November 8 will provide Californians with a slew of choices to make at the ballot box.
Seventeen statewide initiatives are up for a vote including a possible repeal of the death penalty, banning plastic bags and a thumbs up or thumbs down on condoms in porn. And that’s in addition to local legislative and congressional races and the decision of who will win the White House.
However, unless you live in Long Beach, only one of those votes relates to marijuana. Come November, the city’s residents will have three decisions to make that will play a pivotal role in the future of cannabis, not only in terms of deciding its legality, but at what rates it will be taxed.
In August the Long Beach City Council voted to add a tax initiative to the ballot, which outlines how the substance would be taxed in the event that voters approve the sale of medical marijuana in the city. The revenues generated by the tax—projected to be as high as $13 million annually if it includes recreational sales—is pledged to go toward cost recovery. Such recovery would include beefing up law enforcement, a necessary component, according to city leaders who say that a stronger police presence around marijuana facilities is needed to deter crime.
“There is going to be some significant financial resources the city will need to properly regulate the industry,” said Assistant City Manager Tom Modica during a press briefing on the measure last month. “We estimate that it will be necessary to spend approximately 12 million annually just on medical marijuana alone to cover the regulatory, the enforcement cost and health and safety cost.”
Labeled Measure MA, not be mistaken for resident-backed Measure MM that would legalize the sale of medical cannabis, it also contains parameters to govern the sale of recreational marijuana if Proposition 64 passes at the state level.
If that’s a lot to take in, it gets more confusing still. Suppose all three are voted into law the night of November 8—it still wouldn’t mean that recreational marijuana would be guaranteed entry into Long Beach. That would take a separate act by the city council, which, given its tepidness to allow the sale of medical marijuana to resume in the city, doesn’t seem likely.
Another obstacle could be the tax schedule itself. It’s been denounced as “fear mongering” and an obstacle for legitimate businesses to fairly compete with the already existent black market. Measure MA would tax medical cannabis sales at 6-8 percent and recreational sales at 8-12 percent. Add an additional 6-8 percent tax for for any testing, transportation, processing or distribution made by an entity other than the business selling it, and it would charge between $12 and $15 per square foot on cultivation sites.
The citizen initiative Measure MM sets a flat tax of 6 percent on gross receipts and proposes a $10 per square foot tax on cultivation sites. In its argument against Measure MA, a group of industry advocates agreed that the industry should be taxed, but said it should be “done fairly”.
“[…]This competing Long Beach Marijuana Taxation Measure, along with high state and sales taxes, will make Long Beach taxes among the highest in the US, exacting an enormous immoral burden on patients as well as enabling a competitive black market,” the argument states.
Late last year the state passed the Medical Marijuana Regulation and Safety Act (MMRSA), which outlined a framework for municipalities to govern the sale of medical cannabis and created a uniform statewide tax structure. Under the MMRSA, the state would charge a 15 percent tax on top of additional taxes levied by local governments.
Long Beach, if Measure MA were to pass, would essentially put potential marijuana businesses in a position where upward of a quarter of its sales would go toward state and city taxes. Stefan Borst-Censullo, an industry lobbyist and Second District resident, argued that not only would these tax rates be cost prohibitive, but that it could empower the black market.
“For the purpose of controlling the black market, the best way to make sure that will happen is to give support to the businesses putting themselves in front of the breach and accepting the registration and working through the created regulatory scheme,” he said. “As such, even a business tax of between 8-12 percent is really cost prohibitive, especially in the retail sector.”
He also questioned the type of tax that Measure MA represents. In the proposed ordinance the measure is listed as a general tax, meaning that all revenues generated by the tax would go into the general fund and could be spent on anything. Under California law, a “special tax” with revenues earmarked for a specific purpose is subject to a two-third voter approval barrier. A general tax needs only 50 percent plus one to win.
Measure A passed earlier this year as a general tax with a promise similar to the one pledged last night—to only spend the tax revenues on specific areas. However, unlike Measure A, there is no citizen oversight committee to oversee the expenditures from any possible tax revenues generated by the initiative. And just like the resolution passed supporting Measure A, the resolution passed during last night’s meeting is non-binding to any future councils.
While the tax only affects those purchasing medical marijuana, or potentially recreational marijuana, and the storefronts making the sales, every eligible voter in Long Beach will have a say in the future of the industry in the city. If both initiatives pass, medical marijuana will once again be allowed for sale in Long Beach. The question of how much it will be taxed, however, will rely on which measure receives the most support.