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Is this a sweet deal?

SANTA FE, N.M. — Santa Fe Mayor Javier Gonzales’ proposal is not a tax on sugary drinks, it’s a tax that will fund early childhood education.

That’s how he wants people to view his proposal that would place a 2-cent-per-ounce tax on sugar-sweetened drinks sold within the city limits.

“The point is that this is an early childhood program that needs to be paid for,” he said in a meeting last week with Journal North staffers . “I understand the point that this is a soda tax deal, but this is meant to fund early childhood efforts.”

That could be viewed as a re-branding of a previous proposal the mayor introduced in October that called for the city manager to explore ways of reducing sugar intake among city residents. He framed it then as measure aimed at creating a healthier community, with the resolution citing studies that warn of the contributing effects sugar has on heart disease, hypertension, obesity and diabetes.

Santa Fe Mayor Javier Gonzales, right, talks with Kendra Galdamez and other pre-K students at the United Way Early Learning Center at Aspen. (Eddie Moore/Journal)

Santa Fe Mayor Javier Gonzales, right, talks with Kendra Galdamez and other pre-K students at the United Way Early Learning Center at Aspen. (Eddie Moore/Journal)

But, three weeks later, Gonzales held a press conference at City Hall announcing he planned to propose a tax on soda and other sugary drinks to finance expanding and improving early childhood education programs for 3- and 4-year-olds. While roughly 1,000 kids that age are already enrolled in pre-kindergarten programs in Santa Fe, there are another 1,000 who are not, most of them from low-income families. Costs for pre-K programs typically run between $900 to $1,400 per child per month, he said.

Gonzales said the program would help “fill the gaps” in early childhood education and give all children in Santa Fe an opportunity to be kindergarten-ready when they come of age. And the initiative could create close to 200 jobs.

Gonzales formally introduced the proposal during Wednesday’s City Council meeting. Though dubbed a “soda tax,” the tax would extend to other beverages, such as fruit drinks or iced tea with added sugar, sweetened coffee drinks, energy drinks and sweetened milk.

He’s backed away from taxing artificially sweetened beverages, raising some interesting questions about how much a customer would pay at the fast-food counter for a cup that could be filled with either Coke or Diet Coke.

Ultimately, if the City Council endorses the idea, it will be up to city voters to decide by means of a special election whether to impose the tax.

Judging from the public forum at Wednesday’s meeting and comments posted on online newspaper articles, winning public approval may be an uphill battle. Restaurant and bar owners told council members Wednesday the tax would hurt their businesses. Santa Fe Chamber of Commerce President and CEO Simon Brackely spoke against the tax, saying that, with the economy recovering and the possibility of other tax increases (the Santa Fe school district is asking voters to approve a property tax increase for capital improvement bonds in a Feb. 7 vote), this wasn’t the right time for another levy.

Earlier in the day, the Rio Grande Foundation, a conservative public policy group, issued a news release accusing Gonzales of initially misleading the public about his true intent to propose a tax and overstating how much revenue the tax would generate. That group and others have maintained that Gonzales’ proposal is government overreach that micro-manages the personal lives of citizens.

A $7 million program

Gonzales and a support group said at a November news conference that the soda the tax would generate more than $10 million annually. It has since walked back that estimate to $7.2 million per year. Last week, the mayor said that tax ordinance would be written so that the tax disappears if the City Council tries to divert revenues to other purposes. Tax revenues would be distributed to private providers, including nonprofits, which operate pre-kindergarten programs.

A new city commission would determine where the money goes, using a competitive contracting basis, with goals of creating more pre-K slots and mandating that providers meet the state’s top standards for early childhood education.

Gonzales said the idea is for funding to go where it was most needed.

“It would be a needs-based program where people who can least afford it and have furthest access to early childhood education would move to the front of the line,” said the mayor. He said that schools or programs that won’t accept low-income kids won’t get funding.

Santa Fe Community College, which operates an early childhood development center and offers a certification program for teachers, would serve as the project administrator.

Retired UCLA professor Jeannie Oakes is serving as Gonzales’ unpaid consultant for the proposal. She said Santa Fe is a prime spot to start such an initiative because much of the infrastructure and expertise is already here.

“The problem is, we don’t have the capacity to deliver,” she said. “So, with the expertise of the people in the community and looking at the national research, we crafted a very comprehensive plan that would not only open up spaces for children whose needs are not being met, but also would drive quality. Because, if the research says anything, it says the real difference-maker is high-quality pre-K.”

Oakes said the plan is made up of five main components: funding to providers with either four- or five-star quality ratings; public education of the value of pre-K; creating a “navigation system” for families to get their children enrolled; workforce development to train teachers; and support for early childhood education infrastructure.

One misconception is that the city would provide educational services, she said.

“We don’t want the city to be in the business of delivering early childhood education,” Oakes said. “This is about building the capacity with the considerable expertise that is already here in the community.”

At some point, a memorandum of understanding would be signed with Santa Fe Community College, making it project administrator.

