Merced city leaders on Monday took steps toward asking voters to approve a special tax on marijuana-related businesses and purchases on the June ballot.
The Merced City Council unanimously approved a draft ordinance with some changes developed by the city’s weed consultant, Fairfield-based SCI Consulting Group.
The plan, which still needs a final approval later this month, would start most types of weed businesses off with smaller 3 percent to 4 percent taxes with the option to raise taxes up to 10 percent in the future. That includes dispensaries, manufacturing and other business types.
Testing laboratories would see much lower taxes because they’re not big moneymakers and tend to have little strain on the city’s resources, according to John Bliss, the president of SCI. Some of the business types with canopies could be taxed by square-footage, according to the draft of the ordinance.
About 80 percent of voters approved a similar 10 percent ceiling on marijuana taxes in Modesto back in November.
The city of Merced is the only jurisdiction in Merced County that currently has plans to allow for dispensaries along with its other cannabis businesses.
A number of people who’ve expressed interest in opening a weed-based business in Merced spoke in favor of the plan, noting that a lower tax at the beginning would help them get their businesses off the ground.
Jesse Kraft, who runs Advantage Healing Inc. in Sonora, said keeping the taxes low early on could have other benefits.
“That’s really going to help the city with uprooting the black market, keeping it competitive,” he said. “Once you get a customer in the door to access professionally-grown, high-quality product, more than likely they’re never going to go back to the lesser-quality black market.”
The council agreed to put the ballot measure on the June ballot though it will take a two-thirds vote to pass it, according to city staffers. With two-thirds approval, the council can also aim the funding directly toward paying for services from police, firefighters and parks and recreation, staffers said.
If it fails in June, the council could put it on the November ballot, which would need a majority of voter support to pass.
Mayor Mike Murphy said the June ballot is preferable because, if passed, the measure would have a tax revenue stream in place before weed-based businesses begin to need city services. Waiting for the November ballot could set up a scenario where the businesses are up and running months before the cannabis is being taxed.
“They need to match,” he said.