How a tax could make the borough millions
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One of the biggest drinking weekends of the year, other than home Penn State football games, is here: Arts Fest. Students and alumni alike return to take in the culture, and maybe an adult beverage, or two, or three — you get the idea.
When people drink at the downtown bars or buy alcohol from the liquor stores or bottle shops, they don’t pay a local tax. So while people party, and maybe even overindulge, State College borough taxpayers (and surrounding townships) are left footing the bill for any damage or crime that they leave in their wake.
And that cost can be hefty: The State College Police Department is operating with a $10.3 million budget in 2018, and according to borough Manager Tom Fountaine, about two-thirds of crime in this community is related to alcohol.
Years ago, State College estimated that a poured drink tax (a tax on your drink at a bar or restaurant) could bring in about $3 million in annual revenue, Fountaine said. That could offset the costs of those negative consequences associated with alcohol use.
A tax on retail sales of alcohol (say, at the beer distributor or state store), could bring in an annual revenue “much higher” than that $3 million figure, he said.
A caveat: Fountaine said the borough doesn’t have the ability, at this point in time, to figure out an updated estimate on the revenue that could be generated for either tax. Nevertheless, the “dated” numbers are still a significant chunk of change.
While both taxes have been discussed, Fountaine said the borough has shifted to talking more about the retail tax because a lot of the issues driven by alcohol use in State College are not necessarily at the bars and restaurants. Rather, it’s the alcohol that people purchase at stores and drink in private residences that cause the most problems.
What could a local alcohol tax look like?
Alcohol is taxed statewide — the 18 percent Johnstown Flood Tax on the sale of alcohol at the state stores generates more than $300 million per year for Pennsylvania’s General Fund.
But none of the municipalities that are affected by high-risk drinking behaviors, like college and university towns, are receiving any of that revenue, Fountaine said.
“It’s just a system that really doesn’t equitably or fairly distribute revenue from the sales of alcohol to deal with and offset the costs and the negative consequences from alcohol use,” he said.
No one is going to go broke from a simple 10 percent local retail alcohol tax, said Tom King, assistant borough manager of public safety and former State College police chief.
Say you normally get a six-pack of Yuengling for $5.99 — the new price would be $6.59.
The cost of taking care of out-of-town visitors and paying for services, like EMS and police, that deal with alcohol-related crime and issues fall on local taxpayers, said Donna Queeney, coordinator of the State College borough Coalition of Neighborhood Associations.
A poured drink tax would essentially allow the borough to balance its budget on something other than the taxpayers’ backs, said Queeney, who has advocated for the tax for years.
“We need relief in the borough,” she said.
But for businesses, such a tax could have an adverse effect.
“These types of taxes typically result in increased prices being absorbed by customers and decreasing sales at establishments. That’s not a good situation. For those reasons, the Pennsylvania Licensed Beverage and Tavern Association opposes such taxes. We are especially concerned for lower income individuals and mom-and-pop establishments,” Chuck Moran, executive director of the association, said in an email.
It wouldn’t be unprecedented, though. Allegheny County and Philadelphia have both been granted authority by the Pennsylvania legislature to tax alcohol. Philadelphia has a 10 percent liquor tax, and Allegheny County has a 7 percent alcoholic beverage tax.
Allegheny County originally established a 10 percent tax in 2007, according to the Pittsburgh Post-Gazette, but lowered it to 7 percent in 2010 when the taxes generated more revenue than expected.
Joe Shulman — CEO of Hotel State College & Co., which operates Bill Pickle’s Tap Room, The Corner Room, Spats at the Grill, Zeno’s Pub, Chumley’s and Indigo — said he has concerns about the idea of a poured drink tax.
Many of their customers are students on limited budgets, he said. Additionally, a poured drink could cost the bar more, for example in preparing their accounting.
At the end of the day, though, if that tax was imposed, Hotel State College’s four bars and two restaurants would adapt, Shulman said, but it would be “critical” that it be a countywide tax, because otherwise it would be a “severe competitive disadvantage.”
Queeney said it’s essential that a tax would be implemented beyond just the borough — at least in the Centre Region, if not all of Centre County.
What’s standing in the way?
This has been an ongoing issue for decades here, Fountaine said.
“Right now, State College borough taxpayers foot the full bill for the impacts of alcohol, while the bars, the stores selling the alcohol and (Pennsylvania Liquor Control Board) and the state make money. That’s the bottom line. Is that right?” King said.
The people consuming the products should be the ones providing the revenue, he said.
The problem is: The legislature has to grant State College borough the authority to collect such a tax, State College Borough Council President Evan Myers said.
And there hasn’t been movement toward allowing that.
“It’s kind of interesting — on one hand those in power in the state legislature talk about community self-determination, yet they continue to pass law after law restricting local governments from determining a lot of things for themselves,” Myers said. “I think it’s because it goes counter to what they want. So they say one thing and do another.”
The legislators don’t need to be seen as the bad guys and levy the taxes, King said. They just have to give local municipalities the authority to decide.
In 1998, state liquor stores made $8.3 million in sales, according to King. That number grew to $27.5 million in 2015 — a 231 percent increase.
And now beer and wine have been added to grocery stores and gas stations like Sheetz.
“Right now, we have a state legislature that, for the past four or five years, has done nothing but try to find more ways to make alcohol more available. You can now buy it in every grocery store, just about,” King said. “... Liquor stores are open more hours. It’s all about convenience. It’s all about hours. It’s all about selection. It’s all about cost.
“And so we’re increasing the access to alcohol ... and no one is doing anything to say: ‘While we increase access, which will increase negative consequences, we want to make sure we’re taking care of the local communities.’ They’ve not done that. They’ve left us out to dry. They’ve not done anything to help us to manage the consequences of it. And that’s just blatantly wrong.”
Fountaine said they haven’t even been able to convince somebody in the legislature to be a sponsor of a bill.
And the borough hasn’t really received a reason why the legislature hasn’t taken this on, he said, other than that there’s “no political appetite” to levy those kinds of taxes or to modify the tax structure.
State College borough has met on several occasions with other college and university towns to discuss alcohol taxation and is moving forward with “minor progress,” Fountaine said, but the group’s momentum has slowed with the elections and changes in municipal elected officials.
But local legislators say they aren’t ruling out the possibility of giving municipalities greater taxing authority.
Legislators shouldn’t be dictating how local citizens decide the best use of their “hard-earned money,” state Rep. Scott Conklin, D-Rush Township, said.
He said he’s willing to give locals the opportunity to decide whether an alcohol tax would be an option they’d want to pursue.
“This would give those municipalities the opportunity to look at ways to be able to lower the taxes for the local citizens,” Conklin added.
State Rep. Rich Irvin, R-Spruce Creek Township, said in an email that he’s a proponent of keeping government at the most local level, but when the issue becomes taxation, it’s important to keep consistency across the state.
“Local governments are always looking for ways to raise revenues without increasing the hated property taxes, and I am always open to discussing options,” he said.
State Senate Majority Leader Jake Corman, R-Benner Township, said that local municipalities should have more options than just property taxes.
But he cautioned that the “drink tax is wildly unpopular in Harrisburg.”
Corman said that hopefully next year the legislature will pursue a larger property tax bill and that more options for municipalities to raise revenue will be part of it.