SANTA CRUZ >> Despite the opposition committee raising nearly $2 million to prevent Measure Z or the Sugar-Sweetened Beverage Tax from passing into law, a majority of city of Santa Cruz voters approved the tax on local soda distributors.

With the November election results certified, members of the opposition campaign may seek legal action against the city in the coming months, according to Christopher Skinnell of San Rafael-based law firm Nielsen Merksamer Parrinello Gross and Leoni.

“I don’t think there’s any real argument that Measure Z conflicts with state law, the Keep Groceries Affordable Act,” said Skinnell. “The heavy betting would have to be in favor of litigation. Exactly, what that looks like is still to be determined.”

Skinnell’s firm represents the committee opposing Measure Z, which is largely made up of large corporations with a stake in the sale of sugar-sweetened beverages such as the Coca-Cola Co., PepsiCo and Affiliated Entities, and Keurig Dr Pepper, among others.

The firm also served as amicus counsel in the appeal case, which concluded in March 2023, where the California Third District Court of Appeals found that charter cities such as Santa Cruz cannot be financially penalized by the state for lawfully implementing a sugar-sweetened drink or soda tax on residents.

In the fall of 2018, a 1.5-cent-per-ounce sugary drink tax ballot initiative similar to Measure Z was approved by the Santa Cruz City Council to go to a vote by city residents that November. In June 2018, the initiative was brought to a halt when then-Gov. Jerry Brown signed the Keep Groceries Affordable Act, which prevents taxes on grocery items until 2031.

The law included a penalty provision that would take away all of a city’s sales and use tax revenue if any charter city attempted to implement a grocery-related tax such as a soda tax.

After the act was passed, the Santa Cruz city manager suggested the measure be taken off of the 2018 ballot in fear of the penalty, and it was removed by the council.

In 2020, a lawsuit was filed by Jarvis, Fay & Gibson, LLP on behalf of then Santa Cruz City Councilmember Martine Watkins and Fresno-based nonprofit Cultiva La Salud. ChangeLab Solutions and the American Heart Association also supported the legal action.

In fall 2021, the Sacramento County Superior Court ruled that the Keep Groceries Affordable Act’s penalty provision was unconstitutional and unenforceable. The state then appealed the court’s decision and lost.

Following the ruling, in May 2023, the Santa Cruz City Council appointed Watkins and Councilmembers Sonja Brunner and Shebreh Kalantari-Johnson to form an ad-hoc committee to evaluate the placement of a similar sugar-sweetened beverage tax measure on an upcoming ballot.

In late June, the council approved the placement of a sugar-sweetened beverage tax on the November ballot and it became known as Measure Z, which passed by a slim margin. According to the Santa Cruz County Elections Department, 15,780 votes were counted in favor of the ballot initiative, or about 52%, and 14,364 votes, or approximately 48%, were counted against the passage of Measure Z.

The general tax of two cents per fluid ounce will be paid by distributors of sugar-sweetened beverages. The tax is estimated to generate about $1.3 million annually for the city’s general fund and would include a small business exemption for those with less than $500,000 in gross annual revenues.

A seven-member community oversight panel, consisting of members from sectors such as health care, dental, wellness, education and youth organizations will be established next year. The panel will recommend how the revenue brought in by the tax will be allocated with the intention of promoting community health and wellness and for general revenue purposes.