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September 15, 1989
TO: Messrs. A.H. Tisch
FROM: J.R. Cherry
We have discussed ballot items in Anchorage, Alaska
(October 3, 1989) and Kansas City, MO (November 7, 1989) and
that in Colorado for 1990.
We will have cause to consider presently, ballot items
in Belton, MO (November 7, 1989), O'Fallon, MO (November 7,
1989), and of'greatest importance Greensboro, NC (November 7,
Also, we are advised~that Montana and Oregon both have
the prospect of cigarette tax items on their 1990 ballot.
This form of extra-legislative initiative is achieving
a frequency we have not experienced before and it is rapidly
overwhelming the current Tobacco Institute staff and!
straining the company government affairs representatives
because of the staff's present inability to timely provide us
with the information required to sensibly and deliberately
plan an Industry response.
It has been my longstanding conviction that the
principals of the Tobacco Institute State Activities Divisionn
have not brought the necessary thoughtful and systematic
approach or the attention to detail or the organizational
zest required for the workmanlike conduct of these
complicated, expensive and terribly important campaigns. I
have attributed this to an unhappy combination of lack of
talent and insufficient drive. It is clear, however, that in
this view I am a minority of one in the ranks of the company
government affairs representatives. The others believe that
the volume of work has simply outstripped the available
manpower, and R.J. Reynolds and Brown & Williamson have
proposed that the State Activities Division staff be expanded
to provide a group which will address itself exclusively to
referenda. The idea may have merit.
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One thing is obvious: we are not now equipped to
attack these matters in a fashion calculated to achieve the
desired results. I cite below some of the related~
unacceptable occurrences of the recent past:
1. Although the Colorado initiative for a $.25 cigarette tax
increase has received considerable attention and been the
subject of many meetings and much analysis since April of
this year, it was not disclosed to us until early this
week that the proposal includes a provision for indexing.,
and~indeed indexing based~upon the medical portion of the
Consumer Price Index. This would be a rate of increase
which is approximately 300% higher than the Consumer
Price Index as a whole.
2. The advice and'materials which we have received to date
indicate that the Anchorage proposal is for a: 10% tobacco
products tax increase. We are now advised that the
proposal is for a$.12 per pack increase on cigarettes
and a 10% increase for other tobacco products and that
both are indexed based~upon the Consumer Price Index.
Further, the Evans/Kraft firm of Anchorage was hired by
the Institute to handle the campaign and we were not
advised that the firmlis not a campaign management firm
but a marketing and advertising outfit that had a
campaign manager on its staff. That campaign manager
turned out not to be satisfactory and, without consulting
us, Paul Jacobson, the Tobacco Institute Regional Vice
President for Region V, was installed as the campaign
manager. The significance of this is severalfold:
A) The approach to any analysis of a proposed~campaign
budget is very significantly affected by whether the
budget proceeds from a campaign manager who has no~
interest in media placement commissions or a marketing
firm which has a definite monetary interest in media
B) Employing a regional vice president as a campaign
manager is a signal departure from past practice which
has been to employ only specialists in this role, and
such a move raises concerns about the supervision of a
region during the period of time when its vice
president is engaged~ full time managing, a campaign.
3. The Kansas City campaign to oppose a.$.05 cigarette tax
increase on the November ballot must be begun promptly,
yet we do not have in hand either a campaign plan or
campaign budget and the press of time has required the
Institute to designate Stan Boman, the Region VIII Vice
President as campaign manager.
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4. In O'Fallon, MO, a suburb of St. Louis with a population
of 18,000 there will be a November 7, 1989 ballot item
for a$.05 cigarette tax increase. The proximity to St.
Louis compelled a decision to oppose the measure, but in
a fashion limited to a$35,000 grass roots campaign which
is probably modest enough to be funded from the Institute
budget. Our difficulty is that this opposition will have
to be carried forward in Stan Boman's regionat the same
time that Stan is addressing;himself to Kansas City. How,
both matters will be simultaneously handled is something
of a mystery at this time.
5. in Greensboro, NC we face the immediate threat and
probability that on the 25th of this month the City
Council will refer to~the November 7, 1989 ballot a broad!
smoking restriction item for that city. The Greensboro
matter has been cooking for quite some time yet the State
Activities Policy Committee has been kept almost
completely uninformed, and without the Committee's
knowledge the Institute d'elegated supervision~of the
matter to Dick Morgan, the Vice President for Region VI,
Larry Bewley, a middle level government affairs man fr=
R.J. Reynolds and Alex Spears of Lorillard. While the
threat was a remote one, this could have been an
excellent arrangement with those having the most
immediate interest, control and'feel for matters
supervising things, but the Washington staff cut the
matter loose, acting as if the threat was the concern and
responsibility of Dr. Spears and giving no indication as
to whether or not a ballot measure would be opposed with!
full Industry support. Then, without preface of any kind
the Policy Committee was asked on Tuesday of this week
for immediate approval of a $85,000 budget for a direct
mail and grass roots campaign to~be conducted by Walt
Klein Associates. All this without benefit of either a
written campaign plan or budget detailing the elements of
the $85,000 proposal.
6. On each of these campaigns it had been our understanding
that American Tobacco would not participate in the
funding but that where tobacco products generally were
concerned, U.S. Tobacco and the Smokeless Tobacco Council
would participate in the aggregate amount of 3%. The
most recent campaign assessments show participation by
American Tobacco and no participation by either U.S.
Tobacco or the Smokeless Tobacco Council and no
explanation was offered. Subsequent questioning of the
Institute staff yielded the advice that American Tobacco
has agreed to participate on an assessment-by-assessment
basis and that U.S. Tobacco and the Smokeless Tobacco
Council are presently reconsidering their participation.
I am almost certain that it is the confused~progress of
things that has caused U.S. Tobacco and the Smokeless
Tobacco Council to rethink their campaign funding.
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The R.J. Reynolds and Brown & Williamson idea of
campaign specialists on~staff may be an answer to the
foregoing. Their proposal has not been developed to a point
where details of the necessary additions to staff or costs
are available, but the existence of a need for reorganization
cc: Dr. A.W. Spears