Measure M: San Pablo’s Potential Tax on Cannabis Businesses

In a pivotal move for the city of San Pablo, California, voters will soon have the opportunity to express their stance on a new taxation measure affecting cannabis businesses. The November ballot will feature Measure M, which seeks approval to implement a tax on marijuana enterprises within the city limits. Should it pass, this measure would lead local lawmakers to initiate the permitting process for cannabis businesses, which are presently prohibited in San Pablo.

Background on Cannabis Legislation in California

The introduction of Measure M comes eight years after California legalized recreational marijuana use for adults. Currently, the state applies a 15% excise tax on cannabis products, while local tax rates fluctuate between 0% and 15%. Neighboring cities such as Richmond and El Cerrito have already enacted similar measures, allowing for legalized cannabis businesses to operate and thrive.

Measure M: What Does It Propose?

If approved, Measure M will amend San Pablo’s existing business license tax ordinance to introduce an additional tax of up to 7% on the total revenue generated by future cannabis businesses. Initially, however, the city plans to set this tax rate at 5%. City officials predict that the revenue from this tax could contribute an estimated $1.5 million to $2.2 million to the city’s general fund annually.

According to City Manager Matt Rodriguez, once Measure M is passed, the city council would promptly adopt a regulatory ordinance and an operating permit to oversee these businesses shortly after November 5th. Initially, the council aims to permit three cannabis retail establishments, commonly referred to as dispensaries, which will be the maximum allowed under state geographic constraints. Other types of cannabis businesses, including cultivation and manufacturing, will not be accommodated at this stage.

Revenue Predictions: Are They Realistic?

Experts in the field are questioning the projected revenue figures associated with Measure M. Robin Goldstein, the director of the Cannabis Economics Group at UC Davis and co-author of the book “Can Legal Weed Win? The Blunt Realities of Cannabis Economics,” highlights that the city’s revenue forecasts may be overly optimistic. He asserts that the estimates could be as much as four times higher than what might realistically be anticipated based on the average income of California’s cannabis retail operations.

Goldstein emphasizes the competitive nature of the cannabis market, stating that consumer demand is ultimately influenced by several factors including pricing and product quality, not merely the existence of legal licenses. He also raises concerns that limiting the number of licenses could favor larger corporations at the expense of smaller businesses. Currently, West Contra Costa County boasts 30 licensed cannabis businesses, including 27 in Richmond alone, whereas Alameda County features over 400 licensed operators.

Impact on Small Businesses and Community

The implications of Measure M extend beyond tax revenue; it raises crucial discussions regarding the impact on local small businesses. Zee Handoush, a cannabis consultant and executive director at 7 Stars Holistic Healing Center in Richmond, expresses concerns that the additional tax burden will inevitably fall on consumers, as businesses are likely to increase prices to offset costs. Handoush warns that this could lead to the stifling of independent cannabis businesses while providing an advantage to larger, multistate operators.

Goldstein further contends that larger cannabis enterprises often push for increased taxation and regulations that can serve to marginalize small businesses, contradicting the community’s goal of fostering entrepreneurship and expanding the local job market.

Diverse Opinions among Residents

Despite the critical concerns surrounding Measure M, opinions within the community vary. Mashel Lindstrom, a small business owner and resident of San Pablo, shares her belief that dispensaries can be beneficial for the community. Having visited cannabis shops in neighboring areas, she notes that these establishments can foster a sense of community without causing notable issues. However, she has yet to decide how she will vote on Measure M.

San Pablo is currently grappling with a budget deficit stemming from lower-than-expected revenue from the San Pablo Lytton Casino, which previously accounted for over half of the city’s projected $50 million annual revenue. Funds generated from Measure M are designated to support various services, such as local police, recreation programs, community grants, and services aimed at youth and seniors.

Conclusion

As San Pablo prepares for the ballot measure, the implications of implementing a tax on cannabis businesses could resonate deeply within the community. While proponents argue the tax could generate vital revenue for city services, critics caution that it could inhibit small business growth and foster an uneven playing field for market competition. The decision ultimately lies in the hands of local voters, who will determine the future of cannabis business regulation in San Pablo.