A Research Study: The Measurable Economic Impact of Certain Smoke-Free Ordinances in Minnesota

A Research Study: The Measurable Economic Impact of Certain Smoke-Free Ordinances in Minnesota Prepared for the Minnesota Institute of Public Health by Dan Stoltz and Michael Bromelkamp February 23, 2007

TABLE OF CONTENTS Executive Summary... 1 Purpose of Research Study... 3 Approach... 4 Seven Ordinances reviewed from across Minnesota 1. Beltrami County... 6 2. Hennepin County... 11 3. Ramsey County... 16 4. City of Bloomington... 21 5. City of Golden Valley... 26 6. City of Minneapolis... 30 7. City of Moorhead... 35 Summary of Statewide Economic Impact... 39 Data Sources and Study Limitations... 46 Researcher Biographies... 48

EXECUTIVE SUMMARY This study was prepared by economic researchers in response to a request from the study sponsors to evaluate the direct economic impact of some of the various smoke-free ordinances that were implemented throughout the State of Minnesota in 2004 and 2005. One way to measure the direct economic impact of smoke-free ordinances is to analyze the changes and relationships among four key statistics within a defined geographic area (city, county, or state); Numbers of residents (population) Dollars of aggregate sales (hospitality industry) Numbers of employees (hospitality industry) Numbers of eating & drinking establishments (hospitality industry) The Minnesota Department of Revenue s definition of hospitality includes all bars and restaurants. For the purposes of this report, these key statistics were gathered and analyzed for seven jurisdictions where smoke-free ordinances have been implemented; Beltrami County Hennepin County Ramsey County City of Bloomington City of Golden Valley City of Minneapolis City of Moorhead The Consumer Price Index (CPI - National) is being used to support the analysis of the revenue trends included in this study. Aggregate sales for eating and drinking establishments should be considered the key statistic when evaluating the economic impact of a smoke-free ordinance. Retail revenues have also been reviewed to give hospitality industry data a context within general economic conditions. A correlation between the hospitality and retail data was noted which lends credibility to the analysis of the key data. - 1-2/23/07

EXECUTIVE SUMMARY (CONTINUED) Based on data available through 2005, there was no apparent economic impact on the local economies examined in this report, or on the State of Minnesota as a whole. The data graphs show that reported 2005 sales were in line with historical trends. This study was conducted during the first year of several of the smoke-free ordinances included in this report. Ideally, it would be helpful to look at two to three years of data following ordinance implementation to monitor trends over time; however, the historical data that have been accumulated and plotted through 2005 provide a strong foundation for interim analysis. National research in this area is substantial and conclusive 1,2,3,4,5. Numerous peer-reviewed studies using objective data to assess the economic effects of smoke-free ordinances in restaurants and bars in other states have found that smoke-free ordinances have no overall negative economic impact. In fact, in many cases, studies have concluded that the ordinances can have a positive impact on sales in communities that have implemented them. 1 Bartosch WJ, Pope GC. Economic effect of smoke-free restaurant policies on restaurant business in Massachusetts. J Public Health Manage Pract. 1999;5(1):53-62. 2 Huang P, De AK, McCusker ME. Impact of a smoking ban on restaurant and bar revenues El Paso, TX, 2002. MMWR 2004;53(07):150-152. 3 Hyland A, Puli V, Cummings M, Sciandra R. New York s smoke-free regulations: effects on employment and sales in the hospitality industry. Cornell Hotel and Restaurant Administration Quarterly. 2003:9-16. 4 Scollo M, Lal A, Cancer Council Victoria Carlton, Victoria, Australia. Summary of studies assessing the economic impact of smoke-free policies in the hospitality industry. Available at www.vctc.org/au/tcres/hospitalitysummary.pdf. Accessed December 2004. 5 Warner KE. The Economies of Tobacco: Myths and Realities. Ann Arbor, MI: University of Michigan, School of Public Health, Department of Health Management and Policy; October 1999. - 2-2/23/07

PURPOSE OF RESEARCH STUDY Public policy decisions in Minnesota that dramatically affect the health of state residents and their visitors should be based upon an objective evaluation of accurate and complete data. This study was prepared by economic researchers in response to a request from the study sponsors to evaluate the direct economic impact of some of the various smoke-free ordinances that were implemented throughout the State of Minnesota in 2004 and 2005. Direct economic impact can be described as results, or cause and effects which can be attributed to a specific change in local conditions. The components of a credible economic impact study require 1 Use of objective data from independent sources Inclusion of data points after the law was implemented and several years before Use of statistical methods that control for both trends and random fluctuations Appropriate control for overall economic trends This comprehensive study is intended to take a long-term perspective of the effects of the various smoke-free ordinances. It is not intended to magnify the short-term impacts of these ordinances or draw premature inferences from incomplete or insufficient data. It is also not intended to serve as a forecasting tool. The objectives of this study are to Provide a comprehensive picture of the direct economic impact of the various smoke-free ordinances Present a complete analysis of the economic elements impacted by those ordinances Create a consistent approach towards the evaluation of those economic impacts Produce a reliable and relevant analysis which can be used for continuing evaluation and strategic decision-making. Limit analysis to objective facts, without inclusion of anecdotal information which can not be quantified or otherwise supported. This study focuses upon each of these components to support credibility and reliability. See the Data Sources and Study Limitations section of this report for additional discussion. 1 From Siegel, M. Economic impact of 100 percent smoke-free restaurant ordinances. In: Smoking and Restaurants: A Guide for Policy Makers. Berkeley, CA: University of California Berkeley/UCSF Preventative Medicine Residency Program; American Heart Association, California Affiliate; Alameda County Health Care services Agency, Tobacco Control Program; 1992. - 3-2/23/07

