal Would Ban California Cities, Counties From Enacting New Soda Taxes

An eleventh-hour deal between business and labor groups could ban new local taxes on sodas — while avoiding a ballot showdown that could make it harder for cities, counties and school districts to raise other taxes.

The agreement involves an initiative that’s close to qualifying for the November ballot that would raise the voter approval threshold for general sales tax increases and extensions from a majority to two-thirds.

The initiative was submitted by the head of the influential California Business Roundtable, and its biggest backer is the American Beverage Association, which has fought local soda taxes.

One of the state’s most powerful unions, SEIU, feared the effect the ballot measure would have if cities and counties faced new hurdles to raising local revenues.

Now, both are signaling their support for this deal, which came together in about a day and went into print Saturday night.

“We are tracking these discussions closely and remain committed to working on solutions to our high tax and high cost of living issues that impact our future job growth,” Rob Lapsley, who heads the business roundtable, said in a statement, adding that his organization’s board will meet later this week to discuss withdrawing its initiative.

“A temporary pause on further local soda taxes gives California the opportunity to work on a statewide approach to the public health crisis of diabetes,” SEIU Executive Director Alma Hernandez said in a statement. “We are encouraged that conversations are getting on the right track, and we are committed to moving forward on the comprehensive solutions needed to protect the public health.”

The first opposition to the deal emerged Tuesday morning in a statement from the Prevention Institute, an Oakland-based nonprofit organization that advocates for “health equity.”

“There’s something very wrong when the soda industry is able to stop California cities and counties from protecting their own community members’ health,” the institute’s Juliet Sims said in a statement. “Local residents are the ones who should decide what’s best for the health and safety of their own communities.”

Under the agreement, cities and counties would be barred through the end of 2030 from enacting new taxes on groceries, which are defined in the bill as “any raw or processed food or beverage” including “carbonated and noncarbonated nonalcoholic beverages.”

Existing soda taxes in cities like San Francisco, Oakland and Berkeley would be grandfathered in.

If the soda tax ban is passed by the Legislature and signed by Gov. Jerry Brown, the Business Roundtable would then notify the Secretary of State’s office that it is withdrawing its initiative.

That must all happen by Thursday, the deadline for the Secretary of State to certify all initiatives eligible for the November ballot.

The League of California Cities is reluctantly supporting the agreement. It dislikes the soda tax ban but believes the initiative would be even worse.

“While many aspects of SB 872 are distasteful because it would preempt the ability for cities and other local agencies from levying any new tax, fee or assessment on groceries and soda for 12 years, we recognize that the legislation must be compared with the potential passage of the more onerous initiative,” the League’s executive director, Carolyn Coleman, said in a statement.

Although the agreement was largely negotiated outside the state Capitol, there were indications of support from inside the building as well.

“This legislative solution prevents big beverage companies from buying an initiative that would benefit their industry at the expense of local police, fire departments and libraries in communities throughout California,” Assembly Speaker Anthony Rendon said in a statement.