- Business owners say the pandemic, competition from the black market and an oversaturated market is a perfect storm.
- Council members worried about the loss of revenue, although one added, “But 10% is empty.”
Cathedral City may lower marijuana taxes after local business owners beg them to collapse under high costs. But exactly how many are unclear.
The city council has long debated whether to give marijuana businesses a tax break. Despite several meetings on the topic, testimony from industry leaders and other changes to marijuana policy, including a minor tax exemption for growers, the committee has avoided major changes due to concerns about lost revenue.
This may change soon.
At Wednesday’s research meeting, the commission backed lower marijuana taxes, but details remain undecided as it awaits review of the city’s budget in the coming weeks. City Manager Charlie McClendon said he would prepare a resolution on the tax for council consideration in late February.
The city staff’s proposal would halve the retail tax on marijuana to 5 percent, the cultivation tax to $10 per square foot and the manufacturing tax to 3 to 5 cents. Currently, the retail tax is 10%, the plantation tax is $15 per square foot, and the manufacturing tax is 5, 10 or 40 cents per gram, depending on the type of product.
But the council is divided on how to bring those numbers down, either backing staff’s proposal to even lower taxes, or waiting to balance lost revenue in the city’s budget before committing to specific amounts.
Councilman Ernesto Gutierrez said he wondered how the city would make up for the cuts. The committee plans to hold a special meeting Saturday to discuss finances and goal setting, and there are some budget meetings on the books.
“I believe it’s not about whether we do it or not,” Gutierrez said. “how many.”
The city’s marijuana tax revenues total about $4.6 million in 2020, $5 million in 2021 and $3.6 million in 2022, McClendon said. An estimated $1,335,000 in lost revenue per year would be lost if marijuana taxes were lowered to the retail and cultivation taxes suggested by city staff. According to the city staff, there are not many manufacturers in the city.
“It’s kind of scary budget-wise considering we’re going to change the tax rate,” said Mayor Rita Lamb, who backed the staffer’s recommendation. “But 10 percent is empty.”
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The city surveyed local businesses about their operations and financial conditions and received 11 responses. Business owners reiterated Wednesday their fear of losing out due to high taxes, an oversaturated market and competition from cheaper black markets.
Kenneth Churchill, CEO and co-founder of the West Coast Cannabis Club, said, “Cannabis is not the golden goose” that anyone thought it would be. He said it’s not the city’s fault that the marijuana industry is where it is, but it should thank the residents behind the businesses for their help.
“The only one who isn’t on board is the committee, and we’re asking you here to help support small businesses, help support jobs in this community, and help ensure the cannabis industry can survive by meeting with us. 5 percent,” he said.
Atomic Budz owner John Chaisson said the lower tax rate would help it win back and retain local customers, but he was looking forward to when the industry would be taxed and treated like any other type of business.
“I’ve been here since 2017, and I can tell you it’s been very difficult. The pandemic, in particular, has really hurt us,” Chasson said. “Losing tourists and many locals going to the cheaper black market for weed has put a heavy financial burden on my business.”
The commission is expected to vote on lowering marijuana taxes on Feb. 22.
Ani Gasparyan covers the western Coachella Valley cities of Desert Hot Springs and Cathedral City. Contact her at firstname.lastname@example.org.