Dana Point City Council voted down a ballot measure that would tax cannabis sales—a kind of business that is currently not permitted as a storefront within city limits.
The ballot measure would not have determined whether marijuana dispensaries will be permitted in Dana Point. Rather, it would have determined if the city can tax dispensaries, if and when they will be permitted in the future under a different council or under the circumstances that a landmark court case ends city bans on dispensaries.
“In light of the economic impacts of COVID-19, the unforeseen changes in the way the economy will adapt after COVID-19, and the ever-changing laws and attitudes toward cannabis, it is reasonable to believe that the city will be confronted with the discussion whether to permit any cannabis-related businesses in the foreseeable future,” Mayor Pro Tem Jamey Federico said.
Federico placed the item on the agenda and presented the case for considering the ballot measure. The resolution called for city council to submit to the voters an ordinance establishing both a maximum 8% local general tax on the gross receipts received by any cannabis retail business; a maximum $10 per square foot local general tax on the space utilized at such a business for cannabis cultivation, adjusted for consumer price index (CPI) annually beginning in 2023; a maximum 2.5% local general tax on the gross receipts of cannabis testing labs; and a maximum 4% local general tax on any other cannabis business, including but not limited to manufacturing and distribution.
“While changing the standing ordinance that prohibits cannabis-related businesses should include thorough analysis and public outreach with respect to type, number, and location, this proposal only addresses taxing cannabis-related businesses,” he said.
While a city council can make it legal to operate cannabis-related businesses, only voters can approve taxes via a ballot measure. The estimated additional cost to add a separate measure to the Nov. 3 ballot in the next election is approximately $30,044 to $36,013.
Should cannabis-related businesses ever be permitted, the city’s legal counsel said it’s difficult to predict the amount of tax revenue that could be generated for the city, because the amount of tax revenue generated will vary greatly depending on the number and type of businesses permitted by the city.
They estimate, however, that permitting and taxing a limited number of cannabis-related businesses could generate $300,0000 to $600,000 in additional tax revenue per year at the low end, and up to $1.8 million or more at the high end.
Looking Back on Cannabis Legalization
California voters adopted Proposition 215, known as the Compassionate Use Act (CUA) in 1996, which enabled persons who are in need of marijuana for legitimate medical purposes to use it without fear of criminal prosecution under limited, specific circumstances.
In 2004, the State Legislature’s actions to adopt the Medical Marijuana Program Act (“MMPA”) were codified, providing certain legal protections to qualifying patients and primary caregivers who collectively or cooperatively cultivate marijuana for medical purposes.
In 2015, the State Legislature acted to adopt laws further legalizing cannabis-related business activities in what is known as the Medical Marijuana Regulation and Safety Act (“MMRSA”). The MMRSA generally requires all individuals who are engaged in “commercial cannabis activities” (which is defined to include cultivators, manufacturers, testers, dispensaries, distributers, and transporters) to obtain both a State license and local permit (if one is required) prior to commencing operations.
In the wake of MMRSA, which required cities to specifically prohibit cultivation by March 1, 2015 if they wished to have control over the industry, Dana Point City Council unanimously voted to ban all cannabis dispensaries, cultivators and deliveries.
Published: July 23, 2020
Founder & Interim Editor of L.A. Cannabis News