The Davis City Council ultimately decided not to place a 1-cent-per-ounce soda tax on the June ballot, with a three-member majority arguing that it would not effectively raise money for city projects despite vocal support from local health advocates.
The tax proposal was modeled after a similar policy in Berkeley, which in 2014 became the first city in the nation to impose a tax on sugary beverages. Davis residents packed the chambers Tuesday night to argue for or against the proposed ballot measure.
The council voted 3-2 against the proposal, bringing relief to small business owners who showed up in force to say that a soda tax would threaten their already thin profit margins. Many expressed concern that soda sales would go down and that the tax would add an unfair burden on already-strapped employees.
“When these kinds of proposals are put together, it’s always the small consumers and small businesses that get hurt first,” said Suresh Kumar, owner of Olive Drive Market in Davis. “If you see what they’ve done in Berkeley, I have not heard anything positive about the tax that’s been imposed.”
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Rather than pursue a beverage tax, Mayor Dan Wolk, Councilwoman Rochelle Swanson and Councilman Lucas Frerichs asked city staff to propose ways for a task force to address child health issues such as obesity and diabetes.
Councilmen Robb Davis and Brett Lee were the lone votes for putting the soda tax on the ballot.
Swanson expressed concern that putting the beverage tax to a vote so quickly was not “the Davis way,” and that the solution to child obesity is more complex than just taxing soda.
“My concern is that we’d just sit here and check the box, and say, “Look at us, we did the same thing that Berkeley did,’” she said. “I want to see something that reflects Davis values. I want to see a broader, more educated conversation, frankly.
“This is really just targeted at one particular stream because it’s easy,” she added. “We don’t do things easy here. We try to do things right.”
Wolk emphasized the city’s need for large amounts of revenue to fund the restoration of parks, pools and streets. He expressed some concern that a soda tax would draw a huge opposition campaign.
“As an infrastructure revenue measure, we need a different tool,” he said. “The soda tax is very controversial; it hasn’t been studied or really vetted by the community. It would engender well-funded opposition; that was clear in Berkeley and San Francisco. And, to my mind, it would have difficulty at the ballot box.”
Instead, the council voted 4-1 to move forward with what some residents called a “no-brainer” increase to the existing transient occupancy tax, which is paid for by visitors staying in the college town. In two weeks, staff will come back with a proposed measure for the ballot.
If it passes in June, all overnight guests in the city at hotels, lodging houses or Airbnb rentals, would pay a 12 percent city tax on top of their lodging costs, instead of the current 10 percent. If it passes with a majority vote in June, the tax is expected to raise about $250,000 per year, Assistant City Manager Kelly Stachowicz said.
With the Embassy Suites and other hotels considering a move into the city in coming months, the council is looking to the healthy hospitality industry as an answer to the infrastructure conundrum, said Alan Humason, executive director of the Yolo County Visitors Bureau.
The ballot measure will likely not face resistance from local hoteliers, he said, as the tax is on the consumer. The 2-percentage-point tax increase probably won’t drive customers away to Dixon and West Sacramento, which have transient occupancy taxes of 9 percent and 12 percent, respectively. Sacramento’s hotel tax is also 12 percent.
Like other cities, Davis has a separate hotel assessment – 2 percent – to raise money for marketing and promotional activities by the Yolo County Visitors Bureau.
“Transient occupancy taxes are pretty ubiquitous,” Humason said. “I don’t think people look too closely at that tax. People have lots of good reasons to come to Davis, and they continue to come year round. I’d be optimistic about it passing because it affects visitors coming to town, but it doesn’t affect the local population like the other taxes would.”
The occupancy tax is the only proposal of the four discussed Tuesday night that will appear on the June ballot. The City Council rejected a parcel tax and a measure that would have taxed the sale of marijuana if recreational use is legalized on the state level.