Smoking ban bounces back to full council

A bill proposing to ban all tobacco products in county parks almost turned into a resolution weeks ago, which would take away its enforcement component. Rather, the bill was sent back to committee and now has morphed into an anti-smoking bill. “It would have been a lot easier if it was a total ban, but we are looking for a win-win situation here,” Kaua‘i County Councilman Dickie Chang said at the council meeting Wednesday.

The council’s Parks and Recreation Committee, on its second round of dealing with the bill, on Wednesday recommended by a 3-2 vote that the full council approve the bill next week. Bill 2437 has been bouncing around the council since Chang first introduced it on May 23, when it passed first reading. The Parks and Recreation Committee deferred the bill June 20, and on July 5 the bill squeezed out of the committee by a 3-2 vote. On July 11, at the full council for final and second reading, both sides of the issue — the Coalition for a Tobacco Free Hawai‘i and those who opposed the ban — were not satisfied with the bill’s final version. Instead of working on further amendments, the council sent the bill back to committee for additional work.

On Wednesday, Councilman Tim Bynum said the majority of major hotels, resorts and condominiums have been converting to non-smoking facilities. As a result, they have designated public parks and beaches as smoking areas for their guests. One of those hotels on the island’s Eastside has gone to the extent of placing on public property a receptacle for cigarette butts, he said. The bill is supposed to be back at full council for second reading next Wednesday. As it is now, the bill would no longer have a straight ban on tobacco products, and would impose a fine on those who “smoke or carry a lighted cigar, cigarette, pipe, or use any spark, flame or fire-producing device to light any of the aforementioned smoking devices.”

In other words, chewing tobacco or using it for different purposes would still be legal in county parks, as long as there is no fire or smoking involved. However, the bill, once a straight ban, would still allow smoking in a designated area in county parks — the parking lot. But smokers would have to move “at least 20 feet farthest downwind from the nearest park user who is using the park area adjacent to the parking lot,” according to the bill. And if a park’s parking lot is being used as the primary venue for an event, such as Wednesday’s Sunshine Market at Kapa‘a New Town Park, there would be no smoking allowed there.

First offenders would be fined at least $100. The fine grows to at least $200 on a second offense and between $300 and $500 on subsequent offenses. Valerie Saiki, representing the Coalition for a Tobacco Free Hawai‘i, had opposed the bill’s final version when it had reached full council July 11.

Cigarettes worth Rs 3 crore stolen from godowns

Burglars in Bengal seem to have found a new object of fancy - cigarettes. Godowns across the state that stock a city-based tobacco major's cigarettes have reported the theft of goods worth nearly Rs 3 crore over the last nine months. None of the cases has been cracked yet and the burglars have remained elusive. On July 16, a gang of burglars raided a cigarette godown at Andul Station Road.

 "They broke into the godown and fled with cigarettes worth of Rs 29 lakh," said godown owner Sanjib Singh. He pointed out that without a vehicle, the burglars couldn't have possibly fled with such a huge quantity of cigarettes. The burglars didn't take more than an hour to empty the entire stock. Singh lodged a complaint with Howrah (rural) police, but they are yet to make progress in the case.

 A few days before that, on May 26, a similar burglary took place at a Baranagar godown. "It was a Saturday evening and my brother downed the ground-floor shutters of my godown at Sashibushan Niyogi Garden Road," said Partho Pal, the distributor and godown owner. "The godown was closed on Sunday and when I opened it on Monday morning, the entire stock was gone," he added. The stock cost around Rs 12 lakh. He lodged a complaint with Baranagar police, but any headway is yet to be made. The biggest theft was reported on June 24 from a godown in Garfa from where cigarettes worth Rs 40 lakh went missing.

Monoranjan Das, the godown owner, said he lodged a complaint with Garfa police, and the detective department's anti-burglary section is now probing the case. On the same night, cigarettes worth Rs 8 lakh were stolen from a godown in Baruipur and burglars had even tried to break into Sanjib Singh's Andul godown. Probe revealed that similar burglaries had taken place in cigarette godowns in Baguiati, Basirhat, Asansol, Durgapur and Tarakeswar as well. Intriguingly, all the distributors work for a city-based tobacco major.

At Baguiati, police retrieved CCTV footage of the burglars, but none could be identified. Investigating officers suspect that a big and powerful racket is behind the crime and 'traditional' burglars or history-sheeters are not involved, making it difficult for police to track them down.

Second-hand smoke creating a stink

Cigarettes online, mail order from Europe in packs and cartons. 
Condominium board members that are feeling pressure from members to address the issue of second-hand smoke will be pleased to learn that there is a combined effort on the part of the U.S. Department of Housing and Urban Development (HUD), the U.S. Department of Health and Human Services (HHS) and others to advocate and encourage multifamily housing owners and operators to adopt smoke-free policies to protect residents from the dangers of second-hand smoke and to reduce property maintenance costs.

