Long Beach City Council has decided to wait on raising the retail tax on cannabis until they get the results of an economic impact study.
The proposed tax increase would originally have raised the tax rate for both medical and recreational cannabis sales by 1%. However, during the Tuesday, Sept. 8 council meeting, the Budget Oversight Committee recommended a .5% tax increase instead.
Before voting on the agenda item, councilmember Al Austin, who is also Chair of the Budget Oversight Committee, agreed to accept a friendly amendment by councilmember Dee Andrews asking for an economic impact study to be conducted and reviewed before council members vote on raising the tax. Councilmember Mary Zendejas seconded Andrews’ motion.
The results of the study are to be presented to the city council by mid-2021.
“I want to go on record opposing the half percent tax increase on the cannabis industry,” Andrews said. “You know, I understand the intent but with the current economic crisis we are facing due to the COVID it seems difficult to implement a tax without doing an economic impact study.”
If it passes, the increased tax revenue from cannabis sales would be used to support City services that would otherwise have to be significantly cut, according to the proposed FY 21 budget. Despite recent calls from the public to defund the police, a portion of the cannabis tax revenue would go towards Quality of Life (QOL) Officers from the Long Beach Police Department, who work with the homeless population specifically.
Activist groups such as Black Lives Matter Long Beach and the People’s Budget Coalition urged city council at the beginning of the Sept. 8 meeting to divest funding from the police and towards community care and programs run by unarmed civilian professionals, reiterating the position they had expressed for months leading up to the adoption of the Fiscal Year 2021 budget.
It takes between 90 to 180 days to select, train and equip an officer for the Quality of Life team, according to a Dec. 2017 LBPD memorandum. Each Quality of Life officer costs the department $174,421.
“Give that money back to the professionals who went to school for four years, six years, two years, to do that work,” Dawn Modkins of Black Lives Matter Long Beach said on July 7, 2020 at an event memorializing Frederick Taft.
There were previously only two Quality of Life officers for the department in 2017, but that number has now doubled to four, according to LBPD Public Information Officer Arantxa Chavarria. However, LBPD officers not belonging to the QOL team also regularly come into contact with unhoused individuals.
“In addition to the QOL officers and calls‐for‐service patrol officers, other officers, detectives, and employees of the LBPD can spend a significant part of their workday addressing homelessness” the Dec. 2017 memorandum reads. “These officers and employees include Bike Unit officers, Mental Evaluation Team (MET) officers, Park Rangers, Marine Patrol Detail officers, Transit Enforcement Detail (TED) officers, Port Division officers, Harbor Patrol officers, Jail Division employees, detectives, as well as command staff. It is difficult to quantify the total time these and other employees of the LBPD spend responding to and addressing homelessness issues, but it is a challenging issue.”
On page 26 of the budget proposal, eliminating the Quality of Life program is listed as an alternative budget reduction option that would save the City approximately $956,000. This is more than double the projected amount of money that would be brought in by raising cannabis taxes or extending the operating hours of dispensaries.
The Long Beach Collective Association, a group of licensed cannabis businesses in the city, asked their social media followers to contact city council and leave an e-comment telling the council not to adopt the tax increase as this would have an effect on both patients and Long Beach’s legal cannabis industry as a whole.
“We feel that any type of tax will go directly to the consumers,” Adam Hijazi, President of LBCA told the Signal Tribune, “and considering the economic challenges and everybody that’s going through COVID, this is not the right time to increase a tax for the consumers. We know that there’s deficits, we think there is other opportunities where you can increase your tax revenue without increasing the tax rate.”
Hijazi suggested that allowing cannabis businesses to stay open longer may increase the amount of sales the businesses make, thereby bringing in more sales tax without raising the tax rate.
While dispensaries are currently allowed to operate from 9 a.m. to 9 p.m., during the Sept. 8 council meeting, council members unanimously approved allowing them to stay open for two more hours each day, from 10 a.m. to 10 p.m.
In the proposed FY 21 budget, it states that even if the tax increase is implemented, Long Beach’s cannabis industry will still have a competitive tax rate when compared to nearby cities such as Los Angeles, Santa Ana and Carson. However, the proposed budget did not take into account unlicensed dispensaries that have become common in Compton, Wilmington and Gardena, which do not charge their customers tax. While an eighth of an ounce of cannabis may sell for $25 in Compton, in Long Beach the same amount, at a similar quality, can cost well over $45.
According to Hijazi, around 70% of cannabis sales still happen on the black market.
“We want to be able to protect consumers as much as possible, as well as the legal market,” Hijazi told the Signal Tribune, “which is already more expensive or not as competitive as your other illicit or traditional markets.”