‘Not a normal campaign’: Santa Cruz’s Measure Z soda tax tests the limits of grassroots vs. industry titans

In the recent history of Santa Cruz’s major ballot measure fights, from rent control and empty home tax initiatives, to those seeking caps on building height, the latest chapter has been something of a different magnitude. 

Placed on the Nov. 5 ballot by the Santa Cruz City Council, Measure Z proposes a 2-cents-per-fluid-ounce tax on the distribution of most sugar-sweetened beverages. Money is the stated primary motivation: The city believes it could bring in an additional $1.3 million per year for the city’s general fund. Backers of similar proposals throughout the country have argued that these taxes, by making it more expensive to buy products that are bad for you, can help cut down on consumption and improve public health. Opposition campaigns, funded by the soda industry, have cited studies showing the taxes do not influence a person’s decision to purchase, and unfairly burden low- and middle-income earners. 

Money is also the factor pushing Measure Z into a league of its own. The soft drink industry’s chief interest group, the American Beverage Association, has stepped in to try and kill the measure. The most recent campaign finance filings show that $850,000 has been donated to the “No” campaign from just four donors: the parent companies of Coke, Pepsi, Dr Pepper and Red Bull. The local group supporting Measure Z has brought in less than $16,000. 

Treating sugary drinks similarly to cigarettes, long targeted by what many have referred to as a “sin tax,” is hardly a novel idea for local and state governments. Arkansas has imposed an excise tax on soft drinks since 1992. The Obama administration floated the idea in 2009. Berkeley passed the nation’s first tax aimed specifically at sugar-sweetened beverages with its Measure D in 2014 after similar campaigns failed in New York state. Since Berkeley’s success, San Francisco, Oakland, Albany, Seattle, Philadelphia and Boulder, Colorado, have all passed local sugar-sweetened beverage taxes.

But Santa Cruz’s proposal would be the first in California since 2018, when, just days after the Santa Cruz City Council supported putting its own 1.5-cent soda tax on the ballot, then-Gov. Jerry Brown signed the Keep Groceries Affordable Act. The bill, which threatens financial penalties against any local jurisdiction attempting to add levies on grocery store items, shut the door on sugar-sweetened beverage taxes — until last year. In March 2023, a California appeals court judge ruled that the state could not lawfully punish charter cities like Santa Cruz for implementing new taxes to raise revenue. 

If Santa Cruz voters pass Measure Z, other communities stymied by the 2018 bill could follow suit. In that way, it’s reminiscent of Berkeley’s 2014 effort, which set off a domino effect in the Bay Area. Larry Tramutola, who ran the campaign for Berkeley’s Measure D, said this explains why Santa Cruz residents have been blitzed with advertising from the American Beverage Association’s Campaign for an Affordable Santa Cruz. 

“Santa Cruz represents an opening for other communities, obviously, so the American Beverage Association will throw everything into Santa Cruz to try to stamp it out there,” Tramutola told Lookout. “The industry doesn’t care about Santa Cruz, per se; they just don’t want this tax, which they perceive as a cancer, to spread around, whether it be in California or in the Philippines.” 

The American Beverage Association claims the tax is illegal under Brown’s Keep Groceries Affordable Act and puts pressure on low-income and middle-class families. The industry has vowed to fight the tax in court if it can’t convince Santa Cruz voters to oppose it. 

“There will be enormous legal costs involved that rival the money in the campaign,” said Steve Maviglio, spokesperson for the opposition camp. “It’s much easier to speak directly to voters to let them understand why this is a bad idea. Just letting it pass [without a fight] and then saying, ‘OK, we’ll test it in a lawsuit’ makes no sense. The legal costs of this are going to be astronomical.” 

Santa Cruz Councilmember Shebreh Kalantari-Johnson, who is helping to manage the campaign pushing Measure Z, said the city’s attempt to pass the tax is an important test of local governments’ flexibility in the wake of Brown’s 2018 bill.  

“What we do in Santa Cruz has much wider implications; we’re challenging a state law that we know is unconstitutional, and [the American Beverage Association] knows that, too, that’s why they’re pouring so much money into stopping it,” Kalantari-Johnson said. “If we prevail, and when this goes to court, we feel pretty confident that we’re in the right.” 

