Opposition To Smoking Bans Heats Up

Economic Impact By Norman E. Kjono, July 8, 2007 Copyright 2007 Norman E. Kjono

By Norman E. Kjono, July 8, 2007

Copyright © 2007 Norman E. Kjono

This commentary should be read I context of Coalition for Equal Rights (CER) in Colorado Smoking Ban Economic Impact. That four-page document presents an analysis of Colorado liquor excise taxes plus bar and restaurant sales revenues prior to and after the Colorado smoking ban. During a recent talk show appearance on the Colorado Springs Chuck Baker Show that report was discussed at length. Those with an interest in a line-by-line walk through of the economic impact analysis can to so by clicking on the below links:

Chuck Baker Show July 13, 2007 - First Hour

Chuck Baker Show July 13, 2007 - Second Hour

Smoking bans are a contentious issue and their adverse economic impact is widely debated. Predictably, tobacco control claims that smoking bans are good for business. Tobacco control has also invented and widely promotes the Social Marketing theme that when bans are enacted nonsmokers who previously stayed home to avoid having their hair stink from cigarette smoke flock to bars and restaurants and increase revenues for thankful hospitality trade business owners. Hospitality trade businesses the lose money or close their door are generally dismissed as "marginal" enterprises that would have closed in any event.

The above referenced economic impact report, which I prepared as a compensated consultant to Coalition for Equal Rights (CER), was the first effort in Colorado to quantify and present for the public liquor excise tax and hospitality trade revenues before and after the state's smoking ban became effective in July 2006. That revenue data, plus two recent news reports on Colorado newspapers paint a picture dramatically different than the rose-colored view that tobacco control presents. As the tax and revenue facts, as well as anecdotal evidence from small business owners, begins to present themselves tobacco control's false claims about smoking bans are increasingly revealed to be nothing more than Social Marketing sales themes intended to support promotion of special-interest mercantile smoking ban agendas. Those facts also demonstrate how for the Social Marketing themes are increasingly out of line and behind the times compared to the day-to-day reality that hospitality trade small business owners confront.

In this commentary I first present two news articles and one editorial from Colorado newspapers. We then proceed together to take a brief look at the salient points from the Colorado economic impact study, which are buttressed by a section that discusses economic impact of the Washington statewide smoking ban that became effective in January 2006. With that information in mind, a summary discussion with links to relevant information concerning Environmental Tobacco Smoke (ETS) is provided. Finally, the closing sections examine polar opposite views and reconcile those thoughts toward a viable solution.

Recent News Articles from Colorado

From the Aurora Sentinel, July 18, 2007, "Where there's Smoke . . . Sales Climb Higher?" by Sara Castellanos:

A host of bar and restaurant owners in Aurora say that a year after a statewide smoking ban began the air may have cleared, but restaurant profits have gone up in smoke. Still others claim that clean air in bars and dining rooms coupled with a shift in clientele has had a mixed effect during the ban. The noisiest comments about the smoking ban, which effectively snuffed out smoking in all public places across the state, including bars and restaurants, comes from independent bar owners. '(Proponents) claimed that everyone in the long run would be better off, and we would recover our profits, but we definitely have not seen that,' said Myron Melnick, owner of Zephyr Lounge on East Colfax. He says his revenue declined about 4 percent since the measure became law in July 2006. According to the Coalition for Equal Rights, an organization against smoking bans, more than 50 Colorado businesses have closed since the measure was passed. Jim Von Feldt, former president of the coalition and a bar owner in Denver, said his business revenue is 'down considerably.' Von Feldt says his personal income has decreased by 90 percent and his business's revenue decreased by 20 percent in the past year. 'My bartenders will tell you flat out that their tips are nowhere near what they used to be earning, but I am faring a little better than some of my friends whose businesses are completely closed,' Von Feldt said. Fred Willis, president of TREA Bingo on Dayton Street, says he hopes state lawmakers will overturn the measure in the near future. 'I don't smoke, but it doesn't bother me either way. In my opinion, I think those who wish to smoke should be able to smoke wherever they go,' Willis said. Business owners have the option of constructing a smoking patio for smokers, but the ban's restrictions say smokers cannot light up within 15 feet of the main entrance. Businesses such as TREA Bingo, which is a nonprofit organization, say they can't afford to construct a smoking patio. . . . Melnick said he assembled a canopy for smokers outside the Zephyr, but he later received a $1,000 fine from the city for doing so. The city since has told him zoning restrictions prohibit him from opening a smoking patio outside his bar. . . . Gibby's on South Havana Street was fortunate enough to have a smoking patio already in place before the smoking ban went into effect. 'If you have an outdoor area for smokers, you are in luck. A large portion of drinkers are also smokers, so our business has improved to an extent, but only because customers can smoke on our patio,' said bartender Brenda Cassidy. Cassidy also works at the Morrison Holiday Bar and says they took a "huge hit" because they did not have an outdoor smoking area. Cassidy said she has never seen any evidence in either bar showing that profits have risen because of an increase in non-smoking customers. . . . Patrons who are relieved to breathe cleaner air can relish in the fact that air quality improved by 90 percent in bars and taverns since the law was enacted, according to the State Tobacco and Education Prevention Partnership. That doesn't impress the measure's critics. Norman Kjono, columnist and litigation trial expert, along with Senior Vice President for the Coalition for Equal Rights, Allen Campbell, researched the bill's effect on businesses using data from the Colorado Department of Revenue. Their research indicates that revenue for tavern owners was on a steady incline since Jan. 2004, until the smoking ban went into effect and the pattern abruptly ended. From Jan. 2005 to July 2006 liquor excise tax trends were increasing at a rate of $23,593 per month, but from July 2006 to April 2007 the liquor excise tax decreased at a rate of $5,755 per month. Kjono and Campbell's research did show that restaurant revenue increased as a result of the ban, which significantly changed the competitive structure of the hospitality industry. . . . Contrary to the measure's supposition that smoking bans are good for business because nonsmokers will flock to all bars and restaurants, there is no evidence that proves that to be true, Kjono said. 'This is proven to be a flat out lie. Information from other states is readily available that proves that an economic impact was inevitable,' Campbell said. Campbell says the vast majority of neighborhood bars and taverns cannot feasibly expand their property to accommodate the smoking ban's requirements of a smoking patio. . . . Peter Meersman, president and CEO of the Colorado Restaurant Assocation, said in a statement that it is inaccurate to make generalizations about the smoking ban's economic impact on restaurants. . . . Smoke Free Colorado will not release their data on the economic impact of the ban until Sept. 2007, because analysts believe data from less than a full calendar year may be inconclusive.

