.-.. . oeranrmem or nuance Fiscal Note . - Ordinance Smoking Ban 3065 Subject Preliminary Fiscal impact of Smoking Ban on Revenue and Elm-"dates Date: January 22?. 2015 Analyst James Husserl (City Economist) Pages 7 Ordinance Description The prOposed ordinance will ban smoking tobacco. tobacco products, harm: or ma?va other our": macs. and/or the use of electronic smoking devices within the City of New Oriearts and vii provide For relative thereto. The ordinance establishes public policy to protect employees and the germ anti: cf secondhand smoke. The department of health shall have the power to enfome the We! the ?an: designat?d'enfor'bement employees of the department of property mange-men. the decorum 36 Sign and tie department of p?a?rlsand parkways, the'New Orleans Recreation Development ?31: ?re department. and code enforcement shall have the power toenforce the provisions 05:31:26: REVENUES 1. Casino Revenue Current Law Casino Support Revenues . ?2 - I - Existing law provides that the gamingoontrol board and the parish governing authority in! a casino sumac: services contract to compensate the governing authority for the cost of support services resting from operation of the land-based casino. Requires approval of the Joint Legislative Committee on the Budget Current law requires net revenues to be deposited as foiiows: (1) The first $1,800,000 shall be deposited into the Casino Support Services Fund. (2) The next $60 million shall be deposited and credited to the SELF Fund. (3) revenues, incidess of._t_he above amounts shall be deposited into the Casino Support Services Fond until the'casino support services contract is fully funded. (4) The remainder shall be deposited into and credited to the SELF Fund. Qsino Support Services Contract 2014 -2015 "Subject to the conditions, covenants, obligations and requirements and in of the and agreementof the City to provide all Casino Support Services at Seas: to the extent oft'ne amount of provided for hereby, the City shall be compensated in the maximum amount of {'Tct'a; . .. - Land based casino receipts ("Harrah's'i amount to over $330,000,000 per year (each of the last three years). in the master agreement between the State and Narrah's, thecaslno is?required to remit to the state 21.5% of total proceeds, totaled over $70,000,000 per year over the last three years. Based on the current law, the first $1,8m,000 of the remittances from Harnh's will be transferred to the Casino Support Services Fund and paid to them. The 005; .14, .3. $50,000,000 is deposited hto the Any revenues received in excess of $01,800,000 ($1,800,000 ?ngo pap)? a be deposited in the Casino Support Services ?thd ?up to an additidnal the chive}?! same; 16 remitted to the Oty. Any revenues over $63,600,000 (1,800,000 60,000,000 1.800.000) b?e'dep?gltea into the? WM . -l Am decire in revenue to the 5m: fund below $63,600,000 will make it more challenging for the City to secure 1 Nance due under the aate's obligation to fully fund the contractin?. m: Act,ch aw". "r . - 3 u. 531.732"; rem-b .5403." Entries. r' e, . linker Renew ?Menswear; qf?dwmamm mam aim em whew??esef gimme distribution lsbasedupon the proportion of the total amount of fees, ?nes. and penalties the mmidpality contributes to statewide video poker revenues if grimy 's 3 Faerround- 3-3.5, n, Cur-eat Lav Fm Slot Machines and Racigg Tax Akitzxonwee?ytaxabie netslotmadiine proceeds in licensedfacilitles. 1?3" -. Amm'etaxmtheda?ysbe?mhg2.5% tax levied for general mm?rcipal sale use, the; arid;- the storage for use or consurn prion ln?the City of wearer tangible spersdhal'prope'ft'v, -, on. intoi ?ctio - There are a very large of studies tha?thave?been undertaken to examine the impact restrictions "on revenues and taxes in various ?laces. Scoilo and La] (2008) reviewed 165 studies on the topic and?fou?hd thatimpectS' raged from none to substantial in terms of declines in revenue. These studies were undertaken in different places, in different timeframes, and with different competitive circumstances. As an example._some studies have looked at the experience of a statewide smoking restriction on racinos in Delaware in the early 20005. Other looked at Illinois statewide Changes In 2008. Some of the researchers looking at these experiences found little change, while others found revenue declines after two years of about 20%. The illinois studies are interesting in that