What’s in a soda tax?

Colloquially, Measure Z has been referred to as a soda tax, though a stroll through the Morrissey Boulevard Safeway quickly reveals how much further a sugar-sweetened beverage levy would reach. 

The tax will be levied on beverage distributors who sell the products to grocery stores and convenience shops, as opposed to customers at the check-out counter. It’s not guaranteed that the tax will be reflected on the shelves: In cities that have approved similar measures, distributors have passed down price inflation to consumers only on a case-by-case basis. But, assuming the levy trickles down neatly to the prices inside Santa Cruz’s Safeways, the cost of a 24-pack of standard 12-ounce Cokes would jump from $14.99 to $20.75. 

Capri-Suns, a staple for many a child of the 1990s, would avoid the tax as it has less than 40 calories per 12 ounces; but a 10-pack of 6-ounce pouches of its sugar-sweetened competitor, Kool-Aid Jammers, would increase by $1.20.

A 52-ounce bottle of Simply Orange wouldn’t be subject to the tax since it’s 100% natural fruit juice without any added sweeteners. The price of the same-sized bottle of Simply Lemonade, however, only 11% juice with 25 grams of added sugar, would jump by $1.04.

Unlike its cans of black nitro cold brew, a four-pack of Starbucks’ bottled 9.5-ounce vanilla frappuccinos would cost an extra three quarters; a four-pack of standard Red Bull, slightly less. The newly popular Celsius energy drinks? Sugar-, and tax-, free. 

Although Measure Z supporters have promoted the tax as a critical revenue source for improvements to parks, beaches and public health, there would be no strict limits on how the city spends the annual $1.3 million it’s estimated to generate. The money will go into the general fund and could be used on anything from staff salaries and office supplies to park benches. If passed, however, Measure Z would require the city to form a special advisory committee to advise the Santa Cruz City Council on how to spend the additional tax revenue — a model seen in other cities. The city council and the parks and recreation commission would each make one appointment to that committee, and the city manager would appoint the remaining five members. 

“Frankly, it would behoove the city council, and behoove me as a city councilmember and those that come after me, to listen to the advisory body on how to spend this money,” Kalantari-Johnson said. “Otherwise, you lose trust.” 

Measure Z would collect the 2-cents-per-fluid-ounce tax from beverage distributors — the middleman between manufacturers and retailers. However, the American Beverage Association has characterized it as a “regressive” tax because of the likelihood it will lead to higher prices disproportionately borne by lower-income families. 

Regressive taxes are those that are levied at the same amount regardless of the income of the person paying. Consider a sales tax: The $10 in sales tax a person might pay for a grocery trip doesn’t change whether they make $40,000 or $80,000 – yet, $10 weighs more to the lower-income person.

“This is a tax increase disguised as a health initiative,” Maviglio said. “It’s a regressive tax that is going to hit lower- and middle-income people the hardest.” 

Because of this, soda taxes have divided the political left. In 2016, when the city of Philadelphia was championing its own soda tax to fund universal pre-K, the issue split the Democratic presidential primary candidates. Hillary Clinton said she was “very supportive,” while her rival to the left, Bernie Sanders, came out against it, calling it a “regressive grocery tax … that targets the poor and the middle class while going easy on the wealthy.” 

Local advocacy organization Santa Cruz Black, as well as the local chapter of the United Food and Commercial Workers union and the Teamsters Joint Council 7, have all endorsed a “no” vote on Measure Z. Meanwhile, the local chapters of the NAACP and Democratic Central Committee and the Community Action Board have each endorsed a “yes” vote. 

NOVEMBER BALLOT MEASURES: More local and state coverage here

In some ways, 2024 has become the year of the regressive tax. In March, voters supported a city of Santa Cruz sales tax increase from 9.25% to 9.75%, estimated to bring in an additional $8 million per year in general fund revenue. On the Nov. 5 ballot, Measure Q asks voters countywide to support paying a flat tax of $87 per year on each parcel of land in the community, regardless of its assessed value, for land-management initiatives. 

Kalantari-Johnson said two rounds of polling “showed community readiness” for a soda tax: “I think that’s why the industry is pouring so much money into this, because they know there is readiness.” 

