Title
Introduction of Ordinance Amending the Alameda Municipal Code by Adding Article XVII (Tobacco Retailers) to Chapter VI (Businesses, Occupations and Industries) to Require Licensing of Tobacco Retailers in the City and to Prohibit the Sale of Flavored Tobacco Products. (City Attorney 2310)
Body
To: Honorable Mayor and Members of the City Council
From: Janet C. Kern, City Attorney
EXECUTIVE SUMMARY
This Ordinance would require any State licensed tobacco retailer to obtain a City Tobacco Retailer License and, thereafter, to renew such license annually. Retailers would pay a license fee to cover the cost to implement and administer the Ordinance, but a State grant will cover the costs for the first fiscal year. Although tobacco retailers who currently hold a State license will be eligible to receive and annually thereafter renew a City Tobacco Retailer License, if such retailer’s business is located within 300 feet of a public or private K-12 school (the “buffer zone”), a purchaser of such business could not thereafter sell tobacco products unless the business were sold within three years of the adoption of the Ordinance. Moreover, any pharmacy that currently sells tobacco products will be prohibited from continuing to do so after July 1, 2019. Any person not currently holding a State license to sell tobacco products would be eligible to obtain a City license only if the number of such City tobacco retailers is less than 32 (currently there are approximately 50) and if the location is outside the 300 foot buffer zone.
As of July 1, 2019, this Ordinance would prohibit within the City the sale of all flavored tobacco products, including menthol cigarettes.
BACKGROUND
Smoking continues to be the leading preventable cause of death in the United States. More deaths are caused each year by tobacco use than by all deaths from human immunodeficiency virus (HIV), illegal drug use, alcohol use, motor vehicle injuries, suicides, and murders combined.
Within the City of Alameda, State licensed tobacco retailers sell all types of tobacco products including, but not limited to, cigarettes, cigars, little cigars/cigarillos, pipe tobacco, smokeless tobacco, electronic cigarettes, vape pens, e-liquids, hookah, vape tanks/mods, vape atomizer, vaporizers, and e-hookah. Although staff does not know the precise number of State licensed tobacco retailers in the City (because the State will not provide that information to the City), staff estimates there are approximately 50 such retailers. The purpose of this Ordinance is, through licensing, to reduce, over time, the number of tobacco retailers in the City and, as of July 1, 2019, to prohibit the sale of (and therefore access to) flavored tobacco products in the City.
Smoking continues to be the leading preventable cause of death in the United States. Strategies to reduce tobacco use by youth and young adults are especially important given that nearly all tobacco use begins during youth and young adulthood. Moreover, research shows that 81 percent of youth tobacco users ages 12-17 initiated with a flavored tobacco product.
Existing federal and state law related to tobacco products, including e-cigarettes, prohibits the sale of cigarettes, electronic cigarettes and smoking paraphernalia to anyone under the age of 21 (except on military bases). It also prohibits the sale of cigarettes in packages of less than 20. In 2009, the U.S. Food and Drug Administration (FDA) banned cigarettes with characterizing flavors other than menthol, which are known to appeal to youth and young adults. But neither federal nor state law prohibits a city or a county from enacting tobacco retailing licensing ordinances and other regulations concerning tobacco products. Indeed, more than 130 cities and counties in California have adopted ordinances similar to this one.
On December 19, 2017, City Council made a referral to staff to draft an ordinance that would (1) require tobacco retailers in the City to obtain a City Tobacco Retailer License, and (2) prohibit the sale of “flavored tobacco products.” Because of the potential financial impact to tobacco retailers in the City who hold State tobacco retail licenses (estimated to be 50 in number), staff conducted two stakeholder meetings with those retailers to discuss this ordinance and hear their concerns, with 16 confirmed participants in the first meeting and 15 in the second. In addition, staff conducted an informal survey of the community, the results of which are on Exhibit 1.
Taking into consideration the Council referral, the comments staff received from the tobacco retailers, and the responses from the community, staff has drafted the attached Ordinance for Council’s consideration, the salient terms of which are discussed below. In addition, toward the end of this report, staff sets forth various options to include or remove from the Ordinance that the Council may want to consider.
