State of Affairs | Tobacconist magazine

State of Affairs

By Stephen A. Ross

The premium tobacco industry is engaged in a battle for its survival. While all eyes are rightly fixed on Washington, D.C., and the impending Food & Drug Administration’s deeming regulations regarding the premium cigar industry, this is a war also being waged locally in 50 states and the District of Columbia. So while retailers from around the nation have banded together to present a powerful unified front on the national level, what about those key state battles?

It’s a sad truth that tobacconists have a constant target on their backs, and attacks come from all sides and in a variety of forms. There have been more than 500 bills dealing with some aspect of the tobacco trade on the state level in 2015. Cash-strapped legislatures often look to raise taxes on tobacco products to close the gap on budget shortfalls, and anti-tobacco zealots are incessantly urging their state representatives to place more limits on where a person may smoke.

In recent years, the IPCPR has made a concerted effort to organize state associations to protect premium tobacco retailer interests against these various threats on the state level. According to Matt Dogali, the IPCPR’s senior director of state legislative affairs, there are now more than 20 active state associations, and there are hopes to soon form associations in Kentucky, Arizona, Idaho, Montana, Georgia and Missouri.

The IPCPR’s goal, of course, is that every state will have an active state association. Recognizing that small-business owners don’t have the time to research and develop an association on their own or might even be a bit leery of the entire process, the IPCPR is putting a big effort into helping members protect themselves, including a new website, ipcprlegislative.org, where tobacconists can monitor legislative developments on the federal, state and local levels. The website also includes a link to the IPCPR State Association Handbook, which provides easy-to-follow, step-by-step instructions on how to form a state association, organize fundraisers, become a 501(c)(6) nonprofit organization, recruit members and hire a lobbyist.

The 51 battlegrounds are so important that the IPCPR has even pledged financial support to each of the state associations for retaining a lobbyist. The IPCPR’s state government affairs department, which includes Dogali and legislative affairs manager Rachel Hyde, works with each state association when necessary to identify a qualified representative to be a lobbyist in the state. The IPCPR then pledges to pay as much as 70 percent of the lobbyist’s retainer fee in the first year, 60 percent in the second year, and 50 percent in the third year and beyond as the state association’s fundraising efforts become more effective. Pledging financial support to help a state association find and retain a lobbyist shows just how serious the IPCPR is about helping retailers on a state level.

“Forming a state association allows you to present a unified voice in your state,” says Dogali. “It puts constituents in front of their own legislators and helps personalize the story that you’re a small-business owner. Making it a 501(c)(6) allows you to raise money and build a war chest and hire a lobbyist when you need it. Having somebody on the ground who knows the players is critical to your success at protecting your business.”

And there’s evidence the IPCPR’s strategy is paying off. In the last year, state associations in Alabama, Ohio, Louisiana and Nebraska have successfully rolled back or defeated tax hikes and smoking bans. Two of these associations, the Alabama Tobacconist Association and the Louisiana Independent Tobacconist Association, were created in times of relative quiet, with no immediate threat to their livelihoods on the horizon. The other two, the Ohio Premium Cigar & Pipe Association and the Nebraska Premium Tobacco Association, were formed almost too late to present effective resistance to issues in their states. No matter when they were formed, however, each of the state association members agreed that the most important factor in their success was their ability to stand together and represent themselves to their legislators.

Double dodge
When Cigar Rights of America (CRA) executive director Glynn Loope volunteered Jim Clark to head the Ohio association in 2013, all Clark could do was laugh. There was no association, and Loope was nudging Clark to put an association together. Clark, owner of one of the oldest tobacco shops in the U.S., Straus Tobacconist in Cincinnati, soon learned, however, that forming a state association was no laughing matter.

