B.C. municipalities still waiting for their share of pot tax revenue

Local governments that bear the expense of regulating retail cannabis stores in their communities should get a bigger share of federal cannabis tax revenues than cities that refuse to allow legal pot stores, according to Vancouver Coun. Melissa De Genova.

“That excise revenue should be shared with the municipalities that are actually working with the provincial government to provide these services,” she said.

Vancouver has already gone through the zoning, bylaw and application process for five legal non-medical cannabis stores, with dozens more applications pending. The city also obtained a court order this week to close down nine grey-market stores.

“We have borne the expense of issuing licenses and making this work under the new regulation, so I’d like to see a fair and equitable revenue-sharing model that would see revenue come back to our city,” she said.

Several municipalities, including Surrey and Richmond, have said that they will not allow recreational cannabis retail stores.

The federal government charges an excise tax of 10 per cent on the retail price of cannabis, with a minimum of $1 per gram. Three-quarters of that money flows to the provinces, which may decide to give a share to local governments.

Manitoba does not share cannabis excise revenue, while Ontario has agreed to share some of the money with local governments that incur expenses directly related to cannabis.

Vancouver charges $33,097 for a cannabis retail business license, but even that does not cover the city’s costs.

Council raised all business license fees by four per cent last year to make up the difference, a city spokesperson said.

“I want to know that we are covering our costs, and the excise revenue may have to go toward some kind of enforcement,” said De Genova. “I understand most of the enforcement will be provincial, and we need to see what that looks like so we don’t put any burden on the taxpayer.”

B.C. has received $3.8 million from the federal government from the cannabis tax to date and expects to get $10 million for the 2018-19 fiscal year, according to the ministry of public safety. None of that money has been shared with local governments.

The province expects to receive $68 million over the next three years, a far cry from the estimate of $200 million in the last provincial budget.

“The sale of cannabis is not expected to generate significant revenue for the province in the early years of legalization, and the costs associated with setting up and implementing the provincial regulatory framework is anticipated to exceed revenues,” the ministry said.

The Union of B.C. Municipalities has worked through many of the details related to cannabis retail sales with the province, but the cost-sharing arrangement remains unresolved, said president Arjun Singh, who is also a Kamloops city councillor.

“We have asked for detailed negotiations on that topic, but we aren’t there yet,” he said.

Local governments are seeking 40 per cent of the excise tax revenue that flows to the province, to be distributed based on population, according to the UBCM.

“This recognizes two things,” he said. “Local governments have costs associated with cannabis legalization, and we received assurances from the federal and provincial government that revenue would flow to address that, but also that there would be revenue over and above those expenses.”

The UBCM has asked its members for a tally of how much they have spent on legal fees, reviewing retail license applications, conducting inspections, making bylaw amendments, advertising and running public consultations.

The survey anticipates that many costs will be incurred across several departments and may require new staff positions.

Singh would like to see all municipalities and Indigenous governments receive a $10,000 “base share” of the revenue, whether they allow recreational cannabis retailing or not.

Only 12 B.C. municipalities and one First Nation have legal retail outlets for non-medical cannabis. Kamloops has the only government-run shop, but has plans to open 13 more.

“Many communities border each other, so impacts and enforcement will be cross-jurisdictional, like Richmond and Vancouver or Surrey and White Rock,” he said.

The federal government purposely made room in the tax for local governments to benefit, but it is up to individual provinces to make that happen, he said.

“The province has agreed to negotiate. What remains to be seen is what is the right amount,” said Singh. “What the province needs to understand is that we are incurring costs that are quite significant and have been for some time.”

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