DISCUSSION
The Ordinance sets forth extensive and exhaustive findings concerning the need for the Ordinance in order to protect the health, safety, and welfare of City residents. More particularly, the Ordinance establishes that a local licensing system for tobacco retailers is appropriate to ensure that retailers comply with tobacco control laws and business standards of the City and to discourage the sale or distribution of tobacco and nicotine products, including flavored tobacco products, to Alameda youth. The salient provisions of the Ordinance are as follows.
State licensed tobacco retailers must obtain a City Tobacco Retailer License by July 1, 2019 and not all such retailers will be allowed to obtain such license.
The proposed Ordinance requires all State licensed tobacco retailers that are operating in compliance with State law to obtain by July 1, 2019, a City Tobacco Retailer License (City TRL). No tobacco retailer may sell tobacco products in the City unless the retailer has a City TRL. Generally, any current tobacco retailer who holds a State license to sell tobacco products and operates lawfully will be able to obtain and renew such license. Not all retailers, however, that have State licenses will be allowed to obtain or renew a City TRL. Moreover, not all persons who purchase a business from a current retailer will be allowed to obtain a City TRL. In addition, the City will not issue a license to anyone not currently holding a State license until the number of tobacco retailers total no more than 32 and only if the proposed location is located more than 300 feet from a public or private K-12 school (a Youth Populated Area, defined in Section 6-60.20 Z).
First, no City TRL shall be issued to authorize tobacco retailing in a pharmacy. Section 6-60.030 F, AMC. Accordingly, if a stand-alone pharmacy or a retail store, such as Walgreens, that has a pharmacy within its premises currently sells tobacco products, that pharmacy or store will not be allowed to sell any tobacco products after July 1, 2019.
Second, no City TRL shall be issued to a person who purchases a business from a current retailer more than three years after the Ordinance is adopted if the current retailer’s business is within 300 feet of a public or private K-12 school (a “Youth Populated Area”). Section 6-60.30 E, AMC. However, a current retailer may obtain and renew the City license indefinitely, even if the business is located within 300 feet of a Youth Populated Area so long as the business continues to operate lawfully. In addition, if such retailer sells the business within three years of the adoption of the Ordinance as an “Arm’s Length Transaction,” then that purchaser may likewise obtain and thereafter renew the City license. (The City TRL cannot be “transferred,” the new “proprietor” must obtain a new license. Section 6-60.80 A, AMC.) But if the sale occurs outside the three year window-whether by the current retailer or by a different person (if that person purchased the business within the three year window)-any subsequent purchaser of the business would not be allowed to obtain a City TRL and hence could not sell tobacco products of any kind.
Third, the Ordinance provides that the total number of tobacco retailer licenses in the City shall be limited to one for each 2500 inhabitants of the City. This translates to 32 licenses. The current tobacco retailers number approximately 50 and some will be issued City TRL’s post July 1, 2019. Until however, that number is below 32, and unless the proposed location is outside the 300 feet buffer zone of a Youth Populated Area, the City will not issue a new City TRL. Section 6-60.30 G., AMC.
Note that “tobacco products” does not include products that the U.S. Food and Drug Administration has approved to aid in reducing or eliminating nicotine or tobacco dependency. Section 6-60.20 X 3, AMC.
The retailer must post the full retail price of tobacco products and not allow discounts or coupons and there are minimum packaging and pricing requirements.
A tobacco retailer must display the full retail price of all tobacco products and shall not honor or redeem a coupon to allow a consumer to purchase tobacco products for less than retail price. Section 6-60.40 A, B 1-4, AMC.
No tobacco retailer shall sell any “little cigar” (defined in Section 6-60.20 M) unless sold in a package of at least five. Section 6-60.40 B 5, 8 AMC. Nor shall a tobacco retailer sell any cigar unless sold in a package of at least five unless the retail price of an individual cigar is at least five dollars. Section 6-60.40 B 6, 9 AMC. Packages of cigarettes (20 to a package) may not be sold for less than seven dollars. Section 6-60.40 B 7, AMC.
The sale of flavored tobacco products will be prohibited after July 1, 2019.
The U.S. Food and Drug Administration (FDA) and the U.S. Surgeon General have stated that flavored tobacco products are considered to be starter products that help establish smoking habits that can lead to long-term addiction. Menthol's cooling properties may reduce the irritation and harshness of smoking, making menthol cigarettes especially popular among young smokers. Today, 84.6 percent of African American smokers smoke menthol cigarettes, and youth who smoke are more likely to smoke menthol cigarettes than older smokers. More than half of smokers 12-17 smoke menthols.
