Tobacco Scam: Smokefree Restaurants: Fake Economics - Cooking the Books

Mesa, Arizona

Big Tobacco strategy:

Set up front groups to disguise its deep involvement.
Sponsor bogus economic studies.
Intervene expensively at every stage to make "compromise" attractive.
As a last resort, push costly ventilation systems as a "solution."

In autumn 1995, Mesa physicians launched a campaign to put a smokefree initiative on the March 26, 1996 municipal ballot. The initiative, known as Prop 200, required 100% smokefree workplaces and public places, including restaurants, billiards halls, and attached bars.

Bars with a Class 6 license (sale of alcohol as the main activity) could request exemption if the bar was completely separated from any other part of the building by a "floor to ceiling physical wall, a closed door, and a seperate, single pass ventilation system."

Early in the campaign, the Washington D.C.-based Tobacco Institute suggested the hospitality industry would organize against the initiative and offered its aid. An opposition group was duly formed - the "Mesa Freedom Committee" - and the Tobacco Institute ponied up 99% of the committee's budget: $181,650. The National Smokers Alliance, an astroturf group created by PR firm Burston-Marksteller for Phillip Morris, also formed a local committee to fight the measure and kicked in $16,500 more. The physician's group, Mesa for Clean Air, raised $45-240 from various health organizations and individuals.

In February 1996, Tobacco Institute lobbyist Steven Duffy, who also represents the Arizona Licensed Beverage Association, sued the city of Mesa to keep Prop 200 off the ballot. The lawsuit failed and in March, despite being outspent more than 4-to-1 by tobacco interests, the proposition won 55% of the vote.

In May 1996, two months before the measure was scheduled to go into effect, a group of Mesa business owners sued to overturn it, claiming the "exemption" for thirty-five Class 6 liquor licence holders was unfair to the holders of other types of licenses. The City Council was reluctant to amend the measure since it had been approved by a majority of voters.

Hotels also sought exemption to allow smoking in banquet, reception and meeting rooms. The City Council rejected this amendment in July 1996. The same day, the City Council postponed enforcement on Class 6 licensees until Spetember giving city staff time to develop the new ventilation guidelines. It turned out the cost of a "single pass ventilation system" was prohibitive.

By the end of July 1996, some club owners had declared their establishments "private clubs" - charging a symbolic membership fee in order to exempt themselves - and a petition drive was underway to replace Prop 200 with another initiative making smokefree optional but requiring special ventilation systems for those who chose to allow smoking. (This is Phillip Morris's so-called "accommodation" strategy.) The petition called for a special election in March 1997.

In September 1996, the Finance Department of the City of Mesa released the first part of a study paid for by Phillip Morris's "Accommodation Program" Rather than waiting for a year's worth of actual experience or using objective measures of sales tax revenues, the "study" included only the two months immediately after Prop 200 went into effect - and consisted of interviews with establishments that had complained about the measure. Not surprisingly, they claimed they were loosing business, mainly due to a drop in alcohol sales.

The second stage of the study - also financed by Phillip Morris - included a sales tax analysis (comparing July-August 1996 to July-August 1995) using data from 125 businesses; restaurants with liquor licenses (one-third of Mesa restaurants), bars, motel-hotel restaurants and bars, bowling centers, and pool halls. The report found a 5.2% decrease in overall sales, but a 6.6% increase in sales in bars for whom compliance had been delayed.

Independent analysis of sales tax data shows that Mesa's smokefree restaurant measure (blue line) had no effect on hospitality revenues.
(Source)

Flawed because it did not account for economic trends, the study also omitted sales from the two-thirds of Mesa restaurants that went 100% smokefree in July 1996. If they had been included, the "study" would have found a 2% increase in restaurant revenue in July and August 1996 - not a decline. Properly controlling for seasonal and historic trends, independent analysis of sales tax data shows the smokefree measure actually had zero effect.

By October 1996, the study paid for by Phillip Morriss had succeeded in mobilizing support for a compromise on clean aur measures. Phillip Morris's National Smokers Alliance turned up the heat, announcing that three Mesa residents who belonged to NSA were suing the city for descriminating against smokers.

In November 1996, "Citizens to Repeal Proposition 200" petitioned to place a repeal initiative on a special ballot. Mesa Vice Mayor Pat Gilbert (opposied by the City Council due to its costs), and discussed compromise. In December, the National Smokers Alliance hired former Mesa Mayor Peggy Rubach to help overturnProp 200. It also channeled funds to a newly created front group backing repeal of the smokefree measure, the "Valley Business & Restaurant Owners."

At the end of December 1996, compromise amendments passed 6-1 in the City Council. The amended measure allowed smoking in all bars that made more than 50% of their gross revenu from the sale of alcohol. Restaurants could allow smoking in outdoor areas and attached bars, but had to maintain indoor eating areas smokefree. Attached bars and hotel meeting rooms where smoking was permitted were required to have seperate ventillation and be physically separate ventillation and be physically separate from the rest of the facility; non-smoking customers could not be forced to pass through them to reach smokefree areas.

A special election was avoided, and the amendment measure remained in effect until the regular March 1998 election, when voters upheld the compromised measure against repeal by a strong margin.

But tobacco industry allies dod not quit. In 1999, they returned to propose an amendment to allow smoking anywhere a special ventilation shstem was installed.

George Benda of the Chelsea Group linked to Phillip Morris's "Options" program, lobbied and testified. At a City Council hearing, Benda admitted the only difference between the proposed ventilation system and the old, prohibitively expensive one was a design reconfiguration. The council rejected the amendment.