Two years ago, the City of Lompoc approved the manufacture, sale and use of cannabis products. At the time, the majority of the city council was convinced that this would lead to a slump in tax revenues for the General Fund.
Of course, the developer / advocate of every major project ever proposed to the city council has made the same claim, and the city still has a lack of revenue to keep basic services going.
With no limits on the number of cannabis companies set by the council, the staff report shows that 34 applications have been approved and 18 more are in preparation.
So there are probably more places to buy cannabis in Lompoc than places to buy bread and milk.
At the time, the former city administrator and chief of police advised the city council that there were advantages and disadvantages to having the industry run on-site and, if they allowed these operations, how best to manage and monitor those operations.
Their honest assessment of how the industry would affect city government has been ignored.
On April 20, the city council discussed various possible changes to the city’s cannabis regulations, including a proposed new cannabis regulatory department.
The cannabis industry is unique in that the state requires the licensing authority (City of Lompoc) to conduct regular, detailed, and labor-intensive monitoring and annual renewal of licensees.
Supervision means hands-on audits, on-site inspections and reviews of license applications. Some of this work is done by city advisors and some by city officials.
Employees suggest hiring 10 new full-time employees and employing consulting firms at an annual running cost of approximately $ 1,247,000 to oversee these and future licenses.
The staff report said: “It has become apparent that a dedicated cannabis oversight department needs to be set up to cope with the large increase in workload and the need for regulatory oversight for the cannabis industry.
“Having worked on numerous cannabis renewals, staff believe that there should be an annual license renewal with associated fees for each company to provide the oversight required by the same departments that did the initial review of the application have performed. “
The city council periodically updates the master fee schedule and it would be appropriate to follow recommendations from staff recommending an increase in license fees and deposits to pay the additional costs of the cannabis oversight department due to the special audit requirements.
The fee may vary depending on the effort for a particular company.
They then discussed the subject of “tax on taxes”. The cannabis pharmacies requested that the additional 6 percent sales tax they pay be shown as a separate item on the sales receipt. The issue would have to be included in a future vote as it was part of an earlier electoral measure that was approved by the electorate.
Of course, they could just put a sign on the cash register, but I think that was too difficult.
The city administrator said the retailer is currently passing these costs on to its customers without telling them. This is similar to many companies that pass credit card company fees, royalties, taxes they pay on materials, rental charges, utilities, employee wages and benefits, and other business expenses on to their customers as part of the end product and acquisition cost.
Why the council would discuss this at all is not clear, except that Mayor Jenelle Osborne said she had discussed this with industry representatives. If the Council is discussing this issue for this division, why not for all of the division? There are many examples of tax-on-tax situations in many business areas.
Not discussed in the Human Resources Report, but from Mayor Osborne’s remarks that part of the change could be to reduce or eliminate the 6 percent sales tax and add a manufacturing tax if this matter were brought to the voters.
She may not realize that like any other business expense, retailers would simply add that tax hike to the selling price.
These questions will later be referred to the Council in greater detail for public consultation and action.
Other communities like Guadalupe that are currently considering allowing cannabis into their city should look closely at this example – how much does it cost your city to support this industry?
– Ron Fink, based in Lompoc since 1975, retired from the aerospace industry. He has been following the politics of Lompoc since 1992 and retired from the public service after 23 years on various Lompoc commissions. The opinions expressed are his own.