Province, cities preparing for cost of cannabis stores
Funding for pot shops needed after ‘modest revenue’ projections, says finance minister
The province and municipalities will incur up-front incremental costs as a result of the federal government’s decision to legalize recreational marijuana, says Ontario Finance Minister Charles Sousa.
In a recent letter to municipalities identified by the province to host initial cannabis retail stores by July, including Niagara Falls, Sousa said “it appears unlikely” there will be enough revenue to cover the costs associated with legalization.
He said with the conclusion of the federal government’s consultation with provinces and territories on the tax framework, the Ontario government has a better understanding of the revenue share to address the costs of legalization.
“During those discussions, we negotiated for a greater share of revenue on the basis that both the province and municipalities bear incremental costs,” said Sousa.
“We now look forward to engagement with municipalities on a reasonable distribution of the province’s share of the federal excise tax revenue. Given the federal government’s forecasts of modest revenue and the Federation of Canadian Municipalities’ estimated cost projections, our engagement will need to acknowledge that it appears unlikely there will be enough revenue to fully cover the incremental municipal and provincial costs associated with legalization.”
In the letter, which was included in Niagara Falls city council’s agenda this week, Sousa said the ministry will work with the Association of Municipalities of Ontario and the City of Toronto to launch an engagement process with municipalities on cannabis-related funding.
This process, said Sousa, will consider what is known about incremental municipal and provincial costs, and set out a proposed approach to funding for municipalities that “supports our shared policy objectives.”
To help guide the engagement, Sousa’s letter proposed three principles.
“An approach to funding should acknowledge that the province and municipalities will incur up-front incremental costs as a result of the federal government’s decision to legalize cannabis, and that a funding approach should focus on helping to address these costs,” he said.
“An approach to funding should recognize the efforts of municipalities in their areas of jurisdiction associated with the legalization of cannabis. An approach to funding should align with the two-year term agreed to between the federal, provincial and territorial governments on the federal excise tax.”
In late November, the province notified the City of Niagara Falls it will receive at least one governmentrun pot shop when recreational marijuana becomes legal in July.
The Liquor Control Board of Ontario will run new marijuana stores through a subsidiary.
The province announced as many as 40 stores would open in 2018, with 40 more added a year later.
The province plans to set up approximately 150 standalone cannabis stores by 2020.
The province said consumers will also be able to access cannabis through an online retail website.
In his most recent letter, Sousa said Ontario continues to prepare for federal legalization by moving ahead with “its safe and sensible” framework to govern the lawful use and retail distribution of cannabis as a “carefully controlled” substance within the province.
On Dec. 12, Ontario passed legislation that will regulate the lawful use, sale and distribution of recreational cannabis by the federal government’s July deadline.
Sousa said the province remains committed to engaging with municipalities on the process.
“Our objectives in the establishment of the retail and distribution system for legal cannabis are to protect youth and eliminate the illegal market,” wrote Sousa.
“Municipalities are essential partners in the efforts to achieve these goals.”
He said during November and December, staff from the Ministry of Finance and the LCBO met with staff of the municipalities identified for the initial cannabis retail stores.
Sousa said these meetings provided “valuable” insights on provincial guidelines and areas of local interests that will inform store siting.
In a prior letter to municipal leaders, he said Ontario’s store rollout will aim to achieve the right geographic distribution across the province to reduce the number of illegal marijuana dispensaries that have opened up since the federal government announced it will legalize marijuana.
The public will also be notified about the proposed store locations, and will be asked to provide feedback directly to the LCBO, said Sousa, adding none of the retail stores will be located near sensitive uses, such as schools.