Ms. Castellanos spoke with me and Mr. Campbell for more than an hour during a telephone interview to discuss the economic impact of Colorado's statewide smoking ban. A copy of the economic impact analysis linked at top of this commentary was provided to her. She accurately reports information concerning Colorado bar revenues and liquor excise taxes that was included in that analysis document. She stated at the outset that her storyline was to present a picture of economic impact in Aurora, Colorado. To my mind she, has credibly done so. Ms. Castellanos presents an interesting and informative overview of economic impact by presenting anecdotal comments by local hospitality trade small business owners in context of overall statewide trends. Her effort toward balanced reporting on the contentious issue of smoking bans is appreciated.

Several facts about the economic impact of Colorado's statewide smoking ban are established in Ms. Castellanos' report:

1. A mixed effect is observed for restaurant owners. Based on data that I have researched and analyzed I suspect (but cannot and do not attribute the view to Ms. Castellanos) that negative impacts are felt most severely by small, independent neighborhood restaurants, whereas large franchise chain venues have experience less severe or positive impact.  

2. The most widespread negative economic impact is felt by small, independent neighborhood bars and taverns. For example, the Coalition for Equal Rights counts 50 bars and taverns that have gone out of business since the smoking ban took effect and declines on revenue for some bars and taverns are 20 percent or more. In addition, employee tips are significantly reduced.

3. The economic impact also spreads over other venues such as bingo halls. Which raises the point that adverse economic impact is most severely felt in establishments where the activities are most directly associated with smoking, such as dinking alcoholic beverages, gaming, playing pool, etc. 

4. The negative economic impact of Colorado's smoking ban is reduced for hospitality establishments that are able to provide outdoor smoking areas.

5. The negative economic reported is measurably due to and causally associated with the statewide smoking ban and not other external influencing factors.

Whatever else may be said, when combining the information from Ms. Castellanos' report, other Colorado news articles about the smoking ban, and research data one thing becomes certain: contrary to tobacco control's proclamations there is not, nor has there ever been, a teeming hoard of nonsmokers waiting in the wings with bated breath to flock to bars and nightclubs once smoking has been banned. To the contrary, what we observe in Ms. Castellanos' report is confirmation of impact that a new variable advanced by special-interests to suit their mercantile agenda causes a material change in the competitive structure of the hospitality trade. All reports and analysis about smoking ban impacts point to one inescapable fact at this time: the overall statewide impact of the Colorado smoking ban has been and likely will continue to be negative.

Accordingly, tobacco control's assertion that smoking bans are good for business now emerges as a deliberate lie. I do not make that charge lightly. To say that one has lied is to assume intended deception. Pueblo, Colorado passed a smoking ban in 2005. In short order many bars went out of business, the names of the bars that did so are documented. In addition, at the time Colorado's smoking ban became effective adverse economic impact from other states such as Washington was already becoming apparent. Anti-tobacco pushed ahead to extend that economic carnage statewide in Colorado in 2006. Many small business owners now feel the same pain as those before them in Pueblo and other states. The negative impact of smoking bans is a certainty and making any claim that bans are good for business in light of those facts includes the element to deceive others to advance one's personal agenda. Such zealotry is not laudable effort by erstwhile public health advocates, I believe it is the behavior of anti-small-business and anti-competitive-market mandate muggers in pursuit of their own interests regardless of the facts or consequences to others.

In short, tobacco control advocates lie to the public about the merits of smoking bans to advance their Nicotine Replacement Therapy (NRT) financial sponsors' agenda to increase sales of nicotine gums, patches, lozenges nasal sprays and inhalers. Smoking bans prohibit use of tobacco nicotine products that compete with pharmaceutical NRT products. Hospitality trade small business owners are caught in the middle of the Nicotine Market Share Wars. Small business hospitality trade establishments going of out business due to smoking bans becomes mere collateral damage in the Robert Wood Johnson Foundation's and its namesake Johnson & Johnson corporation's "Assault on Smoking." It appears that $446 million in direct financial grants to tobacco control advocates from that foundation to anti-tobacco activists since 1992 has more sway in politicians' and activists' minds than the now-predictable harm they are imposing on hardworking small business owners. The fact that the foundation was listed among the top five institutional shareholders of NicoDerm CQ manufacturer Johnson & Johnson, holding a position valued at $3.9 billion in common stock, becoming an expediently omitted fact in all the ballyhoo about smoking bans. But why should any bar, tavern, or restaurant small business owner in any state be forced to lose one dime in revenues to assure the pockets of activists are lined with a continuing stream of special-interest grants, that Johnson & Johnson enjoys increased sales of its "Smoke Free" nicotine delivery devices, and the Robert Wood Johnson Foundation continues to profit through appreciation of and dividends from its multi-billion-dollar stock position?