APPROACH The direct economic impact of smoke-free ordinances can be defined by analyzing the changes and relationships between four key statistics within a defined geographic area (city, county, or state); Numbers of residents (population) Dollars of aggregate sales (hospitality industry) Numbers of employees (hospitality industry) Numbers of eating & drinking establishments (hospitality industry) For the purposes of this report, aggregate sales for eating and drinking establishments should be considered the key statistic. In addition to eating and drinking establishment data, information on retail sales is included to provide a general economic context for the key statistics. There appears to be a correlation between aggregate hospitality sales and retail sales within most of the jurisdictions in the study. This suggests that Minnesota sales, both retail and hospitality, are dependent upon many of the same factors, such as weather, demographics, local economic conditions, employment, and population, to name a few. 4.0% National Inflation Rates 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% SOURCE U.S. Department of Labor, Bureau of Labor Statistics Aggregate sales numbers are adjusted for inflation using the national Consumer Price Index (CPI) calculated by the Department of Labor. Factoring the effects of inflation out of the sales numbers should magnify any economic impact that could be attributed to the smoke-free ordinances in the study. It allows analysis to be done with constant, real dollars. - 4-2/23/07

APPROACH Method of presentation For the purposes of this report, the statistical information is presented in a consistent format. It is intended to assist the reader in understanding the information presented and permit comparison between the communities and counties included in the report. Based on data over the past twelve years, a trend line was included for each chart that describes the historical pattern of revenue in eating and drinking establishments. The statistical information is presented in the following order: National Inflation Rates Population Eating and Drinking Establishments Aggregate Sales Eating and Drinking Establishments Aggregate Sales per Capita Eating and Drinking Establishments Numbers of Establishments and Employees Retail Aggregate Sales Retail Aggregate Sales per Capita National Inflation Rate A graph of national inflation rates (1994 through 2005) is included earlier in this section of the report. It allows analysis to be completed with constant, real dollars. The national CPI is being used. Population The population of any community, or county, will be a primary indicator of economic activity. Demographics, such as income, location, or age, are additional factors that can affect economic activity. However, population is a major factor driving demand for local eating and drinking establishments. Its inclusion in this report permits the calculation of per capita revenues, which enhances comparability over the years analyzed. Eating and Drinking Establishments Aggregate Sales One of the primary measurements that indicate the economic impact of any smoke-free ordinance is aggregate sales by the affected businesses. Any change in the total sales activity could reflect decisions by consumers to choose alternate facilities. However, a change in aggregate sales could also reflect the impacts of differences in pricing, programs, products, service, hours, and other factors related to the market in which eating and drinking establishments participate. Eating and Drinking Establishments Aggregate Sales per Capita This measurement combines two major indicators of economic activity in a community or county. It factors out the impact of population changes over a period of time. Eating and Drinking Establishments Numbers of Establishments and Employees Secondary indicators of economic activity over time are the changes in the number of businesses operating in the same market space and the number of employees employed in those operations. Retail Aggregate Sales and Aggregate Sales per Capita This additional information is included to complement the aggregate sales data already presented for eating and drinking establishments. Other national studies and an analysis of Minnesota data indicate, in most cases, a reasonable correlation between retail sales and eating and drinking establishment sales. - 5-2/23/07

1. BELTRAMI COUNTY Background An ordinance was passed on August 17, 2004 that prohibits smoking in public places of work and within 10 feet of primary public entrances and exits, open windows and ventilation intakes of public places and places of work. The ordinance was effective on January 1, 2005. Bars and restaurants are exempt under the ordinance between 8:00 p.m. and 3:00 a.m. until January 1, 2007. Starting on January 1, 2007, all bars and restaurants that allow smoking would be required to have a separate smoking room with separate ventilation. Summary findings -- There was no apparent economic impact as a result of the Beltrami County smoke-free ordinance, which was effective on January 1, 2005. The data graphs show that reported 2005 sales were in line with historical trends. Beltrami County - Population 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 SOURCE Minnesota Department of Administrations Demographic Center During the period 1994 to 2005, the population of Beltrami County increased by 18.3% to 42,698, an average annual increase of 1.7%. - 6-2/23/07

BELTRAMI COUNTY Beltrami County - Eating & Drinking Establishments Aggregate Sales $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 Aggregate Sales Linear (Aggregate Sales) Adjusted for Inflation Linear (Adjusted for Inflation) SOURCE Minnesota Department of Revenue Aggregate sales for eating and drinking establishments should be considered the key statistic when evaluating the economic impact of a smoke-free ordinance. From 1994 to 2005, total aggregate sales at eating and drinking establishments within Beltrami County increased by 54.3% to $41,945,246, an average annual increase of around 4.9%. The increase from 2004 to 2005 was $1,017,774, or 2.5%. Aggregate sales numbers are adjusted for inflation using the national Consumer Price Index (CPI) calculated by the Department of Labor. Factoring the effects of inflation out of the sales numbers should magnify any economic impact that could be attributed to the smoke-free ordinances included in the study. It allows analysis to be done with constant, real dollars. - 7-2/23/07

