San Pablo voters will decide if cannabis businesses can set up shop

A measure on the November ballot will ask San Pablo voters if they support a tax on marijuana businesses. If it passes, Measure M would prompt local lawmakers to begin the process of permitting cannabis businesses, which are currently illegal. 

Several neighboring cities, including Richmond and El Cerrito, have passed similar measures and adopted ordinances allowing cannabis businesses.

If Measure M passes, it will amend San Pablo’s business license tax ordinance to include an additional tax of up to 7% of the total revenue of future cannabis businesses. However, the city plans to begin with a 5% tax. 

This initiative comes eight years after California legalized recreational marijuana use for adults. The state currently levies a 15% excise tax on marijuana, while local taxes across California range from 0 to 15%. Richmond, for example, has a 5% tax on cannabis businesses. Measure M would add a layer of taxation to San Pablo cannabis businesses on top of the state tax. San Pablo officials estimate the tax could generate $1.5 million to $2.2 million annually for the city’s general fund. 

“Once it does pass, the council would be adopting a regulatory ordinance and an operating permit after Nov. 5 to regulate these specific types of businesses in San Pablo,” City Manager Matt Rodriguez said. 

Wishful thinking?

Initially, the council plans to approve the operation of three cannabis commercial retail businesses — also known as dispensaries — which Rodriguez said is the maximum amount based on geographic constraints set by the state. The city would not permit other types of cannabis businesses, like cultivation and manufacturing, at this time, Rodriguez said.  

Robin Goldstein, director of the Cannabis Economics Group at UC Davis and co-author of “Can Legal Weed Win? The Blunt Realities of Cannabis Economics,” said that based on the average revenue of California cannabis retail businesses, San Pablo’s revenue predictions seem up to four times higher than Goldstein would expect. 

“People already know where to get good weed at a good price,” Goldstein said. “To think that just because there aren’t any legal licenses there, that suddenly everyone’s going to flock to these places — no, it depends on how competitive they are in price and quality and many other things.”

He added that limiting the number of cannabis business licenses in an area can harm small businesses by welcoming larger retailers and encouraging the unregulated market to continue operating. 

West Contra Costa County currently has 30 licensed cannabis businesses: 27 in Richmond, two in El Cerrito and one in El Sobrante. Alameda County, by contrast, has over 400. 

“We know that the market area, based on consumer demand, could accommodate anywhere from 10 to 13 additional cannabis retailers,” Rodriguez said. “We want to take advantage of that.” 

Small businesses cry foul

Zee Handoush, a cannabis consultant and executive director of 7 Stars Holistic Healing Center in Richmond, said that when cities levy taxes on cannabis businesses, the burden falls on the consumer, as businesses increase their prices to cover increased costs. 

“The people are going to pay for it, at the end of the day. Any time we get taxed, it ends up back in the cost of the products,” Handoush said. 

Handoush also warned that high costs push out independent businesses and encourage the proliferation of multistate operators and chains like STIIIZY, a cannabis company that has a dispensary in El Cerrito. 

Goldstein agreed, adding that big cannabis companies tend to lobby for more taxation and regulation in an effort to keep small businesses out of the market. 

“San Pablo adding 5% locally will absolutely harm small businesses disproportionately,” Goldstein said. “If part of the idea is to attract entrepreneurship, to attract more businesses to San Pablo, to increase the number of jobs and the economy, the best strategy is to not add any taxes.”

But Mashel Lindstrom, a small business owner and San Pablo resident who has visited dispensaries in other neighborhoods to buy CBD products, said that she thought dispensaries could be good for the community,. Lindstrom added that she has yet to decide how she’ll vote on Measure M. 

“The ones that I’ve been to in other cities, they actually create sort of a sense of community,” she said. “I’ve never noticed any issues around those sorts of businesses. So I’m not opposed to them being in San Pablo at all.” 

San Pablo faces a budget deficit after revenue from the San Pablo Lytton Casino fell short by approximately $700,000 over the past two fiscal years. The casino was budgeted to provide more than half of the city’s $50 million projected revenue each year.

The tax money from Measure M would go into the city’s general fund, and the revenue could be used for police, recreation, community grants, and youth and senior services.

(Top photo of San Pablo City Hall, by Emily Evans)

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