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Sunday, March 24 , 2019, 11:46 pm | Fair 51º


Reversing Course, Lompoc Council Agrees to Ask Voters About Cannabis Tax

Unanimous vote came after members heard from marijuana industry representatives

Lompoc City Council members Click to view larger
Lompoc City Councilwoman Jenelle Osborne and Councilman Victor Vega were joined by their three colleagues in voting to ask voters to approve taxes for the cannabis industry in the city. (Janene Scully / Noozhawk photo)

Lompoc voters will decide in November whether the fledgling cannabis industry should pay taxes, the City Council agreed Tuesday, reversing an earlier decision to have no taxes.

The topic returned to the City Council at the request of Councilwoman Jenelle Osborne with the support of two colleagues, and ended with a unanimous vote to put the proposal in voters' hands.

Two months ago, the council had rejected, by a 3-2 vote, asking voters to establish a tax plan for the cannabis operations.

Councilman Victor Vega has been the swing vote on the matter that previously saw Osborne and Mayor Bob Lingl supporting taxes and Councilmen Jim Mosby and Dirk Starbuck opposed. 

Discussion Tuesday centered on whether taxes would help or hurt the industry, along with the impact on the cash-strapped city facing budget shortfalls.

“This is more about what does that tax measure look like and putting it forward to the public to vote,” Osborne said. “This is not a decision by us whether or not to tax. That is not what our decision should be. 

“Our responsibility to the community is to address our shortfalls in our budget, and this is one of many options that we have,” she said. 

The newest proposal incorporates suggestions raised by speakers involved in the industry, such as tacking on a flat tax for distribution and manufacturing, instead of levying an assessment based on gross receipts.

For distribution and manufacturing facilities, the proposal includes a $15,000 flat tax for those cannabis operations with less than $2 million net income and $30,000 for over $2 million,

The proposal also calls for a 6-percent tax on retail operations, excluding medical cannabis, a 1 percent tax for nurseries and cultivation, and zero for testing. 

The proposed measure would include language to allow the council to lower rates as needed.

Man addresses Lompoc City Council. Click to view larger
Joe A. Garcia speaks about a proposal to ask voters to approve a tax on cannabis operations in Lompoc. (Janene Scully / Noozhawk photo)

Vega said the council wants to show a business-friendly attitude to the cannabis industry.

“I think what we’re talking about is the amount of tax to allow them to be successful,” Vega said.  

While some speakers favored taxes, others remained opposed or offered different approaches.

“I’m concerned that today if we allow all these taxes to come to this industry that we will kill this industry, that we will kill jobs, we will kill opportunity for Lompoc and its economy,” said Joe A. Garcia, from the Lompoc Valley Cannabis Association.

He recommended a 5-percent tax for retail gross sales and urged the council to exclude medical cannabis sales. 

Another would-be cannabis operator expressed concern about the council reversing its decision after initially rejecting levying taxes, saying it would not be convenient to locate in Lompoc but the lack of taxes had provided an incentive to move into the city.

Santa Barbara County farmer John De Friel said he and his partners had already invested millions of dollars toward opening his cannabis business in Lompoc, and intend to be part of the community.

“If there is a tax rate put on manufacturing, distribution, it will just make it more difficult for us to continue to attract outside business for our manufacturing facilities,” Freel said.

His business has 65 employees for skilled, well-paid jobs, with about 20 temporarily working in Hollister while they are waiting to open in Lompoc.

He suggested the flat tax, rather than a percentage based on gross receipts.

Jared Ficker, a partner with California Strategies, said a client had purchased a 60,000-square-foot building in Lompoc for operations expected to provide 200 jobs for highly skilled workers.

“We are looking for certainty,” said Ficker, adding that he had been instructed to stop work upon hearing Lompoc would consider taxes.

“We’re at a very sincere reflection point as to whether or not we locate here,” Ficker said. 

The decision to allow cannabis operations in Lompoc has drawn praise and criticism, with one group of foes attempting to launch a referendum.

Noozhawk North County editor Janene Scully can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.

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