BELTRAMI COUNTY $800 Beltrami County - Eating & Drinking Establishments Aggregate Sales Per Capita (adjusted for inflation) $700 $600 $500 $400 $300 $200 $100 SOURCE Minnesota Department of Revenue The aggregate sales per capita of $709 in 2005 represent a decrease from $733 in 1994, adjusted for inflation. Per capita sales are calculated by dividing annual sales each year by population. - 8-2/23/07

BELTRAMI COUNTY Beltrami County - Eating & Drinking Establishments & Number of Employees Establishments 90 80 70 60 50 40 30 20 10 0 # Employees # of Establishments 1,600 1,400 1,200 1,000 800 600 400 200 0 Employees SOURCE Minnesota Department of Employment and Economic Development Over the period 1994 to 2005, the total numbers of employees in eating and drinking establishments located in Beltrami County essentially mirrored the number of establishments. The number of employees grew by 11.7% during the period, compared to a 12.0% increase in the number of eating and drinking establishments. - 9-2/23/07

BELTRAMI COUNTY Beltrami County - Aggregate Retail Sales $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 Aggregate Sales Linear (Aggregate Sales) Adjusted for Inflation Linear (Adjusted for Inflation) SOURCE Minnesota Department of Revenue Beltrami County - Aggregate Retail Sales Per Capita (adjusted for inflation) $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 During the period 1994 to 2005, the total retail sales dollars in Beltrami County grew by 71.3% to $530,446,835. This represents an average annual increase of 6.5%. Adjusted for inflation, the aggregate retail sales per capita of $8,970 in 2005 represents less than a 1% increase over a eleven-year period. - 10-2/23/07

2. HENNEPIN COUNTY Background On October 12, 2004, the Hennepin County Board passed Ordinance Number 24, which prohibits smoking in the indoor areas of food establishments, including those businesses that sell liquor, unless otherwise excluded. Effective on March 31, 2005. A food establishment means those establishments defined in Minnesota Rules 4626.0020, subpart 35, including an establishment that has an on-sale non-intoxicating malt liquor license; an on-sale intoxicating liquor license; an on-sale wine license and/or strong beer liquor license issued by the State of Minnesota, the municipality within which it is located, or Hennepin County. Summary findings There was no apparent economic impact as a result of the Hennepin County smoke-free ordinance, which was effective on March 31, 2005. The data graphs show that reported 2005 sales were in line with historical trends. Hennepin County - Population 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 SOURCE Minnesota Department of Administrations Demographic Center During the period 1994 to 2005, the population of Hennepin County increased to 1,150,912, an average annual increase of around 0.8%. - 11-2/23/07

HENNEPIN COUNTY Hennepin County - Eating & Drinking Establishments Aggregate Sales $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 Sales $ Adjusted for Inflation Linear (Sales $) Linear (Adjusted for Inflation) SOURCE Minnesota Department of Revenue Aggregate sales for eating and drinking establishments should be considered the key statistic when evaluating the economic impact of a smoke-free ordinance. From 1994 to 2005, total aggregate sales at eating and drinking establishments within Hennepin County increased by 92.1% to $2,162,157,320, an average annual increase of around 8.4%. The increase from 2004 to 2005 was $129,871,219, or 6.4%. Aggregate sales numbers are adjusted for inflation using the national Consumer Price Index (CPI) calculated by the Department of Labor. Factoring the effects of inflation out of the sales numbers should magnify any economic impact that could be attributed to the smoke-free ordinances included in the study. It allows analysis to be done with constant, real dollars. - 12-2/23/07

HENNEPIN COUNTY $1,400 Hennepin County - Eating & Drinking Establishments Aggregate Sales Per Capita (adjusted for inflation) $1,200 $1,000 $800 $600 $400 $200 source Minnesota Department of Revenue From 1994 to 2005, per capita aggregate sales increased by nearly 26%, to $1,306, an annual increase of 2.4%. Per capita sales are calculated by dividing annual sales each year by population. - 13-2/23/07

HENNEPIN COUNTY Hennepin County - Eating & Drinking Establishments & Number of Employees Establishments 3,000 2,500 2,000 1,500 1,000 500 60,000 50,000 40,000 30,000 20,000 10,000 Employees 0 # Employees # of Establishments 0 SOURCE Minnesota Department of Employment and Economic Development During the period 1994 to 2005, the total numbers of employees in eating and drinking establishments lagged the increases in the number of establishments, growing by just 1.4% per year (compared to 3.1%). - 14-2/23/07

HENNEPIN COUNTY Hennepin County - Aggregate Retail Sales $20,000,000,000 $18,000,000,000 $16,000,000,000 $14,000,000,000 $12,000,000,000 $10,000,000,000 $8,000,000,000 $6,000,000,000 $4,000,000,000 $2,000,000,000 Sales $ Adjusted for Inflation Linear (Sales $) Linear (Adjusted for Inflation) SOURCE Minnesota Department of Revenue Hennepin County - Aggregate Retail Sales Per Capita (adjusted for inflation) $11,800 $11,600 $11,400 $11,200 $11,000 $10,800 $10,600 $10,400 $10,200 $10,000 During the period 1994 to 2005, the total retail sales dollars in Hennepin County grew by 56.7% to $18,065,284,003. This represents an average annual increase of 5.2%. However, adjusted for inflation, the trend line has decreased over the eleven-year period. - 15-2/23/07

