Staffing for library programs, paying for police enforcement, funding parks maintenance and social events – all of these are financed partly by cannabis taxes collected in several Orange County cities.
Whether cashing in on retail cannabis, allowing processing or distribution within city limits, or backing research related to marijuana – city officials in recent years have dipped into cannabis tax money.
Depending on which city it is, the new tax revenue helps fund local law enforcement, supports youth programs, and provides stopgaps for public spaces like parks and libraries.
While cities have new revenue streams stemming from the cannabis industry, officials often grapple with just how to regulate the industry.
Santa Ana, Costa Mesa and Stanton stand alone in having cannabis storefronts legally operating in the county after voter approval, while other cities like Irvine and La Habra only permit testing and medical research of cannabis, most of which occurs at UC Irvine.
In an effort to boost city finances, Stanton City Council recently approved cannabis delivery services after missing out on potential tax revenue, according to a city staff report.
Some city leaders have questioned their use of cannabis tax dollars as discussions of balancing city budgets are coming up ahead of budget season.
Santa Ana City Councilman Jonathan Hernandez said during an April council meeting that the city’s cannabis taxes could potentially fund struggling departments like public works, and parks and recreation, highlighting that over $3 million taxes collected goes toward code enforcement by police.
“I just want to see our cannabis fund be more balanced so that we can actually focus on city services, youth development and public safety,” Hernadez said during an April 2 regular meeting.
Where Are Cannabis Taxes in OC Used For?
Cannabis taxes in OC are used for a variety of essential services for residents, including retaining police, fire and emergency services and funding for community services like youth programs.
These funds are often enough justification for city leaders to favor local regulation of cannabis, said Robert Solomon, a law professor at the UCI Center for the Study of Cannabis.
“Poor cities are going to say ‘yes’ because they need additional tax revenue,” Solomon highlighted Santa Ana as an example of being the first OC city to allow cannabis retailers.
Under the current fiscal year, Santa Ana’s Cannabis Public Benefit Fund appropriates spending in two ways: funding for youth programs and for code enforcement – which includes money for public safety, legal services, and occasional audits of cannabis businesses.
Officials have allocated roughly $4.2 million for youth programs and $5.6 million for code enforcement.
For youth services, over $2 million is used for staffing park and zoo programs in Santa Ana. An additional $500,000 is used for library programs, including summer reading programs and buying educational material for public use.
The cannabis fund also allocates over $1 million towards policing, which funds 7 positions in the police department towards code enforcement, including $500,000 in overtime pay.
Stanton voters approved Measure A in 2019, which authorized a tax on cannabis businesses to help maintain essential services like police, fire and emergency responses, street repairs and park services for youth and seniors.
This includes using funds for contracts with the Orange County Sheriff’s Department, Orange County Fire Authority, and the city’s Public Safety department which includes Code Enforcement and Homeless outreach services, said Stanton City Manager Hannah Shin-Heydorn in an email.
“That is exactly what we have been and continue to intend to use the revenues on,” she added.
As of April 30, the city received over $510,000 in taxes before the fiscal year ends June 30. This accounts for nearly 83% of the revenue that was anticipated from the special fund in the city’s annual budget.
The city is anticipating a $6 million budget deficit this fiscal year.
Shin-Heydorn said that the city was able to provide more money toward holiday events and hosting new community events from cannabis taxes.
Stanton has just four storefront locations with expected revenue projections for taxes at $620,000 based on this year’s budget.
Similarly, Costa Mesa officials collect cannabis taxes from two voter-approved measures, known as Measure X and Measure Q. The city expects nearly $3 million in revenue from over 20 storefront and non-storefront cannabis businesses based on this year’s annual budget.
Measure Q was approved by Costa Mesa voters in 2020, and it adopted a 7% tax on retail sales.
Of that percentage, 6.5% goes toward the city’s general fund, translating to roughly $2.8 million.
It’s used for the police and fire departments, emergency responses and other public services like programs for youth and seniors at parks, said Tony Dodero, spokesman for Costa Mesa, in an email.
He added that city staff do not have a further breakdown of how funding for each department or other city-related services is received from taxing cannabis.
Half of a percent also funds the city’s Art and Culture Master Plan Fund – which is about $97,500 – while the remaining half percent goes toward a First Time Homebuyers Fund for residents.
According to the city’s budget, goals for year three in the arts master plan include re-introducing a seven-member committee appointed by the City Council, installing new public art projects and help fund art exhibits.
The Debate On Cannabis Regulations
Recently, Costa Mesa City Council members decided to cap the number of cannabis storefronts to 35 and increase the distance between stores and youth centers, while removing 24-hour security at these businesses.
Residents opposed to cannabis businesses often raise issues with public safety, distance between shops and residential zones, and long-term concerns over regulating access to permits.
[Read: Costa Mesa Moves Forward on Cannabis Shop Limits]
The zoning concerns are raised by city officials throughout Orange County who wade into the cannabis debate.
Fullerton City Councilman Fred Jung said some cities might not permit cannabis businesses anytime soon, including Fullerton, as voters show little interest in retail dispensaries.
Even if cannabis tax dollars are used for public services, Jung said that the most difficult hurdle is residents trusting municipalities to properly allocate funds to benefit the community.
“It has nothing to do with cannabis itself,” Jung said. “I think it has to do with the distrust – and it’s well warranted – the public has towards government.”
Solomon, the UCI law professor, said while enforcement from local officials is needed, it’s better to have access to regulated storefronts than an unregulated market.
“There’s a lot of myths about slippery slopes, the kind of clientele that you get and crime. It’s really not substantiated by facts,” Solomon said.
He added that cannabis is like other retail establishments, ranging from low to higher-end markets that attract certain consumers.
“The reality is the first time I went to a dispensary in Santa Ana, I felt like I was going into an Albertson’s,” Solomon said.
Solomon said if federal officials decriminalized cannabis, government coffers from the local to federal could benefit.
“I personally think it’s a transitional stage,” he added, “That’ll change and we’ll see some additional capital to come in once federal issues are resolved.”
Hugo Rios is a Voice of OC intern. Contact him at hugo.toni.rios@gmail.com or on Twitter @hugoriosss
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