The legislation would raise the tax on bottled beverages from 2 cents to 5 cents in July 2013. Supporters hailed the tax increase as a key step toward the biggest overhaul of city schools in decades.
But store owners and beverage industry leaders lobbied hard against the measure, saying it would propel shoppers into the suburbs. The four council members who voted against the tax cited concerns that city residents and businesses are already burdened by too many taxes.
"Instead of luring 10,000 people to the city," said Councilman Warren Branch, referring to Rawlings-Blake's goal to increase the population by 10,000 families over a decade, "we're going to lose 10,000 people."
A final vote is expected next week.
The bill had lingered in a council committee for months, as retailers and lobbyists tried to convince city officials to seek another source of revenue. They warned Monday that the tax, which applies to most bottled beverages, would cause stores to lose revenue and, ultimately, cut jobs.
"We are stunned that in a city where people are overtaxed and thousands of people are looking for work that the council and the mayor are pushing forward this proposal," said Ellen Valentino, executive vice president of the Maryland-Delaware-D.C. Beverage Association.
Rawlings-Blake, who first unveiled her plan to raise $300 million for school construction in November, said through a spokesman that she was heartened by the council's vote.
"After months of debate, this was a significant and arguably historic step forward towards improving the conditions of our public school buildings," spokesman Ryan O'Doherty said in an email.
The proceeds of the tax, about $10 million according to finance officials, are to be combined with some revenue from a planned slots casino and savings from a recalculation of the city's contribution to schools to generate about $23 million. The money would be used to float $300 million in bonds to pay for school construction and repair.
City officials cautioned that work remains, particularly in the state legislature, before construction could begin. A report by the American Civil Liberties Union stated that the schools require $2.8 billion in work, but neither the school system nor the city have released their own estimates.
Schools CEO Andrés Alonso is expected to release a long-delayed report this month that details the scope of the problem — including which schools are in such poor condition they should be closed, said Jason Washington, a senior policy advisor to Rawlings-Blake.
Alonso did not respond to a request for comment Monday.
A working group convened by state lawmakers is slated to begin meeting next week to look at how to issue the bonds, among other topics.
"We're going to move forward right now with the revenue we have, but it won't be the end," Washington said. He said the $300 million proposed by Rawlings-Blake could be part of a larger plan, advanced by Alonso, to float as much as $1.2 billion in bonds.
Administration officials said it has not yet been determined if the city or an independent authority would float the bonds. It appears unlikely that the school system would do so, Washington said.
The state legislature must also approve legislation to enable the city to float bonds using the bottle tax proceeds, Washington said. A similar measure, and other initiatives related to city school construction, failed in the General Assembly this year.
Baltimore became the only jurisdiction in the state to pass a tax on bottled beverages in 2010. Similar measures had been introduced in other cities, including New York, but failed after intense lobbying efforts.
Baltimore's tax applies to most bottled beverages except milk, juices and 2-liter soft drinks. It was initially set at 2 cents and was slated to expire after June 2013. The proceeds of the tax currently go toward the city's general fund.
Many council members spoke passionately in favor of the tax at Monday's meeting. Councilman William H. Cole IVdescribed how his son's school, Federal Hill Prep, frequently dismisses students early due to excessive heat. Councilman Brandon Scott, the council's youngest member at age 27, recalled the subpar conditions at his alma mater, Mergenthaler Vocational-Technical High School, before it received a renovation.
But others expressed concerns about targeting one industry with a tax. Council PresidentBernard C. "Jack" Youngsaid he voted for the measure reluctantly, because he believes it is a regressive tax that will bring in less revenue over time.
Education advocates said after Monday's vote that they hoped to team with beverage industry leaders to encourage consumers to buy beverages in the city to help support Baltimore's schools. They said they would push hard for construction to begin in the near future.
"This is a starting point," said Shannon Siciliano, co-chair of the Baltimore Education Coalition. "We're not stopping."