PURPOSE   

On September 12, 2006, the City Council directed staff to prepare an ordinance to license the sale of tobacco products in the City of Burbank.  In accordance with this direction, a proposed ordinance has been prepared to provide for the licensing of all businesses that sell tobacco products, including smoking lounges.  The purpose of this ordinance is to further reduce the illegal sale of tobacco products to minors.  The proposed ordinance will provide a process that temporarily and/or permanently deprives a business of the privilege of selling tobacco products where they are less than vigilant in enforcing the age restrictions for purchasing tobacco products.    

BACKGROUND

The local licensing of businesses who sell tobacco products has long been recognized as an effective tool for controlling the illegal sales of these tobacco products to under-aged children (under the age of 18).  Currently there are over 50 California cities and counties, locally including Los Angeles and Pasadena that have enacted such ordinances.  The basic premise of all tobacco retailers licensing ordinances is that if a threshold number of verified illegal tobacco sales to under-aged persons occur the licensee may temporarily or permanently lose the privilege of possessing a license.  It is the threat of losing the privilege of having a tobacco retailer�s license that motivates licensees to be more vigilant in the enforcement of the state-mandated age restrictions for the purchase of tobacco products.

The issue of licensing the businesses who engage in the sale of tobacco products first came to Council�s attention in June 2003, and has remained of interest to Council since that time.  Most recently Council reviewed this matter on September 12, 2006, a copy of the September 12, 2006 staff report is attached as Exhibit A, and a copy of the minutes is attached as Exhibit B.   At the September 12, 2006 Council meeting, data was presented which determined that there are substantial illegal tobacco sales to under-aged children in Burbank.

�The California Healthy Kids Survey� conducted by the California Department of Education reports that 29% of eleventh graders in Burbank have tried smoking tobacco products.  In addition, the �Youth Purchase Surveys� conducted in Burbank in December 2005 and January 2006 reported that 27% of the 90 Burbank retailers tested were willing to sell tobacco product to under-aged persons in Burbank.  Given this data, Council directed staff to return with a proposed ordinance for their consideration which licenses the sale of tobacco products.

ANALYSIS

Below is a summary of the proposed ordinance establishing a licensing requirement and procedures for all businesses who engage in the sale of tobacco products (the ordinance is attached as Exhibit C).

1. Who is required to obtain a license?

• Any business establishment that is dedicated in whole or part to the sale of tobacco products (including tobacco paraphernalia) must obtain a tobacco retailers license from the City of Burbank. 

• Any business that does not have such a license (or where a license has been revoked) shall not be allowed to publicly display any tobacco products or paraphernalia, or display any advertisement or indication that tobacco products can be obtained at that location. 

• Licenses shall not be issued to authorize sales from anywhere but a fixed business location.  Tobacco products may not be sold for example from a catering truck.

2. What is the application process and how long are the licenses valid?

• In addition to the normal identifying information, all applicants must provide proof that the location at which they propose to or are selling tobacco products has been issued a valid state tobacco retailer�s license by the California State Board of Equalization.

• A combined fee for the cost of application processing and the annual cost of the license ($235) must be paid.  It is recommended that the annual license fee be pro-rated on a fiscal year basis, in a quarterly manner.

• The license is effective for a one year period or portions thereof between July 1 and June of each year.  The license will expire at that time unless renewed.

• Licenses are non-transferable and violation histories will continue to be counted against a location except where a clear arms-length transfer to a new proprietor has occurred.

• The application processing includes the circulation of the application to the Planning Division for zoning approval and to the Police Department for general information.  When the application has been approved by the Planning Division, the License and Code Services Division will conduct research to determine if there are any grounds to deny the license.  If no such grounds are found, then the license will be approved.

3. Grounds for approval or denial of a license.

• A license shall be granted except where:

• incomplete or false information was provided on the application;

• the location is not appropriate pursuant to zoning or other ordinances;

• and, the applicant is prohibited by the ordinance to possess such a license (i.e., a mobile business not at a fixed location; poor business practices history [previous revocation, etc.])

4. How are the license and application fees established? 

• Regulatory licensing and application fees cannot be more than the cost of administration, processing, and enforcement of the license.  These fees shall be established by resolution of the Council and the license fee shall be prorated on a quarterly fiscal year basis.  Staff�s recommendation for the license fee is $200 per fiscal year, per licensee location and an original or renewal application fee of $35 annually.

5. Requirement for maintaining a license in �good standing�.

• A license will remain valid if all requirements of the ordinance and applicable federal and state tobacco laws are followed, in addition to any local, state, or federal law regulating exterior, storefront window, or door signage.

• The Tobacco Retailer License shall be prominently displayed in a publicly visible location at the licensed location.

• Positive identification is required before a sale of tobacco products is consummated.  The retailer shall not sell tobacco products or tobacco paraphernalia to any person who appears to be under 27 years of age without first examining the identification of that person to make sure they are of legal age to purchase such products.

• Anyone selling tobacco products must be 18 years of age or older.