Former Central Coast state Sen. Bill Monning, who unsuccessfully proposed multiple statewide soda tax bills during his time in the Senate and Assembly, said he doesn’t buy the regressive argument. He called sugar-sweetened beverages a “public health menace.” He said the tax will ultimately help low-income communities, which are disproportionately victimized by sugary drinks’ ill effects. 

“From a public health perspective, that’s exactly right: Those are the communities who are being preyed upon by Big Soda, and increased trends of illness, diabetes and tooth decay are also in those communities,” Monning said. “If you believe in the public health objective, which is to reduce consumption of dangerous products, whether it’s tobacco, soda or alcohol, you use the tax to try and reduce consumption.”

An uphill battle for Santa Cruz

Although the intent of the tax is, in part, to reduce consumption, scientific and economic literature vary whether soda taxes are successful in that.

A February 2023 study out of UC Davis’ Giannini Foundation of Agricultural Economics found that the taxes levied in Berkeley, Oakland and San Francisco had not impacted sales. A paper published by the American Medical Association’s JAMA Network in January found a clear link to lower sales in other cities. The author, Scott Kaplan, found “taxes in Boulder, Philadelphia, Oakland, San Francisco, and Seattle were associated with 33.1% composite increases in [sugar-sweetened beverage] prices and 33.0% reductions in [sugar-sweetened beverage] purchases.” Other studies have pointed out that, in large grocery chains, the soda tax on distributors isn’t always passed through to consumers. 

A 2019 study published out of the University of Sydney and UC Berkeley found that sugary drink consumption actually dropped before Berkeley’s implementation and stayed down after the levy. The authors argue that the constant blitz of campaigning, media and advertising about the health threat of sugary drinks in connection to the proposed tax alone can reduce consumption in a community. 

Most anyone who has watched YouTube videos or television over the past several weeks has likely seen the American Beverage Association’s advertising campaign at work. In one advertisement, young high school and college students lament how expensive Santa Cruz has become. 

“We grew up in Santa Cruz and things are getting really expensive,” one of the young people says. “Iced tea, kombucha, soda, I don’t need to pay an arm and a leg for it. … Don’t make it even harder to afford to live here.” 

Tramutola, the campaign strategist for Berkeley’s 2014 campaign, said that 10 years ago, the American Beverage Association infamously bought much of the advertising space in a Berkeley BART station, and “inundated the mail and inundated advertising.”

“These are not normal campaigns. You can only beat them by grassroots organizing, and it’s an uphill battle,” Tramutola said. “It’s difficult when you’re running against a billion-dollar corporation. They will spend whatever it takes to win. But you’ve gotta be able to compete in some way. You can’t just give them that free rein.” 

In Berkeley, the American Beverage Association ended up spending over $2.4 million to defeat the soda tax — a stunning amount for an election in a city of fewer than 120,000 residents. However, the proponents of the Berkeley tax were not simply working with pennies. The pro-Measure D campaign ended up spending over $900,000 between cash and non-monetary contributions, thanks to sizable contributions from billionaire Michael Bloomberg and the Action Now Network. 

Santa Cruz stands in stark contrast. In Berkeley, the beverage industry outspent its opponents by a 2.5 to 1 margin. As of Sept. 21, the American Beverage Association, with $850,000, was outraising the Santa Cruz Measure Z proponents by more than 53 to 1. 

Kalantari-Johnson admitted the campaign has “taken up more time than I thought it would.” She said she, and fellow City Councilmembers Martine Watkins and Sonja Brunner have been splitting up duties as part-time campaign managers. She said the campaign is “energized,” but that fundraising “has been much more difficult than I imagined.” 

She attributed the low donations to what she sees as a hyperfocus from voters on the national election. The campaign only recently got its first mailer out to voters. Kalantari-Johnson said the slow fundraising meant they recently had to switch gears to an all-volunteer operation, but are now transitioning back to hiring some paid canvassers. 

“We’ve got a lot of work to do, we’ve gotta hit the pavement and we’ve gotta get folks out there,” Kalantari-Johnson said. “We feel good, but we’ve got to be out there knocking on doors.” 

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