Tuesday, January 30, 2018

San Leandro Should Authorize Its Dispensaries To Sell Adult/Recreational Cannabis

On the topic of San Leandro finances, the City is counting on taxes from cannabis dispensaries to help it fill its brand new annual deficit. The City is projecting $1 million in 2018-19 from its new dispensaries. 
This would be helpful - but would not close the City's fiscal hole as the deficit may be as large as $7 million over the next two years. Moreover, as I have been working in the cannabis industry since last Fall, I have a specialized knowledge of many of the issues facing cannabis businesses. 
I shared this information recently with the City Finance Director and City Council. In short, I stated the City should exercise extreme caution in its cannabis tax revenue projections. I gave two reasons: 
1) Although the City has authorized 3 dispensary licenses.  Only two operators - Davis Street Wellness Center and Blum San Leandro - appear likely to be opening in 2018. I have no idea if and when the first city licensee, Harborside San Leandro, will open.
2) The legalization of cannabis in California and specifically the authorization of the sale of cannabis to adults 21 and older, e.g. adults no longer need a medical marijuana card to purchase cannabis, is resulting in a major transformation of the marketplace. 
The excise and sales tax paid by cannabis users under state law as of January 1, 2018, is the same regardless of whether the purchase is for medical or adult/recreational cannabis (absent the small minority of patients that obtain their card directly from the state). Thus, most patients presently with a medical card for cannabis will not renew their cards in 2018 or 2019 as the card no longer serves any purpose and it costs approximately $50 to renew a card. 
Dispensaries in the communities immediately adjacent to San Leandro - Oakland and unincorporated Alameda County - are permitted to sell adult/recreational cannabis, e.g. you don't need a medical marijuana card to purchase the cannabis. Hayward's new ordinance also allows for dispensaries to sell adult/recreational cannabis. 
However, San Leandro's cannabis ordinance presently bans the sale of adult/recreational cannabis. Only persons holding a medical marijuana care are allowed to purchase cannabis.
Do you see what I am getting at? The marketplace for cannabis this year and next will rapidly shift from medical marijuana sales to adult/recreational use sales. Absent action by the San Leandro City Council, dispensaries located here will increasingly have to turn away customers. As a result, the City will receive far less tax revenue. 
Alternatively, if San Leandro changes its ordinance to allow adult/recreational sales of cannabis it will financially benefit the Davis Street Wellness Center as well as the other dispensaries operating in San Leandro. And it will also mean that local sales of cannabis on the black market (which of course do not generate sales tax revenue for the City) should diminish as adults can now buy high quality cannabis, tested by a state approved lab, and sold by a state licensed dispensary. 
Please note - I work as General Counsel for Bloom Innovations, e.g. I am the in-house attorney for the company. The CEO of Bloom Innovations is also the CEO of the Davis Street Wellness Center. I am not an employee or director of the Davis Street Wellness Center. 
Cannabis is now legal in California. If the City wants tax revenue from cannabis sales in my view it should allow all local dispensaries to sell the product to adults whether for medicinal or recreational use. 
What are your views?

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