Philadelphia is pressing ahead with planned capital improvements to be funded from the city’s new beverage tax as the Pennsylvania Supreme Court gets set to determine the future of the policy.

Mayor Jim Kenney has requested that the city council fund initial stages of Philadelphia’s “Rebuilding Community Infrastructure” imitative from funds already approved in the 2018 fiscal year capital budget.

The majority of the city’s planned capital enhancement to parks, recreation centers and libraries are slated to derive from bonds backed by revenues from the 1.5 cent-per-ounce tax on sugary beverages that went into effect Jan. 1, 2017. The State Supreme Court heard oral arguments Tuesday from the American Beverage Association and other opponents seeking to overturn it.

Philadelphia Mayor Jim Kenney, at the Vare Recreation Center, May 17, 2018
Philadelphia Mayor Jim Kenney, speaking at a recreation center Thursday, said the city soda tax will improve that facility and similar ones across the city.

Kenney announced Wednesday that the Vare Recreation Center in South Philadelphia would be the first project to receive upgrades under the Rebuild program. The center was forced to shut down in October 2017 for safety reasons and its upstairs remains closed despite temporary repairs.

“Recreation centers like Vare are the reason we proposed Rebuild and passed the beverage tax in the first place,” said Mayor Kenney in a statement. “We know that every day we’re not investing to improve facilities like this, we’re putting our communities at risk.”

City officials said additional Rebuild projects will be announced in the coming weeks with construction expected to commence later this year. The city plans to initiate a larger set of projects if the beverage tax is upheld by the State Supreme Court. Two lower state courts have already upheld the tax in separate rulings.

“By formally launching Rebuild, we can finally start fixing issues that have plagued neighborhoods for decades," City of Philadelphia managing director Michael DiBerardinis said in a statement.

Kenney said last year that the Philadelphia Authority for Industrial Development would issue bonds for capital projects with the beverage tax funding debt service. Revenues from the tax fell $12.2 million short of the city’s $91 million forecast last year, which resulted in the Kenney administration scaling down initial plans for $300 million of borrowing through three transactions. The city has stuck to its long-range revenue forecast of the tax generating $500 million through the end of the 2023 fiscal year.

Philadelphia’s general obligation bonds were downgraded one notch to A by S&P Global Ratings in late March because of long-term concerns about the city generating enough revenue to meet spending demands of its cash-strapped school district. The city also has debt ratings of A2 by Moody’s Investors Service and A-minus by Fitch Ratings.

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