Santa Cruz’s sugar-sweetened beverage (SSB) tax measure is shaping up to be not only a battle over potentially higher soda prices, but also over a state law that bans cities from proposing measures like it at all. 

City officials say Measure Z would promote a healthier community and a healthier democracy, while the opposition says it amounts to a regressive tax on consumers already struggling to get by.

Measure Z was put on the Nov. 5 ballot by the Santa Cruz City Council and seeks to create an additional $1.3 million in annual revenue for the city by adding a 2-cent per ounce tax on sugary drinks. These include soda, energy drinks, sweetened coffee and tea. Beverages with less than 40 calories for every 12 ounces are exempt, as are essentials like baby formula and those for medical purposes. Dairy products, diet soda, fruit juice, meal replacement drinks and alcohol would also be exempt from the proposed tax.

The tax revenue would be placed in a general fund, but officials say the money will go towards improving parks, beaches and open spaces, as well as supporting health initiatives. A community oversight panel would also be created to make recommendations on how to spend the cash.

The measure also includes an exemption for small businesses making under $500,000 a year, which would protect various local restaurants and shops. While the tax is meant to hit at the points of distribution, in the past, corporations have opted to pass the tax down by increasing prices. That eventually trickles down to the consumer.

The opposition moved swiftly after the Santa Cruz City Council voted to approve placing the measure on the November ballot in late June. The Campaign for an Affordable Santa Cruz filed papers with the Fair Political Practices Commission on July 22, naming the American Beverage Association as the committee’s sponsor. The ABA has led the fight against similar sugar tax measures in cities across the state.

But local restaurateurs, liquor store owners and young consumers have also shown support for the “No” campaign.

Since then, a barrage of TV and print ads — as well as an extensive mailer campaign— has inundated the area with No on Z messaging. Most of it is targeted at Gen Z, with one particularly ubiquitous TV and social media ad featuring a group of young locals in front of an area liquor store.

According to the latest campaign finance reporting, the No on Z camp has amassed over $1.2 million in contributions from Keurig Dr Pepper, the Coca-Cola Company, Pepsico Inc. and Red Bull North America. The campaign had spent $655,064 as of Sep. 21, according to the filings.

By comparison, the pro-Measure Z Committee for a Healthier Santa Cruz had raised only $15,693 by the same time frame. City Council members have been canvassing their districts to raise support. 

Santa Cruz City District 3 Council Member Shebreh Kalantari-Johnson, who is campaigning in support of Measure Z, acknowledged they are fighting uphill against big corporations.

“One of our challenges is that we cannot match, in terms of dollars, what our opponents have been doing, because they’re funded by the beverage corporations,”  Kalantari-Johnson said in a phone interview. “I guess I didn’t anticipate that they would be spending already almost a million dollars, and we’re not even at the end of the campaign.”

Steve Maviglio, spokesperson for the No on Z campaign, said the city is misleading voters with this measure.

“It’s a tax increase masquerading as a health initiative,” he said. “There’s not a dime in there that’s guaranteed to go to anything to do with public health. It’s going into the general fund. And with a multi-million dollar deficit, there are going to be priorities for the city, and it’s not going to be starting new programs.”  

A Healthier Santa Cruz

Supporters of Measure Z argue that the sugar tax will steer Santa Cruzans into making healthier choices. Laura Marcus, CEO of Dientes Community Dental believes there is a correlation between sugar consumption and obesity 

“Studies have shown a marked reduction in consumption of sugar-sweetened beverages and rates of obesity in cities around the world that have implemented a measure like this,” Marcus said. She added that in cities such as Oakland, which adopted an SSB tax in 2017, the consumption rate has decreased.

Oakland voters passed a one-cent per ounce SSB tax in November 2016. Between 2015 and 2019, sugar-sweetened drink consumption dropped by 26.8% compared to nearby Richmond, according to a 2023 study by UCLA’s Center for Health Policy Research. San Francisco. Berkeley and Albany have implemented soda taxes. In the fight for Berkeley’s 2014 Measure D, the ABA poured $3.3 million to beat it at the polls. However, its efforts fell short and the measure passed.

But in Santa Cruz, the No on Z campaign has support from a local social justice activist, who said there are better ways to make the city healthier. Ayo Banjo, a former UC Santa Cruz student body president and organizer with Santa Cruz Black, said consumers should not be penalized to make healthier choices.

“The conversation should really be about what are ways that we are trying to make healthy foods more accessible, and are we doing our best to put out PSAs and culture campaigns and social media and community engagement,’’ Banjo said.

The No on Z campaign cites a 2023 UC Davis study in which it found that “SSB taxes in Oakland and San Francisco were both largely ineffective in reducing SSB purchases and regressive in their incidence,” according to the report. It went on to say the increased revenue was “disproportionately paid by lower income households.” 

“It’s hard work to try to shift a culture of habits. But if that really is the intention, if the intention truly, really is to make our communities healthier, I think we should be doing everything in our power to think about all the different ways we can be influencing a healthier community, not just taxing consumers that then go to a general fund,” Banjo added.

Kalantari-Johnson said the soda tax compares to the taxes on cigarettes that have helped curb smoking.

“It has decreased tremendously, significantly, cigarette smoking, and has funded education campaigns, […] the beverage industry is using the same exact tactic as the tobacco industry, ” Kalantari-Johnson said.

Despite the Yes on Z efforts, she still worries that voters will fall for the opposition’s money and tactics.

The No on Z campaign has employed numerous political consultants and marketing firms to tailor its message to young voters — and it might be working.

 Cabrillo student Libby Hidahl, 26, of Santa Cruz, said the solution is more education about the health effects of sugary drinks, not a tax. Even so, she sees it as a step in the right direction.

“I think it’s an attempt,” said the dental hygiene major. “I don’t know if it will be successful.”

Home Rule

While Santa Cruz voters are seeing the battle play out between local officials and outside money, the larger struggle is at the state level. In 2018, after San Francisco passed its soda tax, then-governor Jerry Brown signed the Keep Groceries Affordable Act, which banned local governments and charter cities from levying new taxes on groceries, including SSB’s. The bill was a compromise between the state and beverage companies backing an initiative to amend the state constitution to make it harder for cities to raise taxes. 

That same year, Santa Cruz City Council Member Martine Watkins and Fresno-based nonprofit Cultiva La Salud sued the state arguing that penalizing cities for raising taxes was unconstitutional and encroached on “home rule” doctrine.

After the state appealed, in 2023 the court of appeals sided with the Watkins and the nonprofit. Now, Santa Cruz officials see Measure Z as the last step towards enshrining the rights of charter cities to decide on what they tax.