The nearest legal marijuana dispensary is currently some 120 miles from Santa Maria proper. That number promises to drop once the industry slowly establishes a foothold in Lompoc, which is just a 20-minute drive away.
Santa Maria and Lompoc stand in stark contrast to each other on the issue of the cannabis industry. The Santa Maria City Council passed an ordinance on March 6, effectively banning all cannabis operations within the city. Lompoc and its City Council are not only welcoming the industry but are also, for the time being, refusing to tax recreational cannabis operations outside basic city fees and business taxes
On March 20, the Lompoc City Council shot down a proposed ordinance that would have introduced a tax on commercial cannabis. Voters would have seen the measure on the Nov. 8 ballot. The vote split at 3-2, with councilmembers Jim Mosby, Victor Vega, and Dirk Starbuck voting against taxing the industry while Mayor Bob Lingl and ordinance author, Councilmember Jenelle Osborne, dissented.
“This isn’t a get-rich scheme here,” Starbuck said at the meeting, adding that while he believed the new cannabis businesses may provide some economic boost to the city, it would “probably be invisible,” once established.
Mosby said the economic benefit that could be obtained from taxes would be “far outweighed by filling up vacant buildings and bringing jobs to this town that we desperately need.”
Osborne argued at the meeting that she didn’t want to strip the industry of its profits and conceded taxes would not solve the city’s myriad budget issues (including a $70 million California Public Employee Retirement System obligation that has to be paid out in $7.5 million to $10 million installments annually). She said the cannabis tax would have been a new revenue stream the city needed and that it “was the reason I supported regulating it locally.” She called the move to not ask voters to consider a tax “irresponsible.”
At the meeting, SCI Consulting Group President John Bliss told the council members it could bring in as much as $1 million in revenue from modest taxation and that a measure would most likely succeed because the majority of voters would not be cannabis users.
California currently has a 15 percent excise tax on retail sales prices of marijuana, along with a $9.25 per ounce dry weight tax, there’s also 7.75 percent in local sales taxes (6 percent state, 1 percent local, a half percent to public safety, and a quarter of a percent to the county). Santa Barbara County is considering taxing gross receipts: 6 percent on retail dispensaries, 4 percent on cultivation, 3 percent to manufacturers, 1 percent to nurseries and distributors, and 8 percent to micro businesses.
Mollie Culver with the Cannabis Business Council of Santa Barbara County told the Sun in a statement that “as an industry we are looking forward to working with the community to develop jobs and economic benefits for Lompoc” and “to enhance city programs and to provide revenue that will economically benefit public safety, municipal, and residential services while being good neighbors in our shared community.”
Mark Lovelace is a cannabis policy advisor for the consulting firm HdL, the company hired by Santa Barbara County to explore options on how to best regulate the newly legalized marijuana industry. He told the Sun that part of the reason the three Lompoc council members may have voted against the tax was to incentivise business because they simply believe business itself is good and will bring benefits without the tax.
“I think they are situated in a way that they can have a nuanced approach to this,” he said, adding that the Santa Barbara region was well suited to support a city taking Lompoc’s tack.
According to California’s Bureau of Cannabis Control, out of the 2,500 state-issued cultivation licenses issued since Jan. 1, more than 500 have come from Santa Barbara County. Those conditions, Lovelace said, should offer considerable support for other aspects of the cannabis industry, like processing, distribution, and retail. Combine the glut of weed in the county with the far distances the average citizen has to drive, and Lompoc is well suited to siphon off a sizable chunk of the available market, he added.
“I think there could be some wisdom in that direction [to not tax],” Lovelace explained. “Does that not mean retailers would not be able to withstand a lower level of tax that would still generate some revenue? No, they probably could.”
He said that the move by councilmembers Mosby, Vega, and Starbuck was also most likely an ideological one. As in, they simply do not believe in burdening businesses with excessive fees, permitting, and taxes as a basic philosophy.
“It’s a little of, ‘What kind of conservatism do you fall on,’” Lovelace added, “pro-business or anti-cannabis?”
The decision to not tax the industry in its early phases however, does come with some risk, despite Mosby’s suggestion at the council meeting that the city could go back and consider taxes once the industry established itself.
“The worst case scenario I guess, is if their ploy works, and it does attract a significant amount of the industry to their area, then it’s going to be politically very difficult at that point to apply a tax to what are now upstanding businesses and business owners,” Lovelace said. “It’s one thing to put forward a tax when the industry is trying to gain a foothold, but once it’s established I think it will be a little more difficult to do that further down the line. On the other hand, once they are established and they are already creating all the jobs and benefits that other legal business do in a community, why would you single this industry out in a way you might not with the others?”
Lovelace noted that taxes on regulated cannabis were usually beneficial to communities because the revenue generated mitigated impacts associated with it, such as increased law and code enforcement.
“Local governments want to make sure that the fees they are charging for processing applications and the taxes they are implementing are appropriate for the amount of time and money that goes into enforcing the laws necessary to regulate such an industry,” he said.
Staff Writer Spencer Cole can be reached at scole@santamariasun.com.
This article appears in Mar 29 – Apr 5, 2018.