3. RAMSEY COUNTY Background An ordinance was passed on September 14, 2004 to prohibit smoking in all indoor areas of any restaurants. Bars may apply for an exemption if more that 50% of their net food and beverage sales are from beer, wine, or liquor. Restaurants with adjacent bars can allow smoking only in the bar if a continuous wall is built separating the areas, have separate ventilation, the bar is maintained under negative pressure relative to adjacent areas, and the bar receives a separate food and/or beverage license. Minors are not permitted to enter or be employed in the bar. Private clubs may apply for an exemption except when they serve food and/or beverages to the public. Summary findings There was no apparent economic impact as a result of the Ramsey County smoke-free ordinance, which was effective on March 31, 2005. The data graphs show that reported 2005 sales were in line with historical trends. Ramsey County - Population 600,000 500,000 400,000 300,000 200,000 100,000 0 SOURCE Minnesota Department of Administrations Demographic Center During the period 1994 to 2005, the population of Ramsey County increased by 4.5% to 515,258, an average annual increase of only 0.4%. - 16-2/23/07

RAMSEY COUNTY $900,000,000 $800,000,000 $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 Ramsey County - Eating & Drinking Establishments Aggregate Sales Aggregate Sales Linear (Aggregate Sales) Adjusted for Inflation Linear (Adjusted for Inflation) SOURCE Minnesota Department of Revenue Aggregate sales for eating and drinking establishments should be considered the key statistic when evaluating the economic impact of a smoke-free ordinance. From 1994 to 2005, total aggregate sales at eating and drinking establishments within Ramsey County increased by 78.2% to $786,253,728, an average annual increase of around 7.1%. The decrease from 2004 to 2005 was $6,632,524, or 0.8%. Aggregate sales numbers are adjusted for inflation using the national Consumer Price Index (CPI) calculated by the Department of Labor. Factoring the effects of inflation out of the sales numbers should magnify any economic impact that could be attributed to the smoke-free ordinances included in the study. It allows analysis to be done with constant, real dollars. - 17-2/23/07

RAMSEY COUNTY $1,400 Ramsey County - Eating & Drinking Establishments Aggregate Sales Per Capita (adjusted for inflation) $1,200 $1,000 $800 $600 $400 $200 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 SOURCE Minnesota Department of Revenue From 1994 to 2005, per capita aggregate sales increased by nearly 22%, to $1,061, an annual increase of 2.0%. Per capita sales are calculated by dividing annual sales each year by population. - 18-2/23/07

RAMSEY COUNTY Ramsey County - Eating & Drinking Establishments & Number of Employees 1,200 25,000 Establishments 1,000 800 600 400 200 20,000 15,000 10,000 5,000 Employees 0 # Employees # of Establishments 0 SOURCE Minnesota Department of Employment and Economic Development During the period 1994 to 2005, the total number of eating and drinking establishments in Ramsey County increased by 17.2%, to a total of 1,099, an average annual increase of around 1.6%. That was at a rate a bit higher than population growth during the same period. During the period 1994 to 2005, the total numbers of employees in eating and drinking establishments located in Ramsey County mirrored the number of establishments, growing by just 1.2% per year, to a total of 20,718. - 19-2/23/07

RAMSEY COUNTY Ramsey County - Aggregate Retail Sales $9,000,000,000 $8,000,000,000 $7,000,000,000 $6,000,000,000 $5,000,000,000 $4,000,000,000 $3,000,000,000 $2,000,000,000 $1,000,000,000 Aggregate Sales Linear (Aggregate Sales) Adjusted for Inflation Linear (Adjusted for Inflation) SOURCE Minnesota Department of Revenue Ramsey County - Aggregate Retail Sales Per Capita (adjusted for inflation) $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 During the period 1994 to 2005, the total retail sales dollars in Ramsey County grew by 98.3% to $7,772,252,435. This represents an average annual increase of 8.9%. Adjusted for inflation, the aggregate retail sales per capita of $10,484 represents a 3.2% annual increase over a eleven-year period. - 20-2/23/07

4. CITY OF BLOOMINGTON Background An ordinance was passed on July 19, 2004 eliminating smoking in indoor public places and workplaces. Effective September 1, 2004, the ordinance also prohibits smoking within 25 feet of entrances, exits, open windows and ventilation intakes of public places and workplaces. Effective March 31, 2005, the smoke-free ban includes outdoor restaurant patios; however, restaurants may designate up to one-half of outdoor seating capacity as permitted smoking areas. The smoking ordinance is in effect for establishments that have on-sale liquor, wine, 3.2 beer, or charitable gambling licenses or permits. Summary findings There was no apparent economic impact as a result of the City of Bloomington smoke-free ordinance, which was basically effective on March 31, 2005. The data graphs show that reported 2005 sales were in line with historical trends. City of Bloomington - Population 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 SOURCE Minnesota Department of Administrations Demographic Center During the period 1994 to 2005, the population of the City of Bloomington decreased by 2.7% to 84,347, an average annual decrease of just over 0.2%. - 21-2/23/07