From the Aurora Sentinel, July 18, 2007, "To See Smoking Ban's Payoff, Colorado Casinos Must Play by the Same Rules," by Sentinel editor Dave Perry:

The smoke wafting from the backroom politics of the casino lobby still hasn't cleared. Casinos have successfully persuaded at least some mountain gambling towns to change rules about how casinos must implement the smoking ban when it extends to them early next year. While state law requires smokers to stand 15 feet from the entrances to public buildings, Central City, according to news reports, will require smokers to stand back a distance of only one inch from the front door. That's ridiculous and likely a safety hazard in itself. It's not hard to imagine lines of cigarette addicts, many with oxygen tanks in tow, choking the front door of just about every casino in town as they loiter outside for frequent nicotine fixes. Since reality won't sit in for these mega-businesses, better legislation needs to. The facts of the matter are clear, but the laws are still a little murky - and fall far short of their intended target. . . . Smoking increases the probability of disease and death - facts everyone has known for years. It is indisputable. In recent decades, any doubt that even second-hand smoke is a danger to all, and a special danger to pregnant women, children or the elderly in fragile health, have been erased. It was unthinkable that so many restaurant and bar workers either had to work in extremely dangerous, smoke-filled rooms or quit their jobs if they didn't like the hazardous conditions they found themselves in. For years, smoking ban critics said such a ban was unfair because people unable to smoke in restaurants in one city would flock to cafés in another, even though evidence in places like Boulder and other non-smoking cities showed that wouldn't be the case. So restaurant owners themselves banned together to persuade state lawmakers to ban smoking, ensuring that every restaurant and bar in the state kicked the habit at the same time. . . .  Foolishly, lawmakers fell for arguments from well-funded state casino lobbyists, who said smoke-filled gambling halls such as those in Black Hawk and Cripple Creek will wither without puffing patrons because they'll go to Las Vegas or far-away casinos on Indian reservations. It's nonsense. It's unfair to every other Colorado restaurant and bar that took the leap. The law was clearly created to protect public safety. Allowing limited smoking at airports prevents nicotine-starved addicts from endangering public health by starting fires while trying to sneak a few puffs inside planes, concourses or airport bathrooms. And why workers and non-smokers in gambling halls deserved less protection than others defied logic. . . . Now, state and city officials must deal directly with the smoking dilemma as it moves outdoors. In Aurora, some establishments are forbidden from offering outdoor-smoking accommodations because of zoning rules. . . . The city needs to hear what bar and restaurant owners have to say and help them deal with one of the most sweeping, beneficial statutes every to hit Colorado's law books. But just like restaurant owners pointed out in the beginning, to keep this important law working, it has to be fair and workable."

Being confronted with Sentinel reporter Sara Castellanos presenting strong evidence of the Colorado smoking ban's adverse economic impact published on the same day as his editorial, editor Dave Perry stridently calls for expanding that negative impact to Colorado casinos. Mr. Perry does so in the name of opposing insider political deals with big business. Judging by the headline of his editorial, the "Payoff" of smoking bans appears to be to spread adverse economic impact farther across the state's hospitality and gaming industry sectors. That's quite some payoff.

It is true that, as Mr. Perry writes, restaurant owners "took the leap" to support Colorado's statewide smoking ban. It is also true, however, that in clear contrast bar and tavern owner were pushed over the economic impact cliff by their restaurant owner hospitality trade brethren. Restaurant owners apparently did so because, as discussed in the below section about the economic impact of  Washington's statewide smoking ban that took effect January 1, 2006, when bans are passed bar revenues decline and restaurant revenues tend to increase. That trend is also proven true to date for Colorado in the economic impact study referenced above. So we observe a newspaper editor proclaiming the need to pass smoking bans as a way to fight big business, and to do so byexpanding statewide bans that corporate franchise Big Business actively supports.

Mr. Perry has omitted from his editorial several important facts about casinos to make his case. Smaller, independent casinos in Blackhawk and Cripple Creek have had discussions with the Coalition for Equal Rights (CER) concerning opposition to the Colorado smoking ban. CER representatives have also met with senior members of the Colorado Gaming Association in Denver. They provided documented facts the discredit tobacco control's claims about Environmental Tobacco Smoke (ETS) to the association. The association senior staff did not distribute that information to its members. In addition the Colorado Gaming Association has stood on the sidelines concerning the smoking ban. The majority of the association's members, large corporate enterprises with gaming locations in multiple states, understand smoking ban impacts that restaurant associations enjoy. Just as statewide smoking bans change the competitive structure of the hospitality trade by giving "Smoke Free" large franchise chain restaurants a competitive advantage over neighborhood bars and taverns, the smoking ban also provides a competitive advantage for large, multi-state gaming interests that would prefer to go smoke free over smaller, independent gaming establishments. It should also be considered that Big Casinos in the grand mecca of organized gaming, Las Vegas, have stated they do not oppose smoking bans. It again appears that we are to oppose Big Business interests by passing bans that large multi-state Big Casinos support.

Mr. Perry also mentions pregnant women in his call for expanding smoking bans. There was a very recent study concerning exposure to Environmental Tobacco Smoke conducted by the University of Washington. I interviewed by E-Mail one of the study's authors, as reported in Big Drugs, Pregnancy and Social Marketing II. The first commentary in that series (linked in the second commentary) discloses that the study authors did not measure ETS but invented and inserted a number in their calculations that they believed represented the possible effects of such exposures. The second commentary includes verbatim text of my E-Mail questions and the study author's responses, including the acknowledgement that their study cannot establish a causal relationship between exposure to ETS and the child behaviour problems under review. We arrive at the rather stunning observation that Mr. Perry says any doubt about the alleged dangers associated with pregnant women's exposure to ETS has been erased, when study authors make it abundantly clear that they did not measure actual exposures and that they cannot establish a causal relationship.

