2021 Election, Elections, Lakewood, Local, Sherrie Peif, TABOR, Taxes

Lakewood City Council reverses course, kills enormous tobacco tax measure

LAKEWOOD — Despite initial support from the 11-member Lakewood City Council for a massive tobacco tax proposal to be placed on the November ballot, council members killed the idea 9-2 on second reading at their regular meeting Monday.

Dana Gutwein, Ward 4, and Karen Harrison, Ward 5, were the only two council members to vote yes.

Complete Colorado broke the initial story and has been following the progress since the idea was discussed at a May 3 study session.

Consumers purchasing tobacco products in Lakewood could have seen a pack of cigarettes jump as high as an additional $4.50 per pack if voters were given the chance to approve a significant tax-hike proposition that ranged from an immediate 20 percent increase to a maximum of 50 percent in the future — without returning to voters.

The tax would have been assessed on all tobacco and nicotine products including cigars, chew, electronic cigarettes, and all other methods of vaping.

A ‘harsh and unfair measure’

Natalie Menten, a Lakewood resident who has been fighting the issue since it was first introduced said that although it was a good victory, while she was out trying to alert small business owners,  she met far too many who were ready to just throw in the towel if this passed. They weren’t even sure how they could take a couple hours away from work to call-in to a city council meeting and wait for their allotted three minutes of public comment time, Menten said.

“It’s unfortunate that this harsh and unfair measure was recommended by the city in the first place,” Menten said. “It took valuable time and energy from citizens and business owners to fight it.”

Menten said she also met tobacco consumers who already felt beaten-up due to the enormous tobacco tax hikes over the last few years.

“Many of those I spoke to felt it was pointless to try to stand up for themselves,” Menten said. “They are tired of just being viewed as a tax-revenue cash cow, when the reality is that their pockets are getting tapped out from obscene tax hikes.”

Menten was pleased that in the end, business owners and citizens did speak up, she said.

“It was enough to change the city council’s vote because before those messages it looked hopeless, and it was going to the ballot. Piling yet another regressive, harsh, and punitive tax on a limited population was a bad policy decision..”

Although voters in the communities of Aspen (15 cents per cigarette and 40 percent on all other tobacco), Crested Butte (15 cents per cigarette and 40 percent on all other tobacco) and Glenwood Springs (20 cents per cigarette and 40 percent on all other tobacco) have recently passed similar taxes, Lakewood would have been the first metro-area city to impose such a special tax. That worried some council members that it would cause residents to buy their tobacco products outside the city.

“We’re going to be the only one in the Denver metro area that has this special tax they will go elsewhere,” said Sharon Vincent, who represents Ward 2, adding it also came with the unintended consequences of sales in other areas declining. “People are very quick to tax others when it doesn’t affect them.”

Up to 50 percent without a vote

In 2019, the state legislature made it possible for cities and other local governments to charge their own taxes on tobacco by forgoing their share of state excise taxes. Lakewood voted to exempt itself in April and began collecting the already-in-place 3 percent sales tax.

At the May work session, council members discussed whether to ask voters for a special tax on cigarettes and other tobacco that staff estimated could raise $20 million a year based on a 30 percent hike — or .13 cents per cigarette.

However, after the meeting city staff met again with the budget and audit board, who recommended asking voters for 20 percent with the caveat the board could increase that to 50 percent in the future without going back to voters.

When the math was officially computed, a 20 percent increase resulting in $19.1 million of new revenue, 30 percent raised $28.7 million, 40 percent raised $38.3 million and 50 percent meant $47.9 million per year in new revenue, with no limits in how it could be spent.

Ballot language said it would be for use on education and public health programs associated with tobacco and nicotine consumption; however, it also included “other general expenses” as an allowable use.

The funds would have been exempt from revenue caps under the Taxpayer’s Bill of Rights, allowing the city of Lakewood to permanently retain and spend all revenue collected.

Perhaps most concerning for those opposed was the council approved the ballot on first reading in a consent agenda not meant for items such as tax increases.

A 20 percent increase would immediately raise the cost of a pack of cigarettes from its current cost of $9.57 per pack to $11.36 per pack after all state, local and excise taxes are added. Those numbers increase to reflect a 30 percent increase to $12.25 per pack, 40 percent to $13.17 per pack and 50 percent to 14.04 per pack.

‘Moral hypocrisy’

Those numbers were another reason many of the council members struggled moving the vote forward. Council member Anita Springsteen, Ward 3, called it a moral hypocrisy.

“We got hundreds of comments by email of people against this,” Springsteen said. “They’ve taken time to reach out. We don’t often see that. We care about affordable housing, and yet we put forward this tax on the poor. It hurts low income and people of color the most. It hurts businesses. Why are we spending so much time on something people are whole heartedly opposed to? Why are we not talking about cutting our city budget instead of how to tax the poor?

In fact, everyone who testified during the meeting, testified against it.

Brian Fojtik, a consultant for the National Association of Tobacco Outlets, said a tax of this size would devastate Lakewood retailers, in particular gas stations, convenience stores and tobacco stores.

“These businesses are disproportionately owned by first- or second-generation immigrants for whom English is not a first language,” Fojtik said. “They are already suffering because of COVID. They have experienced losses of 45 percent in gasoline sales and 20 percent or more of in-store purchases. The average convenience store relies on tobacco product sales for 36 percent of instore revenue to remain profitable. … Given Colorado’s new minimum price law, if this tax were enacted, a consumer could save a minimum of $14-$35 dollars on every carton of cigarettes by purchasing outside of Lakewood pretty much anywhere. Market research shows that consumers will not only leave to purchase tobacco products, but they will also leave to purchase food beverages and other items outside Lakewood.”

Charley Able, who represents Ward 1 and was in favor of the tax at the work session saying he wanted to “go the max” and was not concerned Lakewood might be overpricing cigarettes, also changed his mind and voted no after all the testimony and after learning that much of the language of the initiative would follow state definitions.

“Because the state legislature has very convoluted language attached to nearly everything they do, and because I prefer simple straight to the point statements that we don’t have in this (proposal),” Able said. “I have also been somewhat persuaded by (Council member Barb) Franks’ argument that we won’t make a noticeable difference in the number of people who smoke, but we will make a noticeable difference in the pocket books of people who generally can’t afford another hit.”

In the end, Mayor Adam Paul said the process missed including a stakeholders’ group.

“And a collaboration, talking to some of the trade groups there is room to look at doing taxation; however at these rates it’s not something that was going to be effective, and I don’t know what that rate is, what that balance is.”

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