CITY OF BLOOMINGTON $300,000,000 City of Bloomington - Eating & Drinking Establishments Aggregate Sales $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000 Aggregate Sales Linear (Aggregate Sales) Adjusted for Inflation Linear (Adjusted for Inflation) SOURCE Minnesota Department of Revenue Aggregate sales for eating and drinking establishments should be considered the key statistic when evaluating the economic impact of a smoking ordinance. From 1994 to 2005, total aggregate sales at eating and drinking establishments within the City of Bloomington increased by 49.7% to $252,174,229, an average annual increase of around 4.5%. The decrease from 2004 to 2005 was $6,198,758, or (2.4)%. The trend line appears quite flat, after inflation, over the period under evaluation. Aggregate sales numbers are adjusted for inflation using the national Consumer Price Index (CPI) calculated by the Department of Labor. Factoring the effects of inflation out of the sales numbers should magnify any economic impact that could be attributed to the smoke-free ordinances included in the study. It allows analysis to be done with constant, real dollars. - 22-2/23/07

CITY OF BLOOMINGTON $2,500 City of Bloomington - Eating & Drinking Establishments Aggregate Sales Per Capita (adjusted for inflation) $2,000 $1,500 $1,000 $500 SOURCE Minnesota Department of Revenue The aggregate sales per capita of $2,078 in 2005 represent only a slight increase over eleven years (less than 1% per year). Per capita sales are calculated by dividing annual sales by population. - 23-2/23/07

CITY OF BLOOMINGTON City of Bloomington - Eating & Drinking Establishments & Number of Employees Establishments 300 250 200 150 100 50 0 # Employees # of Establishments 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Employees SOURCE Minnesota Department of Employment and Economic Development During the period 1994 to 2005, the total number of eating and drinking establishments in the City of Bloomington grew by 18.9%, from 201 to 239. Over the period 1994 to 2005, the total numbers of employees in eating and drinking establishments located in the City of Bloomington has significantly lagged the growth in the number of establishments. The numbers of employees of eating and drinking establishments fell by 4.8% between 1994 and 2005, to 6,370. However, there have been substantial increases since 2002 when employment reached a low of 5,417. - 24-2/23/07

CITY OF BLOOMINGTON City of Bloomington - Aggregate Retail Sales $3,500,000,000 $3,000,000,000 $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 Aggregate Sales Adjusted for Inflation Linear (Aggregate Sales) Linear (Adjusted for Inflation) SOURCE Minnesota Department of Revenue $25,000 City of Bloomington - Aggregate Retail Sales Per Capita (adjusted for inflation) $20,000 $15,000 $10,000 $5,000 During the period 1994 to 2005, the total retail sales dollars in the City of Bloomington more than doubled. Aggregate retail sales grew by 124% to $2,879,614,887. This represents an average annual increase of 11.2%, highest of all areas covered in this study. - 25-2/23/07

5. CITY OF GOLDEN VALLEY Background An ordinance was passed on October 19, 2004, effective March 31, 2005. The ordinance prohibits smoking in both indoor and outdoor dining areas of liquor and food establishments, within 25 feet of entrances, exits, open windows, and ventilation intakes of public places and places of work, within 25 feet of any outdoor dining area at any liquor or food establishment, and in public parks and recreation facilities. Summary findings There was no apparent economic impact as a result of the City of Golden Valley smoke-free ordinance, which was effective on March 31, 2005. The data graphs show that reported 2005 sales were in line with historical trends. City of Golden Valley - Population 25,000 20,000 15,000 10,000 5,000 0 SOURCE Minnesota Department of Administrations Demographic Center During the period 1994 to 2005, the population of the City of Golden Valley actually declined slightly, from 20,947 in 1994 to 20,510 in 2005 substantially no change over the period presented. - 26-2/23/07

CITY OF GOLDEN VALLEY City of Golden Valley - Eating & Drinking Establishments Aggregate Sales $50,000,000 $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 Aggregate Sales Adjusted for Inflation Linear (Adjusted for Inflation) Linear (Aggregate Sales) SOURCE Minnesota Department of Revenue Aggregate sales for eating and drinking establishments should be considered the key statistic when evaluating the economic impact of a smoking ordinance. From 1994 to 2005, total aggregate sales at eating and drinking establishments within the City of Golden Valley increased by 142% to $46,677,426, an average annual increase of around 12.9%. The increase from 2004 to 2005 was $3,733,811, or 8.7%. Aggregate sales numbers are adjusted for inflation using the national Consumer Price Index (CPI) calculated by the Department of Labor. Factoring the effects of inflation out of the sales numbers should magnify any economic impact that could be attributed to the smoke-free ordinances included in the study. It allows analysis to be done with constant, real dollars. - 27-2/23/07

CITY OF GOLDEN VALLEY $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 City of Golden Valley - Eating & Drinking Establishments Aggregate Sales Per Capita (adjusted for inflation) SOURCE Minnesota Department of Revenue From 1994 to 2005, total aggregate sales per capita in the City of Golden Valley increased at an average annual rate of 7.0%, adjusted for inflation. Per capita sales are calculated by dividing annual sales each year by population. NOTE Data for numbers of eating and drinking establishments and numbers of employees are not available from the Minnesota Department of Employment and Economic Development for the City of Golden Valley. The resulting charts and analyses are not available. - 28-2/23/07

