When Californians voted in 2016 to allow the sale of recreational marijuana, advocates of the move envisioned thousands of pot shops and cannabis farms obtaining state licenses, making the drug easily available to all adults within a short drive.
But as the first year of licensed sales comes to a close, California’s legal market hasn’t performed as state officials and the cannabis industry had hoped. Retailers and growers say they’ve been stunted by complex regulations, high taxes and decisions by most cities to ban cannabis shops. At the same time, many residents are going to city halls and courts to fight pot businesses they see as nuisances, and police chiefs are raising concerns about crime triggered by the marijuana trade.
Gov.-elect Gavin Newsom, who played a large role in the legalization of cannabis, will inherit the numerous challenges when he takes office in January as legislators hope to send him a raft of bills next year to provide banking for the pot industry, ease the tax burden on retailers and crack down on sales to minors.
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“The cannabis industry is being choked by California’s penchant for over-regulation,” said Dale Gieringer, director of California NORML, a pro-legalization group. “It’s impossible to solve all of the problems without a drastic rewrite of the law, which is not in the cards for the foreseeable future.”
After voters legalized marijuana two years ago under Proposition 64, state officials estimated in there would be as many as 6,000 cannabis shops licensed in the first few years. But the state Bureau of Cannabis Control has issued just 547 temporary and annual licenses to marijuana retail stores and dispensaries. Some 1,790 stores and dispensaries were paying taxes on medicinal pot sales before licenses were required starting Jan. 1.
(Los Angeles Times)
State officials also predicted that legal cannabis would eventually bring in up to $1 billion in revenue a year. But with many cities banning pot sales, tax revenue is falling far short of estimates. Based on taxes collected since Jan. 1, the state is expected to bring in $471 million in revenue this fiscal year — much less than the $630 million projected in Gov. Jerry Brown’s budget.
“I think we all wish we could license more businesses, but our system is based on dual licensing and local control,” said Alex Traverso, a spokesman for the state Bureau of Cannabis Control, referring to the requirement that cannabis businesses get permission from the state and the city in which they want to operate.
Less than 20% of cities in California — 89 of 482 — allow retail shops to sell cannabis for recreational use, according to the California Cannabis Industry Assn. Cities that allow cannabis sales include Los Angeles, Oakland, San Francisco and San Diego.
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Eighty-two of Los Angeles County’s 88 cities prohibit retail sales of recreational marijuana, according to Alexa Halloran, an attorney specializing in cannabis law for the firm Solomon, Saltsman & Jamieson. Pot shops are not allowed in cities including Burbank, Manhattan Beach, Alhambra, Beverly Hills, Inglewood, Compton, Redondo Beach, El Monte, Rancho Palos Verdes and Calabasas.
“While some cities have jumped in headfirst, we’ve taken a deliberate approach,” said Manhattan Beach Mayor Steve Napolitano, “to see how things shake out elsewhere before further consideration. I think that’s proven to be the smart approach.”
Voters have also been reluctant to allow cannabis stores in their communities.
Of the 64 California cities and counties that voted on cannabis ballot measures in the November midterm election, eight banned the sale of cannabis or turned down taxation measures, seven allowed sales and 49 approved taxes on pot businesses, said Hilary Bricken, an attorney who represents the industry. Among them, voters in Malibu approved pot shops while Simi Valley residents voted for an advisory measure against allowing retail sales.
Javier Montes, owner of Wilmington pot store Delta-9 THC, says he is struggling to compete with a large illicit market unburdened by the taxes he pays as a licensed business.
“Because we are up against high taxes and the proliferation of illegal shops, it is difficult right now,” Montes said. “We expected lines out of our doors, but unfortunately the underground market was already conducting commercial cannabis activity and are continuing to do so.”
Montes, who received his city and state licenses in January, says his business faces a 15% state excise tax, a 10% recreational marijuana tax by the city of Los Angeles and 9.5% in sales tax by the county and state — a markup of more than 34%.
He says there isn’t enough enforcement against illegal operators, and the hard times have caused him to cut the number of employees at his shop in half this year from 24 to 12.
“It’s very hard whenever I have to lay people off, because they are like a family to me,” said Montes, who is vice president of the United Cannabis Business Assn., which represents firms including the about 170 cannabis retailers licensed by the city of Los Angeles.
DELTA-9 faces a 15% state excise tax, a 10% recreational cannabis tax by the city of Los Angeles and 9.5% in sales tax by the county and state, the shop owner says. (Marcus Yam / Los Angeles Times)
Sky Siegel, who operates a cannabis business in Studio City, said he recently gave up trying to open another store in Santa Monica because of its restrictions on such businesses.
“It turns into this ‘Hunger Games’ to try to get a license,” said Siegel, who is general manager of Perennial Holistic Wellness Center, which has a dozen employees in Studio City and also operates a delivery service.
He says his firm is up against thousands of unlicensed delivery services going into cities where storefronts are banned.
“To me, it doesn’t make sense” that many cities have prohibited shops, he said. “Banning does nothing. It’s already there. Why not turn this into a legitimized business, which is what the people want.”
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California has also issued fewer cultivation licenses than expected in the first year of legalization, with about 2,160 growers registered with the state; an estimated 50,000 commercial cannabis cultivation operations existed before Proposition 64, according to the California Growers Assn. Some have given up growing pot, but many others are continuing to operate illegally.
The trade group hoped to see at least 5,000 commercial growers licensed in the first year, said Hezekiah Allen, the group’s former executive director who is now chairman of Emerald Grown, a cooperative of 130 licensed cultivators.
“We are lagging far behind,” Allen said. “It’s woefully inadequate. Most of the people in California who are buying cannabis are still buying it from the unregulated market. There just isn’t a reason for most growers to make the transition.”
Patrick McGreevy Dec 27, 2018
(Marcus Yam / Los Angeles Times)
Source: http://www.latimes.com/politics/la-pol-ca-marijuana-year-anniversary-review-20181227-story.html