There are many policy actions the City Council could take to address the harms of smoking and the diseases caused by tobacco. This aspect of the legislation is focused on those products marketed directly to the community’s youth. In 2009, Congress passed the Family Smoking Prevention and Tobacco Control Act (FSPTCA) granting the FDA with regulatory authority over tobacco products. In September of that year, the FSPTCA banned artificial or natural flavorings, as well as herbs or spices, which produce characterizing flavors in cigarettes, but menthol was excluded from the regulation. The Tobacco Products Scientific Advisory Committee (TPSAC) has been established and charged with developing a report assessing the impact of the use of menthol in cigarettes on public health and proposing recommendations to the FDA on whether menthol should be banned or not. The TPSAC report and recommendations were submitted to the FDA on March 18, 2011 and the report found that the availability of menthol cigarettes has an adverse impact on public health in the United States and recommended removal of menthol cigarettes from the marketplace.
Although the manufacture and distribution of flavored cigarettes (excluding menthol) is banned by federal law, neither federal nor California laws restrict sales of flavored non-cigarette tobacco products, such as cigars, cigarillos, smokeless tobacco, hookah tobacco and electronic smoking devices and the nicotine solutions used in these devices. Despite being advised about the adverse effects of menthol in cigarettes, neither the state nor federal legislators have taken steps to ban this substance. There has also been lack of movement to ban flavoring in other tobacco products.
Accordingly, this Ordinance will ban the sale of flavored tobacco products after July 1, 2019. Section 6-60.110, A, AMC. There will be a rebuttable presumption that a tobacco product is a flavored tobacco product if the tobacco retailer or manufacturer (1) makes a statement or claim that the tobacco product “imparts a characterizing flavor,” or (2) uses text or images on the labeling or packaging that indicates the tobacco product imparts a characterizing flavor. Section 6-60.110, C, AMC. A “characterizing flavor” means a taste or aroma, other than tobacco, imparted prior to or during consumption of a tobacco product including menthol, fruit, chocolate, honey, candy, etc. Section 6-60.20, B, AMC.
Other communities have adopted ordinances similar to the draft Ordinance as to a buffer zone and/or banning flavored tobacco products.
|
City |
Buffer |
|
Berkeley |
Businesses within 600 feet from K-12 schools are in a buffer zone and are prohibited from selling flavored tobacco, but can sell unflavored tobacco |
|
El Cerrito |
No buffer zone |
|
Hayward |
New businesses within 500 feet from K-12 schools are in a buffer zone and are prohibited from selling flavored tobacco, existing businesses in the buffer zone are exempt |
|
Oakland |
No buffer zone, adult only stores and stores with 60% or more of their sales from tobacco are exempt |
|
San Francisco |
A density cap prevents new tobacco retailers where the number of permits in the Supervisorial district exceeds 45, if the location is within 500 feet from a school, if the location is within 500 feet of another location permitted to sell tobacco, and if the location was not previously occupied by a permitted establishment |
|
San Leandro |
No buffer zone |
|
City |
Flavored Tobacco Products |
|
Berkeley |
Bans all flavored tobacco only in the buffer zone |
|
El Cerrito |
Bans all flavored tobacco but exempts menthol |
|
Hayward |
Bans all flavored tobacco but exempts menthol |
|
Oakland |
Bans all flavored tobacco except at tobacco stores |
|
San Francisco |
Bans all flavored tobacco in all areas of the city |
|
San Leandro |
Bans all flavored tobacco but exempts menthol |
Consequences for Violations of the Ordinance
The following are the penalties for violation of the Ordinance (Section 6-60.130 A., AMC):
1. For a first offense, the licensee shall pay a fine of $1500
2. For a second offense, the license shall be suspended for 15 days but in lieu thereof, the City may allow the retailer to pay fine by calculating the average daily sales of the retailer’s tobacco products in the last 30 days and multiplying that number by 15
3. For a third offense, the license shall be suspended for 30 days but in lieu thereof, the City may allow the retailer to pay a fine, calculated as in the previous sentence by multiplied by 30
4. For a fourth offense, the license shall be revoked.
Having the option to impose a suspension or a fine based on sales is akin to how the State Department of Alcohol and Beverage Control imposes sanctions for retailer’s violating laws concerning alcohol sales. Decisions concerning suspensions, fines, or revocations may be appealed to the City Manager, with review of the City Manager’s decision to the Superior Court. Section 6-60.130 B.
