Quick Take
The City of Santa Cruz announced Tuesday that it has won a lawsuit brought by industry groups over Measure Z, the sugar-sweetened beverage tax that voters approved in November 2024. The city expects an appeal.
The City of Santa Cruz has won a lawsuit in Sacramento County Superior Court over the sugar-sweetened beverage tax that voters approved in 2024, the city announced on Tuesday afternoon.
“The court’s ruling sends a clear message: local democracy can withstand even the deepest-pocketed opposition,” said Vice Mayor Shebreh Kalantari-Johnson in a media release. “Santa Cruz voters made a clear choice to fund healthier futures for our kids, seniors, and families, and this decision protects that choice from a costly industry challenge. I’m proud of our city for standing its ground and leading the way for charter cities across California.”
City Attorney Cassie Bronson said in the release that the city appreciates the court’s “well-reasoned analysis” and its evaluation of the legal issues.
“This ruling affirms the city’s authority as a charter city to implement a thoughtfully crafted local measure that addresses local health concerns, generates local revenue, and was approved by City of Santa Cruz voters,” she said.
Voters approved Measure Z, the sugar-sweetened beverage tax, in November 2024, with 52.4% of 30,144 votes cast in favor of the tax. It charges 2 cents per fluid ounce on the distribution cost of putting most sugar-sweetened beverages on store shelves and in restaurants.
It is expected to raise about $1.3 million annually, with the money going toward services and programs that promote community health. According to the ballot measure language, that includes maintaining neighborhood parks, beaches and open space, providing safe routes to school, improving bike and pedestrian safety, fighting diabetes, heart disease and childhood obesity, and more.
Just months after the election, in May 2025, the American Beverage Association (ABA), along with other organizations, filed a lawsuit against the levy in Sacramento County Superior Court. The California Grocers Association, California Hispanic Chambers of Commerce, the California Alliance of Family-Owned Businesses, the California Chamber of Commerce and the California Fuels and Convenience Alliance were the other groups listed as plaintiffs in the lawsuit.
The ABA poured almost $2 million into a campaign opposing the tax ahead of the election, and the subsequent lawsuit closely mirrored the campaign messaging. It argued that the city violated the Keep Groceries Affordable Act, which the state legislature passed in 2018. That legislation bars new local taxes on grocery store items, but a 3rd District Court of Appeals judge ruled in 2023 that the state could not punish a charter city for passing local taxes that aspire to raise revenue, forming a path forward for the eventual sugar-sweetened beverage tax.
The court is expected to issue its final judgment within two weeks, and petitioners will have 60 days to appeal. The city expects an appeal, according to the media release. The timeline for the appeals process is to be determined, hinging on if and when petitioners file an appeal, and when the state’s 3rd Appellate District can hear the case.
The city has already formed the tax’s oversight committee and will continue to collect the tax until the appeal process is complete, if the petitioners eventually file one.
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