San Diego voters will be told this fall that passage of a ballot measure to tax businesses selling recreational marijuana could generate an estimated $22 million for city coffers in the first year, according to documents made available Tuesday.

Councilman Mark Kersey with supporters on election night. Photo by Chris Stone

The estimate is part of a fiscal analysis of Measure N, which will go before voters in November. The City Clerk’s Office released fiscal and legal analyses on the dozen city of San Diego propositions that will be decided in the general election.

Measure N would only take effect if voters statewide approve Proposition 64, which would decriminalize recreational marijuana use. The drug is currently allowed under state law only for medical purposes.

The tax, proposed by Councilman Mark Kersey, is designed to cover city regulatory costs of marijuana legalization, which is projected to be around $650,000 annually.

The levy would be 5 percent of gross receipts in the first year, rising to 8 percent the second year. The City Council would have discretion in the future to hike the rate to 15 percent. Marijuana sold for medical use would be exempted.

The city’s Independent Budget Analyst‘s office, which compiled the fiscal analyses on the local measures, based its revenue projection on what’s occurred in Colorado, where recreational use is allowed. The IBA looked at Denver, which has roughly half of San Diego’s population.

“In 2015, Denver reported gross retail cannabis sales — excluding medical — of approximately $220 million from an average of 128 retail outlets,” the IBA report said.

“Adjusting Denver’s sales for San Diego’s population gives an estimated hypothetical sales figure for San Diego of $440 million,” the report said. “If the proposed (tax) were applied to this amount at the initial rate of 5 percent, the tax would raise approximately $22 million annually.”

The report said annual revenue would jump to $35 million at the 8 percent tax rate.

Actual revenue would fluctuate depending on the number of non-medical cannabis businesses permitted in the city, which has yet to be determined; the rate at which the industry develops; the amount of consumer demand in the region, including availability in neighboring jurisdictions; and the price of recreational marijuana, which may change over time, according to the IBA.

The IBA said most of the measures on the ballot would have a minimal fiscal impact on the city. For those that do, the IBA said:

  • Measure C, the Chargers’ plan to hike hotel room taxes to help build a stadium and convention center annex, would raise between $1.3 billion and $1.6 billion for the project. But if revenues fall short of estimates, the city’s “general fund support may be necessary, reducing funding available for other public purposes.”
  • Measure D, which restructures tourism spending, bans an expansion of the current convention center and addresses the future of Qualcomm Stadium, would raise hotel room taxes to generate an additional $18 million to $98 million annually for the city, depending on certain actions by area hotels.
  • And Measure K, which would mandate automatic runoffs for municipal offices, would increase election costs in a range from $30,000 to $260,000 for additional voter materials and ballot counting, based on recent experience.

— City News Service

Show comments