CITY OF GOLDEN VALLEY City of Golden Valley - Aggregate Retail Sales $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 Aggregate Sales Linear (Aggregate Sales) Adjusted for Inflation Linear (Adjusted for Inflation) SOURCE Minnesota Department of Revenue City of Golden Valley - Aggregate Retail Sales Per Capita (adjusted for inflation) $25,000 $20,000 $15,000 $10,000 $5,000 From 1994 to 2005, aggregate retail sales in Golden Valley grew by 232%, to $438,821,632 (adjusted for inflation). This represents an annual increase of 21%. From 1994 to 2005, aggregate retail sales per capita grew by 239% to $21,396 (adjusted for inflation). This represents an annual increase of 22%. - 29-2/23/07

6. CITY OF MINNEAPOLIS Background The City of Minneapolis ordinance prohibits smoking in bowling alleys and pool and billiard halls, in addition to restaurants and bars. The city s ordinance went into effect on March 31, 2005. Summary findings There was no apparent economic impact as a result of the City of Minneapolis smoke-free ordinance, which was effective on March 31, 2005. The data graphs show that reported 2005 sales were in line with historical trends. City of Minneapolis - Population 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 SOURCE Minnesota Department of Administrations Demographic Center During the period 1994 to 2005, the population of the City of Minneapolis increased by 5.8% to 387,711, an average annual increase of just 0.5%. - 30-2/23/07

CITY OF MINNEAPOLIS City of Minneapolis - Eating & Drinking Establishments Aggregate Sales $1,000,000,000 $900,000,000 $800,000,000 $700,000,000 $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 Aggregate Sales Linear (Aggregate Sales) Adjusted for Inflation Linear (Adjusted for Inflation) SOURCE Minnesota Department of Revenue Aggregate sales for eating and drinking establishments should be considered the key statistic when evaluating the economic impact of a smoking ordinance. From 1994 to 2005, total aggregate sales at eating and drinking establishments within the City of Minneapolis increased by 59% to $859,696,535, an average annual increase of around 5.3%. The increase from 2004 to 2005 was $81,524,003, or 10.5%. Aggregate sales numbers are adjusted for inflation using the national Consumer Price Index (CPI) calculated by the Department of Labor. Factoring the effects of inflation out of the sales numbers should magnify any economic impact that could be attributed to the smoke-free ordinances included in the study. It allows analysis to be done with constant, real dollars. - 31-2/23/07

CITY OF MINNEAPOLIS City of Minneapolis - Eating & Drinking Establishments Aggregate Sales Per Capita (adjusted for inflation) $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 SOURCE Minnesota Department of Revenue From 1994 to 2005, total aggregate sales per capita in the City of Minneapolis increased at an annual rate of 0.6%, adjusted for inflation. Per capita sales are calculated by dividing annual sales each year by population. - 32-2/23/07

CITY OF MINNEAPOLIS City of Minneapolis - Eating & Drinking Establishments & Number of Employees Establishments 1,200 1,000 800 600 400 200 0 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Employees # Employees # of Establishments SOURCE Minnesota Department of Employment and Economic Development During the period 1994 to 2005, the total number of eating and drinking establishments in the City of Minneapolis increased by 24.5%, to a total of 1,022, an average annual increase of around 2.2%. During the period 1994 to 2005, the total numbers of employees in eating and drinking establishments located in the City of Minneapolis grew by just 1.0 % per year, to a total of 18,064. - 33-2/23/07

CITY OF MINNEAPOLIS City of Minneapolis - Aggregate Retail Sales $4,500,000,000 $4,000,000,000 $3,500,000,000 $3,000,000,000 $2,500,000,000 $2,000,000,000 $1,500,000,000 $1,000,000,000 $500,000,000 Aggregate Sales Linear (Aggregate Sales) Adjusted for Inflation Linear (Adjusted for Inflation) SOURCE Minnesota Department of Revenue $12,000 City of Minneapolis - Aggregate Retail Sales Per Capita (adjusted for inflation) $10,000 $8,000 $6,000 $4,000 $2,000 During the period 1994 to 2005, the total retail sales dollars in the City of Minneapolis fell by 25.2% to $3,045,971,149. This represents an average annual decrease of 2.3%. - 34-2/23/07

7. CITY OF MOORHEAD Background An ordinance was passed on June 21, 2004, amended on November 15, 2004, that prohibits smoking in public indoor workplaces that includes bars and restaurants. There are two exceptions to the ordinance. The exceptions allow smoking in businesses with liquor licenses that restrict minors from entering and in bar areas of restaurants as long as the area is enclosed by walls and off limits to minors. Summary findings There was no apparent economic impact as a result of the City of Moorhead smoke-free ordinance, which was effective on December 15, 2004. The data graphs show that reported 2005 sales were in line with historical trends. City of Moorhead - Population 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1998 1999 2000 2001 2002 2003 2004 2005 SOURCE Minnesota Department of Administrations Demographic Center During the period 1998 to 2005, the population of the City of Moorhead increased by 6% to 34,244, an average annual increase of just 0.9%. - 35-2/23/07

