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Grover Voters will Decide City’s Cash for Grass, Marijuana That Is

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By Theresa-Marie Wilson ~

The Grover Beach City Council unanimously voted to move ahead with a ballot measure asking voters whether or not to place a tax on the sale of marijuana. The levy would include medical cannabis and, quite possibly, recreational pot use should California voters approve legalizing it in the November election.

“I think it makes sense that we do move forward to place something on the ballet,” said Mayor John Shoals. “I do want to make sure we do something that is fair and put that to the voters.”

Earlier in July, the council directed staff to initiate zoning laws permitting cannabis use that would allow businesses to open shop, as well as a commercial cultivation, manufacturing, and laboratory testing.

“Under state law they need to be separate entities,” said City Attorney Martin Koczanowicz. “You can not have the same entity doing all of the activities. State law tries to separate to ensure quality control.”

Currently the city prohibits brick and mortar and mobile dispensaries

Should the ballot measure be approved, the city would receive increased revenues based on the amount of the tax and the number of businesses operating within the city.

The ballot measure would allow for a gross receipt tax of five percent for medical marijuana sales in the city and 10 percent for recreational marijuana if Proposition 64 passes.

“With regards to the gross receipts, you would need to basically have an audit every year and, very frankly hope, that nobody cooks their books and runs a certain amount of sales without reporting them,” said Koczanowicz.

If the amount of tax that was approved by voters does not change, in theory the city could change the methodology of taxation such as by square footage or a flat rate—gross receipts are irrespective of size.

“This is so uncharted to anybody; we just don’t know where it is going to go,” said Councilwoman Mariam Shah. “I think the gross receipts at least gives some fluidity without having to come back to the voters.”

For cultivation and manufacturing, the initiative would mandate a square footage tax. Staff would propose a formula for that amount at the Aug. 1 meeting.
The tax treats both medical and recreational marijuana the same to the “extent that the tax measure says ‘any use that is legalized,” said Koczanowicz. “Growth is currently permitted on an indoor basis only. All cultivation under state law is permitted indoors.”

All the tax talk aside, Mayor John Shoals said the goal isn’t exclusively about making money for the city.

“This is not all about generating revenue,” Shoals said. “There is another component to this. It costs more money to regulate than to not. We have to figure out how to get compensated for the services, that if this goes down the road, whether it is medical or recreational, the city has a to regulate this. We do have to figure out how to make sure we are being compensated. I don’t want everyone to think this is a huge money grab. This is really to strike a balance between making sure that we are paying to have this regulated, to make sure our community is safe and this is accounted for.”

Should voters approve legalization to allow recreational use of cannabis in California similar to Colorado, Oregon and Washington, there would be a 15% statewide excise tax, in addition to the sales tax rate of each jurisdiction, on cannabis activities. However, it does exempt medical marijuana from some taxation.

Several cities including Santa Cruz, San Jose, Palm Springs, Oakland, and Sacramento have approved tax measures and the cities of Santa Barbara and King City will have tax measures on the November 2016 ballot.

The city has until Aug. 12 to submit the 75-word ballot measure to San Luis Obispo County. The council is expected to make a final approval on wording at its Aug. 1 meeting.

Should voters approve the initiative, Grover Beach could be the first municipality in the county to tax the sale of marijuana. Staff estimates that it will take 4-6 months to get through the process before coming back to the council for adoption.

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