PURPOSE

The purpose of this report is to provide the City Council with information concerning the issue of tobacco retailers licensing and recommend the City Council to direct staff to return with a draft Tobacco Retailers Licensing Ordinance for consideration.

BACKGROUND

The issue of tobacco retailers licensing first came to Council�s attention in June of 2003.  At that time representatives from the Valley Community Clinic, who are advocates for preventing the illegal sale of tobacco products to under-aged persons (children less than 18 years of age), addressed Council with their desires for the City of Burbank to adopt a Tobacco Retailers Licensing Ordinance.

Tobacco Retailers Licensing Ordinances are ordinances which are recognized as effective and useful tools for local governments when trying to control businesses from selling tobacco products to under-aged persons.  Prevention of this type of illegal tobacco sales is premised on the fact that when a certain threshold number of illegal sales are verified from one license holder, the license holder can have their tobacco retailer�s license either suspended, revoked, or denied upon renewal.   When there is a threat of losing a license which provides a privilege such as selling tobacco products, a license holder and their employees are more apt to abide by the regulations pertinent to licensure.

In 2003, Council�s initial response to the Valley Community Clinic�s request was to forward this matter to the Burbank Youth Board for their consideration.  Since that time the Burbank Youth Board has reviewed this matter twice, once in November 2003 and again in May 2006.  Both times the Youth Board rejected the concept of a tobacco retailer�s license.  Copies of the Youth Board minutes from their November 2003 and May 2006 meetings are attached as Exhibit A.  The Youth Board�s rejections were based on their belief that licensing a retailer would be ineffective for preventing youth from acquiring tobacco products because there are so many other places to acquire tobacco products, such as family members and friends. In addition the Burbank Youth Board felt that the proposed ordinance was �too vague and questioned the statistical information presented�. 

Also in 2003, there was a new State law developed by the State Board of Equalization for regulating tobacco sales.  This law is known as AB 71, the California Cigarette and Tobacco Products Licensing Act.  When staff initially reported to Council in April 2003, it was recommended that after the Burbank Youth Board deliberated on this matter that staff would continue to follow the progress of AB 71 for its effectiveness to regulate tobacco product sales to under-aged persons.   Throughout 2004 and 2005 staff did observe how this law functioned and found that the law primarily dealt with tobacco tax evasion and the smuggling of tobacco products.  Consequently it has been determined that the primary function of the law was to generate revenues through resale tax recovery.  Although this law provides for licensing elements, the law essentially does very little to reduce tobacco sales to under-aged persons.

ANALYSIS

Data concerning the sales of tobacco products to under-aged persons in Burbank has been received from a survey conducted by the Valley Community Clinic.  This survey, known as a �Youth Purchase Survey�, was conducted between December 2005 and January 2006 in Burbank.  The survey included a sampling of 90 retailers in Burbank of which reportedly 27% of the retailers were willing to sell tobacco product to under-aged persons in Burbank.  The methodology used to conduct the survey is called an �unconsummated� sale method.  Unconsummated sales involve having an under-aged person attempt to buy cigarettes from a retailer without actually intending to complete the transaction if the retailer did not ask for identification.  A copy of the survey, along with a corresponding map is attached as Exhibit B. 

A nationwide survey known as �The 2003 National Household Survey on Drug Abuse� conducted by the Substance Abuse and Administration, U.S. Department of Health Services, found that 77% of youth between the ages of 12-17 who acquired tobacco products reported purchasing tobacco products from retail stores.  Further, �The California Healthy Kids Survey� conducted by the California Department of Education reports that 29% of 11^th graders in Burbank have tried smoking.  In addition, the Burbank Police Department records indicate that in the past six years there has been an average of 129 citations issued each year to under-aged persons in Burbank for the possession of tobacco products.

Due to the sensitive nature of utilizing persons who are minors (under the age of 18) for actual Police Department �stings�, the department has not recently conducted �stings� for determining at what level local merchants may be selling tobacco products to under-age persons.  In the past the Burbank Police Department had conducted these types of �stings�, however data reflecting the numbers and percentages of violators is no longer available.  The current Burbank Police Department and License and Code Services enforcement process concerning illegal tobacco sales is primarily conducted in response to complaints from citizens alleging that retailers are selling tobacco products to under-aged persons.  This past year the City (Police Department and License and Code Services) received less than ten complaints of this nature.