declines in revenue at casinos in Illinois occurred while much lesser declines were seen in States over th??sa'me? pEri'O'd. 1- The Louisiana Gaming Control Board has received a presentation by-the? Gaming Enforcement Division that presented revenue calculations based on some of these studies. Those calculations assumed a two year reduction of 20.4% after the smoking restrictions were Imposed, with 12% in the first yea r, and a further'9.5% In the second?year: These revenue calculations were presented to ?provide a picture" of what might happen, but the Gaming Enforcement Division did not conduct a study on?thi?s issuelikely th?t_the actualimpact Orleanswould be different than those 's?en in; other places?fo'r atriumbgr. 9f 3f the'pribr studiestodk place du?ring'Vears of can affect gaming. Some Bf?t?h'e? prior' studies were statewide, whereas this ordinance affects a substate area. Some of the competitive situations may be different than New Orleans, with its large number of tourists and convention visitors that may have fewer easy v, alternatives for?garrfilipgf?lls?g,tspm?e pf the studies. may be more relevantthan others for certain types _of gambiiggzit, mavbeeasi?'rt? A . r) "c 'It REVENUEIMPA EXPLAN ON CASI gig i-MgTh9 current-payment struqfuteguarantees,SMILQODO to mean. These moneys are not dependent on land base . casino receipts. . The other portioan the payment, and $1,800,000, onthe total amount of receipts from Harrah?s. For the'State's 2014 - 2015 ?scal year (July to June}, overall State receipts are likely to reach (based on the current collection trend) the minimum amount of $63,600,000 that are needed for the City to receive the full additional $1,800,000. 2016 . The current payment structure guarantees $1,800,000 during the City?s 2016 fiscal year. The second portion of the payment is depended on overall land casino receipts. Assuming a 20.4% decreasepyer years in gaming revenue-as presentedtothe.Chairmanpf Gaming Board by the/auditdir-ector of the Gaming Enforcement Division the second portion of the payment $1,800,000 could be at risk in 2016. A 20.4% decrease inland base casino receipts could result In overall State receipts dropping below the 561,800,000 amount that is needed for the City to start receiving additional revenue up to $1,800,000. 2. VIDEO POKER 2015 . Assuming a 12% a decrease in gaming revenue during the ?rst year as presented to the Chairman of the State?s Gaming Board by the audit director of the Gaming Enforcement Division, and assuming the ordinance will become effective at 3 the end of-February of the year, the overall- impacton video poker revenue for 2015 is- an-estimated reduction of up to $314,000. -. 216Assuming a 9.5% decrease in gaming revenue during the second year as presentedito the Chairman of the State's Gaming Board by the audit director of the Gaming Enforcement Division, the overall irnpact on video game revenue for ofupr-ta?zismnem . - RGROUND Assuming a 12% a decrease in gaming revenue during the first year as presented to the ofthe State's Gaining Board by, the audit director of the Gaming Enforcement 0 - . . .q Wang #59038. stems-at, the end Febmar?y of th?yggir, the averaii?i?gii a la "crediting:ng upto - "3 that, a" :2 ""1c tor-'3' $167 660"" I . .1- - in'i?bub 3,3555 (in: '9 7" I i '2 2016 - . . ?83.: i a- a" mn?L i, Gaming-Beard bythe audit director R3 0' thabeEr-ari dag-Fair?di?ouad revenue for? 2016 is an additional reduction estimated of up to $150,000. 4. SALES TAX ,J'ut: 2? .. Revenue Explanation I The literature available provides con?icting results regarding the effects of a smoking ban on safes?tax?il?vemesai Several studies supporting a smoking ban suggest sales tax revenues are not affected or could actually increase. Studies performed by entities opposing a smoking ban suggest overall sales tax revenues could decrease significantly. There7i?s"?* also limited empirlCal data "a?helState leval'rlratscari breviae' of a' smoking ban on sales tax. . Nb?ch?angelin am" sales-micrevenoeaah?be this tirri??: 1, .1 .02. .