In addition, violations of the Ordinances are considered a public nuisance and may be abated as such and the penalty and enforcement provisions provided in other sections of the Municipal Code-administrative or criminal citations, injunctive relief, recovery of the City’s costs to investigate and attorney’s fees-may be imposed on violators. Section 6-60.150, AMC.
Fees to cover the cost of the program
The Ordinance contemplates there will be a fee imposed on retailers in order for the City to implement and enforce the Ordinance. Section 6-60.100, AMC.
The Alameda Police Department, in coordination with the City Manager’s Office, obtained a grant from the California Department of Justice in the amount of $196,588, and recently applied for a second grant in the amount of $358,625, that will pay for the initial implementation and enforcement costs of the Ordinance in 2019-20, as well as signage and an information campaign. In the following fiscal years, City staff will have a better idea of what the program costs will be and those costs will be spread among the retailers. It is anticipated the retailers would be billed in conjunction with the City’s business license collection program.
Outreach and Education
The Alameda County Public Health Department and City staff will work together to develop and conduct a retailer outreach and education program designed to inform tobacco retailers about the requirements of this Ordinance and the link between flavored tobacco products and chronic disease. Any written materials and/or trainings developed will be offered in multiple languages in addition to English.
Concerns of Tobacco Retailers in Alameda
In the two meetings that staff held with the City’s tobacco retailers, retailers had two primary concerns.
First, if the intent of the Ordinance is to help ensure that tobacco retailers are not selling tobacco products to under age individuals, the retailers contend the Ordinance is not necessary because as of 2016, State law requires anyone purchasing tobacco to be over the age of 21. In addition, the retailers argue there currently are sufficient procedures in place to ensure tobacco products are sold to only those 21 years of age or older. For example, many retailers have scanning systems at their registers that scan the identification, such as a drivers’ license, of the person making a tobacco purchase to verify the person is at least 21 years old. In addition, if the intent is to prevent young people from having access to flavored tobacco products, the retailers submit the Ordinance is also unnecessary because such products can be easily obtained via the internet.
Second, the retailers point out that many customers at stand-alone stores such as a 7-Eleven do not simply purchase tobacco products. Rather they use such stores for convenience and purchase gas, sundries, alcoholic beverages, and other drinks. If the store does not sell flavored tobacco products, in particular menthol cigarettes, customers will go to other communities for these tobacco products and purchase the “add on” products there. In addition, the “business” of some tobacco retailers represents their savings, and their means to retire. If the business owner cannot sell the business with the ability of the purchaser to continue to sell tobacco products, the retailers contend the Ordinance for all practical purposes has substantially reduced the value of their business and imposes an economic hardship on their future.
Retailers also submit that this new ban comes at an especially difficult time, following the City imposed increase of the minimum wage and the November 6, 2018 ballot measure that would potentially increase the sales tax.
The retailers raised these additional concerns:
• Ordinance brings fear;
• By taking away certain sales it makes it harder to pay rent;
• Things are already changing to reduce the appeal to youth, including warning labels getting bigger and more prominent on the packaging;
• For penalties, consider following FDA guidelines, there should be a warning before a financial penalty or suspension;
• Grandfathering is a critical issue - if a business has a license but a daycare moves in and that daycare is included in the buffer zone, the established business should be able to stay - and consider also allowing the license to be transferred, so the business does not take a huge loss when time to sell;
• If you exempt menthol, retailers could keep it behind the counter or in other less visible locations;
• Retailers are losing out to internet sales already, this will make it worse;
• Allow retailers to bundle products to encourage a higher price point and discourage use;
• Consider exemption on hookah tobacco as it is part of some culture’s heritage;
• Consider less severe penalties;
• Exempt chewing tobacco - the average age of those that chew regularly is 40;
• Exempt menthol;
• Exempt premium cigars from flavor ban;
• Exempt pipe tobacco - this is not a product that young people use;
• Develop a list of what is banned and what is not; and
• Provide compensation to retailers - like the buyback program in San Francisco.
Analysis of Community Survey
Between September 20 and October 5, 397 community members and tobacco retailers responded to an online survey the City hosted regarding the ban on flavored tobacco. Of those, 389 reported living in Alameda and 95 included their email address to be kept informed of the City’s efforts. A full report of the survey results is attached. Exhibit 1. Generally, 59 percent of respondents support banning the sale of flavored tobacco in Alameda with 36 percent opposed and 6 percent not sure.
