Economic Impact of a Smoke-Free Ordinance on Bars and Restaurants in a Small, Rural, Missouri Community

Abstract

The purpose of this study was to analyze the economic impact of a city-wide smoke-free ordinance in the small, relatively isolated, rural, Northeast Missouri community of Kirksville. A model similar to prior studies was applied to the taxable sales revenues of eating and drinking establishment data prior to and following enactment of a smoke-free ordinance. It was found that there was a significant positive change in eating and drinking establishment taxable sales revenues post-enactment.

Introduction

Although adopting smoke-free policies is viewed as a wise health and business decision, the hospitality industry has feared such smoke-free workplace policies will decrease business and revenues. It appears, however, that few, if any, reliable, peer-reviewed studies support that claim.^1,2 Currently, more than 40 countries have passed some type of smoke-free law; this includes almost 30 countries whose laws incorporate smoke-free bars and restaurants and over half of the states in the U.S. that have passed 100% smoke-free laws incorporating bars and restaurants.^3,4 Internationally, there has been no undue economic impact documented for smoke-free ordinances in countries as diverse as Italy and Ireland.^5,6 The same has been noted nationally for states such as Massachusetts, Washington, and California.^7–9 Although the state of Missouri is not smoke-free, 20 municipalities possess smoke-free restaurant ordinances, and 18 municipalities possess smoke-free bar ordinances.³ In addition, smoke-free ordinances did not exert undue economic impact in localities such as New York City, Minneapolis/St. Paul, or several cities in Texas.^10–12 To date, nearly 600 United States cities and localities have passed 100% smoke-free laws that include bars and restaurants.¹³

While most studies have examined the economic impact of smoke-free legislation on bars and restaurants in communities with large populations, and some have examined the economic impact on small cities, few studies have examined the economic impact of smoke-free legislation on relatively isolated rural communities with smaller populations. Compared to urban and suburban areas, tobacco use and secondhand smoke exposure is more prevalent among rural residents, there are fewer policies in place to protect rural residents from secondhand smoke in the workplace,¹⁴ and larger rural communities tend to have stronger tobacco control policies than smaller rural communities.¹⁵

Purpose/Significance

Kirksville, a small, rural Northeast Missouri community, enacted a smoke-free ordinance effective July 1, 2007, covering bars, restaurants, public recreation facilities, and sports venues within the city limits. Unique to previous studies, this rural city is a small ‘college town’ community of only 17,000 residents, but is the major commercial hub for a 40-mile radius. The purpose of this study was to determine the economic impact of the smoke-free ordinance on local bar and restaurant taxable sales revenues.

Methods

Data

Quarterly taxable sales revenue data were obtained from public reports of the Missouri Department of Revenue. Data for eating and drinking places were reported under the standard industrial classification code (SIC) 581.¹⁶ Total city tax revenue data were also obtained to indicate possible changes in the city’s economy. The consumer price indices (current series) for all urban consumers for the Midwest region were selected from the several price indices published by the Bureau of Labor Statistics to adjust for price inflation in all the revenue data.¹⁷ The data on unemployment rates were obtained from the Missouri Economic Research and Information Center, Missouri Department of Economic Development.¹⁸ The 12 quarters of data prior to ordinance’s enactment and 12 quarters following July 1, 2007 enactment were used in the analysis. Quarterly taxable sales revenue data for eating and drinking places were adjusted for changes in city’s economy, population and unemployment.

Analysis

The null hypothesis of no difference between pre- and post-smoke-free ordinance mean taxable sales was tested using a t-test to compare the difference between mean taxable sales ‘pre’-smoke-free ordinance and mean taxable sales ‘post’-smoke-free ordinance. An F-test was conducted on the variances of the two samples to test the hypothesis that the population variances associated with the two were the same. The t-test for two samples (pre- and post-smoke-free ordinance) was conducted with the assumption of equal population variances. The impact of the smoke-free ordinance on taxable sales was assessed using the p-value associated with the t-statistic (calculated).