- ,ll-Jay] I. Other revenues and fees Rivergate Lease . -. -: .r Current Agreement- r- 1" ?1 The'turren't agreement between the City and Harrahfs'p'f?Vide's tor-?6 guarantee ahn'?ai leasepayrne?nt to' the of 312500.000Revenue impact Explanation - Under the current agreement, the City is guaranteed an annual $12,500,000 lease payment. However, Harrah?s believes the potential introduction of a smoking ban could represent a change in contract terms. The issue is Currentlyunder review by legal counsel. enalty Fee Promsed ordinance Allowing smoking indoors would carry up to a $100 fine for the initial offense and double that for a second offense within 12 months. Fines could reach $500 for each additional offense in the same year. Violation of the ordinance by an individuai wiil carry a $50 charge per violation. . I I . Revenue ma; Explanation 2105 . Assuming the enforcement strategy will include a long education and training portidii during the first year,.no revenues derived from enforcement are expected. .1 There is no information available to provide the revenue Impact effect of enforcing this ordinance in 2016Enforcement . . -. - .1 The ordinance broadly authon?Zes a?nu'mber of?ti?b?artm??ntsitd Enforce f?e'prd'visions with respect to bars; casinos and other places. The estimates below are those of the individual departments. With more discussion, it may be possible to streamline enforcement and obtain savings versus the individual estimates. Safely and Permits Assuming current staff remains performing their existing tasks, Safety and Permits will require five additional building inspectors to provide proactive enforcement of the ordinance at a cost of $51,500 per person or a total of $250,000 per year. Five additional inspectors will be assigned in zones to cover areas of the city where there are concentrations of bars. Additionally, 5 would allow for rotating zones and 7-day enforcement. Costs are expected to begin in 2015 at approximately $187,500 (full hiring in March 2015) and continue every year after at approximately $250,000. RDC The estimated expense to reprint Park Rules signs in order to include the smoking ordinance for all facilities is estimated at $10,160 {$40 per sign multiplied by two signs per location) in 2015. Cost in the following years for new signs and maintenance is estimated at $500 per year. Parks and Pa rkways Assuming current staff remains performing their existing tasks, Park and Parkways will require four additional rangers (two teams of two) to enforce the non-smoking restrictions at Lafayette Square and Richard Annette Bloch Cancer Survivors Plaza. Each team would be one full-time and one part-time. They would work 7-7 during CDT and 7-6 during CST. if enforcement during night hours is required, that would require additional rangers. Full time ranges expected to cost $48,000 per year and part time expected to cost $20,000 per year. Total cost per year estimated at $136,000. Costs are expected to begin in 2015 at approximately $102,000 (full hiring in March 2015) and continue every year after at approximately $136,000. 1? .. I ., . Code-Enforcem? enb?? a - - .rJ Assuming current staff remains performing their existing tasks, Code Enforcement vvilP'r'e?'uire 2t?r'aszditib'nal inspectors t6" cover additional workload, 1 analyst to research property information, 2 supervisors to monitor staff, 1 adminstaff to track data and assist with admin work. Additionally, 2 vehicles costing approximately related 6r? around 5,000 per year. Costs are expected to begin in 2015 at approximately $398,152 (full hiring in March 2015) and," cor-itinuer?v?iwt?ia?erat annmxima?ew $419359? a' 1 . . Hm"1'wa . .L. at De rtment Assuming current staff remains performing their-existing tasks, the Health Department will require 1Iprogram supervisor, 2 y?e'S? - includeequipment (PC and phones}, vehicle maintenance, consulting services and supplies printing and advertising costs totaling approximately $15,650 in recurring and $45,056 in non-recurring expenditures. Costs are expected to begin in 201's ?'a'B?F?ii?iateiy $189,763 (run hiring in March i015) a?ad c?hiin'u? avers; 'ye'?r after ai'a'?pm? sights, C: Fire Department Assuming current staff remains performing their existing tasks, to proactively and aggressively enforce u; .. Department will add two inspectors at an annual cost of approximately $200,000. Costs are expected to 53:35 in 2015 99an'dg Additional Impact (Sin Thousands) GENERAL FUND Casino Support $0 ($1,800) Video Poker ($314) ($218) Sales Tax 50 50 Fair Graounds ($167) ($150) Penalty Fee $0 $0 Lease $0 $0 EXPCNUDTURES FY 2015 FY 2016 (Sin Thousands) GENERAL FUND Safety and Permits $188 $250 NORD $10 $1 Parks and Parways $102 $136 Code Enforcement $398 $411 Health Department $190 $193 Fire $150 $200