Legal Pot Takes Hits from the Board of Supervisors

The supervisors just approved a Chinatown ban on cannabis businesses, and sent a new marijuana business tax to the November ballot.

It’s not easy being green for the San Francisco cannabis industry these days. The Board of Supervisors issued two setbacks to the local pot trade at Tuesday’s meeting: an outright ban on marijuana businesses in Chinatown, and a November ballot measure to charge an additional new tax on all cannabis businesses in the city.

The Chinatown pot industry ban essentially goes into effect immediately, because any new applications in that neighborhood would not not be approved going forward. The marijuana business tax  will go before San Francisco voters on the Nov. 6, 2018 ballot.

Sup. Aaron Peskin introduced the Chinatown cannabis ban, which would apply to not just dispensaries, but all marijuana businesses like grow operators or manufacturing facilities. “I happen to represent the densest, most populous part of the city,” Peskin said Tuesday, rattling off a laundry list of neighborhood organizations like Chinese Chamber of Commerce that supported the ban. “This is really about paying some respect to a community that wants it and deserves it.”

It’s no surprise that the ban’s four co-sponsors voted in support of the bill (Sups. Jane Kim, Katy Tang, Sandra Lee Fewer, and Ahsha Safai). But it was a surprise that District 10 Sup. Malia Cohen voted for it, considering the blistering condemnation she gave the ban when discussion started.

“I’m appalled to even be sitting here with this piece of legislation before us today,” she first said at the beginning of deliberations. “I find it not only irresponsible but also wholly inappropriate that any member of this board would take such a NIMBY approach to cannabis legislation. We are better than this.”

But Sup. Cohen wasn’t better than this some 45 minutes later when votes were cast. “There is enough access for anyone that wants to consume cannabis,” she said before voting for the ban.

Peskin noted that his district has the second-highest number of existing cannabis permits in San Francisco, with 14 more pending. (Though he’s counting businesses in his entire district, much of which is outside Chinatown.) The ban also applies to the outer edges of the neighborhood, which could mean curtains for new dispensary applications like the one for the Little Darlings strip club space in North Beach.

Sups. Rafael Mandelman, Hillary Ronen, and Vallie Brown were the only ones to vote against the ban. “Today we are discussing a ban in Chinatown,” Brown said. “Down the road, I’m concerned we will be forced to revisit this issue over and over again, even in my district. What prevents that from occurring?

“We are creating a situation in which cannabis dispensaries are clustered in a few small areas of the city. So we’re talking about traffic concerns, all the concerns when you cluster businesses like that.”

Safai defended the Chinatown cannabis ban in a gentrification context.

“There are certain parts of the city that add significance and play a special role in our history. Chinatown is one of those places,” he said. ”When you’re talking about a small merchant that’s been there for years and paying a certain price per square foot, versus someone who can come in and exorbitantly raise the rent, you’re no longer able to compete.”

The cannabis business tax was sponsored by Sup. Cohen, and also passed by an 8-3 vote to go on the November ballot.

“We must commit to the equity program in helping upstart businesses, particularly those that make their homes in communities of color,” Cohen said Tuesday. “It’s time to fund these programs. It’s time for us to put our money where our mouth is. And we need revenue to do it.”

The tax would be implemented on a staggered timeline to help the industry stabilize, starting in drips in 2019 and going into full effect in 2021.

“The rates I’ve introduced are among the fairest and the lowest in the entire state,” Sup. Cohen added. “When you compare the ten percent tax rate that is going on in Oakland, to the 20 percent in Santa Barbara, Santa Cruz has seven percent, five percent for the entire industry in Berkeley and an outright ban in both Marin County and San Mateo County, this is a fair starting point.”

(Oakland voters may roll that tax back.)

San Francisco cannabis tax is 8.5 percent on purchases, but that’s unrelated to this legislation. This measure would be a gross receipts tax levied on cannabis businesses — dispensaries, growers, and manufacturers. But you’d better believe much of that tax will get passed on to the customer.

“The retail cannabis industry is barely six months old,” said Sup. Mandelman, who joined Sups. Kim and Hillary Ronen in voting against the tax hike. “Cannabis businesses are already facing high taxes at the state level, and constantly shifting regulations.”

The ballot measure would exempt medical cannabis, testing and delivery services, and those with pot businesses that make less than $500,000 in gross receipts.

Sup. Cohen stressed the the tax would also fund loans and education programs. “I can’t think of a better place to start than those folks that are making a considerable amount of money, and projected to continue making a considerable amount of money,” she said.

Except they might not be making a considerable amount of money. KQED recently reported that California cannabis tax revenue is not even half of what was projected so far in 2018. Prices keep getting higher high, driving some customers back to the black market.

The board would be able to raise or lower the cannabis tax rate at any point in the future, should voters approve it in November.

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