Support was highest (65%) for banning flavored electronic smoking devices and tobacco products (e-cigarettes, vaping, vape juice), flavored chewing tobacco (63%), flavored little cigars/cigarillos (63%), flavored cigars (62%), and flavored wraps (59%). There was slightly less support for flavored hookah tobacco (58%) and menthol cigarettes (53%), and substantially less support for banning flavored cessation products (29%). [Note that the Ordinance does not prohibit the sale of cessation products that have been approved by the Federal Drug Administration.]
When the community was asked about a buffer zone, there was the strongest support for a buffer zone near K-12 school sites (60%). In addition, 54 percent supported the buffer zone including parks and playgrounds, 52 percent supported including preschool sites, and 49 percent supported including arcades and libraries.
When asked if existing retailers should be exempt from the buffer zone, 40 percent said yes, 41 percent said no, and 19 percent were not sure.
Survey Conducted by the Alameda County Tobacco Control Program
The Alameda County Tobacco Control Program conducted two surveys in the City, one survey concerning what tobacco products were being sold in stores in Alameda, for example the availability of flavored tobacco products, cigar package sizes, and pricing for tobacco products, and the other survey concerning data from the community concerning its knowledge, attitude, and perceptions about tobacco product policy options, including restricting the sale of flavored tobacco products.
The results of this survey are on Exhibit 2.
Resolution of the Alameda Unified School District
On October 23, 2018, the Alameda Unified School District Board of Education adopted a resolution (Exhibit 3) in support of the draft Ordinance.
COUNCIL OPTIONS
The proposed Ordinance described herein is a robust Ordinance. In light of what the tobacco retailers and community members have expressed in staff’s outreach, Council may wish to consider the following options:
• Allow pharmacies with current State licenses to continue to sell tobacco products or extend the date after which such products could be sold;
• Allow without limitation as to when the Ordinance is adopted purchasers of businesses to continue to sell tobacco products if the current proprietor obtains and renews its City Tobacco Retailer License, even if the business is within the “buffer zone”;
• Expand or delete the current buffer zone (as currently drafted, within 300 feet of any public or private K-12 school [Youth Participation Area]);
• Expand the definition of a Youth Participation Area (e.g., to include a playground open to the public, a youth center, preschools, parks, etc.);
• Allow for the sale of menthol cigarettes but continue to prohibit the sale of other “flavored tobacco products”;
• Ban the sale of menthol cigarettes (and continue to prohibit the sale of other “flavored tobacco products) but suspend the ban on the sale of menthol cigarettes until July 2020 or later; and
• Ban “flavored tobacco products” but allow the sale of certain products, including premium cigars, pipe tobacco, smokeless tobacco, and hookah tobacco.
FINANCIAL IMPACT
The Alameda Police Department received a grant in the amount of $196,588, and applied for a second grant in the amount of $358,625, from the State Department of Justice to cover the implementation costs of the program in the first fiscal year, along with signage and an information campaign. Staff will determine on an annual basis what the costs will be on an ongoing basis and will provide a resolution to the City establishing an annual license fee, to be paid by the retailers, and collected along with the City’s business license tax. The budget to implement this new program will be increased during the regular budget process.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This Ordinance would amend the Alameda Municipal Code by adding Article XVII to Chapter XXIV, beginning with Section 6-60.10.
ENVIRONMENTAL REVIEW
Adoption of this Ordinance is not a project within the meaning of Section 15378 of the CEQA Guidelines in that it (a) is an Ordinance of general policy and procedure and does not constitute a project within the meaning of that term as defined in CEQA and (b) has no potential for resulting in either a direct or reasonably foreseeable indirect physical change to the environment.
RECOMMENDATION
Introduce an Ordinance amending the Alameda Municipal Code to require the City’s licensing of Tobacco Retailers in the City and to prohibit the sale of flavored tobacco products
Respectfully submitted,
Janet C. Kern, City Attorney
By,
Michael H. Roush, Interim Assistant City Attorney
Sarah Henry, Public Information Officer
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibits:
1: Results of Community Survey
2: Results of Tobacco Control Program Survey
3: Alameda Unified School District Resolution