British Columbia’s mayors and councillors will hold their annual convention next month, just four weeks before cannabis is legalized, and that’s very much on their minds.
The Union of B.C. Municipalities convention agenda is dotted with cannabis-related resolutions, some of them angling for a share of the take once retail sales begin in October.
One of the details still to be worked out is whether B.C. will share some of the proceeds from sales with the local governments that will handle many of the consequences of legalizing pot. There has been a lot of committee work between the provincial and local governments on cannabis issues, but that key question is still hanging in the air.
B.C. has been noncommittal. When local governments asked Finance Minister Carole James directly for an even split last spring, she downplayed the amount of money that was expected. The tax rate is being kept low to avoid losing customers to the established underground market. So cannabis isn’t expected to generate “significant revenues,” she said.
But the opening position of several municipalities is this: Whatever the size of the pot, a 50/50 split would be good.
Three resolutions from different locales all ask for an equal share.
Pemberton council cites a lack of communication about how local governments will be affected by legal cannabis. More work in bylaw enforcement, policing, municipal planning and public health is expected. To offset those costs, it wants to be included in the distribution of tax revenues, to the tune of “at least 50/50.”
The village of Tahsis follows suit by urging the same thing, saying local governments have been enduring downloading of costs for decades. Other municipalities have similar resolutions filed. One says that it’s likely a substantial portion of the regulatory burden and associated costs for compliance with and enforcement of the new cannabis legislation will fall on local government.
They’re all going to be overtaken by a special resolution that is still being drafted and will be one of the first in the batting order when the convention opens in Whistler on Sept. 10.
Details haven’t been made public yet, but the exact share to be requested will be based on an in-depth calculation of costs that local governments can anticipate. The operating principle in the minds of local officials is that not one red cent of property tax revenue should be used to cover the cost of fulfilling the federal Liberals’ campaign promise to legalize marijuana.
The resolution will likely pass overwhelmingly, but so did one last year that asked the provincial government to provide funding to cover the responsibilities and administrative burden of cannabis.
There is still no deal.
The issue is similar to what happened between the provinces and the federal government over the prospective revenues. Ottawa offered to share the revenue from the specific cannabis excise tax 50/50, but provinces used all the same arguments local governments are now making to ask for more. In that case, they won. The federal government upped the provincial share to 75 per cent and capped its take of revenues at $100 million.
Ontario and Quebec subsequently signed deals that committed set amounts of cash to be disbursed to their local governments. That’s the idea B.C. local leaders are pursuing.
The NDP government has consistently minimized the estimates of the amount of money government could make from the legal sale of cannabis. The February budget has a nominal estimate of $75 million over a full year. But the emphasis in many of the decisions has been on curbing the black market, not maximizing profit.
Last week, the Liquor Distribution Branch, responsible for cannabis wholesaling and some retailing, set the mark-up at 15 per cent on the landed cost of cannabis.
That’s the original price plus all transportation, duties, taxes, packaging and handling costs before it gets to the customer.
All private retailers and the government-owned B.C. Cannabis Stores will buy at a common wholesale price, and no one can retail below that level.
B.C. stands to make about 75 cents a gram on the excise tax when sales open in October. The government still isn’t inclined to say if it’s going to be shared.
