Long Beach officials want to tax marijuana sales, crops

July 01, 2010

Paul Eakins, Long Beach Press-Telegram

In an attempt to bring new revenue into the city coffers, Long Beach officials are proposing a tax on marijuana. Director of Financial Management Lori Ann Farrell is asking the City Council on Tuesday to set a date for a public hearing to approve putting a marijuana tax measure on the November ballot. The proposal was added to the council's agenda Friday thisafternoon.

Under Farrell's proposal, medical marijuana collectives would be charged a 5 percent gross receipts tax. A tax of 0.75 cents per square foot would be charged for sites that are used exclusively to cultivate marijuana.

California voters legalized medical marijuana in 1996, but recreational marijuana use is illegal. That could change with Proposition 19, a measure on the November ballot that would legalize marijuana in California for people 21 and older.

Considering this possibility, Farrell's proposal also includes a 5 percent to 10 percent gross receipts tax on other marijuana businesses.

If the council OKs the plan Tuesday, a public hearing would take place Aug. 3, when the council would vote on whether to place the tax on the ballot. Long Beach voters would have to approve the tax in November for it to go into effect.

Because no Long Beach elected positions are on the ballot in November, the council would have to declare a fiscal emergency in order to place the measure on the ballot.

The idea of taxing medical marijuana collectives has been bandied about since the council approved regulations in March that require collectives to register with the city, pay permit fees - which marijuana advocates say are exorbitant already - and run through a gamut of other requirements.

The law severely restricts where collectives can be located, keeping them out of residential areas, away from schools and 1,000 feet away from one anothereach other.

The ordinance also requires that Long Beach collectives grow their marijuana within the city limits and allows them to grow the plant on-site or to set up a separate cultivation location.

City officials have estimated that there are up to 85 collectives in Long Beach, but that number is expected to be reduced to 30 once the new restrictions are fully implemented, according to Farrell's report. The last day for collectives to apply for a permit was June 18, and on Sept. 20 a lottery will take place to determine which among those that are too close together will be allowed to operate.

If voters pass the marijuana tax, Farrell said in her report that she doesn't yet know how much money the city could raise.

Oakland, which was the first U.S. city to tax medical marijuana collectives, raised $23,608 in 2008 with a tax rate of 0.12 percent, according to Farrell. Voters there approved increasing the tax rate to 1.8 percent in July 2009, which it was estimated would raise $294,000, Farrell said.

Any extra revenue would be welcomed by Long Beach officials as the city faces an $18.5 million budget deficit in the next fiscal year that begins Oct. 1 and more shortfalls for at least the next two years.

Other cities, including Berkeley and Sacramento, are considering marijuana taxes as well.

However, Kris Hermes, spokesman for Americans for Safe Access, the country's largest medical marijuana advocacy group, said Long Beach's proposed 5 percent tax is "pretty steep."

He said the tax could just get passed on to medical marijuana patients who may not be able to afford it. Ideally, no marijuana tax would be placed on the ballot, he said.

"We don't believe that patients should be taxed at all for their medication," Hermes said.

The organization considers marijuana to be the equivalent of prescription drugs, which aren't taxed, Hermes said. On the other hand, cannabis is in a gray area - it isn't recognized as a legal drug by the federal government, and doctors don't give actual prescriptions for it.

Hermes said it is still much closer to a prescription medication than to an aspirin.

"You can't just go into the pharmacy and get it over the counter," he said. "You need to go to a physician and get a recommendation."

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