• Self service displays of tobacco products or paraphernalia are prohibited.

6. Compliance monitoring.

• This ordinance grants the authority for periodic verification of the business operations to assure compliance with applicable laws.

• Police officers may enforce these code provisions.  The use of �youth decoys� is allowed for compliance monitoring operations without their being in violation of tobacco laws.

7. Revocation of a License.

• In addition to any criminal penalties for the sale of tobacco products to under age minors, the retailer�s license may be subject to suspension and ultimately revocation proceedings where there have been confirmed sales to underage minors.  Revocation proceedings require notice and an opportunity to be heard.  (Note � Council should determine the threshold number of sales which would qualify for revocation within a stipulated period of time.  It is staff�s recommendation that 2 successfully prosecuted violations within a 12 month period would warrant a revocation of the license).

• Staff and the City Attorney�s office recommend both a suspension for the illegal sales to under age minors and a �cooling off� period after a license has been revoked before a license be renewed.  The proposed ordinance provides for an initial 30 day suspension for one illegal sale, during which time no tobacco products may be sold.  Two illegal sales during any 12 month period will result in revocation of the permit.  Once a permit is revoked for two underage sales, staff recommends a cooling off period of 60 days before accepting an application for a new license.  Subsequent violations would result in longer periods of time before renewal of the license would be possible.

• Appeal of revocation.  Any licensee whose tobacco retailer license has been revoked has the right to appeal this decision as provided in, Chapter 2, Article 15, of the Burbank Municipal Code.

8. Penalties for selling tobacco products without a license.

• Violations of the Burbank Municipal Code are either misdemeanors or infractions (known as �wobblers�) which give the discretion to the prosecutor to decide how to charge the violation.  Staff recommends that these provisions be made misdemeanors.

ORDINANCE IMPLEMENTATION STRATEGIES

Most new ordinances require strategies for implementation.  These strategies include the following elements: education element; an enforcement element; and, in this ordinance, a fee structure element.

Educational Element

As with most new ordinances, the effectiveness of the ordinance from a compliance perspective, is directly related to the educational strategies used to inform the public (business community) about the requirements of a new ordinance.  Therefore, staff feels that substantial educational time prior to the effective date of the ordinance would be beneficial to assure the success of the new ordinance.

For example, if Council adopts this ordinance in January, 2007, typically the ordinance would become effective 30+ days after publication, or around mid-March, 2007.  However, staff feels that there should be 4 months of educational effort in advance of the implementation of the ordinance in order to make sure all information concerning the ordinance requirements is understood by potential licensees.  In addition, since this ordinance proposes a regulatory business license (Tobacco Retailers License) which is intended to span a fiscal year (July 1 through June 30), it is recommended that the implementation of such a regulatory license begin at the beginning of the fiscal year 2007/08.  As such, in order to provide for a substantial educational period, and because of fiscal year licensing timing, staff recommends that Council adopt this ordinance with an effective date of July 1, 2007.

The different types of educational mechanisms which will be used to inform the public and the business community of an adopted Tobacco Retailers Licensing Ordinance will be the following:

1. Direct notification letters will be sent to all businesses which are currently registered with the State of California for the State Board of Equalization Tobacco Retailers Permit.

2. Utility billing inserts.

3. Open invitation meeting at the Buena Vista Library Auditorium to discuss the ordinance with the public and the business community.

4. Press releases.

5. TV6 information scroll.

6. City website posting.

7. Advertising in the Burbank Chamber of Commerce newsletter.

8. Newspaper advertisements.

9. A City of Burbank presentation to the Burbank Unified School District at a School Board meeting.

Enforcement Element

The Burbank Police Department will be the primary enforcement entity responsible for conducting under-aged purchase surveys (�stings�) to determine if licensed businesses are violating the proposed ordinance.  In addition, along with the License and Code Services Division, the Police Department will also investigate complaints of allegations of violations by businesses which may be selling tobacco products to under-aged children.

Past discussions with the Police Department determined that once the ordinance becomes effective, it will allow for sufficient time for businesses to acquire Tobacco Retailer Licenses.  Acquisition and verification of a bona fide license will first be conducted and completed by the License and Code Services Division.  Those businesses which do not acquire proper licensure after being informed of the licensing requirement will be referred to the City Attorney�s Office for disposition. 

After the effective date of the ordinance, and the educational component is completed by the License and Code Services Division, the Police Department will determine times and locations for conducting sting surveys.  These surveys will be conducted in similar fashion as the current Police Department stings for �alcohol sales to minors� are conducted.  These surveys will involve an under-aged person attempting to purchase tobacco product from a retailer in the presence of a plain clothed police officer.  If illegal sales take place, then a witnessing police officer will cite the person who conducted the illegal sale to the under-aged person.  Currently, the Police Department has determined they will conduct a minimum of 2 surveys annually and will be available on an �as needed� basis should this not be a sufficient number of surveys to achieve compliance.