Typical of anti-smoking zealots, Mr. Perry spins facts that prove the opposite of what tobacco control claims in the name of the smoking ban agenda. Mr. Perry either has his facts wrong about who is behind opposition to extending the Colorado smoking ban to casinos or he deliberately choose to spin the facts in a false light to advance his personal preference. Neither case is acceptable for a credible news end editorial source.

From the Colorado Springs Gazette, June 30, 2007, "Breathing Easier or Feeling Burned," by Bill Radford

"A statewide smoking ban that took effect one year ago has left some businesses thriving, some charting a new course and some suffering. Before the ban, proponents argued that good health equals good business. They tried to ease business owners' worries by citing studies showing revenues don't decrease - and sometimes increase - with the implementation of statewide smoking bans. . . . Put Harmony Bowl in the plus column. Heidi Grettenberger, a manager there, has seen more families come to bowl since the ban, which took effect July 1, 2006. . . . The restaurant business has also generally benefited, said Luke Travins, managing partner of Concept Restaurants in Colorado Springs, which operates South-Side Johnny's, Jose Muldoon's and others. . . . The situation with bars, though, is more muddled. At Will's Sports Pub on South Nevada Avenue, "happy hour has pretty much disappeared," said owner Will Pelz. 'Most of those people that came in for Monday through Thursday happy hours were smokers. That's just the way it was.' But Pelz, an early vocal opponent of the ban, isn't complaining. His business is doing well, he said, after the ban forced him to shift to more of a restaurant than a bar. . . . Oscar's Tejon Street bar and restaurant remains more bar than restaurant, said owner Phil Duhon. Even so, sales are up 20 percent to 30 percent. He credits that at least in part to a roughly 900-square-foot outdoor addition where smokers can still puff away. 'My outdoors is constantly packed,' he said. . . . Duhon sees the smallest bars suffering the greatest impact. 'The mom and pop bars, I don't see them making it.' Dozens of bars statewide have already gone under, according to the Coalition for Equal Rights, which was formed by Colorado bar owners to challenge the ban as unconstitutional. The coalition's Web site, www.stopthebans.com, lists about 55 businesses it says shut down because of the smoking ban. However, one shuttered Springs business - Nemeth's El Tejon Restaurant - appears to be listed three times, albeit with some name variation and misspellings. The site lists El Tejon Restaurant, Neimeths S Tejon and Nemethe's El Tejohn Bar. Mike Nemeth, co-owner of the restaurant that closed last fall, said it didn't close because of the smoking ban. The ban was a factor, he said, but it was a minor one. "I still would have closed," he said. The smoking ban may actually have helped business a bit, he said, though he saw it as another example of government interference. . . . Deb Lile, president of the coalition's board of directors, said the list of smoking ban casualties comes from business owners and any erroneous ones will be removed from the site. Her business - the Love Shack in Denver - has been devastated by the ban, Lile said. "We're a pool hall, and my pool leagues are down 40 percent. And therefore, so is my business." Bruce Hicks, owner of Murray Street Darts in Colorado Springs, said his business fell 25 percent after the ban took effect. His solution: Ignore the law. In February, he helped organize a "civil disobedience" protest, encouraging bars to openly defy the ban and collect $1 donations from smokers to pay fines. "Approximately that 25 percent is back since we've been protesting," Hicks said. However, he faces a stack of 22 citations for suspected violations of the ban, each carrying a maximum fine of $200. His next court date is in late July, Hicks said. . . . The Adam's Apple Lounge in Colorado Springs briefly violated the ban as a "protest bar" like Murray Street Darts. "That lasted until they (the city) started threatening our liquor license, and then we were done," said co-owner Linda Picarillo. Business at the lounge is down 15 to 20 percent, she said. . . . The Spirit Keeper tavern in Black Forest saw business plummet by nearly 70 percent last fall, said owner Shari Warren. But when the Black Forest Inn closed, it left her with no competition in the area. Thanks to that, she said, 'we're back up to almost 100 percent where we were before the smoking ban hit.'" (Underline, italic added.)

In fairness to Ms. Warren, it should be noted that Mr. Radford cast her statements in an apparently false light. Ms. Warren says that she never stated or implied during her interview that she was thankful a competitor went out of business in order for her to recover lost revenues. It should also be noted that, as talk show host Chuck Baker reports in the above-linked audio files, Mr. Radford's wife is a spokesperson for the county health department that has actively supported the Colorado smoking ban.

Consider Mr. Radford's June 30, 2007 article about Colorado Springs in light of what Ms. Castellano reported above from Aurora, Colorado on July 18, 2007. Mr. Radford's article proves, once again, discernible patterns of adverse economic impact from the Colorado smoking ban:

1. The restaurant trade generally benefited from the smoking ban. This reflects the mixed results for restaurants.

2. The greatest negative impact is felt by small independent bars and taverns. Again, reports of 20 percent or higher impact are reported.

3. The ban's negative economic extends to other venues, this article reports a pool hall has lost 40 percent of its revenues. This confirms negative impact in establishments where patron conduct is most directly associated with smoking.

4. In this article Oscars Tejon Street Bar reports sales are up 20 to 30 percent, with its outdoor patio always full, similar to the report concerning Gibby's on South Havana Street reported by Ms. Castellano. Not reported in either article was Tom Barton's 44 Club in Denver, which went out of business because it could not add an outdoor smoking area. Brenda Cassidy, who works at both Gibby's and Morrison Holiday bar, confirms Mr. Batons unfortunate experience, saying that the Morrison bar took a "huge hit" on revenues because it could not put in an outdoor smoking area.

