At the ballot box in November, Santa Monica voters will be asked to give the City permission to tax commercial cannabis retailers.
Speaking to City Council on Tuesday, July 26, city staff said they estimated a business license tax on such retailers could bring in up to $1 million per year to the City, once enacted.
Council members themselves estimated the true revenue from such a measure would be many-fold higher: Councilmember Phil Brock said he expected annual income from a 10% tax on retail sales could bring in up to $5 million per year to the city.
In the end, council members voted, 6-1, to approve placing Brock’s proposed language on the November ballot: “Shall the measure to establish a business tax on every licensed cannabis business, including adult use non-medicinal cannabis retailers, distribution, manufacturing, cultivation, laboratory testing or any other licensed cannabis business, and retailers of products in containing psychoactive cannabinoids, including cannabinoids derived from industrial hemp, up to 10% of gross receipts on cannabis and/or hemp derived psychoactive products sold in the city, which all together could generate an estimated $3-5 million annually, until repealed, be adopted?”
City staff suggested council members approve a cannabis business tax for the 2024 ballot in an effort to not overwhelm voters this November — and because there are no immediate plans for recreational cannabis retail to begin inside city limits — but Brock and others said that amounted to leaving money on the table.
“I think the focus is really just not about what we’re going to do in the future and what we might decide to open and how that will look, but really, that we’re missing out on an opportunity on income, whether how small or how large … I think that we’re just missing out on an opportunity,” Councilmember Lana Negrete said. “And I think in terms of voter fatigue … This is so different, I think our voters are smart enough to read and understand that a tax that has to do with the transfer tax and real estate property, and something that has to do with cannabis, are completely different vehicles. Some may not be impacted by it at all.”
The sole dissenting vote came from Councilmember Gleam Davis, who agreed with city staff who cautioned that “voter fatigue” could dissuade Santa Monicans from approving this or the myriad other local tax-related measures already lined up to go before them in the Nov. 8, 2022, midterm election, instead giving blanket “no’s” across the board.
“I’m a ‘tax-and-spend’ Democrat, don’t get me wrong, but we already have talked about putting a TOT [transient occupancy tax], we have two transfer taxes on [the ballot] that we’re going to ask the voters to evaluate, we are putting other measures on the ballot right now,” Davis said. “The Santa Monica local ballot is getting really long and, at some point — and it doesn’t have to be just taxing measures — at some point, people go, ‘You know what? I just can’t deal with all of this. No, no, no, no, no, no, no, no, no.’”
Later, Davis added: “I think the risk of losing either one of the transfer taxes, losing the rent control amendment, losing the TOT, I start to get a little queasy in my stomach.”
The language of the ballot measure would allow the city to impose up to a 10% tax, but council members suggested the City start off with smaller percentages to allow cannabis businesses to become established and successful before imposing larger tax burdens.