Results

Summary statistics are presented in Table 1(a). Based on the F-test conducted on the variances of the two samples for eating and drinking establishments, we failed to reject the hypothesis that the population variances were equal (Table 1(b)). Therefore, a pooled t-test was conducted on pre- and post-smoke-free ordinance taxable sales. Based on p-values from the pooled t-test, the null hypothesis of no change in taxable sales post-smoke-free ordinance was rejected (Table 1(c)).

Table 1.

Statistics and Test Results

a) Summary Statistics
Smoke-free Ordinance	Number of Quarters	Mean	Std Dev	Std Err	Minimum	Maximum
Pre	12	5696859	298389	86137.6	5284631	6098151
Post	12	6110701	294314	84961.2	5549414	6520573
Difference (Pre - Post)		−413842	296359	120988

b) Equality of Variances: Result of F-test
Method	Degree of Freedom		F Value	Pr > F
	Numerator	Denominator
Folded F	11	11	1.03	0.9644

c) Equality of Mean Tax Revenues: Result of T-test
Method	Variances	Degree of Freedom	t Value	Pr > |t|
Pooled	Equal	22	−3.42	0.0024

The taxable sales revenues of eating and drinking places in Kirksville increased by 7.3% with an average quarterly increase of $413,842, post smoke-free ordinance.

The trend in adjusted revenue from eating and drinking establishments in Kirksville from the third quarter of 2004 to the second quarter of 2010 is shown in Figure 1. The revenues from eating and drinking establishments, adjusted for inflation and economic activity, also showed no downward trend after ordinance enactment.

Figure 1.

Trend in Adjusted Revenue from Eating and Drinking Establishments in Kirksville.

(Adjusted for Information)

Conclusion and Discussion

In this small rural college community, it was determined that the smoke-free bars/restaurants ordinance posed no undue economic harm to hospitality business, and taxable sales revenues posted a significant positive change post-ordinance. The results of this current study mirrors the neutral or positive economic effects following smoke-free ordinance enactment quantified by other studies. However, a limitation was that all bars and restaurants were examined in the aggregate. Although there was a possibility that some establishments may have ‘broke-even’ or even lost revenue pre- to post-ordinance enactment, the net economic impact was the main focus.

Restaurant and bar owners frequently fear that smoke-free ordinances will decrease business and revenues. These fears have been exacerbated by studies overtly and covertly funded by the tobacco industry or their allies. Scollo et al.² examined nearly 100 extant studies related to smoke-free legislation. After systematic review, it was determined that studies using subjective data (e.g. surveys, anecdotes) were four times more likely to conclude negative economic impact compared to studies using objective data (e.g. taxable sales). See Figure 1. Further, studies that were not peer-reviewed were 20 times more likely to conclude negative impact than those that were peer-reviewed. All of the studies that found negative impact had been supported by the tobacco industry; whereas, none of the non-tobacco industry supported studies reported economic harm.² In the state of Missouri, as a recent example, the tobacco industry claimed that Kansas City’s smoke-free policy would harm hospitality business, but multivariate econometric models concluded the ordinance had no negative economic impact on hospitality business.¹⁹ When satisfying the basic criteria of objective instead of subjective data, being published in a peer-reviewed journal, and being free of tobacco industry influence, the preponderance of studies, including this current one, concluded no undue economic harm to bar and restaurant business as a result of smoke-free ordinances.

Biography

Carolyn C. Cox, PhD, CHES, (above) is Corresponding Author of this paper, and Professor in Health Sciences, at Truman State University in Kirksville. Noaman Kayani, PhD, is a Research Analyst at the Missouri Department of Health and Senior Services, Office of Epidemiology. Stanley R. Cowan, RS, MPA, is a Research Aide in the Department of Family and Community Medicine at the University of Missouri School of Medicine. Leslie A. Moss, BS, CHES, MHA, is a Graduate Research Assistant at the MU Center for Health Ethics, University of Missouri. This article is the second in a two-year Missouri Medicine special series on Preventive Cardiology.

Contact: ccox@truman.edu