5. The above reports once again confirm that revenue losses - as well as increases for bars that have an outdoor area - are directly attributable to the Colorado smoking ban and are not due to other external factors.

Imagine yourself as a small business owner who has invested capital in a retail trade establishment and worked years to build a clientele. Many of your employees become virtual family members. Your business revenues decline to where you must consider closing the doors and you watch employee tip income sharply decline as well. In addition, you see the value of your cash and sweat equity investment in that business, which you were depending on for retirement from sale proceeds, vanish. Then you realize this had happened to your business and many others in your trade to assure that your patrons who smoke are coerced by smoking bans to switch nicotine brands to "Smoke Free" nicotine delivery devices manufactured by a New Jersey mega-pharmaceutical and promoted by one of its largest shareholders.

Is this the American dream that you thought you were living? Are you operating in a free an open competitive market, as you may have believed you were? Would you wish the economic fate reported by many in the two articles above on any other small business owner or competitor?

Colorado Smoking Ban Economic Impact Data

As presented and linked at the top of page 1 in this commentary, an analysis of Colorado Department of Revenue data for Liquor Excise Taxes, restaurant revenues, and bar revenues was conducted. This is the first analysis conducted of those three revenue items in relationship to each other. As should be evident from the differing impacts reported in Ms. Castellano's July 18, 2007 article about aurora and Mr. Radford's June 30, 2007 report about Colorado Springs, any analysis that merely looks at hospitality trade revenues as a whole can be seriously misleading. Such an analysis is misleading first because it fails to identify and report the considerable variance of impact between business sectors such as bars versus restaurants within the overall hospitality trade industry. Doing so masks or hides the observable change in the competitive structure of the hospitality industry that is becoming quite apparent, even with this initial data for three quarters after the smoking ban became effective. A second reason that a look at overall hospitality trade revenues exclusively is not appropriate is because removing the context of Liquor Excise Tax revenues to the state eliminates a comparative benchmark. For example, if excise taxes are essentially flat but restaurants report increasing revenues but bars report declining revenues, it must be mathematically true that restaurant cocktail lounges and beverage services, and possibly liquor stores, are enjoying increased sales. Absent the excise tax benchmark one loses that perspective to reconcile revenues and taxes. 

The full four page analysis report is available to readers through the link at top of page 1. In addition, an in-depth discussion of anecdotal reports for bars and a page by page presentation of the analysis is available by clicking on links to the Chuck Baker Show. Readers can therefore review and listen to that information in the depth that they personally choose. Accordingly, I will limit my written comments here to a few pertinent observations about each of the four pages.

The following should be read with the understanding that the Colorado smoking ban became effective July 1, 2006, in the middle of the calendar year.

Page 1: Calendar year Liquor Excise Taxes increased considerably from December 2004 to December 2005, but that increase leveled off 2005 to 2006. For the 18 month (6 quarter) period of January 2005 to end of June 2007 the trend for state liquor tax revenues increases was +23,593 per month. After the smoking ban from July 1 end of available data (April 2007) the trend for state liquor tax receipts reverses, to -$5,755 per month. Taxpayers will nee dot make up that nearly $30,000 per month negative swing in liquor tax receipts.

Page 2: Shows the Liquor Excise Tax trend data for various periods using Excel spread sheet linear regressions.

Page 3: For the 6 quarter period from January 2005 to July 2006 (before the smoking ban) the rate of bar revenue increased consistently accelerated, compared to sales for the previous year's quarter. During that quarter bar revenue increases compared to previous year increased from +6.44 percent the first quarter of 2005 to +29.46 percent the second quarter of 2006 (ending June 30). After the smoking ban became effective July 1, 2006 that accelerating trend for increase in bar revenues abruptly reversed. Bar revenue percentage increases sharply declined from the high of +29.46 percent to lower than before the analysis began (merely +6.23 percent as of end 1st Quarter 2007 versus +6.44 percent for the 1st quarter of 2005.) In contrast, after the smoking ban the percentage increase in restaurant revenues compared to the prior year accelerates from 8.03 percent at end of 2nd quarter 2006 to 10.9 percent at end of the 4th quarter 2006.

Page 4: Comparing actual quarterly bar trade revenues after the ban to the previous 6 quarter trend before the ban reveals that bar trade revenues are well below trend. For example, 3rd quarter 2006 bar revenues were $1.8 million below trend, 4th quarter 2006 revenues were $7.8 million below trend, and 1st quarter 2007 revenues were $7.2 million below trend. To date, as of the most recently available information, the adverse economic impact on bar revenues imposed by the Colorado smoking ban is $16.8 million.

Page 5: Presents the .PDF file data and associated E-Mails for bar revenues (NAIC Code 72241 for Drinking Establishments) data received on request from the Colorado Department of Revenue (DOR). The DOR Web site does not publish data for that hospitality trade sector so it was requested in conformance with the industry code under which such data are retained. Restaurant sales and liquor excise tax data were retrieved from reports published on the DOR Web site.

The bottom line is that, contrary to tobacco control representations, the smoking ban has been bad for small business neighborhood bars and taverns, it has produced mixed results for restaurants, and it has imposed a discernible negative shift in the trend of Liquor Excise Tax receipts for the State of Colorado. In addition, bars that close their doors and go out of business are dismissed by tobacco control advocates as "marginal," while tobacco control lauds their smoking ban as the source of a natural increase in revenues for remaining bars due to reduced number of establishments and competition.