Components of Model Ordinance

Currently, the most thorough and up to date Tobacco Retailers Licensing Ordinance is the model ordinance established by TALC (Technical Assistance Legal Center) which is attached as Exhibit D.   The framework of this model ordinance is designed to regulate tobacco retailers by establishing a licensing process which enables the adopting jurisdiction the ability to exercise both policing and administrative authority.  The cost of the regulating license and subsequent enforcement is recovered through licensing fees.   If Council directs staff to return with a draft Tobacco Retailers Licensing Ordinance, staff would begin this task by formulating a draft ordinance which utilizes the TALC ordinance as the �backbone�.  The primary components of the ordinance would include:

• A licensing requirement (this describes the requirement for licensing a particular business activity, in this case a Tobacco Retailers License).

• A provision stating that the license would only be issued to a fixed location (licenses may not be issued to any mobile business activity such as a food preparation vehicle).

• An application procedure (this describes the basic procedures for completing and processing a license application).

• Reasons for approval or denial of the license (this determines the grounds for license denial and the requirement for approval if denial is not an option).

• License renewal and expiration periods (these are the time frames established for holding a license in good standing).

• Fees for the license.

• Requirements for maintaining a license in good standing (a license may only be valid if all requirements of the ordinance are abided by).

• Compliance monitoring (grants authority for periodic verification of the business operations).

• A license revocation process.

• An application process for a new license after revocation.

• Penalties for retailing tobacco product without a license.

• An appeal process for the suspension, revocation, or denial of a license.

• A settlement process in lieu of an appeal hearing (a license which is in jeopardy of suspension or revocation may be administratively resolved without a hearing).

This model ordinance offers a variety of component options for Council to discuss.  Staff believes the components listed above will provide a solid basis for creating a Tobacco Retailers Licensing Ordinance unique to Burbank�s needs.

How Enforcement Will Be Conducted

The City of Berkeley currently uses an enforcement method staff feels is the best model for enforcement.  The mechanics of this enforcement involve utilizing two police officers working in conjunction with trusted under-aged persons who have past experience with the policing authority.  Working as a team with the police department an under-aged person will attempt to purchase cigarettes from willing retailers while in the presence of a plain-clothed police officer.  Once the under-aged person successfully purchases a tobacco product and leaves the retailer�s premises the plain-clothed officers will then take the appropriate actions needed to cite the offending retailer.

If the citation results in a successful conviction for the sale of tobacco product to an under-aged person this will become a part of the record for the license holder�s license file.  Depending on the penalty parameters adopted as part of a Burbank Tobacco Retailers Licensing Ordinance, once a conviction is attained the Tobacco Retailers License will either be maintained as valid, suspended, probationary, or revoked for the balance of the duration of the license.  In addition, a successful conviction for the sale of tobacco product to an under-aged person will have a monetary fine attached.  The amount of the fine would be determined by whether or not this type of a code violation was considered an infraction or a misdemeanor.  Generally speaking infraction fines are in the $100 to $500 range, while misdemeanor fines can go as high as $1,000 and/or 6 months in jail.  In addition, both infractions and misdemeanors can also charge court cost penalty assessments. 

Components for Calculating Licensing Fees

The cost of any regulatory license cannot exceed the cost of processing, administrating, and enforcement of the license.  Consequently, when calculating what a license of this nature would cost in Burbank, it is necessary to determine the associated costs incurred by the License and Code Services Division for processing and administrating of the license, in addition to the cost of enforcement by the Police Department.

Preliminary discussions with the Police Department concerning proposed future enforcement (�stings�) determined that the Police Department enforcement for illegal tobacco sales to under-aged persons would mirror Burbank Police Department enforcement actions currently utilized for illegal sales of alcohol to minors.  The Burbank Police Department currently averages three illegal alcohol sales to minors (�stings�) a year and has determined that if they were to conduct similar �stings� for illegal tobacco sales they would conduct two �stings� a year for this purpose. The estimated annual cost of conducting two Police Department �stings� for illegal alcohol sales to minors is $6,350.  Therefore, Police Department staff estimate that this amount will be the associated costs for illegal tobacco sales to under-aged persons �stings�.

The other factor needed to calculate a license fee is the License and Code Services Division�s estimated cost for processing and administrating a licensing program.  The cost of such a program depends on whether or not an ordinance governing such licensing included licensee background investigations as a requisite for license acquisition.  The low end cost of a license would be approximately $75 and the high end cost would be approximately $130.  Therefore, for purposes of getting a �ball park� figure for this report, staff will use an average figure of $100 per license as a cost for processing and administering a program for the License and Code Services Division.

