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Home My WebLink Aboutagenda.council.worksession.20170807 CITY COUNCIL WORK SESSION August 07, 2017 5:00 PM, City Council Chambers MEETING AGENDA I. Local Tobacco Tax Discussion P1 Page 1 of 3 MEMORANDUM TO: Mayor and City Council FROM: CJ Oliver, Director of Environmental Health THRU: Sara Ott, Assistant City Manager DATE OF MEMO: August 3rd, 2017 MEETING DATE: August 7th, 2017 RE: Local Tobacco Sales Tax REQUEST OF COUNCIL: Staff is requesting City Council direction regarding whether to draft language for a ballot measure that would apply a local sales or excise tax on all tobacco products sold in the City of Aspen. Specifically, staff is requesting direction on: · Whether to pursue the municipal tax · An appropriate amount for the tax · Whether the revenue should be placed in the general fund or in a special purpose fund PREVIOUS COUNCIL ACTION: In June, City Council passed Ordinance 17, Series 2017 which raised the age to purchase tobacco products in Aspen from 19 to 21 years and created a local sales license to sell any tobacco product in the City of Aspen. These provisions will take effect on January 1st, 2018. During the consideration of Ordinance 17, City Council inquired about the feasibility of a local tobacco tax . BACKGROUND: Aspen has a long history of taking local action to protect public health. Aspen was one of the very first places in the country to enact a local smoking ordinance to protect employees in the workplace and protect indoor air quality. Aspen was also the first city in Colorado to raise the age to purchase tobacco products to 21. DISCUSSION: The primary motivation for the proposed tobacco tax in Aspen is to make tobacco products more difficult to access for all smokers and potential smokers but particularly for younger tobacco users who are still in their formative stages of tobacco use. The tax would apply to all tobacco products as described in Ordinance 17 including cigarettes, cigars, smokeless tobacco and vaping products. The authority for municipalities to impose taxes on cigarettes and tobacco products is specifically granted by statute, specifically C.R.S. Section 39-28-112 and Section 39-28.5-109. P2 I. Page 2 of 3 Currently, at the state level, there is a specific price per pack which is applied to cigarettes ($0.84 per pack) and a percentage of the manufacturer’s price (40%) applied to all other tobacco products. To keep reporting as simple as possible, staff is recommending that a local tax would be applied in a similar manner with a specific amount per pack of cigarettes and a percentage applied to all other tobacco products as defined in Ordinance #17. Below is a table that shows what the impact of a few options for a tax amount would be on a pack of cigarettes and a container of chewing tobacco based on current observed prices at local tobacco sales points. Location Current Average Per Pack $1 Increase $2 Increase $3 Increase $4 Increase Cigarettes Gas Station $6.50 $7.50 $8.50 $9.50 $10.50 Grocery Store $5.60 $6.60 $7.60 $8.60 $9.60 Location Current Average Per Container 10% Increase 20% Increase 30% Increase 40% Increase Chewing Tobacco Gas Station $4.29 $4.72 $5.15 $5.58 $6.01 Grocery Store $4.82 $5.30 $5.78 $6.27 $6.75 There are currently 7 retail outlets for tobacco products in Aspen including gas stations, grocery stores, tobacco bars and shops, the golf pro shop and a luggage store. Environmental Health staff are currently in the process of reaching out to these retailers to see how to best administer the collection and reporting of the potential tax in a manner that mimics the processes currently in place for the collection of state tobacco taxes and minimizes duplication. FINANCIAL/BUDGET IMPACTS: Currently, the City of Aspen receives roughly $75,000 annually as its portion of State tax collections on tobacco products. This share of State revenue is based on the percentage of total retail sales within the City, relative to total retail sales Statewide. Adoption of Ordinance 17 requires the City to forgo any portion of the State’s tax on tobacco. Adoption of a city tax would offset this loss in revenue. The amount of revenue that can be generated by a new local level tax will depend on the per pack or percentage increase applied, and the habits of consumers following the implementation of said tax. Tourist and resident/workforce consumption will likely reflect different tolerance to a change in tax, so additional analysis will be needed to be done on current sales volume (in-season and off-season) to estimate what a new tax will generate once Council direction is provided on the desired taxation. P3 I. Page 3 of 3 NEXT STEPS: If City Council directs staff to continue to pursue a local tobacco tax, staff will bring back language for a ballot measure that is in accordance with the direction provided at a regular meeting on August 28th, 2017. CITY MANAGER COMMENTS: ATTACHMENTS: P4 I.