When California’s cannabis shops opened their doors six years ago, they inaugurated the world’s largest market for legalized recreational marijuana.
This historic step would transform the state, predicted supporters and opponents. Californians would get justice and gobs of money — or fall victim to reefer madness.
What’s life like after legalization? Pretty chill. The passionate claims made by both sides ended up being overstated. The sky hasn’t fallen, and the state has some more money. But there are some new challenges, such as local regulations, accidental ingestion by children and emergency medical problems among elders.
The state is said to have earned $5.7 billion in cannabis tax revenue, but revenues have fallen somewhat short of projections.
Legalization promised to generate an estimated $1.4 billion a year in new tax revenue within a few years. It got close in 2021, reaching $1.3 billion at its peak in mid-2021. But funds have slumped since then, falling to just over $1 billion in 2022, with similar revenues expected for 2023.
And there are still a lot of unknowns. Surprisingly, the state has no good historical data about the number of acres in cultivation. Statistics about youth usage are woefully incomplete. There is no roadside sobriety test for cannabis, and the CHP doesn’t track accidents that involve drivers who are high on pot.
A study by the Rand Corporation and Institute of Labor Economics found no relationship between county laws that legally permit dispensaries and reported violent crime, but there are no statewide data on dispensary-related robberies.
Enacted in 2016 and implemented in 2018, Proposition 64 allowed for local control over cannabis, so more than half of California’s cities and counties ban commercial cultivation and sales.
Six years later, many say the struggle is real. Cannabis purveyors report they continue to navigate challenges in Marin and across the state.
In San Rafael, cannabis businesses scored a victory after a successful crusade to lower an excise tax in 2022. Businesses now pay a 2% special business tax – a reduction from 4% – which has dropped expected revenue from $500,000 to $346,216.
“The decrease in Measure G revenues from FY 2021-22 to FY 2022-23 can be attributed to challenging conditions in the cannabis market and the temporary decrease in the cannabis tax rate from 4% to 2% for delivery non-storefront license types on January 1, 2023,” City Manager Cristine Alilovich wrote in an email.
Still, merchants such as Danielle Span, co-founder of Moonflower Delivery in San Rafael, said owning a cannabis business in Marin remains tough.
“Everyone just does what they do to survive,” she said. “I can’t look at the cannabis industry and say it’s a success. For all the struggle, you might call it a pretty big failure.”
Cannabis businesses, like any other, are beholden to the ebbs and flows of the economy. Unlike others though, they are subject to state and local taxes that can cut into profit and strangulate growth. Early predictions were prone to error. And illicit weed is still abundant, undercutting legal sales.
Also, pot prices are down, reducing profits. Since legalization, the average wholesale price for a pound of California cannabis flower has plummeted from $1,600 to $643, according to Cannabis Benchmarks, the nation’s provider of data for U.S. cannabis markets due to supply and demand. Legalization created a “green rush” of growers, boosting supply. But demand has stayed steady, and many communities restrict sales.
“We’ve hit five years in business, but like everyone, we’re adapting to survive. You can wait on regulations to change or decreases in taxes to change, you have to take it as it is,” Span said.
Nurit Raphael, owner and founder of Ona Life, a cannabis delivery service based in San Rafael, said the rate reduction for non-storefront delivery license holders has been positive.
“The city has been focused on supporting existing cannabis license holders and has limited new expansion of cannabis licenses in San Rafael,” she said.
Raphael said the likely next step would follow the city’s stated goals and objectives on cannabis, which include a stringent review of new and current licenses and addressing products targeting youths. The state will also review hemp products — byproducts of the cannabis production process — for sale on the open market.
Statewide, there are 695 licenses for storefront retail dispensaries, most in urban hubs in Los Angeles and the Bay Area.
In Marin, growth has been limited. In 2017, the Board of Supervisors approved an ordinance in that prohibits adult-use commercial cannabis activities, including cultivation, manufacturing, testing, distribution or retail sales.
The county regulates unincorporated areas, where all retail cannabis storefronts are prohibited, according to the county. One medical cannabis delivery-only business license has been issued in the county’s jurisdiction.
In southern Marin, a cannabis measure in Sausalito failed to capture public support. Measure K failed in 2022 with approximately a quarter of the vote, highly criticized by its restrictive language and promotion of only a single business.
Timothy McCloud proposed another cannabis sale ballot measure for the city, which he ultimately pulled due to a lack of public support. McCloud said he believes cannabis is a low priority in the county and in Sausalito, overshadowed by prominent and divisive issues such as housing and public safety.
“The existing cannabis companies have worked to stifle competition and also, communities seemed to be more focused on issues like crime, infrastructure, and closely monitoring fiscal year budgets,” he said.
McCloud said he sought to institute the ballot measure to support Sausalito during its budget crisis. Political sentiment seemed geared against it, however.
“Fast-forward to today and Sausalito seems to be doing a slightly better job of managing expenses and also, focusing on urgent infrastructure needs, which, for me, deprioritizes the need for cannabis tax revenue,” he said.
Independent Journal reporter Giuseppe Ricapito contributed to this report.
H/T: www.marinij.com