CITY OF MOORHEAD City of Moorhead - Eating & Drinking Establishments Aggregate Sales $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 1998 1999 2000 2001 2002 2003 2004 2005 Aggregate Sales Linear (Aggregate Sales) Adjusted for Inflation Linear (Adjusted for Inflation) SOURCE Minnesota Department of Revenue Aggregate sales for eating and drinking establishments should be considered the key statistic when evaluating the economic impact of a smoking ordinance. From 1998 to 2005, total aggregate sales at eating and drinking establishments within the City of Moorhead increased by 43.8% to $36,879,855, an average annual increase of around 6.3%. The increase from 2004 to 2005 was $3,211,007, or 9.5%. Aggregate sales numbers are adjusted for inflation using the national Consumer Price Index (CPI) calculated by the Department of Labor. Factoring the effects of inflation out of the sales numbers should magnify any economic impact that could be attributed to the smoke-free ordinances included in the study. It allows analysis to be done with constant, real dollars. - 36-2/23/07

CITY OF MOORHEAD $900 $800 $700 $600 $500 $400 $300 $200 $100 City of Moorhead - Eating and Drinking Establishments Aggregate Sales Per Capita (adjusted for inflation) 1998 1999 2000 2001 2002 2003 2004 2005 From 1998 to 2005, total aggregate sales per capita in the City of Moorhead increased at an annual rate of 1.6%, adjusted for inflation. Per capita sales are calculated by dividing annual sales each year by population. NOTE Data for numbers of eating and drinking establishments and numbers of employees are not available from the Minnesota Department of Employment and Economic Development for the City of Moorhead. The resulting charts and analyses are not available. - 37-2/23/07

CITY OF MOORHEAD City of Moorhead - Aggregate Retail Sales $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 1998 1999 2000 2001 2002 2003 2004 2005 Aggregate Sales Linear (Aggregate Sales) Adjusted for Inflation Linear (Adjusted for Inflation) SOURCE Minnesota Department of Revenue City of Moorhead - Aggregate Retail Sales Per Capita (adjusted for inflation) $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 1998 1999 2000 2001 2002 2003 2004 2005 During the period 1998 to 2005, the total retail sales dollars in the City of Moorhead grew by 78% to $494,032,072. This represents an average annual increase of 11.1%. From 1998 to 2005, aggregate retail sales per capita increased at an annual rate of 4.6%, to $10,027. - 38-2/23/07

SUMMARY OF MINNESOTA STATEWIDE ECONOMIC IMPACT Summary findings There was no apparent economic impact as a result of the smoke-free ordinances reviewed in this report. The data graphs show that reported 2005 sales were in line with historical trends. State of Minnesota - Population 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 SOURCE Minnesota Department of Revenue During the period 1994 to 2005, the population of the State of Minnesota increased by 13.9% to 5,205,091, an average annual increase of 1.3%. - 39-2/23/07

STATE OF MINNESOTA State of Minnesota - Eating & Drinking Establishments Aggregate Sales $8,000,000,000 $7,000,000,000 $6,000,000,000 $5,000,000,000 $4,000,000,000 $3,000,000,000 $2,000,000,000 $1,000,000,000 Aggregate Sales Linear (Aggregate Sales) Adjusted for Inflation Linear (Adjusted for Inflation) SOURCE Minnesota Department of Revenue State of Minnesota - Eating & Drinking Establishments Aggregate Sales Per Capita (adjusted for inflation) $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004-40 - 2/23/07

STATE OF MINNESOTA Aggregate sales for eating and drinking establishments should be considered the key statistic when evaluating the economic impact of a smoke-free ordinance. Aggregate sales for eating and drinking establishments have increased at a rate of about 7.5% per year since 1994. Adjusted for inflation, per capita sales have shown a 1.3% average annual increase, paralleling the increased population of the state during the same period. The increase in aggregate sales for eating and drinking establishments from 2004 to 2005 was $406,487,116, or 6.5%. Aggregate sales numbers are adjusted for inflation using the national Consumer Price Index (CPI) calculated by the Department of Labor. Factoring the effects of inflation out of the sales numbers should magnify any economic impact that could be attributed to the smoke-free ordinances included in the study. It allows analysis to be done with constant, real dollars. - 41-2/23/07

STATE OF MINNESOTA State of Minnesota - Eating & Drinking Establishments & Number of Employees Establishments 12,000 10,000 8,000 6,000 4,000 2,000 0 # Employees # of Establishments 200,000 150,000 100,000 50,000 0 Employees SOURCE Minnesota Department of Employment and Economic Development The numbers of employees have basically paralleled the number of eating and drinking establishments between 1994 and 2005. - 42-2/23/07

STATE OF MINNESOTA State of Minnesota - Aggregate Retail Sales $80,000,000,000 $70,000,000,000 $60,000,000,000 $50,000,000,000 $40,000,000,000 $30,000,000,000 $20,000,000,000 $10,000,000,000 Aggregate Sales Linear (Aggregate Sales) Adjusted for Inflation Linear (Adjusted for Inflation) SOURCE Minnesota Department of Employment and Economic Development State of Minnesota - Aggregate Retail Sales Per Capita (adjusted for inflation) $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 Aggregate retail sales in the State of Minnesota grew by 86% since 1994. Even adjusted for inflation, retail sales grew by over 32.8% over the same time period. Adjusted for inflation, the aggregate retail sales per capita of $9,745 in 2005 represents less than a 2% increase over a eleven-year period. - 43-2/23/07

