A tax on marijuana could raise $6 million for the South Bay’s biggest city.
The Chula Vista City Council approved a 7-percent tax on retail marijuana sales and a $15-per-square-foot tax on cannabis growing facilities Tuesday.
The city’s voters approved the legal sale of cannabis in 2016 and authorized a tax on marijuana sales and cultivation last November.
With more than 80 license applications expected for up to 12 cannabis retail and delivery licenses, the city manager’s office surveyed 140 California cities and counties for details on their tax rate for legal cannabis sales.
Deputy City Manager Kelley Bacon found a tax range of between 5 and 15 percent on retail sales in those other locations, and determined that a 7-percent tax on retail and delivery sales and a $25-per-square-foot tax on cannabis growing facilities would be reasonable rates for Chula Vista.
“Looking at the state and the region, (7 percent) just seemed like a sweet spot to start off," Bacon told NBC 7.
The city council approved the 7-percent retail tax but adopted a lower, $15-per-square-foot tax on marijuana growers.
The city had estimated that a 7-percent and $25-per-square-foot taxes could generate $6 million a year in new revenue. It’s unknown how much less will be generated by the reduced tax on cultivators.
"There are those who told me I'm estimating low, but I'd rather be conservative and be wrong, than go high and be wrong,” Bacon said.
That new revenue will not start flowing until the new licenses are approved and the retail sales begin, which could be this December.
“So we're not going to see revenue coming flying through the doors,” Bacon said. “It could take up to three years for all of our allowed applicants to get their businesses up and running."
Bacon said the additional revenue would flow to the city’s general fund, to be used for increased public safety, parks, a library and pension payments. The money could also fund a more aggressive legal effort to shut the unlicensed dispensaries now operating in Chula Vista.
There are now at least four unlicensed storefronts in the city.
One cannabis entrepreneur who follows the rules said he welcomes a crackdown on unlicensed outlets, and has no problem with a 7-percent tax.
"It's extremely fair," said Zachary Lazarus who is applying for three cannabis sales licenses.
Lazarus said his application offers even more revenue over and above the tax, in the form of contributions for libraries and children’s programs.
"Let the city be endowed extra money,” Lazarus said. “Because there is a profit in cannabis."