PHILADELPHIA -- The Philadelphia Department of Health has provisionally adopted a new set of tobacco regulations that would impose a limit of one retail store that sells tobacco products per 1,000 residents in each of the 18 districts in the city. This means that if the current density of retail stores that sell tobacco products is higher than the 1/1,000 ratio in any given district, then a retailer cannot relocate its store in that district, nor can a retailer open a new store in that district. Retail stores that are licensed in the city could continue to sell tobacco products so long as the annual retail tobacco license is renewed.
However, on the health’s department's website, a table and map show that the density of retail stores exceeds the 1/1,000 limit in 14 out of the 18 planning districts. This limitation essentially guarantees that no new retail store development will occur in three-fourths of the entire city. Here’s a map.
The fact that the city’s board of health “provisionally” adopted the regulation Sept. 8, 2016, before requesting or receiving input from the public, including retailers affected by the regulations, is problematic. This process is essentially backwards and does not allow public input first and governmental-agency deliberation second.
Besides preventing new retail stores from opening in more than three-fourths of the city, the tobacco regulations would likely result in retailers facing a significant devaluation of their businesses. Many retail stores are family-owned, “mom and pop stores.” However, the new regulations may require a person obtaining a current store through a purchase or other transfer to prove to the health department that the store was acquired through an “arm's-length transaction.” If a retailer dies and a son or daughter inherits the store, does inheritance constitute an “arm's-length transaction?” If a parent wants to hand down their store to one of their children, is a gift transaction an “arm's-length transaction”?
These are legitimate transfers, but the regulations are devoid of any factors that must be taken into account to determine what is and is not an “arm's-length transaction.” This vagueness leaves it up to the sole discretion of the Philadelphia Department of Health to determine whether to issue a tobacco license to a new store owner. The problem is that the sale of tobacco products accounts for up to 40% of in-store sales for an average convenience store. If a tobacco retail license is not issued for a store that is transferred, the value of that store is diminished significantly. Consequently, a convenience store would face a severe reduction in sales if a retail tobacco license is not issued because the business model for a convenience store includes gasoline sales outside at the pump and tobacco sales inside the store. Without both gasoline and tobacco sales, the economic viability of a convenience store is doubtful.
NATO has submitted comments directly to the Philadelphia Department of Health informing the board members of the financial effect on small retail stores if the density restrictions are formally adopted and enacted by the board of health.