Exclusive | Liberal California city looks to double nanny-state soda tax as shocking spending emerges

Berkeley, the first US city to introduce a tax on soda and sugary drinks more than a decade ago, wants to double the rate as claims emerge about how the money collected is being spent.

Voters are now being asked to double the 2014 tax — which is one cent per fluid ounce, or 12 cents for a can of Coke — despite questions being raised about how the tax money is spent and monitored.

The decision to increase the tax comes as businesses rage saying they’re already struggling as basic city services go unmet and homeless encampments fester.

There’s a twisted anti-American irony in doubling a tax on a beverage in a country born out of rebellion against taxation on a beverage.

In 1773, furious colonists dumped British tea into Boston Harbor in defiance of taxation without representation, helping ignite the American Revolution.

A financial review by the California Post identified serious financial irregularities involving the Berkeley soda tax’s top recipient, Health Black Families, a nonprofit that has been awarded more than $2.2 million in taxpayer money since the tax went into effect. 

The organization provides a number of community services targeting the African American community, including a program called “Thirsty for Change!” as well as cooking seminars and tours of farmer’s markets.

But in filings with the IRS, Healthy Black Families’ accounting records contain conflicting compensation figures, massive expenses that don’t add up and hundreds of thousands of dollars in unexplained legal fees, raising questions about how carefully Berkeley officials are tracking the money it doles out.

Gary Krausz, a partner at accounting firm Gursey Schneider LLP who reviewed the IRS records for The Post, said that Healthy Black Families’ returns “show repeated failures in basic financial reporting.” 

A retired accounting professor who separately reviewed Healthy Black Families’ records called the filings “incompetent.”

Healthy Black Families listed more than $300,000 in miscellaneous expenses in 2024 — roughly a third of total spending — without the required itemization.

In 2023, the nonprofit had almost $233,000 in unexplained expenses.

“Expense allocations do not add up; officer compensation is reported inconsistently and changes in net assets do not reconcile,” Krausz told The Post.

From 2021 through 2024, the organization reported no independent voting board members, no tax-return review and no written conflict-of-interest, whistleblower or document-retention policies, Krausz said.

“The governance disclosures are troubling,” he added.

Healthy Black Families also reported $247,285 in legal expenses in 2021 and $170,187 in 2022 without explaining the underlying matters.

The nonprofit’s CEO, Wilhelmenia Wilson, who draws a salary of roughly $120,000, did not respond to requests for comment.

In tax filings, her name and title were misspelled multiple times.

Healthy Black Families’ most recent accounting firm, New Leaf Accounting, emailed The Post saying it could not answer questions by press time, citing tax-filing deadlines and requesting more time to review records.

Berkeley officials — Mayor Adena Ishii, City Manager Paul Buddenhagen and members of the City Council — also did not respond to The Post’s calls and emails containing questions regarding financial reviews, grant monitoring and concerns about how taxpayer money is being spent.

While many of the programs Berkeley funds via the soda tax relate to healthy eating habits, cooking and gardening programs and dental care, other spending appears far more questionable. 

Five grants totaling $245,000 went to a program to teach day laborers “life skills,” while taxpayers also funded two grants totaling nearly $125,000 for a project called “Artists Against Soda.”

Mustafa Thotta, a manager at Middle East Market & Cafe who previously ran a 7-Eleven, said Berkeley’s taxes have gotten out of control while street conditions, homelessness and crime remain problems.

“Each penny matters,” he said.

“People know about their health nowadays — everybody knows what to drink, what not to drink, because of all the social media. They know everything, so it’s up to them.”

Julian Cañete, president and CEO of the California Hispanic Chambers of Commerce, blasted the city’s spending.

“It is clear that this tax is ineffective and benefiting no one except the so-called nonprofits,” he said. “Voters should keep that in mind before doubling a tax for countless family-owned small businesses in Berkeley struggling to stay afloat.”

Berkeley’s pioneering tax kicked open the door to similar levies in Oakland, San Francisco, Philadelphia and Seattle — but promises of healthier communities have been followed by fights over where the money goes.

In Oakland, soda-tax advisers accused officials of using the revenue to backfill city services rather than directing more money to community health programs.

A 2023 analysis by the think tank SPUR found that both Oakland and San Francisco treated the revenue as general operating funds rather than reserving it for efforts to counter the harms of sugary drinks.

While studies have linked soda taxes to lower sugary-drink sales and some improvements in children’s weight, concrete findings on health benefits have been mixed. 

A 2024 study tracking nearly 69,000 California adults with prediabetes found no significant reduction in new diabetes cases during four years after the taxes took effect. A separate study of roughly one million adults found no significant overall improvement in body mass index across four taxed California cities, although Berkeley and some demographic groups showed modest reductions.

Xavier Morales, executive director of the Praxis Project and a longtime member of Berkeley’s soda-tax advisory panel, cited research showing a recent drop in Berkeley children’s body mass index while defending community programs.

“We’ve been able to use these funds in the way that we promised the voters,” he said.

Asked about spending concerns, he said: “I don’t see any of that kind of waste.”

When presented with Healthy Black Families’ accounting discrepancies, Morales said: “Everything you just described to me, I have no knowledge of.”

Morales said grantees submit reports, make presentations and host events for commissioners to attend, and lauded Healthy Black Families’ work.

“I do know that they are doing great programming,” he said.

The American Beverage Association, which fought the original tax in 2014, issued a statement to The Post slamming the current effort to double the tax.

“Increasing taxes on groceries when household budgets are already stretched thin hurts working families, small businesses and their employees,” officials said. “Studies have consistently shown that these taxes have not meaningfully delivered on reducing consumption or obesity, and disproportionately burden those who can least afford it.”

Berkeley voters have until Nov. 3 to decide on Measure AA, which would replace the penny-per-ounce general tax with a 2-cent special tax dedicated to health, nutrition and water access.

Funding from the proposed tax increase would require grant disclosures, performance requirements, audit rights and provisions to recover funds — safeguards the city would have to enforce.

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