Oakland soda tax: For health or budget reasons?

by Chris Reed | May 9, 2016 5:09 am

Oakland skyline, wikimediaThe city of Oakland’s decision last week to put a penny-per-ounce soda tax on the November ballot was depicted by city leaders as a common-sense move to fund programs to combat public health problems related to obesity.

“It is time that big beverage companies dip into their millions of dollars of profits and help pay for the damage their products cause,” Mary Pittman, president of the Oakland-based Public Health Institute, told KQED[1]. The $6 million to $12 million the tax would generate annually would be divvied up by an advisory panel for worthwhile public health programs, the PBS affiliate noted.

But there is no hard requirement on what the money be used for. As the San Jose Mercury-News reported[2], those tax dollars would go into the city of Oakland’s general fund — a detail that wasn’t included in some of the stories about the soda tax.

This infusion would come as Oakland continues to deal with decades of budget headaches. The Silicon Valley economic boom has had far fewer benefits for Oakland’s treasury than those seen in many neighboring cities and suburban communities.

The two-year, $2.4 billion budget approved[3] by the Oakland City Council in June 2015 included money for 40 new police officers and pay “restoration” increases for some municipal employees. But pleas were rejected for extra funding to address and reduce child prostitution; improve programs for refugees; remedy quality-of-life issues; allow for longer hours at libraries and animal shelters; and more.

‘Financial time bomb’ hanging over city

pension-red-inkOn long-term pension liabilities, Oakland has a huge hole to dig out of because of its pioneering role[4] in borrowing money — so-called pension obligation bonds — to cover pension payments in the presumption that investing the borrowed money would generate such high returns that they could both pay off the borrowing and pay for annual city pension contributions.

As it has periodically since 1985, in 2012, Oakland issued pension bonds — $212 million worth — so it wouldn’t have to make contributions again until fiscal 2016-17. The last budget includes new funding for pension obligations, but the overall problem remains a “financial time bomb,” as the San Francisco Chronicle described it in 2012[5]. The city has continued to use these bonds even though the the investments they were used for haven’t come close to providing the hoped-for returns.

Oakland’s dire fiscal straits also explains city leaders’ disinterest in providing any help to the Oakland Raiders to prevent the storied NFL franchise from moving to Los Angeles, Las Vegas or San Antonio in coming years. As CalWatchdog reported[6] last year, NFL officials were dismayed at Oakland’s unwillingness to provide the sort of help that San Diego was considering to keep the Chargers in town.

When it comes to help from the city, “there is no there, there,” ESPN’s John Clayton wrote [7]in August.

CA has long history of tax bait-and-switch

Perhaps if Oakland voters approved the soda tax in November, the $6 million to $12 million it generated annually would be used for the exact sort of public health programs that advocates. But California has a long history of taxes and fees being pitched for one intended use and being used for another.

In 2011, Gov. Jerry Brown was successful in his push to shut down city redevelopment programs that diverted billions of dollars in local property taxes. Instead of being used to reduce blight, fund economic development and pay for affordable housing, then-Controller John Chiang found[8] the funds were routinely used around the state to pay salaries of city officials, police officers and other government employees not in traditional agencies, as well as to pay for general administrative costs, a day-care center and more.

In 1998, California voters adopted Proposition 10[9], which imposed a 50-cents a pack tax on cigarettes. The proceeds were supposed to go strictly to early childhood education programs known collectively as “First 5.” But there has been little oversight and years of critical headlines[10] about money being spent on projects having little to do with early childhood education.

In 2006, it was revealed that First 5 chairman Rob Reiner, the Hollywood director/producer, had used $18 million in taxpayer funds on a “preschool for all” TV ad campaign at the same time that he had launched a signature-gathering effort for a “preschool for all” initiative. Reiner and others faced allegations of misuse of public funds, but charges were never filed.

But in Oakland, the Mercury-News reports the list of prominent supporters for the Oakland soda tax is long and growing. So far, the list includes “state Sen. Loni Hancock, state Assembly members Rob Bonta and Tony Thurmond, Alameda County supervisors Wilma Chan and Keith Carson, Oakland Mayor Libby Schaaf, Oakland school Superintendent Antwan Wilson and City Council members Lynette Gibson McElhaney and Desley Brooks.”

  1. KQED: http://ww2.kqed.org/stateofhealth/2016/05/04/oakland-city-council-puts-soda-tax-on-november-ballot/
  2. reported: http://www.mercurynews.com/business/ci_29734761/love-pop-might-cost-more-if-oakland-soda
  3. approved: http://www.eastbaytimes.com/breaking-news/ci_28412362/
  4. pioneering role: https://calpensions.com/2014/02/10/the-big-casino-paying-pension-debt-with-bonds/
  5. 2012: http://www.sfgate.com/bayarea/article/Oakland-s-financial-time-bomb-pensions-3743946.php
  6. reported: http://calwatchdog.com/2015/08/13/oakland-seems-indifferent-potential-nfl-city-swap/
  7. wrote : http://espn.go.com/nfl/story/_/id/13420108/clear-momentum-team-los-angeles-owners-meetings-nfl
  8. found: http://www.sco.ca.gov/Press-Releases/2011/03-2011_RDA_Review.pdf
  9. Proposition 10: http://www.sco.ca.gov/Press-Releases/2011/03-2011_RDA_Review.pdf
  10. critical headlines: http://www.flopped5.org/news.html

Source URL: https://calwatchdog.com/2016/05/09/oakland-soda-tax-health-budget-reasons/