A new 63 page manual for owners or management agents of federally assisted public and multi-family housing has been published that provides eye-opening facts for community leaders, managers and operators. Smoke Free Housing is a 63 page compilation of material that includes specific information that can be helpful in limiting or eliminating smoking on multifamily buildings, as well as links to additional resources.

Portland State University's off-campus smoking ban

Among the things it claims to value, right up there with "learning and discovery" and "openness and reflection," Portland State University lists "a climate of mutual respect." PSU, then, would surely -- surely! -- be loath to prohibit an unpopular minority from engaging in a perfectly legal activity in a manner that harms no one else. And as for seeking such a prohibition on other people's property, forget about it, right?

 Just kidding! Mutual respect doesn't apply to smokers. Everyone knows that. Thus has PSU approached Portland Parks & Recreation about banning cancer sticks in the South Park Blocks in the middle the campus. PSU manages this chunk of the Park Blocks, mowing the grass and maintaining trees, says university spokesman Scott Gallagher. But the city owns the land, a detail that would complicate any push to create a tolerance-free zone for smokers.

Thank goodness for that. Gallagher says the potential ban is an extension of PSU's healthy campus initiative, which has drawn a bead on smoking. Also, campus surveys indicate that 75 percent of students would like PSU's campus to become smoke-free. An even greater percentage would probably like PSU to become tuition-free. But popular ideas don't always make good policy. Anyway, why should a smoker who has no connection to PSU have to snuff out his cigarette while strolling the Park Blocks near campus? Some, no doubt, would argue that even fleeting exposure to second-hand smoke in an open-air environment is dangerous, but we're not buying that.

Dosage matters. Others might point to littering, which, though wrong, is something many nonsmokers do, too. Ultimately, though, the push would have little to do with actual harm, either to bystanders or to the environment. Instead, it would be a naked expression of socially acceptable intolerance. Which is why Portland Parks & Recreation should remind PSU that the Park Blocks are not a part of the university's campus and won't go smoke-free. Students and others who don't approve of smoking can always give smokers a wide berth. Respectfully, of course.

Smoking Opportunity In Universal Corporation

Buying any business that is already or may be commoditized in the future is always dicey. But it is precisely that fundamental risk that creates opportunities in companies that sell undifferentiated products. Investors consistently over- or under-react to news about the product (be it tobacco, corn, or whatever), which enhances price volatility, thereby increasing the chances that the company may be bought at a bargain.

Today's case in point is Universal Corporation (UVV) one of the world's largest leaf tobacco merchants. To set the stage here, picture buyers from UVV contracting with farmers all over the globe for them to sell their tobacco leaves to UVV. Universal then processes, packages, and supplies the larger, more famous name-brand cigarette companies. In recent years Philip Morris (PM) and Imperial Tobacco (ITYBY.PK) each made up over 10% of UVV revenues.

 There are some who have, in the past, tried to compare Universal to its own customers such as PM or ITYBY because they are, after all, in the tobacco business. This is likely always going to achieve the same result. It will always tell you that UVV is undervalued compared to the name-brand peers. Of course it is cheaper when looking at all the typical measures such as PE, PB, PCF, PS if you look at those same metrics for Philip Morris International. Philip Morris has spent billions of dollars over decades building raving fans of its tobacco brands. Most people have never heard of UVV. It is in the commodity business of leaf procurement compared to the biggies with their loyalty or affinity brands. Now, of late UVV has had some additional competition from its own customers as they have begun to send out their own buyers to tobacco farmers, in an age-old effort to "cut out the middleman." We fully acknowledge this is a possible threat as the efforts may be successful in further pinching UVV's tight margins. We'll just be very conservative, demanding a large margin-of-safety to outweigh such dangers. We won't compare UVV to PM. UVV has been around since 1918, so let's just simplify things and compare it to itself over time.

For our analysis, we will make another conservative, simplifying assumption that going forward the world tobacco market will shrink at about 0.5% per year. We think this is exceedingly reasonable in that UVV has demonstrated a negative annual growth rate of negative 0.2% for the past ten years. Before we ever even bother looking at the income statement, we dive into the balance sheet. This is rare indeed in our world where quarterly EPS seems to be the holy grail of numbers. But our staid approach fits our staid personalities and likely best serves our staid clients.

The balance sheet for UVV is quite solid. Its long term debt makes up only 25% of its total capital. We are kitchen-sink types of guys and gals, so we add in a few of UVV's other liabilities that are long term in nature to come up with a LTD/Total Capital ratio of just over 28% -- not bad at all for a recession-resistant business. The majority of the debt comes due several years into the future (though some is due in 2013) so we should not have to worry about troubled refinancing turning into a liquidity event. Working capital per share is astounding at $56.

