PROP. 64: WHAT’S IN IT FOR LOCAL GOVERNMENTS?

Submitted by Jeff Kolin

With Prop. 64 on the Nov. 8 ballot, California voters will decide whether cannabis should become legal for recreational use among adults age 21 and older.

The initiative's language runs 63 pages, with sections that allow adults to possess up to one ounce of cannabis and up to eight grams of concentrate. Personal cultivation would be legal for up to six plants.

As with the package of state laws passed in 2015 to regulate medical cannabis, Prop. 64 allows local governments to ban outdoor cultivation and regulate indoor cultivation, and control permits for dispensaries, retail sales and manufacturing.

Important limitations come with Prop. 64. For example, cannabis use in public would not be permitted, nor would driving or operating heavy machinery. Employers may ban recreational use by employees.

For local governments, authority to regulate cannabis is maintained in provisions that require dual permits and licenses -- both state and local -- for recreational and medical marijuana production, distribution and sales. Cities and counties may establish local tax rules for medical and recreational cannabis.

Prop. 64 would create a 15 percent excise tax on sales of both medical and recreational cannabis (though retail sales taxes will not be charged on medical marijuana). A cultivation tax of $9.25 per ounce for flowers and $2.75 per ounce for leaves would be created. Various estimates claim revenue from the taxes would exceed $1 billion annually.

Sixty percent of the tax revenues would be used to fund youth education and treatment. Another 20 percent would go to state and local law enforcement, with environmental protection receiving the final 20 percent. The distribution would follow a series of specific funding requirements outlined in the act, totaling $65 million by 2022-23. The state will take up to four percent off the top to cover administrative costs.

Prop. 64 would prohibit the sale of cannabis by businesses that sell alcohol or tobacco. Any on-site consumption would be subject to local control.

Strict labeling, packaging and testing requirements would be established by state authorities, and existing cannabis businesses would receive priorities for state licenses. To ally fears of industry takeovers by industrial producers, licensing for large-scale cultivation sites would be delayed until 2023. Prop. 64 would require the state to develop regional appellations by county origin.

The regulation development process is currently underway for medical cannabis by the Bureau of Medical Cannabis Regulation. The work provides insight into the questions state authorities hope to address as they develop draft regulations for medical cannabis.

It's likely that the regulation development hearings will be used to shape rules for recreational cannabis if Prop. 64 is approved.

MuniServices will continue to have representatives attend the state's pre-regulatory hearings and will develop comments on behalf of client cities and counties. For information, contact Larry Bergkamp at Larry.Bergkamp@MuniServices.com 530-301-2564 or Jeff Kolin at Jeff.Kolin@MuniServices.com 310-975-9580


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