Much to the chagrin of upset smokers and tobacco retailers, Dublin began work Tuesday on a tobacco ordinance that could become one of the Bay Area's toughest.

The city is considering restrictions that could spell the end for some current tobacco retailers and limit where future sellers could locate.

In front of a large crowd of tobacco retailers, anti-smoking advocates and smokers, the City Council began work on an ordinance that would prohibit new tobacco retailers from opening 500 to 1,000 feet from places children frequent, such as schools, parks and day cares.

It would also restrict the density of new tobacco-based shops to within 1,000 feet of one another and implement a licensing system to monitor retailers and punish those selling to minors by revoking or suspending their licenses.

The council disagreed on a grandfather clause that would exempt the city's 25 current tobacco retailers from most of the ordinance, except for a licensing system that would help the city monitor retailers selling tobacco.

The city staff recommended the grandfather clause and that it apply to the land and not the business. City Attorney John Bakker said grandfathering would save the city time and money and protect it from possible litigation. Without the clause, the city would have to conduct individual hearings for the retailers to determine their worth and the time required to earn back their investment.

"We are starting to overreach if we say you can have it in one part and not another," said Councilman Eric Swalwell. "It doesn't make sense and doesn't help us reach our goal."

Swalwell said the city's goal is to keep tobacco away from kids and that a 500-foot distance from schools and preschools would be sufficient and at the same time limit the number of current retailers affected.

"I don't think you guys realize the impact this will have," said Tim Johnson, who has owned the Chevron station on Dublin Boulevard and San Ramon Road for the past 30 years. "Tobacco accounts for 42 percent of my in-store business and is 30 percent of my (overall) sales."

Johnson also took issue with the proposed licensing fee, saying he is already licensed by the state and federal government and what the city is considering would be a tobacco tax on top of a tobacco tax.

The council first broached the idea of using zoning rules to limit tobacco sales in January and discussed including residential areas in the ordinance and no grandfather clause.

A vote on the ordinance is months away with the council and staff agreeing to hold at least two additional public meetings. No dates have yet been set for those meetings.

Contact Robert Jordan at 925-847-2184. Follow him at Twitter.com/robjordan127.