Cloverdale seeks to join growing number of California cities taxing marijuana

With medicinal marijuana becoming more regulated and the possibility that California voters will legalize pot in November, Cloverdale is pursuing a local tax on cannabis-related businesses.

A majority of Cloverdale voters would need to approve the tax, which the City Council is likely to place on the November ballot.

Mayor Mary Ann Brigham said there is no shortage of people wanting to set up dispensaries or other cannabis businesses in Cloverdale, and it makes sense for the city to tax them.

“Definitely the green revolution has hit Northern California hard,” she said. “We all know that it exists here and that it’s a pretty big part of our economy.”

Besides Cloverdale, a number of cities in California are moving ahead with November ballot measures to tax marijuana, including Santa Barbara, Grover Beach in San Luis Obispo County and Fillmore in Ventura County.

Currently, there are at least 18 California cities with commercial marijuana taxes on the books that can be collected in addition to state taxes.

Some cities tax dispensaries only, while others also tax cultivation operations.

Sacramento, which has more than 30 dispensaries, generates more than $2.8 million in revenue from its 4 percent commercial marijuana tax on gross receipts, according to figures compiled by Cloverdale officials. Palm Springs, with about a half-dozen dispensaries, collects an estimated $1 million with its 10 to 15 percent variable tax.

And Shasta Lake, with only two dispensaries, generates at least $175,000 with a 6 percent tax.

Cloverdale officials are considering a tax measure with a maximum of 15 percent on dispensary sales, cultivation, distribution, delivery and testing businesses. But the tax might be lower with a sliding scale depending on the type of business.

City officials say they want to avoid taxes that are onerous.

“There is a general concern being expressed that if state and local jurisdictions get too aggressive in taxing, it would continue as a black market,” said City Manager Paul Cayler.

At the last City Council meeting, growers said they were willing to pay taxes and legitimize their operations.

“The people in the industry are more than ready to pay their share for being able to conduct business in the town and contribute to the city,” said Oliver Schraner, a Cloverdale resident who described himself as a grower and member of the Small Farmers Association. “We want to do the right thing. We want to step out into the light.”

Patrick King, a cannabis advocate who owns Soil King Garden Center, urged the City Council to place the taxation measure on the ballot as soon as possible, although he said it should be a maximum 5 percent tax.

“It’s important to get something on the ballot now,” he said, because it will generate revenue and the tax may be less than what a future council would ask voters to impose.

King said Tuesday licenses for cannabis distribution should go to local residents to protect the small farmer, “keep it local and community oriented.”

The city still had not determined the number of businesses that will be licensed, and the conditions placed on them.

The discussion in Cloverdale has evolved from eight years ago when the city banned marijuana dispensaries. It was only in January that the city lifted a prohibition on outdoor cultivation for medical marijuana, making an exception for patients to grow a few plants outside.

Any type of commercial marijuana or commercial medical marijuana activity remains prohibited. But that is unlikely to last.

“It looks like we’ll allow a couple of dispensaries to go in,” said Mayor Brigham, adding that it’s still to be determined whether they would go downtown, or in a commercial area.

“The general consensus of the council I think is times are changing and if they are, they are going to move toward reform of cannabis rules in Cloverdale,” Cayler said.

The pressure for change is gaining momentum with Proposition 64, the Adult Use of Marijuana Act that recently qualified for the statewide November ballot. It would allow for recreational use, something polls show has a strong likelihood of passage.

If the California proposal passes, sales of recreational marijuana could begin as soon as Jan. 1, 2018 and raise an estimated $1 billion annually for the state.

Sales of both recreational pot and medical marijuana initially would be subject to a 15 percent state excise tax. But cities and counties would retain the right to prohibit pot-related businesses and to impose their own fees and taxes.

The measure sets up a comprehensive system governing marijuana businesses at the state level and allows local governments to regulate marijuana-related activities and subject the businesses to zoning and permitting requirements. But marijuana businesses still could be banned by a vote of the people within a locality.

Brigham said she is hearing primarily from people who are pro-legalization, who want the city to regulate and tax cannabis businesses.

But she said there are others who take a less benign view and still see it as a drug akin to heroin.

“I would really like to get feedback from the public in Cloverdale on how they feel about this,” she said.

The council is scheduled to discuss more specifics of the measure on July 26 before preparing to officially put it on the ballot at its Aug. 9 meeting.


George Boyadjian

Founder of 420 College.

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