Philadelphia's new tax on sugar-sweetened beverages is a credit positive for Pennsylvania's largest city and is expected to improve its financial position, according to Moody's Investors Service.
Moody's analyst Christopher Coviello said in a Jan. 23 report that the 1.5-cents per-ounce tax on sugary drinks will benefit Philadelphia by funding programs aimed at strengthening the city's tax base through expanded early childhood learning and community improvement projects. Philadelphia followed Berkeley, Calif., in becoming only the second U.S. city implement a tax on sugary beverages and the city is expecting to generate $91 million in tax revenues during the 2018 fiscal year. City officials are estimating $409.5 million in revenues during the first five years of tax after it takes effect on Jan. 1, 2017.
"The monies that accrue during fiscal 2017 through 2021 will be held in the city's general fund," said Coviello in his report. "Although this accrual is a function of the time it takes for the programs to be completely implemented, the city will benefit from strengthening its reserve levels and, in turn, its overall financial position."
Mayor Jim Kenney said the beverage tax will fund 6,500 new pre-kindergarten seats and will also pay for debt service on $300 million in new borrowing that will allow the city to improve parks, libraries and recreation centers. Portions of the new revenues will also finance a tax-credit program for vendors that sell healthy beverages.
Moody's rates Philadelphia at A2 with a stable outlook. The City of Brotherly Love has an A-plus rating from Standard & Poor's and A-minus from Fitch Ratings.
