Visalia presses forward with cannabis tax

Visalia City Council meeting on May 20, 2024.(Rigo Moran)

Visalia City Council further explores opportunities of enacting a cannabis sales tax in the city amid continued ban on dispensaries

VISALIA – The city has furthered the discussion on the framework for a cannabis sales tax in Visalia ahead of possible state requirements.

On May 18, the Visalia City Council heard a presentation by HDL Company regarding the process of enacting a cannabis tax. This is in anticipation of the potential for a state mandate requiring cities allow for medicinal cannabis sales. Although efforts to pass a mandate at the state level have fallen short, the city wants to have an ordinance in place in case legislation does pass in the future.

Currently, marijuana dispensaries and delivery services are banned in Visalia. Visalians who want to purchase cannabis must use a delivery service from nearby communities like Tulare and Woodlake, as delivery services are permitted to make deliveries in the city.

A state law that went into effect on Jan. 1 2024, Senate Bill 1186, prevents cities from banning deliveries, but does not require that cities allow physical sites. So the passage of a tax measure does not mean Visalia would change its stance on barring cannabis businesses; however, it will allow the city to collect money from delivery businesses serving the Visalia community.

Among the issues the council is debating is an appropriate tax rate. Mark Lovelace from HDL Company estimated that tax revenue could generate anywhere between $500,000 and $1 million annually, and recommended a tax rate between 5% and 10%. The council acknowledged establishing a high tax rate would allow for reductions at a future date, while raising the tax rate would be a more difficult proposition. Thus, the city is currently debating a 6% tax on sales that would add to existing sales tax revenue already.

Visalia initially banned marijuana businesses in 1997 after the passage of The Compassionate Use Act, which allowed for medicinal sales of marijuana in California in 1996. The ban was further upheld with the passage of a ban on recreational sales in 2017 after the state legalized recreational use in Proposition 64.

Thanks to current state laws, local jurisdictions have a great deal of leeway regulation of cannabis sales, including the ability to ban retail sales, medical sales, cultivation and block packaging facilities. However, they cannot bar home indoor cultivation, nor can they bar individuals from purchasing marijuana in legal areas and bringing it into the city.

The majority of cities in California do not allow the physical sale of marijuana. Voter-initiated propositions in several cities have not passed in recent voting cycles, including in Manhattan Beach, Santee and other Southern California cities.

In Woodlake, which has allowed marijuana sales since 2018, the city has seen significant increases in tax revenue that have allowed the city to renovate parks, pave streets and hire additional police officers. In 2023, the “largest marijuana distribution facility in the world” opened in the city. The 87,000 square-foot warehouse opened and will ultimately provide jobs for more than 100 people. Woodlake currently charges a tax rate on sales of 10%.

A primary argument against allowing medical and recreational marijuana sales is a perceived concern of an increase in crime. Statistics have not borne that assumption out, and in fact, some areas have seen decreases in criminal activity as illegal marijuana sales have become less common. California NORML, an organization that advocates for marijuana legalization lists at least a dozen studies and news stories that show decreases in crime in neighborhoods with dispensaries. 

Visalia has currently allocated $85,000 to HDL Company and FM3 Research from the general fund to study and craft language for a ballot measure that could appear on the November 2024 ballot. It would then be up to voters to determine whether cannabis should be taxed in Visalia.

The council voted unanimously to continue the process of developing a ballot measure to tax cannabis at the May 18 meeting.

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