S.J. County marijuana tax to go before voters

Tax would apply if county ever rescinds ban on commercial marijuana

The San Joaquin County Board of Supervisors voted 3-2 to approve a tax measure on commercial cannabis businesses during Tuesday’s meeting in Stockton, which will be added to the general election ballot in November.

The ordinance would impose a tax ranging from 3.5 to 8 percent of gross annual income on commercial cannabis businesses and cultivation within the county’s unincorporated areas, according to county counsel Mark Myles. The ordinance would also impose an annual fee of $2 per square foot of licensed cultivation space, should the county decide to lift the ban on cannabis businesses or cultivation in the future.

The proposal also recommends that an oversight committee be formed, consisting of 15 people with expertise in areas such as early childhood education, public health and law enforcement who do not belong to organizations that would directly benefit from the tax revenue, Myles explained.

“Because this is a special tax, in placing it before the voters, it requires two-thirds voter approval to pass,” Myles said.

If approved, the tax would be set at 3.5 percent of annual gross income to start, although the board would have the option to increase it to as much as 8 percent. During the first year, 70 percent of the tax revenue would fund law enforcement as well as public health and safety, with the remaining 30 percent going to youth programs such as early childhood literacy and gang reduction, he added. That ratio would decrease each year, with equal funding for each category by the fifth year.

The proposal also recommends that two board members be appointed to the board’s ad hoc committee on commercial cannabis, Myles said. The committee would be authorized to both sign arguments in favor of the measure and respond to opposing arguments, he added.

Supervisor Chuck Winn, who represents the District 4 area that includes Lodi, raised the question of whether the minority of board members who oppose the tax measure would be able to voice their dissent.

“Minority members of the board wouldn’t be speaking on behalf of the board. They would be speaking on behalf of themselves,” Myles said.

Winn also raised the question of enforcement, specifically regarding possible situations involving people growing more than the six plants allowed for personal use by state law. He used the example of a house with 1,300 plants that the growers claim are for personal use.

Myles explained that such a scenario would not be covered by the tax measure, as the cultivation would be illegal, and would be handled by law enforcement agencies and the district attorney’s office. Tori Verber Salazar, district attorney for San Joaquin County, confirmed that 1,300 plants would be considered a criminal enterprise, adding that law enforcement as well as the environmental health department would investigate such a case.

“We would take all of the tools and resources of the county to attack it with a wrap-around approach. We would also look at the ordinance to make sure that they can never operate in the commercial cannabis industry again,” Verber Salazar said.

When District 3 Supervisor Tom Patti asked whether the county would be able to recover the cost of enforcement, Verber Salazar responded that while asset forfeiture would be one method, her office plans to work with the county counsel to explore other options. District 2 Supervisor Kathy Miller, vice chair of the board, offered her view on covering the cost of enforcement.

“The idea is to strongly encourage people engaged in commercial cannabis activities to be licensed and pay their taxes. As we move forward with this cultivation ordinance, we want to make sure that our costs can be recovered,” Miller said.

Winn expressed concerns that the tax revenue would not be enough to recoup enforcement costs, as well as the possibility of attracting more illicit cultivation by appearing too welcoming to cannabis.

“My concern is what kind of message are we giving to those looking for a location

to grow their product? I wouldn’t want San Joaquin County to be seen as a county that embraces marijuana activity. My argument is why are we in such a hurry to go down this path when we don’t know what the outcome will be?” Winn said.

Miller said that the county already spends approximately $1.4 million each year enforcing illegal cannabis operations, and that regulating commercial cannabis could add another $1 million to that cost. She added that the county will not receive additional resources from the state, and that she felt that the tax ordinance would be the county’s best option for covering those costs. District 5 Supervisor Bob Elliott, chairman of the board, agreed that enforcement costs would likely increase, although he joined Winn in opposing the measure.

“I think we’re heading down the wrong path with this. At the minimum, we should keep the ban in place on commercial cannabis and watch what happens in other counties,” Elliott said.