STATE OF MINNESOTA Eating and Drinking Establishments Aggregate Sales in Ordinance Communities as a Percentage of Minnesota Total, 2004-2005 Percent of Minnesota Total Sales 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 2004 2005 BELTRAMI HENNEPIN RAMSEY BLOOMINGTON GOLDEN VALLEY MINNEAPOLIS MOORHEAD SOURCE Minnesota Department of Revenue It is interesting to look at the seven jurisdictions analyzed in this report in relation to total eating and drinking aggregate sales in the State of Minnesota during 2004 and 2005. There was little change in the sales percentages to total aggregate eating and drinking sales in the State of Minnesota, with some slightly increasing and some slightly decreasing. It appears that these jurisdictions, existing in a state environment where many of the remaining jurisdictions allowed smoking, did not lose significant market share. The largest decrease was in Ramsey County (12.65% to 11.78%). The largest increase was in Minneapolis (12.42% to 12.88%). - 44-2/23/07

STATE OF MINNESOTA 450 Millions Cigarette Packs Sold in Minnesota 400 350 300 250 200 150 100 50 0 SOURCE Minnesota Department of Revenue Cigarette Packs Sold in Minnesota Per Capita 90 80 70 60 50 40 30 20 10 0 As shown in the graph above, the quantity of cigarette packs sold within the State of Minnesota is decreasing, even as the population increases. Since 1994, total packs sold in the state have fallen by 12.4%, although the population grew by 13.9% during the same period of time. The per capita sales of cigarette packs in Minnesota have fallen by 25% since 1994, to 62.5. This information is included to show that unit sales of cigarettes are declining over the period of time covered by this research report. - 45-2/23/07

DATA SOURCES AND STUDY LIMITATIONS This study uses Minnesota Department of Revenue taxable liquor and taxable non-liquor aggregate sales data for establishments reporting such data. This study does not examine liquor sales in off-sale establishments. Sales numbers are not adjusted for inflation unless specifically noted. Other factors besides smoking-related ordinances may have had an impact on local economies. Other influences on sales in eating & drinking establishments include: The condition of the local economy o Impact of gasoline prices on travel patterns o Success of local sports teams o One-time economic events (conventions, etc.) Population changes Weather Consumer preferences Consumer disposable income Changes in minimum wages Where key holidays fall in relation to the weekend Changes in DUI laws (drop to.08 from.10) The price of food and liquor in bars and restaurants relative to the prices of other goods and services This study makes use of some limited data. For example, sales data was not available from the Minnesota Department of revenue for all the years under study. This study analyzes revenue data, which is not the same as profitability. For example, liquor sales tend to be more profitable than food sales; and certain businesses may intentionally incur additional expenses in an effort to keep revenues the same. This study examines only the direct revenue and employment impact on bars and restaurants. It excludes effects such as reduced building cleaning costs, reduced employee health-related costs, and the economic effects on charitable gambling and on other businesses. The study excludes the health impacts on customers and bar and restaurant workers from reduced exposure to second-hand smoke. The study relies on the comparability of data obtained from the Minnesota Department of Revenue, where coding changes over the years have resulted in some inconsistencies. The trend lines were introduced to mitigate the impacts of these classification issues. All types of hospitality revenues are included in the data. In addition, during the study period, there was a change in coding standards (from SIC codes to NAICS codes), and the amounts reported under both were averaged in the year of the change. - 46-2/23/07

DATA SOURCES AND STUDY LIMITATIONS Data sources by type: Minnesota, County, and City Aggregate Sales (Minnesota Department of Revenue) Population demographics (Minnesota Department of Administration Demographic Center) Consumer Price Index U.S. Department of Labor, Bureau of Labor Statistics Minnesota, County, and City Eating and Drinking Establishments (Minnesota Department of Employment and Economic Development) Minnesota, County, and City Eating and Drinking Employees (Minnesota Department of Employment and Economic Development) The State of Minnesota was included as a general benchmark for comparison purposes in contrasting cities and counties to the larger state trends. - 47-2/23/07

RESEARCHER BIOGRAPHIES Daniel Stoltz, CPA (inactive), MBA Chief Financial Officer Twin City Co-ops Federal Credit Union St. Paul Dan is the CFO of Twin City Co-ops Federal Credit Union. He serves as Councilmember of the City of Lino Lakes; Chair of Midwest Challenge; Treasurer of the Lindbergh Foundation; Vice Chair of the Cooperative Foundation; Board Member at Northwestern College & Radio; and is Chair of Presbyterian Homes/Stonecrest Woodbury Senior housing. He has received his Master of Business Administration from the University of St. Thomas. Michael Bromelkamp, CPA, MBA, CIA Principal Olsen Thielen & Co. Ltd. CPAs St. Paul Mike is a Principal in the St. Paul Office of Olsen Thielen CPAs and has nearly 30 years of experience in accounting, auditing and consulting including managing corporate finance and accounting functions for a large national service company and supervising audits for a large national accounting firm. Mike is a graduate of St. John s University in Collegeville, Minn., and received his Master of Business Administration from Carlson School of Management at the University of Minnesota. - 48-2/23/07