Cannabis tax Measure CT skates to easy victory

by Steven Felschundneff | steven@claremont-courier.com

On Tuesday, Claremont voters decisively passed a ballot initiative to tax cannabis-related commerce in Claremont.

Measure CT, which authorizes Claremont City Council to impose a tax on marijuana sales and manufacturing, passed with 61% of the vote. The tax will go into effect if and when those businesses are allowed to operate in the city.

Relaxing Claremont’s 16-year-old ban on marijuana businesses has been gaining momentum since the state passed the Adult Use of Marijuana Act, Proposition 64, in November 2016.

The council elected to put the tax measure on the ballot now in part to prevent a citizen led initiative, driven by a petition drive, from reaching voters first. Under a citizen led measure, control of the tax rate and possibly the regulations allowing cannabis business in the city would be beyond the council’s control.

The tax will have two separate arms: a 4% to 7% levy on gross sales for both retail storefronts and delivery services and a tax on commercial cannabis businesses, such as cultivation and manufacturing. Commercial enterprises would either pay 1% to 4% on gross sales or be taxed based on the square footage of the operation, depending on the type of business.

Voters were asked to approve a percentage range rather than a fixed tax to give the council flexibility in tailoring the final rate to match market conditions. The council could also adjust the rate periodically as long as it stays within the range approved by voters.

If the council authorizes a framework regulating and approving cannabis businesses in Claremont, the tax could generate $500,000 annually, according to HdL Companies, the consultant hired to study marijuana commerce in the city.

Even without marijuana businesses in Claremont, the new levy will still generate as much as $160,000 annually by taxing deliveries from outside our borders. According to City Manager Adam Pirrie, the city would hire a company such as HdL to inform dispensaries in the area to begin collecting the tax on deliveries headed to Claremont.

In anticipation of voters approving recreational use of marijuana, the City Council authorized an ordinance in October 2016 prohibiting commercial cannabis operations, including retail dispensaries, cultivation, and manufacturing facilities, as well as delivery services within the city.

“Proposition 64 stipulated that if a city did not enact local cannabis commercial licensing restrictions or a ban by January 1, 2018, commercial cannabis businesses could operate with a valid state license,” read a city staff report from March. “Therefore, until local regulations and interests could be analyzed and identified for implementation, the City of Claremont adopted ordinances to regulate the personal use and cultivation of cannabis and restrict commercial cannabis activities in the city.”

The city contracted with HdL to conduct two virtual workshops and circulate an online survey to gauge public support for allowing cannabis businesses to operate here, as well as how that commerce should be regulated and how to the sales should be taxed.

Approximately 50 people attended the workshops and expressed mostly favorable opinions about allowing cannabis retail stores in Claremont, according to a staff report. It was not entirely a green light, however, as attendees shared concerns about social equity, public safety, and locations of future retail outlets.

The 48-question survey revealed strong support for both medicinal and recreational use of marijuana, but less support for allowing commercial cannabis businesses to operate in Claremont.

Divided into business types, retail garnered the strongest support with 57.7% of respondents expressing support for storefront retailers for medicinal marijuana, 55% for adult recreational retail and 61% for delivery-only services.

Although the public gave tepid approval to allowing cannabis businesses in Claremont, the idea of taxing marijuana commerce was very popular with 90.2% either strongly or somewhat supporting taxing retailers.

In March the council approved a resolution for city staff to develop a comprehensive plan for a regulatory policy with a wide range of options, from allowing only delivery services to approving a wide rage of commercial businesses.

Sometime in the next few months the City Council is expected to consider allowing cannabis businesses to open in Claremont.

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