Cannabis revenue won’t kick in right away

Alberta’s fledgling cannabis industry isn’t expected to turn a profit for the provincial government in the two years following legalization while the province sets up sales and distribution.

The NDP’s budget, tabled Thursday, included the first peek at how much it will cost to bring bud to market.

Alberta projects a loss of $90 million over two years, but the bottom line will make it into the black in 2020-21. That’s when the province estimates it will pull in a net income of $37 million.

“For the first couple of years … we’re seeing it as a net loss,” Finance Minister Joe Ceci said at a news conference.

There’s no word on what that means for municipalities, which have called on the province to share cannabis revenue. Ceci encouraged municipalities to “stay tuned” on how they’ll benefit from pot tax revenues.

In a deal struck between the federal government and its provincial and territorial counterparts late last year, Ottawa committed to a 75-25 split on tax revenues from cannabis sales — one dollar per gram, or 10 per cent of the producer price, whichever is greater — with the majority of that cash going to the provinces.

Federal budget documents tabled last month stated “a substantial portion” of cannabis tax revenues should go to municipalities, “who are on the front lines of legalization.”

Ceci told reporters Thursday that talks with municipalities, as well as with the federal government, are ongoing.

“It’s pretty early days,” he said. “There’s still more information we need from Ottawa, frankly, to understand fully what … is available.”

In December, federal Finance Minister Bill Morneau said Ottawa would get about one-quarter of the estimated $400 million in annual tax revenues generated from selling legalized marijuana, with the rest to be split between the provinces on a per-capita basis. That deal could potentially bring about $35 million to Alberta.

Thursday’s budget forecasts $26 million in cannabis tax revenue in 2018-19 and estimates that will grow to $99 million by 2020-21. Revenue is expected to increase as the illegal cannabis market shrinks.

Cannabis will also be subject to a markup through the Alberta Gaming and Liquor Commission, the government agency responsible for distribution.

Provinces and cities are expected to shoulder the load when it comes to funding enforcement costs, ranging from retail licensing to stopping impaired drivers.

But without a commitment from the province, Calgary Mayor Naheed Nenshi said the city is already starting to feel the brunt of fronting those enforcement costs.

“Is it a billion-dollar burden? Of course not,” he said Thursday afternoon. “But is it a couple million bucks that I’d rather not spend up front? Yes.”

Nenshi said he was disappointed by the lack of information on cannabis revenue distribution but that the city would continue to negotiate with the NDP government.

“This should be very easy. Just say ‘Look, we’re going to cover your costs at a minimum,’ and so I’m surprised that hasn’t been done yet,” he said.

“This regulatory change, this legislative change was made not by us, so to foist the costs on us is not the right thing to do.”

The provincial government is still in the process of developing a framework for how those funds would be distributed as it awaits clarification from Ottawa, according to Ceci.