Smoking Ban Economic Impact in the State of Washington

From the State of Washington, Department of Revenue June 11, 2007 press release, "Smoking Ban Has Minimal Effect on Overall Income of Bars, Taverns," quoting DOR spokesman Mike Gowrylow:

"OLYMPIA, Wash., June 11, 2007 - The Initiative 901 smoking ban that began in December 2005 appears to have had minimal effect on the overall income of bars and taverns. Their gross business income increased 0.3 percent during 2006, compared to 1.1 percent average annual growth from 2002 through 2005. While income from gambling activities declined, it was offset by growth in taxable retail sales of food and drink.  Taxable sales grew 3.6 percent in 2006, compared to 2.1 percent average annual retail sales growth for 2002 through 2005. Although the Department has not attempted to establish a cause-and-effect relationship between the ban and business revenues, the numbers suggest that bars and taverns may have lost some smokers, but gained customers drawn to a smoke-free environment.  While some drinking places may have been hard hit by the ban, overall the industry appears to have been able to adapt. The same couldn't be said for gambling establishments, whose gross income dropped 9.8 percent during 2006.  However, business income for this sector already was in recent decline, dropping 8.6 percent in 2004 and 5 percent in 2005 after a 19.5 percent gain in 2003. Restaurants didn't appear to be affected by the smoking ban because 80 percent of them already were smoke free before the ban took effect.  The taxable retail sales of full-service restaurants increased 9.1 percent in 2006, compared to 8.3 percent average growth for 2002 through 2005. " (Underline added.)

NOTE: WA DOR data are customarily for Fiscal Year ending June 30. If the above data are for fiscal year they are a year old. If for the 2006 calendar year they are six months old. Data cannot be for FY 2006-2007 because the last month data for June 2007 are not yet reported.

The Washington Department of Revenue data reveals a fundamental shift in the competitive structure of the hospitality trade. Restaurant revenues accelerated, previous increases in bar revenues reversed, there will be a corresponding reduction in tavern profits and increase in restaurant profits. Those facts set the framework for economic impact and damage analysis. My layman's view is that the press release also illustrates the power of the legal case that bars and taverns may have as to economic impact under federal workplace standards for economic feasibility.  

The Washington Department of Revenue press release is interesting because it illustrates how tobacco control and its state agency supporters spin the economic impact of smoking bans on bars into "positive news," which is in turn immediately distributed statewide through mainstream media news.  
 

1.1 Discussion of Washington Statistics. Consider the facts as presented by the Washington Department of Revenue: 

a.) Bar and tavern income increased 0.3 percent during 2006, compared to previous three-year average increases of 1.1 percent 2002 to 2005.

1. The rate of increase in income for bar and tavern income declined significantly from 1.1 percent per year to 0.3 percent in 2006.

2. Those figures represent a 72.7 percent decline in revenue growth compared to the preceding three-year average.

b.) In contrast, "taxable retail sales of full-service restaurants increased 9.1 percent in 2006, compared to 8.3 percent average growth for 2002 through 2005."

1. The rate of increase in income for restaurants accelerated from a previous three year average of 8.3 percent to 9.1 percent in 2006.

2. Those figures represent a 9.9 percent increase in 2006 taxable sales by restaurants compared to the preceding three year average.

c.) Restaurants are experiencing accelerated increases in sales while bars and taverns experience sharp decreases in sales growth, both compared to preceding three-year baseline.

1. However, restaurants tend to have a more diverse revenue base, which includes meal service and often alcoholic beverage sales.

2. Perhaps this explains why the Washington Restaurant Association (WRA) did not oppose Washington's I-901 in 2005. Their large franchise chain principal membership, 80 percent or more of which were smoke free as of 2005, benefits by taking customers from small neighborhood establishments that permit smoking.

d.) Please note the term "Taxable Retail Sales" is used by WA Department of Revenue for restaurants, whereas "Gross Business Income" is reported for bars.

1. While the terms may be similar, the vast majority of bar and tavern income would be from liquor sales. Conversely, for restaurants the majority of income would be from food.

2. The proper distinction would be to compare trends for liquor tax receipts from restaurants and for bars and taverns as two separate data items.

3. Failing to do so may hide a highly relevant fact: what if growth in liquor sales for restaurants that also serve alcoholic beverages are strongly increasing while those for bars and taverns are decreasing? That fact would also strongly support the case that smoking bans are employed by large franchise chains to take market share from small, neighborhood  independents. 

e.) For gaming establishments "gross income dropped 9.8 percent during 2006.  However, business income for this sector already was in recent decline, dropping 8.6 percent in 2004 and 5 percent in 2005 after a 19.5 percent gain in 2003."

1. Gross income for gaming establishments continued to decline for three consecutive years.

2. It appears that previous moderation of the decline has reversed, with the greatest decline in revenues (-9.8%) for the past three years occurring in 2006.

1.2 Consider the above information in light of the February 12, 2007 report by the President's Council of Economic Advisers and InflationData.com
 

a.) Real Gross Domestic Product (GDP) increased 3.4 percent in 2006. Restaurants are experiencing increases in revenues (9.1%) vastly greater (267 percent) greater than GDP, while bars and taverns are experiencing revenue increases (0.3%) a mere fraction of GDP (8.8%).

1. Considering that in Washington 80 percent of restaurants were already smoke free at the time I-901 passed in November 2005, this statistic could be extremely important as a measure of the true adverse impact of smoking bans.

2. Bars and taverns are falling more and more behind growth in the national economy while restaurants are accelerating ahead of overall economic growth.

b.) InflationData.com reports that as of June 15, 2007 the current inflation rate is 2.69%.