Get this, if we take each and every liability the company owes, both long and short, and take it away from the current assets to get a "Net, Net Working Capital" per share we get a positive $27. So, despite claims in a posting on this website from 2011, ironically made near the stock price bottom for the company (3 Reasons to Avoid Universal Corp.), UVV has ample liquidity and a very good balance sheet. The dividend is safe, but history shows that cuts and rebuilding in their dividend amount have occurred from time to time. Operating income for the latest fiscal year covers interest expense by about 8 times, certainly healthy.

The number of shares outstanding has been relatively steady for the past decade, so its use of cash to buy back bits of shares to offset any issuance seems a reasonable way to prevent dilution. The most recent fiscal year revenue was $2.45 billion. Remember we will use a negative 0.5% annual growth rate for their sales. This completely ignores any growth via acquisitions that may occur. We will use a net margin of 4.5% going forward, which is safely in the historical range and even a little conservative. Any efficiency UVV can wring out of the business in the future is not included in this projection.

These simplifying assumptions make the math quite straightforward and we do not fear that they escape reality. Over the long run we completely expect these conservative assumptions to be proven correct. Naming the discount rate is a nasty business, filled with pitfalls and peril. Set too high, meaning too conservative, and the investor stays in cash an awfully long time. If it is set too low, the investor quickly learns the importance of a margin-of-safety - the hard way. Though nearly completely arbitrary and misleading in its presented precision, we calculated a required rate of return for the equity of 9.3% using beta (we'll not bother showing you the inputs as you can make up whatever you want to force the outcome).

To sniff test this result, we looked at the company's capital structure. UVV has 6.75% convertible preferred stock outstanding. They also have some borrowings at 7.1%. We think 9% as the actual cost of equity should suffice and voila, with all the inputs, the equity is intrinsically worth $50. A final, short-hand double check that our estimate of $50 for the price is accurate involves looking at book value. We treated the outstanding preferred stock on the balance sheet as debt and calculated a book value per share of $42.

 Since the global financial meltdown occurred, the stock has traded at an average multiple of 1.2 times book, which is lower than the previous five years. If we take the conservative, historical price-to-book of 1.2 times the very conservative book value of $42 we get a value of, $50 for the stock. We think the stock provides excellent value at its current price. Should the stock grow beyond its intrinsic value we would not hesitate to reduce exposure since it is a company producing a commodity with no real differentiation.

FAQs about Birmingham's Smoke-Free Ordinance

Recent news reports about business defying Birmingham’s smoke-free ordinance have raised questions in the community. The Health Action Partnership offers help to individuals and companies looking for information about the rules and how to report violations. The most commonly asked questions and answers are below.

  Q: What cities are affected by the smoke-free ordinance?
A: The local ordinance passed by the Birmingham City Council does not apply to Birmingham’s suburbs or anywhere outside of Birmingham city limits. Other municipalities have similar laws.

 Q: Where is smoking prohibited?
A: The ordinance prohibits smoking in all enclosed public spaces within the city of Birmingham. This includes bingo halls, private clubs, any enclosed city property, nursing homes, offices, taxis, buses, restaurants, most bars (except certain tobacco stores, or cigar/hookah bars), hotels and motels, polling places, and parking decks. Outdoor arenas, stadiums and amphitheaters are also smoke free within 30 feet of the bleachers or grandstands.

  Q: Can people smoke outside?
  A: Smoking is off limits within seven feet of the entrance of an enclosed public space, bus shelter or bus station, or other public transportation platform. Outside seating or serving areas of restaurants and bars located on public property (such as city sidewalks) are also smoke-free zones.

  Q: Who enforces the smoke-free ordinance?
A: County health officers, fire marshals, and police officers are allowed to enforce the smoke-free ordinance. Owners, operators, managers and employees of establishments where smoking is prohibited should instruct customers not to smoke on the premises, and to ask them to leave if they refuse to stop smoking. Businesses that allow customers to violate the smoke-free ordinance can face severe penalties, including the loss of a business license.

Smoking must be banned from public outdoor spaces

Policies to reduce second-hand smoke exposure have largely been based upon the idea that second-hand smoke is an indoor problem, but growing scientific evidence is shattering this concept. Recent research shows that people in close proximity to smokers in outdoor spaces are exposed to similar levels of second-hand smoke as those inside a home or restaurant.

Cancer causing chemicals such as benzene and arsenic are inhaled and are a health danger. If exposure to second-hand smoke can be comparable in both outdoor and indoor spaces, then protection from inhaling it must be as well. Workers in outdoor dining spaces should be protected from second-hand smoke exposure in the same manner as their indoor restaurant worker peers. Children should be as protected on public playgrounds and parks as they are in public schools.

And, patrons at outdoor events should be as safe from second hand smoke exposure at public concerts and parks as they are in side City Hall. The World Health Organization has issued warnings that there are no safe levels of second-hand smoke. I urge the Woonsocket City Council to ensure that all people who work or play in Rhode Island's public spaces can share the same protections from second-hand smoke.