Staff has not conducted a survey of all the businesses in Burbank to determine the exact number of businesses which sell tobacco products.  However, based on retailer records maintained by the License and Code Services Division, a close estimate would be approximately 125 Burbank retail businesses sell tobacco products.  Therefore, estimating that there will be 125 licensees in Burbank as a fee basis, and including the Police Department�s estimated annual costs for enforcement of $6,350, each licensee would be responsible for approximately $50 in police costs.  Police costs of $50 per licensee would be added to the License and Code Services annual average cost of $100 per licensee for processing and administration.  The combination of Police costs ($50) plus License and Code Services costs ($100) equal a minimum $150 per licensee as the annual license fee.  If background investigations are included as a requisite for licensing, then the maximum license fee would be $40 more for an annual license fee of $190.  As such, without knowing the exact number of licensees in Burbank, the initial license fee to conduct a Tobacco Retailers License Program in Burbank would be approximately $200 per licensee, annually.

These fee estimates are preliminary and are best used only as a starting place for discussion purposes.  Staff has determined that the license fee for sixteen other local jurisdictions� Tobacco Retailers Licenses averages approximately $250 annually (Exhibit C).   Therefore, if Burbank charged and annual license fee of $200 for a tobacco retailers license, it would be at the lower end of license fees for similar licenses in other jurisdictions.

In the past two years numerous California cities and counties have adopted local tobacco retailers licensing ordinances.  Amongst a few, Berkeley now has a license requirement with a fee of $303, as does Pasadena with a license fee of $211.  Some of the other cities include San Francisco ($225), Sacramento ($300), Vista ($250), and in late 2005, the City of Los Angeles adopted a fee of $208 for such licensing.  Statewide over forty California cities and counties have adopted tobacco retailer licensing provisions in order to thwart the sale of tobacco products to under-aged persons.

CONCLUSION

Restricting the sales of tobacco products to youth, in particular under-aged youth, is an important goal for preserving the health and well being of future generations.  Tobacco retailer licensing is a tool local government can use to create opportunities which lead to helping youth resist the kinds of social pressures they experience both from their peers and the lure of tobacco company advertising. The information provided in this staff report demonstrates that there is a problem with underage tobacco usage in the City of Burbank and it is staff�s opinion that adoption of a Tobacco Retailers Ordinance will assist in resolving this problem.

Staff has been informed by anti-tobacco advocates that in California the current illegal retail sales rates of tobacco products to under-aged persons fluctuates between 14% to 31% of the retail businesses in California communities.   Contrary to these percentages, and a prime example of the effectiveness of tobacco retailer licensing, is the success of Contra Costa County.  After this county adopted and enforced a Tobacco Retailer Licensing Ordinance using the methods earlier described in this report, the illegal tobacco sales rates dramatically fell from 37% to 2%.

A local Burbank Tobacco Retailers License would be an effective tool for controlling the activity of tobacco sales to under-aged persons.  However, staff is uncertain such regulatory licensing would prevent the use of tobacco products by under-aged persons given the other sources available, such as friends and family, for acquiring tobacco products.  When studying this issue consideration should be given to the differences between controlling verses preventing behavior through the use of regulatory licensing.

The act of licensing for the purpose of regulating a business practice essentially accomplishes one primary function with certainty.  That function is, that in order for a particular business activity to continue, it will only do so through the privilege of acquiring a regulatory license.  If the requirements for maintaining the validity of a regulatory license are violated, then license privileges can be revoked, suspended, or denied. 

As previously stated in the report, the Burbank Youth Board determined that regulatory licensing would not prevent under-aged tobacco usage or change under-aged behaviors toward tobacco usage.  However, the clinical health experts and professional policy makers associated with studying the effectiveness of regulatory tobacco licensing have concluded that regulatory licensing will prevent under-aged tobacco usage by making it more difficult for the under-aged to acquire tobacco products for use.  Therefore, based on expert opinion from professionals such as the Deputy Director of the Los Angeles County Tobacco Control and Prevention Program, the Valley Community Clinic, and over 40 California cities and counties; local tobacco retailer licensing programs are effective mechanisms for prohibiting the under-aged from purchasing tobacco product. 

RECOMMENDATION

It is recommended that the City Council direct staff to return with a draft ordinance for the licensing of tobacco retailers in Burbank.    

EXHIBITS

                   A       Burbank Youth Board Minutes

                   B       Youth Purchase Survey

                   C       Tobacco Retailer Survey Report

                   D       TALC Model Tobacco Retailers Ordinance (With Annotations)

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