1. Washington restaurant revenues show strong increases in profitability compared to inflation (profits increase of 9.1% are more than three times the inflation rate and growing.)

2. However, bars and taverns profit increase of a mere 0.3 percent put them at a scant ten percent of the current inflation rate.

3. Again there is are clear indications that bars and taverns are falling well behind restaurants, failing to keep up with inflation.

c.) Contrary to claims by the state department of revenue and tobacco control advocates, there are clear economic indicators that Washington bars and taverns are particularly hard hit by the state's smoking ban that became effective in January of 2006.

The above data from the State of Washington concerning the economic impact of statewide smoking ban Initiative 901, which passed in November 2005, confirms adverse impact. Moreover, the same trend as observed in Colorado, bar revenue trend increases reversing while restaurant revenue increases accelerate, is observed. Colorado's adverse economic impact from its smoking ban is not an isolated case, nor are its results dramatically different that that of other states. We are beginning to observe a documented trend. 

Finally, Washington's experience with gaming revenue declines becomes a predictor of what will occur should the Colorado smoking ban for casinos become effective in January 2008. Gaming trade representatives testified before the Colorado legislature during its 2007 session that its tax payments to the state would decline by $15 million per year or more. By the 2009 session Colorado taxpayers will be able thank the Aurora Sentinel's editor, Mr. Perry, for their new taxes levied to make up for that lost revenue to the state.

A Few Words About Environmental Tobacco Smoke (ETS)

 

The case for smoking bans rises and falls on the credibility of tobacco control claims about the health risks presented for nonsmokers through exposure to Environmental Tobacco Smoke. A few salient facts about ETS and associated health risks are presented in Summary of 16 Important Points About Environmental Tobacco Smoke. Both our federal courts and the U.S. Department of Labor's Occupational Safety and Health Administration (OSHA) have strongly repudiated several facets of tobacco control's clams about ETS. It is better to let federal judges and OSHA speak to issues concerning ETS on their own merit, so I leave those salient points for the reader to discover in the above-linked summary.

A little known fact about smoking bans is that they are also employed by the American Society of Heating, Refrigeration and Air-Conditioning Engineers (ASHRAE) to substantively reduce ventilation rates and intake of fresh outdoor air in restaurants and bars. The following postings to Forces.org present a detailed analysis of ASHRAE's recent changes in ventilation standards.

May 30, 2007 [09:45 GMT] - Environmental Tobacco Smoke in Perspective: ASHRAE Standard 62.1-2007 -- On May 28, 2007 Forces.org published Norman Kjono commentary that addressed the American Society of Heating, Refrigeration, and Air-Conditioning Engineers (ASHRAE) 62.1 Standard-2004, Environmental Tobacco Smoke (ETS) in perspective: material risk, regulatory standards, and study results. Today we post Mr. Kjono's additional commentary concerning ASHRAE's Standard 62.1-2007, announced May 22, 2007. Rather than solving the problem that tobacco control created for ASHRAE through the 2004 ventilation standards, it appears that the new standards compound it. The good news is that under the new ASHRAE standards smokers can enjoy special, separate rooms with superior ventilation airflow than nonsmokers.

As documented in the above postings tobacco control advocates sat on a board that aggressively supported reducing ventilation airflow in restaurants and bars by 50 percent and 69 percent respectively. How does reducing ventilation rates by half or more improve overall Indoor air Quality?  In fact, tobacco control's support of dramatically reducing ventilation in restaurants can present new health risks for patrons and employees despite prohibiting smoking. Readers may find the evidence concerning human lung carcinogens from cooking with oils included in the above May 28 and 30, 2007 commentaries, reported in the December 1992 EPA report on secondhand smoke, to be of concern and interest. The March 2005 study concerning other carcinogens not associated with tobacco smoke and lung cancer among nonsmokers, published by the Journal of the National Cancer Institute, presents compelling evidence that must be considered by all who are genuinely concerned with legitimate public health measures.

Suffice it to say that in light of the above information tobacco control's false claims about Environmental Tobacco Smoke are less credible than its claims that smoking bans are good for business.

Reconciling Polar Opposites

We the people, and particularly those who own and operate hospitality trade small businesses, find ourselves confronted with special-interest mandate smoking bans that impose negative and now well-documented economic consequences tobacco control denies, to protect workers from health risks that do not exist as represented by anti-tobacco activists. The smoking bans adversely affect all taxpayers, consumers and small business owners - smokers and nonsmokers alike - due to lost tax revenues, higher costs, and manipulation of free competitive markets. Tobacco control programs to not work as represented, they do not deliver on the promises made to justify their implementation, and the adverse consequences imposed by smoking bans are growing. In my view, we are long past the time when this deceptive Social Marketing scheme must end.

But to do so responsibly we as a people must reconcile opposing and clearly polarized views. How do we affect that reconciliation? One approach be would consider the well-established criteria applied by OSHA in its examination of a proposed new workplace regulation, as required by federal law. That approach makes sense to me because OSHA is the only federally recognized workplace health and safety regulatory organization that also has the force of federal law behind its worker safety conclusions.

In broad, general terms OSHA employs a two step process. The first step is to examine the nature and scope of the proposed regulation to reach a decision as to whether it should be enacted. A principal concern that OSHA addresses as this stage through public hearings and expert testimony is to determine whether the proposed regulation addresses a bona fide material risk standard (prevention of serious illness or death) to workers health or safety. If the proposed regulation is determined to have merit and address a bona fide work place health or safety issue, the second step is to examine its economic feasibility. Economic feasibility is defined by criteria concerning costs of compliance and changes in competitive structure of the industry(s) affected by the regulation. Based on these considerations OSHA sets a Permissible Exposure Limit (PEL) when the regulation addresses hazardous substances encountered in the workplace. PELs are usually established based on an eight hour average exposure, though for some exposures Sort Term Exposure Limits (STELs) are also included. By definition, if the employer maintains a workplace where employee exposure to a hazardous substance is below established PELs workers are statutorily protected.