The Ohio Premium Cigar & Pipe Association was officially established in January 2014 with the IPCPR’s help, just two months before Ohio’s governor, John Kasich, attempted to raise the OTP tax to 49 percent from 17 percent. That tax hike was eventually defeated, but an even larger OTP tax increase was proposed during the 2015 legislative session.

shutterstock_314147951“We dodged a bullet in 2014, but this year we faced a real challenge,” Clark says. “Between the legislative sessions, we hired our lobbyist Bobby Kovey to strategize our response. Bobby is not just a lobbyist; he’s an adviser who was born to do this. We narrowed the issue down to a few talking points to discuss in one-on-one conversations with legislators. We talked about being small, family-owned businesses that would go out of business if the OTP tax was raised. We talked about the resulting job losses, which gained their attention. Most important, we were able to show how a tax hike would affect Ohio’s revenue by increasing cross-border sales.”

Clark testified in front of both state House and Senate committees. The House passed a budget that included no OTP increase. The Senate supported a small increase in the OTP tax. Eventually, a senator proposed a compromise that would have capped the tax on premium cigars to 50 cents, but the House turned down that bill as well. By the end of the session, the Ohio legislature passed a budget that had no OTP tax increase.

“The IPCPR is still building that bridge to support retailers on the state level, but they were great help to us,” Clark says. “The State Association Handbook was very useful, and both Matt and Rachel were very responsive to any questions I had. You have to donate some time to your association, but the payoff is worth all the effort.”

Vigilance and unity
The Louisiana Independent Tobacconist Association began as an informal group of tobacconists working together long before its incorporation as a 501(c)(6) in 2009, and like so many Louisianans, the association prides itself on its independence.

About half of the eligible tobacco businesses in Louisiana are members of the Louisiana Independent Tobacconist Association, and there is a group of associate members composed of manufacturers and distributors who support the association’s lobbyist.

“We’re like a bunch of siblings,” explains Sarah Betz, owner of Baton Rouge’s Bayou Tobacco and association president. “We fight among ourselves sometimes, but when someone from outside the family picks on one of us, we all band together and fight it. We’ve not lost a statewide battle since we formed the state association.”

Betz says the association does not recruit consumers, preferring to remain as a small group of concerned tobacconists. Of the association members, leadership revolves around three people—Betz, Rene Gerard of Lafayette’s Piper’s Haven and Marjorie Patel of New Orleans’ Mayan Import Company.

“The three of us have worked together for a long time now, and we’re proactive in taking the fight to the statehouse whenever we think there will be a problem,” Betz says. “We’ve not had a tax increase on cigars or pipe tobacco since 1974. We’ve also learned to be vigilant about the language in a bill. We read every line of every bill that has anything to do with tobacco. There might be one line in a 60-page bill that could have a catastrophic impact on your business. The legislature can be sneaky sometimes, and you have to keep them honest.”

Betz, Gerard and Patel spend one or two days a year at the state capitol. Being just five minutes from the legislative center, Betz often is the first to defend Louisiana tobacconists and has found a formula for success—flexibility and speaking to issues that lawmakers care about.

“Sometimes you have to be ready to testify before a committee on less than a day’s notice,” she explains. “When you’re talking to a legislator, you can’t point out that the proposed legislation is unfair because they don’t care if it’s fair or not. You have to show how the proposed legislation will affect the state because that’s what they’re interested in. They’ve got to be able to talk to their colleagues about how the bill would impact the state to convince them to support your stance on a bill.”

Stay off the menu
The Alabama Tobacconist Association came together in 2012 after several years of informal meetings among Alabama tobacconists at the IPCPR show. While there were no immediate in-state issues to concern these tobacconists, they knew that one day they would face some sort of struggle. Working with the IPCPR, they established a 501(c)(6), raised funds and retained a lobbyist.

“It was a lot of work on the front end, but once all the paperwork had been filed, it became pretty easy,” says Harris Saunders, owner of Birmingham’s Cigars & More and a key member of the Alabama association.

shutterstock_272983136In February 2015, Governor Robert Bentley proposed doubling the state OTP tax as part of a plan to make up a $700 million budget shortfall. The rainy day for which the Alabama Tobacconist Association was formed had arrived.

