Would a Local Supermajority Vote Requirement For Fees and Taxes Hurt the Promise of California’s Statewide Legal Cannabis System?

Photo by Thought Catalog

A proposed November ballot initiative currently in the signature gathering phase could push many local governments further towards the prohibition of cannabis business activities in their area.

The Tax Fairness, Transparency and Accountability Act of 2018 would require all local fees and taxes to be approved by a two-thirds vote.

The initiative, sponsored by the California Business Roundtable argues that one of the main purposes of the measure is to overturn the “loophole” created by Cannabis Coalition v. City of Upland.

The case involved a 2014 initiative in Upland, CA that would repeal the city’s prohibition on medical marijuana dispensaries, create regulations permitting medical dispensaries, and would imposed a $75,000 annual licensing and inspection fee to cover Upland’s administrative costs.

The proponents of the initiative requested that the measure be considered at a special election, but the City of Upland believed that the annual licensing and inspection fee was actually a tax and therefore, belonged on the general election ballot as required by Proposition 218 passed in 1996.

The coalition challenged the City and initially the lower court sided with Upland. The California Appeals Court reversed the lower court’s decision and the California Supreme Court upheld the Appeal Court’s reversal.

In the majority’s opinion, the Supreme Court ruled that nothing in the State’s Constitution prohibited or restricted citizens’ to place a measure on the ballot to approve fees or taxes. What was left uncertain in the opinion, however was whether or not citizens’ initiatives are subject to the Prop. 218 two-thirds vote threshold required for local government sponsored initiatives. And that’s where the currently proposed initiative comes into play.

The sponsors of the current initiative, the California Business Roundtable, made of some of the state’s largest companies including Wells Fargo, Albertsons, KB Home, Blackstone Group, Chevron and others, argues that the proposed ballot initiative will close this loophole by ensuring all fee and tax proposals meet the high two-thirds threshold.

This measure, however, could have much broader impacts that stated or anticipated. Since the passage of Proposition 64 in 2016, one of the main sticking points in many local jurisdictions has centered around the ability of local governments to collect an fair and appropriate amount of fees and taxes to support local law enforcement and programs with cannabis generated tax revenue. Recently, the O.C. Register released a database that showed that fewer than one in three California cities allows any cannabis business activity in their area.

If a two-thirds vote requirement is required to implement local cannabis-related fees and taxes to cover enforcement and oversight administration, where’s the incentive for local governments to adopt cannabis friendly business policies? The “carrot” included in Prop. 64, was the ability for cities and counties to raise revenues to fund local priorities. With a higher-vote threshold, it’s not hard to imagine many of the local jurisdictions that are still on the fence will decide to sit on their hands and not approve cannabis business activity in their area. Without easy access to licensed retailers statewide, consumers will continue to be forced into to buy their products from the illicit market.

As of this article, the proposed initiative had gathered 25% of the signatures needed to qualify for the November ballot. The coalition has until July 25, 2018, to gather all 585,407 valid signatures to qualify.

Questions about the initiative process? Contact us here or at info@thecannabisfile.com.

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