As discussed in the first several items of Summary of 16 Important Points About Environmental Tobacco Smoke, OSHA conducted the first step in its rule making process concerning Environmental Tobacco Smoke (ETS) 1994 to 2001 concerning proposed Indoor Air Quality regulation that included a nationwide smoking ban. The result of that rulemaking process was that OSHA withdrew its proposed nationwide smoking ban regulation in December 2001. We should take a brief look at that rulemaking process concerning ETS in terms of the two principal steps:

1. Bona fide Material Risk: In August 2001 OSHA filed a brief with the U.S. Court of Appeals for the Circuit of Washington D.C. that addressed the petition by Action on Smoking and Health (ASH) for a Writ of Mandamus to compel OSHA to promulgate a nationwide smoking ban (see OSHANOTES.PDF for complete text). In the brief OSHA communicated several conclusions to the appeals court, including:

a.) Page 8: "In addition, although the participants did not address whether the proposal's residential-analogy method of quantifying risk was sound, they made clear that accurate data on ETS exposures in workplaces would be a fundamental component of such an assessment of the occupational hazard."

b.) Page 8: "The participants found that by 1998, however, new approaches were available that might be used to assess the health effects of exposure to ETS at various levels in the workplace.

c.) Page 9: ". . . it now appears that, contrary to the assumption in the proposal, it may be possible to perform dose-response analysis for the ETS risk assessment. This may allow selection of a permissible exposure level for ETS, something that was not possible at the time of the proposal."

d.) Page 17: "Here, as we have explained above, the proposed rule appears to be based upon outdated information and methodology and its risk estimates are not supported by the weight of evidence now available." 

e.) Page 18: "Nor does OSHA believe that issuance of an ETS rule would prevent between 2,234 and 13,723 excess deaths annually, or anything like that."

f.) Page 18: "This potential hazard is not, as ASH's Petition suggests, so egregious as to demand instant action, . . ." (Underline added.)

It should be noted that OSHA has published for decades a Permissible Exposure Level (PEL) for a substance unique to tobacco smoke, nicotine. OSHA's conclusion regarding ETS exposure and nicotine was addressed in its February 24, 2003 "Reiteration Of Existing OSHA Policy In Indoor Air Quality," OSHA stated:

"Although OSHA has no regulation that addresses tobacco smoke as a whole, 29 CFR 1910.1000 Air contaminants, limits employee exposure to several of the main chemical components found in tobacco smoke. In normal situations, exposures would not exceed these permissible exposure limits (PELs), and, as a matter of prosecutorial discretion, OSHA will not apply the General Duty Clause to ETS."

Upon completing this first step OSHA concluded that no changes to its regulations concerning ETS was necessary to protect worker's health.

2. Economic Feasibility: OSHA also examined economic feasibility concerning smoking bans.

a.) OSHA reached specific conclusion concerning the economic feasibility of smoking bans in the hospitality trade. In its August 2001 brief to the U.S. Court of Appeals OSHA stated:

Page 8: "The June 1998 workshop on ventilation controls addressed the feasibility of the proposed rule in certain industry sectors. In industries where there is substantial contact between customers who smoke and workers, such as some sectors of the food, beverage and gaming industries (including bars and casinos), the proposed rule's prohibition on smoking except in separately ventilated areas may not be economically feasible." (Italic added.)

b.) In addition, both the anecdotal evidence reported in recent Colorado news articles and excerpted above and analysis of Colorado Department of Revenue data demonstrate that the Colorado smoking ban violates three of OSHA's principal criteria for economic feasibility:

Industry or sector economic impact cost of compliance greater than 1 percent of annual revenues.

Industry or sector economic impact cost of compliance greater than 10 percent of annual profits.

Material change in competitive structure of the industry or sector affected.

In stark contrast with OSHA's material risk standard tobacco control applies a "Zero Tolerance" de minimis risk policy (no possibility of harm under reasonably foreseeable circumstances). That private policy, not federal workplace worker protection standard, is applied because a total prohibition on the use of tobacco nicotine products that compete with pharmaceutical Nicotine Replacement Therapy is the only policy that will predictably increase sales of "Smoke Free" nicotine delivery devices. Not only does that substitute private policy for federal regulatory standards but by doing so employers are deprived of - deliberately denied - the safe harbor protections of federal worker safety regulations. We the people, including hospitality trade small business owners, therefore find ourselves confronted with the unsavory dilemma of private, special-interest policy mandated sell pharmaceutical products through smoking ban that do not add to worker safety, are economically unfeasible for employers, and that willfully violate important parts of the federal worker safety regulatory scheme.

Our choice therefore becomes responsibly to either recognize the authority and merit of federal workplace safety regulations or to continue to ignore the wisdom inherent in that regulatory scheme at increasing expense to taxpayers, consumers and small business owners. The choice we make will determine whether we remain entrenched in polarized opposing camps or demonstrate the good will and common sense of reconciling those opposing views by returning to responsible workplace health and safety regulations.

As always, the choice ultimately rests with we the people, not special-interest activists or self-serving politicians. We merely need to remind ourselves on occasion that we only receive the quality of government that we deserve through our silence or earn on merit through constructive action.

May we choose wisely. Those who use their freedom to squander liberty soon find themselves with neither.

Norman E. Kjono 


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