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Bethel city rakes in revenue from new tobacco tax

Sean Doogan
A new excise tax on tobacco in the Southwest Alaska hub of Bethel brought the city more than $25,000 in its first month in effect. With an election looming, city officials have yet to decide what to do with the money. Loren Holmes photo

A new tobacco excise tax in the Southwest Alaska hub of Bethel brought the city more than $25,000 during the month of March, the first month the tax was put into effect. City finance officials say they don’t have the numbers for April yet, but they could go even higher.

The new $2.21 per-pack tax on cigarettes, along with a 45-percent tax on all other tobacco products, including chewing tobacco, was passed by the Bethel City Council in December 2012. But with an election looming, city officials have yet to decide what to do with the money.

"The city council will decide that in the near future,” said Bethel City Manager Lee Foley. “For now, we are just collecting and saving the money, but whatever is decided, I am sure the tobacco excise tax money will be spent on the public good,” he said.

Bethel is a small town by most standards, with a population about 6,000, but it has a big tobacco habit. Like much of rural Alaska, it has smoking rates for both adults and children that are higher than the statewide average. The Alaska Tobacco Control Alliance says one in three adults in Southwest Alaska smokes. That compares with a statewide average of about one in five.

Youth smoking rates are also higher in Southwest Alaska than across the rest of the state. In Bethel, it is estimated that 26 percent of youths smoke. Smokeless tobacco use is also quite high in the region, with an estimated 23 percent of adults “chewing.” That dwarfs the statewide average use rate of 5.3 percent. Generally, all rates of tobacco usage are higher among Alaska Natives than non-Natives.

The high prevalence of tobacco use among Bethel-area residents was one reason the new excise tax was proposed. It was introduced by Bethel City Council Member Eric Whitney. “I wanted to raise awareness about tobacco use and find a way to decrease it across Bethel,“ Whitney said. “Every time you go outside, whether it be from a hospital, school, or store, you run into a big cloud of cigarette smoke.”

The Bethel tobacco tax was debated at City Council meetings last fall, when a pack of cigarettes cost about $8.50, less than if bought in larger cities, like Fairbanks and Anchorage. Now a pack in Bethel costs more than $10.

The new tax is on track to supply the city with about $300,000 per year -- potentially making it one of the city’s main sources of income -- but the number could change if the extra cost convinces some Bethel smokers and chewers to kick the habit.

So far, that doesn’t appear to be the case.

"I am surprised at the amount of money it is bringing in, so it doesn’t appear that has happened, yet,” Foley said.

There are no immediate plans by the Bethel City Council to decide what to do with the tax windfall. The money, for now, is sitting in a city bank account. By law, it must, at some point go into the community’s general revenue stream, and from there, it could be passed out to city departments. Some ideas have been floated for the money: to fund tobacco prevention and education, or to bolster organized outdoor activities for Bethel’s kids. But the windfall is idle for now.

One potential reason the money has yet to be allocated: the fear that the revenue source may not be around long enough to be counted on. Four of the seven seats on the city council will be up for grabs in Bethel's October municipal election, and the tobacco tax could become a major issue for voters.

"I have heard a lot of talk about people saying they are going to run for the council so they can repeal the tax,” said Mark Springer, who was one of two no votes on the tax. Springer, who does not use tobacco himself, says he opposes the tax because “the city has no business getting into the health and wellness business.”

Even a tax supporter on the council admits it will be a major topic of discussion when the elections begin.

"The members can repeal it at any time, and the council is very reluctant to allocate the tobacco excise funds now, because we fear it might not be around after the election,” said Bethel City Council member Mary Sattler, who supports the tax.

There have been also threats of a citizens' initiative to repeal the tax, and lawsuits. “And there are more than a few potential city council candidates who say they will run, with the idea of repealing the tax as a major part of their campaign.” Sattler said.

It is still too early to tell whether the tobacco tax will reduce smoking rates in Bethel. Numbers supplied by the Alaska Tobacco Control Alliance claim that for every 10 percent increase in the price of a pack of cigarettes, adult smoking rates decrease by 5 percent and up to 7 percent fewer children smoke.

Whether those decreases happen in Bethel remains to be seen, but one thing is certain: The full impacts of the community’s tobacco excise tax remain clouded.

Contact Sean Doogan at sean(at)alaskadispatch.com