Los Angeles County is regulating the cannabis business, and like most governmental agencies the county wants to generate revenue from it.
The county plans to achieve this by taxing the growing, cultivation and retail sales of the legal, popular recreational drug within unincorporated county areas. However, the county will need the voters’ help to proceed.
On Tuesday, the Los Angeles County Board of Supervisors voted 4-0 to place a marijuana tax measure on the ballot for the Nov. 8 election. Supervisor Janice Hahn was absent and did not vote. To set the county’s cannabis tax plan in motion, a simple majority of county voters is required in November.
The tax would generate about $10.4 million annually beginning July 1, 2023 and continuing through July 1, 2026. The county supervisors have the option to raise the tax rates at a later date, which could generate as much as $15.2 million in annual revenues.
The plan affects marijuana businesses involved in the sale, cultivation, manufacturing, testing, distribution and other commercial aspects, according to the adopted resolution. The county plans to permit up to 25 storefront retail marijuana businesses, 25 delivery businesses, 10 indoor/mixed light cultivation farms, 10 manufacturing businesses, 10 distribution businesses and 10 testing laboratories.
The ballot measure would enable the taxing of cannabis in a number of categories and at various rates as follows:
• 4% of gross receipts of retail sales
• 3% of gross receipts on manufacturing and processing
• 3% of gross receipts on distribution
• $4 per square foot, assessed on canopy space for mixed-light cultivation or no artificial lighting; $2 per square foot assessed on canopy space in any nursery; and $7 per square foot assessed on canopy space for cultivation using only artificial light.
The measure drew criticism from an association representing rural town councils, mostly from the Antelope Valley, where illegal marijuana growing operations have been popping up.
Susan Zahnter, director of the Association of Rural Town Councils, was concerned that the board of supervisors was ignoring the violence and environmental damage from illegal pot farms in the Antelope Valley.
“Prosecution is almost non-existent,” Zahnter told the supervisors. She was worried that the measure invited more illegal operations, saying, “We want protections from this scourge on our communities.”
State Sen. Scott Wilk, R-Lancaster, wrote in an op-ed in this newspaper last month that the illegal farms lead to human trafficking, assaults and robberies and were responsible for the murders of at least five people living in the high desert community.
He and others in the desert region see the legalization of marijuana in 2016 as an entry for international drug cartels to move into the Mojave Desert and other high-desert communities to grow marijuana illegally.
The illegal grows strip the land of soil, and lead to deforestation and wildfires, while pesticides and other poisons seep into the ground and could reach the groundwater, a source of drinking water, Wilk wrote.
Supervisor Kathryn Barger said she was aware of the problems, and that the Antelope Valley has been disproportionately affected by illegal farms, but she said the measure does not allow outdoor grows and it won’t allow the county to collect revenue from illegal pot farms or businesses.
“Outdoor grows will not be permitted,” Barger said. “We will not tolerate illegal operations. Cannabis must take place in structures and not in greenhouses. The approach we’ve adopted will equitably distribute legal cannabis businesses in each supervisorial district, and specifies that cannabis cultivation will only be permitted indoors.”
Barger said the county must ensure that legal marijuana businesses “do not create new harms for rural communities.” She said the county’s legal cannabis framework that will define where and how cannabis businesses can operate is expected to be drafted by 2023.
“And efforts to enhance enforcement of illegal cannabis grows are part of the equation,” she said.
Supervisor Hilda Solis was concerned that people of color, especially Latinos, have been unable to get into the legal marijuana business. In the U.S. only 5.7% of the 30,000 cannabis companies are Latino-owned, she said.
She asked that the county’s Department of Consumer and Business Affairs (DCBA) and its Office of Cannabis Management (OCM) help remove barriers that prevent permitting and licensing for future Latino owners.
The state collected about $817 million in adult-use cannabis tax revenues in fiscal year 2020-2021, according to the county staff report. Revenues have been used on drug research, treatment, enforcement, youth programs and preventing environmental damage from illegal grows.
If the Los Angeles County measure is approved by the voters, the revenues will flow into the county’s General Fund and may be spent on a wide array of programs and initiatives, the report stated.