Image via Wikipedia user Alapoet.

published on November 9, 2017 - 1:34 PM
Written by David Castellon

Voters in two rural Tulare County cities have overwhelmingly passed ballot initiatives to allow for the taxation of cannabis-related businesses.

In the City of Woodlake, with only 346 votes cast on Measure S in Tuesday’s election, the initiative had the support of 71.1 percent of the voters, while Farmersville’s Measure Q got slightly less support, receiving 66.2 percent of the 290 votes cast.

In the case of Woodlake, that means the city will move forward with reviewing applications for cannabis businesses, as prior to the election its city council had approved an ordinance allowing five types of cannabis-related businesses — cultivation, lab testing, manufacturing, transportation and retail sales, with a limit of two cannabis retail shops in the city.

Passage of Proposition 64 last November by California voters legalized the use, sales and production of marijuana for recreational purposes, but over the past year state officials have been working on methods to license such businesses, with plans to issue the first temporary licenses after the start of next year.

Cities and counties, in turn have the right to enact ordinances regulating those businesses or to ban them entirely, and in the Valley most communities are going the latter route.

Woodlake and Farmersville are among the exceptions the Valley, driven at least in part by the prospect of added tax revenues from the new cannabis businesses.

But in order for cities or counties to issue new taxes, voter approval is needed, which is why the

Farmersville and Woodlake elections were held this week.

As for what the actual tax will be on cannabis-related sales in Woodlake, its city council will decide that in December, though the ballot initiative limits the amount to no more than 10 percent of sales, noted Ramon Lara, the city administrator.

Cultivation operations would be taxed differently, at $25 per square foot for the first 3,000 square feet of plants being grown, and $10 per square foot after that.

Lara said that whatever the tax the city imposes, it likely will be comparable to what other California cities are charging.

Fitch Ratings, Inc., one of the nation’s big-three credit-rating businesses, recently reported that in states that have legalized nonmedical cannabis, the low end of combined local and state cannabis taxation stands at 10-20 percent, while the higher end can reach 50 percent in some states.

Starting next year, the state of California will impose a 15 percent excise tax on retail purchases of marijuana and products made with marijuana, while cultivators will have a separate tax for their commercial sales — $9.25 per dry weight ounce of cannabis flowers and $2.75 per dry-weight ounce of cannabis leaves.

Among the 30 states allowing commercial or medical cannabis or both, California stands at the higher end of the combined state and local tax rates, at 35-45 percent, according to the Fitch report.

It goes on to warn that high tax rates could elevate prices for legal pot to the point that it drives customers to illegal black market dealers selling for less.

Lara agreed, saying, “We have to find a fine medium where people who do business in Woodlake can be competitive, or you risk pushing everything to the black market.”

He said the city has received applications for permits — five applicants looking to open retail shops that sell marijuana and related products, though only two such businesses will be allowed in the city — and three interested in starting cultivating businesses.

Under Woodlake’s ordinance, commercial growing operations would have to be done indoors, and the applicants have made proposals to build structures 10,0000 to 75,000 square feet in size for their proposed cultivation operations.

As for Farmersville — where officials have been very open in saying cannabis businesses are being considered there because the city needs the added tax revenues they could bring — the next step will be decided on Monday.

The Farmersville’s city council has put together an ordinance allowing only marijuana-cultivating businesses, but officials opted to hold off on the vote on whether to approve it until after residents voted on taxing such businesses.

Now that it has passed by a high margin of voters, Farmersville, City Councilman Greg Gomez said that for the council vote on the ordinance, “I expect it will pass and we will allow commercial growing.”

Both Woodlake and Farmersville voters on Tuesday also passed one-cent and half-cent sales taxes, respectively.

In the Fresno County town of Coalinga, which has also taken steps to welcome cannabis-related businesses in town, a 1-percent sales tax initiative was rejected by voters Tuesday.

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