With medical marijuana dispensaries coming through the pipeline and the possibility of legalized recreational pot becoming likelier, the city of Santa Barbara is looking to get a head start on the state’s evolving marijuana landscape.
The City Council voted 7–0 Tuesday to place a measure on November’s ballot that, if passed, would place a 20-percent tax on both medicinal and recreational marijuana.
Putting a tax proposal on the ballot in an election year in which none of the council members is up for reelection required a unanimous vote declaring it an emergency measure.
What kind of emergency it would have to be, City Attorney Ariel Calonne said, is not specified in the California Constitution, and hasn’t been tested by the courts.
The justifications the city drafted for the tax include insufficient funds for its capital, operating, and reserve needs; extra funding being required to ensure dispensaries’ compliance with relevant laws; and extra funding being required to ensure the protection of public health and safety should recreational pot be legalized.
“The purpose of the tax is expressly stated as being to generate revenue,” Calonne said. “This is not a regulatory measure.”
The tax requires a simple majority of voters to approve it, and would be placed on businesses’ gross receipts.
The “Santa Barbara Marijuana Control Act” would go into effect March 1, 2017, and would not be applied to customers, patients, or caregivers.
The ordinance employs a wide definition of a marijuana business, Calonne said, that includes cooperatives and collectives and those involved in related operations such as cultivation, delivery, and transportation.
The revenue would go to general city services, including those intended to regulate the pot industry, such as zoning enforcement and policing, but also services related to fire, parks, and the library.
The original tax measure written by city staff proposed a 10-percent rate for medical marijuana and a 20-percent for recreational marijuana.
Councilman Randy Rowse wondered whether that original two-tiered structure would create incentives for businesses in the city to stick to the medicinal side to avoid the higher rate.
The statewide trend away from the collective/cooperative model to a commercial model for medicinal pot, he said, made a single rate more forward-looking.
The council’s ability to go back and amend the ordinance in the future and lower the rates meant that applying the 20-percent across the board wouldn’t be a high-risk change, Mayor Helene Schneider said.
After studying other cities’ medical-marijuana taxation systems, city staff estimated that $1.1 million would be raised annually from a 20-percent rate once all three of the city’s permitted medical marijuana dispensaries are up and running.
Because it has yet to be legalized, revenue from recreational pot is harder to approximate, city Finance Director Robert Samario said, but estimated it to be another roughly $1.1 million annually at the 20-percent rate.
“I caution against being too aggressive,” Councilman Frank Hotchkiss warned of the tax rate.
Hotchkiss brought up the possibility that too high a rate could facilitate an underground marijuana industry that could sell the substance more cheaply.
The quality control inherent to legal, taxed pot could help counteract that, Calonne said.
“If you look at the South Coast, we did stick our finger in the light socket; we have the dispensaries,” Rowse said. “The rest of the South Coast cities — and I’ve gone to the League of Cities and talked about this — are looking to Santa Barbara and saying, ‘Okay, what are these guys doing?’”
With Tuesday’s meeting serving as the council’s final chance to put a measure on the ballot before county-imposed deadlines, Calonne and City Administrator Paul Casey had to make many of the decisions in writing the measure after the council directed city staff to come up with options for a tax measure only a month ago.
“It’s a new chapter for parents, our school system, for us, and those of us who work in the youth community,” said Councilwoman Cathy Murillo. “We need to talk to our young people like how we talked to them about alcohol and other drugs. Marijuana is going to have a different kind of presence in the community.”
The state recently passed a trio of laws that form the Medical Marijuana Regulation and Safety Act, which imposed a March 1, 2016, deadline for cities to enact local cultivation laws.
In a hasty response, the council in January approved rules limiting marijuana cultivation in the city to 100 square feet for qualified patients at their own residences.
Santa Barbara also has a dispensary ordinance covering medical marijuana storefronts, permitting up to three to operate in the city, each of which has to be located in a different pre-determined zone.
One dispensary, which has yet to begin operating, has been approved for 3617 State St.
Last month, the Council denied two appeals protesting another proposed dispensary at 118 N. Milpas St.
Dispensaries are prohibited from cultivating their pot within the city. Both the State Street and Milpas Street dispensaries have identified cultivation spots within the county, which allows limited cultivation.
Dispensaries are further required to operate as cooperatives or collectives, and cannot make a profit off the medical marijuana sold to their members.
The Community Development Department and the Santa Barbara Police Department are empowered to conduct annual inspections of the dispensaries to ensure compliance and can charge them an inspection fee.
The Adult Use of Marijuana Act, a ballot initiative with the backing of Lt. Gov. Gavin Newsom and the California Medical Association, has racked up over 600,000 signatures — close to double the requisite number to make the November ballot.
If passed, the initiative would legalize marijuana and hemp, establish state agencies to oversee the substance, and impose cultivation taxes and a 15-percent excise tax on it.
Californians 21 and older would then be permitted to possess, transport and use up to an ounce of marijuana for recreational purposes.
— Noozhawk staff writer Sam Goldman can be reached at sgoldman@noozhawk.com. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.