Violations of the code which involve selling tobacco product without a license, as well as violations of the code which involve selling tobacco product to under-aged children may be prosecuted as misdemeanors with penalties up to $1,000 or six months in jail.  In addition, after successful prosecutions to the same licensee, there shall be a resulting action to revoke or suspend the business�s Tobacco Retailers License.

Fee Structure Element

The cost of regulatory licenses 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 the processing and administration of the license; in addition to the cost of enforcement by the Police Department and the License and Code Services Division.

Preliminary discussions with the Burbank Police Department concerning proposed future enforcement (�sting surveys�) determined that the Burbank Police Department enforcement for illegal tobacco sales to under-aged persons would mirror the enforcement strategies currently utilized for illegal sales of alcohol to minors.  The estimated annual cost of conducting two Police Department sting surveys of this nature is $6,350.  The additional Police enforcement costs for responding to related complaints associated with tobacco sales to under-aged children are estimated by the Police Department to be a minimum of $2,000 annually.  Therefore the annual total related Police costs associated with Tobacco Retailer Licensing, is $8,350.

The other factor needed to calculate a license fee is the License and Code Services Division�s estimated costs for processing and administrating a regulatory licensing program.  As long as background investigations of license applicants are not a part of the application process, the License and Code Services Division�s cost estimates is $130 per applicant.  This includes the application processing, administration, enforcement, and the initial costs and on-going costs of an educational program.

Staff has conducted a citywide survey and determined that there are 135 businesses which currently sell tobacco products in the City of Burbank.  Attached as Exhibit D is a list of those businesses and also attached is a corresponding map showing the location of the businesses (Exhibit E).  Consequently the License and Code Services associated annual costs with this proposed regulatory licensing program is $17,550 (135 businesses X $130).  Staff believes that $1,250 will be spent for an initial educational program, while $400 will be spent for an on-going educational program.  Consequently the first year of the Tobacco Retailers License program will include the following costs:

Burbank Police Department Costs             $  8,350

License and Code Services Costs             $17,550

Educational Program                                    $  1,250

            Total First Year Cost of Program    $27,150

Therefore, if the first year of the program total costs are $27,150 and there are 135 businesses to share the total cost of this program, each Tobacco Retailers License will cost approximately $200 per license.  Staff has determined through a survey of 16 other California jurisdictions that the annual average cost of a Tobacco Retailers License in many of these jurisdictions is $250.  Therefore, the proposed license fee of $200 per year in Burbank would be $50 or 20% lower in Burbank than in the 16 other jurisdictions (the survey is attached as Exhibit F).  

CONCLUSION

At the September 12, 2006 City Council meeting staff presented facts which demonstrated that in cities which have adopted a Tobacco Retailer Licensing Ordinance, such ordinances have been valuable tools for restricting the sales of tobacco products to under-aged children.  Included in the September 12, 2006 staff report was the 2004 California Youth Purchase survey which further demonstrated that there is a problem in Burbank with illegal tobacco product sales to under-aged children.  Therefore, Council determined that the adoption of a Burbank Tobacco Retailers Licensing Ordinance was warranted.

Tobacco retailer licensing ordinances are effective tools for preventing under-aged tobacco purchases because of the threat for licensees to lose the privilege of selling tobacco products through a license revocation process.  Included in the license revocation process are appeal rights for actions to revoke a tobacco retailer license.  The appeal process to any such proceedings mirrors other types of city licensing revocation and suspension processes which the City of Burbank currently utilizes.

Currently, there are over 50 city and county jurisdictions in California which have adopted tobacco retailer licensing ordinances.  These cities have reported very favorable results from the adoption of their tobacco retailers licensing ordinances.  The only changes to the ordinance some cities have made, such as Los Angeles and Pasadena is to raise their initial licensing fees to cover the cost of administration, processing, and enforcement.

The proposed tobacco retailers licensing ordinance staff is recommending for adoption is an up-to-date ordinance which contains proven and effective administrative and code enforcement elements currently utilized by the California jurisdictions possessing tobacco retailer licensing ordinances. These jurisdictions include, amongst many, Sacramento, Sacramento County, Berkeley, Los Angeles, Contra Costa County, and Pasadena.   Therefore, staff believes the proposed ordinance staff is presenting to Council this evening will fulfill the needs of the community as requested by Council at their September 12, 2006 meeting.

RECOMMENDATION

It is recommended that Council adopt and ordinance entitled:  AN ORDINANCE OF THE COUNCIL OF THE CITY OF BURBANK AMENDING CHAPTER 8 OF THE BURBANK MUNICIPAL CODE ESTABLISHING A LICENSING REQUIREMENT AND PROCEDURES FOR ALL BUSINESS WHO ENGAGE IN THE SALE OF TOBACCO PRODUCTS.

EXHIBITS

                        A         September 12, 2006 Staff Report

                        B         Minutes of Council Meeting on September 12, 2006

                        C         Draft Tobacco Retailers Licensing Ordinance

                        D         List of Burbank Businesses Which Sell Tobacco Product                                               E         Location Map of Businesses in Burbank Which Sell          

                                    Tobacco Products

                        F          City Licensing Survey

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