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Regional Report: Sun Rises in the West, For a Change

Legislative victories on taxes and fees in California and Oregon ring in spring on a high note, while an impending fuel shortage during the peak driving season could crimp profits at the pump in Colorado and Wyoming.

For the first time in California, a large city -- San Diego -- was defeated in its attempt to levy a fee on tobacco retailers. “It was a really big win,” said Auday Arabo, president of California Independent Grocers and Convenience Stores (CAIGCS).

“San Francisco, Los Angeles and Sacramento all charge retailers a local fee ranging from $50 to $300 to sell tobacco, on top of the state fee of $100 -- but when San Diego tried it we lobbied against it and won,” Arabo declared. “Now that we've built up momentum in reining back local fees on tobacco, we're looking forward to leveling the playing field on this issue for tobacco retailers throughout all of California.”

Elsewhere in California, the California Independent Grocers Association (CIGA), with 1,200 members throughout the state, installed a new slate of elected officials on April 16. Incoming chairman of the board Scott Hair, owner of Green Frog Markets in Bakersfield, pointed out, “More than ever, we must keep informed of local land use and zoning issues as they pertain to our industry.”

Sharon Paxton, CIGA's executive director, noted that independent grocers gain an advantage in the marketplace by being members of a large network of “like-minded professionals,” constituting “a united and powerful group.”

As the peak driving season gets under way out west, petroleum marketers in Colorado and Wyoming have a major concern: inadequate supplies, especially of diesel fuel. “We don't know at this point whether we'll be able to meet demand,” said Roy Turner, executive director of the Colorado/Wyoming Petroleum Marketers Association (CWPMA). “The refineries always experience a shortage during turnaround, when they switch from winter fuel to spring and summer, but this year they've also had a few additional problems to contend with. As a result, allocations to jobbers have been cut to 70 percent. I just hope things straighten out by the time demand picks up.”

And if that isn't enough to worry about, petroleum retailers are finding that credit card fees are cutting into their profits more than ever.

“What's happened,” explained Turner, “is that while around 60 percent of sales used to be on credit cards, it's now up to 80 percent because people just don't have the cash on hand to pay for expensive fill-ups. Well, every credit card sale reduces profits a minimum of 6 cents per gallon because of the credit card fee.

“And on top of that, a lot of people are switching from medium and premium grades to low-grade gas, which has a lower margin. So with the price of a barrel of petroleum skyrocketing, the retailer is caught in the middle and ends up with lower profits. Doesn't seem right, does it?”

Meanwhile, retailers in Oregon might be able to tell their grandchildren they've seen a miracle, as the state legislature actually considered returning money to taxpayers.

The Oregon House has passed House Bill 2127, reducing employers' unemployment taxes 12 percent. A Senate committee then sent it on to the Senate for consideration (which is where it is right now, as we narrate this unlikely tale.)

"We fully expect it to pass the Senate," said Dan Floyd, lobbyist for the Oregon Grocers Industry Association (OGIA), which fought for the bill's passage.

And when their grandchildren ask why the legislature did it, retailers can tell them that someone found a surplus in the unemployment fund, whereupon they decided to reduce the tax.

"In the four years following January 1, 2006, when the reduction goes into effect," said Floyd, "Oregon retailers will save $300 million in taxes, money that will go back into their enterprises. Oregon will then become an even more attractive place to do business in."

Sadly, not every story has such a happy ending. Gerald Tedrow, executive director of the Western Petroleum Marketers Association, with eight states on its roster (Arizona, Hawaii, Idaho, Montana, New Mexico, Nevada, Utah and Washington), reports that the high price of gas is hurting petroleum retailers because it increases the cost of doing business.

“First of all,” noted Tedrow, “inventory costs go up every time the price goes up; credit card costs also go up, since card fees are directly related to dollars spent; and we're finding that as prices rise, pump-and-run drive-offs also increase, and that can run into a lot of money.

“Drive-offs are about the only thing we can control, by switching to pay-at-the-pump or pay-in-advance, but anti-trust laws prevent us from getting together as a group to agree on what to do. So we're hoping that state legislatures will work out a solution. Nothing on the horizon, though.”

Finally, apropos of high gas prices, a radio station in Utah decided to help their listeners by naming the local gas station with the lowest prices each day. It seemed like a good idea at first, but then some stations began lowering their prices just to get the publicity, then raised their prices back up once their names were mentioned. Short-term gain, maybe, but long-term goof. Somebody ought to give those dealers an F in Marketing 101.
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