Burgeoning industry expected to remain in red for two years

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,” said Finance Minister Joe Ceci at a news conference.

There’s no word on what that means for municipalities, which have called on the province to share cannabis revenue.

“We understand the government expects not to make any money itself on cannabis so it feels like it doesn’t have anything to share with municipalities,” said Edmonton Mayor Don Iveson. “But our position remains across the country that municipalities need support from the senior orders of government.

“Because we don’t want to see property taxpayers on the hook for policing costs or bylaw costs.”

Edmonton faces an estimated $4.5 million annually in direct costs plus $5 million to $7 million in policing costs, he said.

But Ceci said if municipalities are concerned with being unfairly burdened, “they’re not the only ones.”

“It’s pretty early days, we’re needing more information from Ottawa,” he said.

The Alberta budget forecasted $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.

The federal government and provinces have agreed to share tax revenue — one dollar per gram, or 10 per cent of the producer price, whichever is greater. Provinces will take 75 per cent of the tax and can also collect an additional tax of up to 10 per cent of the cannabis retail price. Alberta is planning to implement the optional provincial tax.

“We don’t want to have disparities across the country,” Ceci said, adding the federal government will collect the tax on Alberta’s behalf and redistribute it because the province has no existing sales tax.

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

The NDP opted for governmentrun online sales while privatizing brick-and-mortar stores.

“There’s lots of activity of course in the private market around all of this, jockeying, licensing and producing,” Ceci said.

The federal government’s cannabis legislation, Bill C-45, passed its second reading in the Senate on Thursday. If approved, Ottawa will remain on track to legalize the use of recreational cannabis on July 1.