Cook County repeals beverage tax

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CHICAGO – Cook County, Illinois board commissioners voted Wednesday to repeal a controversial sweetened beverage tax, action that sets the clock ticking on a six-week deadline to make up for $200 million of lost revenue.

The board voted 15-2 at its Wednesday meeting, largely a formality after commissioners made clear their intentions after more than three hours of testimony and debate during the board’s Finance Committee meeting Tuesday.

All 17 board members sit on the committee and 15 voted in favor of the repeal Tuesday.

The tax passed last year on an 8-8 vote with one member absent. Board President Toni Preckwinkle -- who has championed the tax as a means to raise revenue to pay for health and public safety costs and to curb the use of drinks that health experts believe contribute to obesity and diabetes – then cast the deciding vote.

After weeks of defending the tax and issuing dire warnings that a repeal would force the county to impose an 11% across-the-board cut, Preckwinkle accepted defeat and put the ball in the commissioners’ court.

“As I outlined last week, it is up to the commissioners to choose our direction on revenue, and I respect their authority to do so. Now, together, we must chart a new course toward the eighth consecutive balanced budget of my tenure as board president,” Preckwinkle said in a statement.

During Tuesday's debate, the commissioners, who face re-election next year, vowed to work together to close the gap but offered few suggestions beyond eliminating vacant positions, consolidating services, selling off receivables, and streamlining government.

“This budget is going to be challenging. It is up to us to work together,” said Commissioner John Daley, a Chicago Democrat who chairs the Finance Committee and is an ally of Preckwinkle. He originally voted for the tax but flipped to support the repeal.

Daley called on the county’s other elected officers – such as the sheriff, state’s attorney, treasurer, and clerk, whose operations are funded in the county budget -- to cooperate in the effort to cut spending. Before the county turns to a new revenue stream it has to prove to the public that the budget “is in order,” he said.

Cook Assessor Joseph Berrios warned of layoffs and office closures if funding is cut and said tax bills could go out late with tax anticipation note borrowing possibly needed to smooth cash flow.

The penny-per-ounce tax sparked a public outcry and pitted advertising campaigns led by retail merchant groups against ones funded by former New York City Mayor Michael Bloomberg focused on the health benefits of reducing consumption.

During Tuesday's testimony, backers of the tax and critics squared off. Small business owners and restaurant owners bemoaned the loss of sales to stores across county lines.

Tax collections began in early August and will end as the new fiscal year begins Dec. 1. Preckwinkle last week unveiled a proposed $4.9 billion operating budget for the next fiscal year that relies on the tax revenue.

Cook’s experience could dampen the enthusiasm of other local governments for a sugary drink tax. Several California cities have won voter approval to levy a similar tax and Philadelphia imposes one.

In Cook’s case, some believe the beverage tax served as a tipping point. Over the last several years, Cook has raised the sales tax to fund pensions and Chicago has passed a record property tax hike for the same purpose. Chicago Public Schools has also raised its levy for operations and pensions. Chicago additionally has levied a new water surcharge for pensions and passed a tax on plastic bags. Illinois in July raised the income tax.

“The financial health of too many of my constituents is in critical condition and I cannot in good conscience add to their suffering,” said Commissioner John Fritchey, a Chicago Democrat.

The lone vote against the repeal, Commissioner Larry Suffredin, a suburban Democrat, said he was proud to maintain his support and blamed the state for putting the county in a difficult position. The state is nearly $200 million behind in various payments. “This is the most dysfunctional state in the union,” he said.

The tax covers most sweetened beverages and sports drinks, even those with non-caloric artificial sweeteners, while leaving out 100% fruit juices, milk and infant formula.

The county's general obligation bonds are rated A2 by Moody's Investors Service, AA-minus by S&P Global Services, and A-plus by Fitch Ratings. Ahead of a refunding last year, Moody's and Fitch revised the county's outlook to stable from negative while S&P downgraded it one notch. S&P assigns a stable outlook.

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