New Study: CA Cities Blocking Pot Missing Out on Big Revenue

A new study commissioned by the California Hispanic Chambers of Commerce and Weedmaps speculates on just how much revenue municipalities that have banned cannabis are leaving on the table, especially amidst a coffer clearing pandemic.

It’s in the billions for sure.

“Local bans on cannabis retail have hampered opportunities for cannabis entrepreneurs for almost four years since California voters passed Prop 64,” said Julian Canete, president and CEO of California Hispanic Chambers of Commerce. “In the wake of COVID-19, there’s never been a better time for local governments to embrace the potential for more tax revenue that fund critical services, and we hope this study encourages many to rethink their opposition.”

The study itself was conducted by Applied Development Economics. The company was founded in the 1980s by a group of planners and economists from the Department of City and Regional Planning at UC Berkeley. According to the company website, they’ve specialized in exploring the economic development opportunities that emerge from improving environmental quality.

The biggest overall takeaway from the report is that the legal cannabis industry continues to show significant market potential for additional legal sales throughout California.

But local governments have proven their own worst enemy in the past. Roughly 75% of cities continue to ban access to legal marijuana by local decry according to Weedmaps’ data. And the only way to capture much of the lost revenue is if the number of retail cannabis establishments expands to meet local demand in those communities that do not currently have legal retail cannabis sales.

“The state’s underperforming retail cannabis market, the range of potential market support has significant upside. The market demand already exists, with most of the demand currently met through illicit sales channels that generate no tax revenues,” the report’s authors noted in an announcement. One of the points of hope for the market is California’s cannabis tax receipts totaled over $635 million in 2019, certainly a big jump from the $397 million collected in 2018.

The longer the pandemic goes on, the more difficult the questions that will arise for many communities. How long until the moral high ground of not selling weed crumbles from the weight of ideas like hiring more firefighters?

Brian Allison, Weedmaps’ Western Regional Director of Government Relations, took to Medium to give his thoughts on the report. He noted just how devastating the future looks for many communities already running low on funds.

“Vital public services are in jeopardy,” Allison said, “The livelihood of thousands of public sector workers is on the cutting block. The negative, far-reaching, and irreversible impact on the lives of all Californians is almost impossible to imagine.”

Allison spoke to the current situation possibly being a catalyst for change given the circumstances.

“Jurisdictions across the Golden State are looking to legal, adult-use cannabis as one way to generate much-needed tax revenue,” Allison said. “Mayors, city councilmembers and county supervisors are taking a serious look at opening their communities to legal cannabis retail (dispensaries and delivery services) as well as other related components like growing and manufacturing. The potential tax revenue is certainly enticing.”

Allison went on to explain what he believes has happened in the years following Prop 64 passing. He argued a lot of Californians think they already voted to make access a reality, but it may be getting lost in the transition between the ballot box and city council chamber. “There’s a disconnect between what voters actually wanted to see as a result of Proposition 64, and what their local leaders thought they wanted. The civic repercussions of COVID-19 have brought that disconnect into sharp focus,” he said.

Allison argues that California voters sent what they thought was a clear message to Sacramento, in addition to their own city halls. That message was a demand for a robust statewide market. “Unfortunately, many local leaders didn’t get the memo,” he said, “They misinterpreted the voice of the people, arguing that their constituents may have voted for adult-use cannabis, but didn’t necessarily want it sold in their backyards. As a result, today only 89 of California’s 482 cities allow cannabis retail sales.”

The only negative thing about the report was it seemed to undervalue the scale of the underground market. Earlier this year industry data crunchers estimated the total value of the underground cannabis economy to be $8.7 Billion. The report valued the entire market, both legal and illicit, at $7.9 billion.

But everything else in the report seemed to validate the expectations of those people who have been calling out communities blocking access for years. Now as those municipalities look at their balance sheets through the pandemic, the question is how far will some be willing to go to get a piece of the billions being left on the table?

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