“We discovered early on that we worked well as a committee of equals, and we share responsibilities for raising money and representing our association in Montgomery [Alabama’s state capitol]. We met for an online conference once a week for 15 to 30 minutes with Rachel Hyde to plan our strategy.”

Email blasts to their consumers asking them to contact their representatives and voice their objection to the tax hike proved particularly effective. The association remained vigilant as OTP tax increases were proposed during a regular session and two special sessions. Ultimately OTP was omitted from the final tax bill that passed the legislature.

“At the statehouse, we heard from legislators that they were aware of us because of the emails they had gotten from their constituents,” Saunders says. “One legislator told me, ‘If you don’t have a seat at the table, you’re probably on the menu.’ We were smart to have formed an association long before we faced any issues because we had everything ready to go when we needed it. It’s a big thing for states that don’t have associations to consider, because if you wait until you’re on the table, it’s probably too late.”

Back from the brink
Considering recent events, Nebraska retailers would agree with Saunders. In perhaps the most dramatic case so far, premium tobacco dealers in Nebraska were almost adjudicated out of existence. On June 1, 2009, the Nebraska Clean Indoor Air Act went into effect. The law prohibited smoking inside indoor workplaces, restaurants, bars and gaming establishments but included exemptions for cigar bars and cigar stores.

Big John’s Billiards in Omaha, hoping to once again allow smoking inside its business, challenged the law’s constitutionality. The legal wrangling took years to resolve, and on Aug. 29, 2014, the Nebraska Supreme Court ruled that the exemptions for cigar bars and tobacco shops were unconstitutional. Complying with the Supreme Court’s decision, the state would allow smoking at cigar bars and tobacco shops until Oct. 31, 2014, when it would presumably be lights out for Nebraska’s tobacco retailers.

Shortly before the Supreme Court’s decision became public, a few Nebraska premium tobacco retailers set aside differences created by years of competition and formed the Nebraska Premium Tobacco Association. Led by Jeff Doll of Safari Cigar and Chaz Kline of S.G. Roi, the Nebraska Premium Tobacco Association hired a lobbyist and set to work formalizing their association as a nonprofit. They also reached out to the IPCPR, the Tobacconists’ Association of America, the CRA and the Cigar Association of America.

“When we asked for help [the IPCPR was] there,” recalls Kline, the Nebraska Premium Tobacco Association’s vice president. “They gave us hope and they rallied us. Their support was vital to our success. Matt is enthusiastic and experienced, and he helped us narrow down our argument to three or four issues. We all had a lot of sleepless nights, but he gave us confidence that we could fight this.”

With the help of the Cigar Association of America and the IPCPR, the Nebraska Premium Tobacco Association’s strategy in the statehouse created L.B. 118, which amended the Clean Indoor Air Act by reclassifying cigar bars as cigar retailers that had liquor licenses, that are open only to patrons who were at least 21 years old and that asked employees to sign a waiver acknowledging they worked in a smoking environment. Members of the state association talked to their representatives and testified before various committees. The hard work paid off. In February 2015, the Nebraska legislature approved their requests by a resounding 45-3 margin, and the bill was signed by Governor Pete Ricketts.

“That a group of tobacconists can put aside their differences, create a strategy and be successful is a fantasy story come true,” Kline concludes. “It was a great experience, and I had never been involved in anything like it before. We fought the good fight and we won. That gives me confidence for whatever we may face in the future.”

While the future may be murky and sometimes seems overwhelmingly glum, the experiences of the Ohio, Alabama, Louisiana and Nebraska associations show that tobacco retailers should not give up. Presenting a unified voice, personalizing their stories to their legislators, engaging customers and crafting effective arguments to counter tax hikes and wider smoking bans can work. “Get involved,” Dogali concludes. “It will make a difference.”

For more information, visit ipcprlegislative.org.

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