Mayor plans to raise bottle tax to pay for school construction

Mayor Stephanie Rawlings-Blake will seek to raise the city's bottle tax from 2 cents to 5 cents as part of a plan to boost funding for school construction and repairs, her administration said Thursday.

The bottle tax money and other revenue would create a funding stream of $23.8 million that the Baltimore school system would use to float $324 million in bonds to renovate and replace dilapidated buildings.

The mayor's proposal has reignited the debate that accompanied the City Council's approval last year of a 2-cent tax on bottled beverages, a vote that came after months of wrangling and fierce opposition from retailers and the beverage industry.

A measure to raise the tax to 5 cents could be introduced in the council as early as Monday. A 5-cent tax could generate up to $11 million in annual revenue, mayoral spokesman Ryan O'Doherty said.

The proceeds from the bottle tax would be combined with some of the revenue from a planned slots casino in Baltimore, as well as savings from a change to the city's school funding formula. Rawlings-Blake would ask the state legislature to increase the cap on the school system's ability to sell bonds, O'Doherty said.

Education advocates warned that $324 million would not go very far in addressing the schools' needs. A 2010 report from the American Civil Liberties Union identified $2.8 billion in necessary renovations and construction. Hundreds of students, teachers and parents rallied across from City Hall last week to protest conditions in schools such as rodent infestation, broken windows and doors, and a lack of adequate heat and air conditioning. Another protest is planned for Sunday.

"It's a good first step, but much more will need to be done to get to the $2.8 billion needed to modernize all the schools in Baltimore," said Bebe Verdery, education director of the ACLU of Maryland.

Verdery called on Rawlings-Blake to use the entire capital budget for schools to float bonds. The $23.8 million in new funds would be in addition to $17 million that the city now sets aside for school facilities.

Store owners and beverage lobbyists complained that the bottle tax would drive shoppers across the county line to buy groceries.

"This was like getting hit upside the head with a can of peas today," said Rob Santoni, chief executive of the eponymous Highlandtown grocery store.

He accused Rawlings-Blake of showing "an outright disrespect for Baltimore businesses," saying his store has lost more than half a million dollars in sales over the past year, which he attributed to the city tax.

If the higher bottle tax is approved, the plan would be in place by the fiscal year that begins in July 2013, O'Doherty said. The proposed tax would be of indefinite duration, he said — unlike the current 2-cent tariff that was to sunset after three years.

Rawlings-Blake's proposal depends on revenue from the casino planned for Hanover Street, near the stadiums. The casino's opening has been delayed by more than a year; the state slots commission is considering the sole bid that was received this fall in response to a request for proposals.

The mayor has pledged to use 90 percent of the city's portion of slots revenue to decrease Baltimore's property tax rate — which is twice as high as the rate in surrounding counties — by 9 cents over nine years.

The remainder, an estimated $1.6 million annually, according to O'Doherty, would go to school construction.

An additional $12 million would come from savings that school officials discovered this year when they adjusted the formula by which the city's contribution to schools is calculated, O'Doherty said.

Voters approved this week the creation of a fund to hold money for school construction, a measure originally introduced by Council President Bernard C. "Jack" Young and Councilman James B. Kraft.

A spokesman for Young did not respond to requests for comment Thursday. Young abstained from voting on the bottle tax last year, citing a conflict of interest because a relative worked for a bottler, but privately lobbied against the tariff.

Councilman Carl Stokes, chairman of the taxation and finance committee, said Thursday that he would not support the mayor's proposal.

"I think it is the wrong way to fund school construction," Stokes said. "We need to do right by our children, but not by making their parents pay another regressive tax."

The council arrived at the 2-cent tariff after months of tense negotiations, while simultaneously — and with much less debate — passing substantial increases to energy, cellphone and income taxes, parking fines and other fees.

The council voted down a 4-cent measure proposed by Rawlings-Blake but, after a series of reversals by council members, the tax was approved at a lower rate for a shorter period. Milk, fruit juices and 2-liter bottles are exempt from the tax.

Councilwoman Helen L. Holton, who had opposed the 4-cent tax, introduced the amendment to create the 2-cent tax, though she said at the time that she had many reservations.

Since then, beverage industry leaders and store owners have been lobbying council members to repeal the tax.

Ellen Valentino, executive vice president of the Maryland Delaware DC Beverage Association, said her organization continues to strongly oppose any bottle tax.

"The last thing working Baltimoreans need is another tax," said Valentino, who led the push against the tax in 2010. "It is a job-killer, and we're surprised that during this difficult economic time there isn't more of an effort to grow jobs, retain jobs and not put an additional tax burden on Baltimore."

Valentino pointed to the decision by Pepsi to stop bottling beverages at its city plant in January. The Hampden facility continues to distribute drinks.

Rawlings-Blake briefed city schools CEO Andrés Alonso on the plan Thursday morning, and her office was contacting council members and schools advocates to pitch the idea.

Jeff Zellmer, a lobbyist for the Maryland Retailers Association, said increasing the tax would drive more shoppers to purchase groceries in the surrounding counties. He said the 2-cent tax has been particularly deleterious to small, independent markets and that some stores have lost as much as 10 percent of their profits since the tax was approved.

The proceeds from the 2-cent tax were said to be needed for street cleaning and other public works projects. Members of the AFSCME union rallied and posted billboards in support of the tax after Rawlings-Blake said the proceeds would prevent scores of city public works employees from losing their jobs. O'Doherty said the mayor's new plan would not target the tax revenue to schools until July 2013, when the original levy was to expire.

The 2-cent tax generated about $4 million in its first year, less than the $5 million that finance officials had predicted.

The administration might seek the bottle tax increase by asking a council member to propose it as an amendment to a bill currently before the legislative body, O'Doherty said. That bill, ironically, was intended to kill the tax by hastening the sunset date. It was introduced by Councilwoman Belinda Conaway, a bottle tax opponent, who this week lost her bid for re-election. The new council will be sworn in next month.

It is unclear how many council members will support Rawlings-Blake's proposal. Those who oppose it will likely face criticism from administration officials and education advocates.

Rawlings-Blake was the first big city mayor to push through a bottle tax in recent years.

Stokes, whose committee would have to approve the measure, complained that the Rawlings-Blake administration is manipulative in the way in which it presents funding demands.

"It's a trick," he said. "Last year, they said we needed a beverage tax so sanitation workers would not lose their jobs.

"I think we ought to pull back and work on the entire revenue and budget and funding issue in a comprehensive way, rather than handle it piecemeal," Stokes said.

Baltimore Sun reporter Liz Bowie contributed to this article.