Impact of a Smoking Ban on Restaurant and Bar Revenues --- El Paso, Texas, 2002

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Smoke-free indoor air ordinances protect employees and customers from secondhand smoke exposure, which is associated with increased risks for heart disease and lung cancer in adults and respiratory disease in children (1,2). As of January 2004, five states (California, Connecticut, Delaware, Maine, and New York) and 72 municipalities in the United States had passed laws that prohibit smoking in almost all workplaces, restaurants, and bars (3). On January 2, 2002, El Paso, Texas (2000 population: 563,662), implemented an ordinance banning smoking in all public places and workplaces, including restaurants and bars. The El Paso smoking ban is the strongest smoke-free indoor air ordinance in Texas and includes stipulations for enforcement of the ban by firefighting and law enforcement agencies, with fines of up to $500 for ordinance violations (4). To assess whether the El Paso smoking ban affected restaurant and bar revenues, the Texas Department of Health (TDH) and CDC analyzed sales tax and mixed-beverage tax data during the 12 years preceding and 1 year after the smoking ban was implemented. This report summarizes the results of that analysis, which determined that no statistically significant changes in restaurant and bar revenues occurred after the smoking ban took effect. These findings are consistent with those from studies of smoking bans in other U.S. cities (5--8). Local public health officials can use these data to support implementation of smoke-free environments as recommended by the Task Force on Community Preventive Services (9).

To study the impact of the El Paso smoking ban on all sectors of the local restaurant and bar industry, TDH and CDC obtained quarterly sales tax reports and monthly mixed-beverage tax receipts from the Texas Comptroller of Public Accounts. The sales tax reports provided revenue data for restaurants, bars, and retail businesses, grouped by Standardized Industrial Classification (SIC) codes. Categories were created for restaurants (SIC codes 5812, 5816, and 5817) and bars (SIC codes 5813 and 5814) (10). The sales tax reports included revenue generated by sales of meals and sales of beer and wine for establishments with beer and wine retailer permits; sales tax revenue data were used for 1990--2002. Other restaurant and bar revenue data came from reports filed by holders of mixed-beverage permits. The state's mixed-beverage gross receipts tax, enacted in 1994, is levied on revenue generated by sales of alcoholic beverages (e.g., liquor, beer, and wine) and nonalcoholic beverages and ice used in mixed drinks. Mixed-beverage revenue data were used for 1995--2002.

Multiple linear regression analysis was used to examine the effect of the El Paso smoking ban on changes in revenue over time. The following independent variables were considered: a variable indicating whether the smoking ban was in force, an ordinal variable to represent secular time, and three variables to indicate during which one of four calendar quarters the revenue data were collected. Two regression models were created for each of the following primary dependent variables: 1) revenue subject to sales tax from all restaurants and bars, restaurants only, and bars only; and 2) revenue subject to the mixed-beverage tax. For each category, the first model examined the association between the smoking ban and revenue, and the second examined the association between the smoking ban and the fraction of revenue as a percentage of El Paso's total retail revenues (SIC codes 5211--5999). This fraction accounts for economic variation that might impact revenue in all sectors of the retail economy (6).

Two sets of statistics were used to evaluate the quality of the models. The Durbin-Watson statistic was calculated for each model to determine if first-order autocorrelation was present. Variance inflation factors were examined to determine if multicollinearity was present in any of the models.

Restaurant, bar, and mixed-beverage revenues varied by quarter; in all categories, revenues usually were higher during the fourth quarter (October--December) of each year (Figure 1). During all four quarters, bar and mixed-beverage revenues accounted for approximately 1% of total retail revenues (Figure 2).

None of the regression models for restaurant, bar, or mixed-beverage revenues or for such revenues as percentages of total retail revenue over time showed any statistically significant changes after the smoking ban was implemented (Table). In addition, the results did not change when revenues were adjusted for inflation, and adjusting for changes in price did not change the results (8). In all models, the variance inflation factors had values of <2 for each of the independent variables, indicating that multicollinearity was not present, and the Durbin-Watson statistics indicated that none of the autocorrelations was statistically significant (Table).

Reported by: P Huang, MD, Texas Dept of Health. AK De, PhD, Div of Applied Public Health Training, Epidemiology Program Office; ME McCusker, MD, EIS Officer, CDC.

Editorial Note:

No decline in total restaurant or bar revenues occurred in El Paso, Texas, after the city's smoking ban was implemented on January 2, 2002. These findings are consistent with the results of studies in other municipalities that determined smoke-free indoor air ordinances had no effect on restaurant revenues (2,5--8). Despite claims that these laws especially might reduce alcoholic beverage revenues (2), the mixed-beverage revenue analyses indicate that sales of alcoholic beverages were not affected by the El Paso smoking ban.

The findings in this report are subject to at least three limitations. First, because sales tax reports lag revenue collection by 6 months, sales tax data were available for only 1 year after the El Paso smoking ban was implemented. However, analyses from other cities that included data for several years after a smoking ban was enacted indicated no declines in restaurant or bar revenues (6--8). Revenue data from El Paso will be monitored for any changes in restaurant and bar revenues. Second, because limited revenue data for El Paso were available, methods that might provide better estimates of the impact of the ban could not be used. Regression models measuring changes in slope for revenues before and after implementation of smoke-free indoor air ordinances might provide better estimates of how these ordinances affect revenues (8); time-series models also might produce better estimates. When more information becomes available, these models should be applied to the El Paso data. Finally, because the SIC code--based restaurant and bar categories are not mutually exclusive, certain bars were included in the restaurant category created for this analysis. However, mixed-beverage tax data, which provide a more precise measure of alcohol-related revenue, support the finding that bar revenues were not affected by the smoking ban.

Opponents of smoke-free indoor air ordinances have claimed that enacting smoke-free indoor air ordinances will harm restaurant and bar revenues (2). However, the findings in this report indicate that, in El Paso, Texas, restaurant and bar revenues were not affected by the smoking ban. Such analyses of economic data can provide local policymakers with statistical evidence to evaluate the merit of implementing smoke-free indoor air ordinances in their communities.

This report is based on contributions by M Boerm, P Gingiss, Univ of Houston; Research Div and Open Government Section, Office Texas Comptroller of Public Accounts.

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