“Quite honestly,” the mayor said, “it’s a perfect fit. It’s an example of a partnership that needs to happen to remove the city from the bureaucracy and administration, and puts it squarely in the hands of a community expert that is ready to take on this role very willingly and has already proven they know how to do it.”

Existing providers

Katherine Freeman, president and CEO of United Way of Santa Fe County, which has made prenatal to pre-K education its main focus, is fully supportive of the mayor’s plan.

“It’s a really solid plan,” she said, adding that she has confidence in SFCC President Randy Grissom and Jennifer Duran-Sallee, director of the college’s Early Childhood Center of Excellence, to administer the program.

Freeman noted that the proposal calls for an independent audit to be done annually to make sure the program is working as intended.

From left, Kimberly C de Vaca, Andrea Esparza and Satya Rugsaken paint with watercolors at the United Way Early Learning Center at Aspen. (Eddie Moore/Journal)

From left, Kimberly C de Vaca, Andrea Esparza and Satya Rugsaken paint with watercolors at the United Way Early Learning Center at Aspen. (Eddie Moore/Journal)

United Way, which operates a five-star program, stands to be a part of the program. It recently purchased the old Kaune Elementary School from Santa Fe Public Schools with the intention of turning it into an early childhood education center. It is in the process of raising money to make the conversion and is about halfway to a $7 million goal.

“Our goal is to have a full-day, full-year center where, once a child is enrolled, they are assured to be there until they reach kindergarten,” Freeman said.

Anne Liley is director of the highly regarded pre-school program at First Presbyterian Church downtown. Asked how the initiative would benefit her program, she said, “I’m not sure that it will.”

Serving 80 families with children aged 1 to 5, the program is already at capacity and has no room to grow, she said.

But Liley did say her program could benefit from grants that would help cover the cost of the kids who qualify for Children, Youth and Families Department support, who make up 10 percent of enrollment. She also appreciates that money will go toward professional development because she recognizes a need for quality teachers in early childhood education.

“There are not enough teachers to meet the high quality standard,” she said, also expressing confidence in SFCC’s role. “If there’s a way to increase capacity and support high-quality employees, that would be wonderful. I think the fact that they will be using Santa Fe Community College will allow that to happen.”

The tax

The 2-cent-per-ounce tax doesn’t necessarily mean that the price of a six-pack of Pepsi would go up from $2.99 to $4.43. Technically, distributors of sugary drinks are the ones that get taxed. It’s up to them to decide how much they want to pass on to retailers and consumers.

Gonzales said using property or gross receipts taxes to fund the initiative was considered, but he settled on taxing sugary drinks as a recurring source of funding based on an analysis by Kelly O’Donnell, a research professor in economics at the University of New Mexico.

O’Donnell says many factors were considered to arrive at estimated revenues. Some of it is based on data collected by the federal government measuring consumption of sugary drinks and consumer trends. She makes some assumptions, too, but says they’re based on previously recorded scientific data. O’Donnell says the distributors who are taxed typically don’t pass 100 percent of it onto consumers; she estimates it would be about 75 percent. Her revenue projection is also based on “unity elasticity,” which assumes that, for every 1 percent increase in price, expect a 1 percent decrease in sales.

But the City Different also has to be considered differently in some respects. “Santa Fe’s economy is incredibly tourism reliant, especially the food and beverage sectors,” she said. She estimates visitors will consume 10 percent of the taxed beverages.

Another thing about out-of-towners, she said, is they are less influenced by price increases. “If you’re planning a trip to a spa in Santa Fe, you’re not going to change your mind about your Pepsi based on a small difference in price,” she said.

O’Donnell said she’s tried to keep her estimates on the conservative side. In the end, she estimates $7.2 million in revenue against expenditures of about $7 million. “The assumption is it would give us a little safety net, but also to the extent that it could be banked so services could continue even if projections were off.”

Council schedule

Santa Fe’s City Council will have its first opportunity to weigh in on the plan at its Feb. 8 meeting. It could agree then to hold a public hearing at the council’s March 8 meeting.

At that time, the council could pass an ordinance that would call for such a tax to be used specifically for early childhood programs, along with a resolution establishing guidelines for the initiative and a commission to provide oversight. A special election would have to be held within 60 days of the council’s approval, making the likely date of the election in early May.

City Clerk Yolanda Vigil said this week a special election would cost the city up to $75,000.

Mayor Gonzales is going to have to sell the plan to win voter support. Don’t think of it as a tax on soda, he says, think of it as an investment in Santa Fe’s future.

“Unless Santa Fe makes a commitment to invest significantly in creating access for kids who currently don’t have that access to early childhood programs, the cycle of poverty will continue to happen, and the issue of income inequality and the achievement gap will further widen,” he said.

“And that’s just not acceptable when we know that there is proven policy that is based on science and evidence that can transform lives. And, while nobody likes new taxes, this represents a real revenue source that goes to make sure this effort gets funded.”

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