The city of Lompoc proposes a new cannabis tax measure in order to generate revenue for the city

Seaweed Dispensary owner Todd Mitchell seized on Lompoc’s laissez-faire attitude toward the cannabis industry as an opportunity to open the first and only cannabis lounge on the Central Coast. 

“Lompoc is a great place [for cannabis businesses]. There are very few municipalities that went for the free market where as long as you meet zoning restrictions and state regulations, you can open a shop,” Mitchell said.

After Proposition 64 legalized recreational marijuna in 2016, the Lompoc City Council decided less regulation was the way forward, according to current Mayor Jenelle Osborne.

“Other communities were going through the process of permitting and we saw it created political landmines; it didn’t respect cannabis as a new industry,” she said. 

click to enlarge The city of Lompoc proposes a new cannabis tax measure in order to generate revenue for the city
LOUNGING : Seaweed Dispensary and Lounge in Lompoc, sells both medicinal and recreational cannabis with pickup and delivery available.

After several public meetings and lots of research, the City Council decided there was an opportunity for the industry to benefit city residents, said Osborne, who was a council member at the time. Mitchell attended several of those meetings. 

“It seemed they turned more toward tax dollars rather than trying to make it a hub for cannabis,” he said.  

While the city didn’t regulate the number of commercial cannabis licenses it distributes, Lompoc voters passed cannabis taxes in 2018. These include a cannabis cultivation tax (1 percent of proceeds), cannabis retail and microbusiness taxes (up to 6 percent of proceeds), and a cannabis manufacturing and distribution tax—$30,000 for businesses with net incomes of more than $2 million, $15,000 for less, according to a city staff report. 

After experiencing 10 years of budget cuts and a lack of revenue coming into the city, Osborne said Lompoc gained $1 million from the cannabis industry in 2020. 

“The [cannabis] tax has allowed us to remain afloat, but it is not going to solve our ongoing budget crisis,” she said.  

Lompoc has another cannabis tax measure on the Sept. 14 gubernatorial recall ballot, which would establish a tiered tax structure for cannabis manufacturing and distribution to replace the current flat tax rate. The structure, which would go into effect on April 1 if passed, would tax cannabis manufacturers and distributors at higher rates as their profits increase, and vice versa.

Osborne said the goals for the tax are to increase the city’s general fund revenue—which goes toward libraries, police, fire, parks, and streets—and establish city staff specifically for cannabis. 

Lompoc Community Development Director Christie Alarcon said the tax measure is necessary for cannabis business oversight. The city doesn’t have a dedicated department or employees solely focused on cannabis, and Lompoc continues to see the industry expand.  

“Our intent is for us as a local jurisdiction to ensure they are operating properly so the state won’t come and pull their license. We want them here, and the staff wants to work with the cannabis businesses,” she said. 

Alarcon oversees the building and planning department, a role that she says is crucial to processing commercial cannabis licenses. She said her department saw extreme cuts during the 2019-20 budget cycle, leaving Alarcon with one planner, one planning manager, and one development services assistant. 

To date, her team has approved 54 cannabis use licenses. Of those, 33 are for dispensaries or retail, 10 for manufacturing, 12 for distribution, five for processing, two for indoor cultivation, and two for laboratories. The planning department is also working on 52 noncannabis related projects. 

“We are always looking for solutions, and are solutions-oriented in getting these businesses open. Given what we have been able to accomplish without having a cannabis division or department has been really amazing,” Alarcon said. 

She attributes the department’s efficiency to the city’s concurrent licensing process, which allows potential store partners to apply for their commercial cannabis licenses and other permits at the same time. 

“My goal for my department is a high level of customer service and customer satisfaction. The better we are staffed, the better we are able to work with people on an individual level to explain these technical and overwhelming processes,” she said. “The tax rate on the ballot is still below what our neighboring jurisdictions are charging and still gives Lompoc a competitive advantage.”

Mitchell is one of the people who took advantage of  Lompoc’s cannabis business opportunities. 

“I got into the industry right as we were turning the corner of Proposition 64. I’ve always been interested in cannabis, specifically its medical use,” Mitchell said. 

Mitchell said he saw cannabis’s positive effect on his son, who started seeing a pediatric cannabis physician to help with neurological issues and saw improvement. As understanding of the substance grew through more research and conversation, Mitchell said people seemed to become more open to cannabis, which pushed him to open his business.

“My family had a conversation, and we decided if we are going to try it, we may as well while it’s new,” he said.

Mitchell applied for Seaweed’s license in March 2018, received approval in July, and opened its doors in December. The operation received two licenses: one for the dispensary and the other for the lounge. 

As the first lounge in the region, public health and safety concerns delayed its opening. Mitchell and his team worked with the city in order to navigate the regulations, installed significant air filtration systems, and worked with Lompoc’s fire marshall on occupancy restrictions.  

The lounge, he said, allows people to try something new.

“We can’t give away cannabis, but we can do smaller amounts for people to try. It’s a unique opportunity for travelers, and it’s pretty fun,” he said. 

In addition to Seaweed, Mitchell is licensed for indoor cultivation, outdoor cultivation, delivery services, and distribution, which could be impacted by this tax. 

Mitchell said he’s concerned that he will have to raise his prices as a result of the tax measure on the Sept. 14 ballot and it will cause his customers to go elsewhere. Higher taxes could make things tougher for cannabis businesses in Lompoc, he said, as stores start to open near larger cities. 

“If we are unable to offer prices that will sustain and support a dozen or more retail stores, the [city’s] tax revenue will stay the same unless you can attract more people from outside the city,” Mitchell said. “Lompoc is a unique place, and the city needs to approach cannabis taxes in a unique [way].”

Reach Staff Writer Taylor O’Connor at [email protected].