Measure Y would impose a special 5 percent business tax on marijuana cultivation. The initiative’s passage could provide an impetus for ongoing city efforts to draft plans to license commercial pot production in the capital city. Andrew Seng aseng@sacbee.com
Measure Y would impose a special 5 percent business tax on marijuana cultivation. The initiative’s passage could provide an impetus for ongoing city efforts to draft plans to license commercial pot production in the capital city. Andrew Seng aseng@sacbee.com

Local Elections

Marijuana businesses line up behind Sacramento tax initiative

By Peter Hecht

phecht@sacbee.com

May 25, 2016 06:00 AM

A campaign mailer for Sacramento’s Measure Y ballot initiative calls for a “yes” vote to establish a dedicated city children’s fund to bolster after-school enrichment, job training, youth employment and prevention services to keep kids off the streets.

A single sentence on the back of the mailer makes reference to the proposed new tax that would generate the revenue for those services: “In 2015, the State legalized the cultivation of marijuana,” the mailer reads. “Measure Y is paid for by placing a 5% tax on that legal activity.”

In recent weeks, local marijuana businesses have come out in strong support of the measure. The committee for Measure Y had raised nearly $170,000 as of Tuesday, with more than $92,000 of that coming from cannabis-related businesses. That includes $55,000 from medical marijuana dispensaries in Sacramento.

Measure Y would impose a 5 percent business tax on indoor commercial marijuana cultivation in Sacramento. The city doesn’t have regulations in place yet for licensing commercial marijuana cultivation, and Measure Y itself would not specifically allow such activity. But, if passed, the initiative could add impetus to the ongoing city effort to draft cultivation regulations.

All proceeds from the cultivation tax would be directed to a special fund dedicated to programs and services for children. The majority of the money would be funneled to nonprofit groups offering programs such as after-school enrichment, art and music classes, youth homeless services, job training and gang diversion. Other funding would go to city departments that provide youth services.

The measure doesn’t specify which groups would get funding; it requires the City Council to set up a committee to decide how the money is distributed. Passage of Measure Y requires a two-thirds vote.

This is a great opportunity for our industry to prove that we want to make our communities safer and a better place to live.

Kimberly Cargile, CEO, A Therapeutic Alternative

Sacramento officials are already crafting regulations to license indoor commercial marijuana cultivation in areas zoned for warehouse and light industrial use. The City Council is expected to consider a cultivation ordinance later this year that would lay out rules of operation and the location and number of commercial facilities allowed in city limits.

The cultivation tax proposed in Measure Y would apply to marijuana grown for medical use, as well as for recreational use if Californians approve a statewide measure slated for the November ballot that would expand legalization.

Several Northern California marijuana businesses have jumped in to support Measure Y. No campaign committee has been formed to raise money against the measure.

The list of backers who have contributed $10,000 include officers and former officers for several Sacramento dispensaries, including Valley Health Options, Florin Wellness Center, 1841 El Camino Dispensary, True Compassion Cooperative and the Collective Efforts dispensary.

“I am all for it,” said Kimberly Cargile, CEO of A Therapeutic Alternative, a midtown dispensary that has donated $2,500 to the “yes” campaign.

“Investing in children is a long-term solution to lowering crime and homelessness. This is a great opportunity for our industry to prove that we want to make our communities safer and a better place to live.”

Several major donors have ties to the marijuana industry. Michael Ray, chief executive of Bloom Farms, a San Francisco company that makes cannabis oil vaporizer pens, donated $5,000. Green Earth Technology, a cannabis-related company in Courtland, contributed $10,000. Another $10,000 came in from TerraForma Inc., a Roseville company with ties to the industry.

California was the first state to allow medical marijuana. Now, two decades later, voters are expected to be asked whether to legalize recreational use of the drug. The legalization measure headed for the statewide November ballot is the product o

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Daniel Conway, a former chief of staff for Mayor Kevin Johnson and now managing partner of Truth Enterprises, a marijuana industry investment company, contributed $2,500. Harvest Law Corporation, a Sacramento firm specializing in marijuana regulations, donated $5,000. Another $2,500 came in from Midnight Farms of Sacramento, a cannabis nursery.

Despite the industry’s support, the architect of Measure Y noted that the initiative itself doesn’t authorize commercial pot cultivation in Sacramento.

“The City Council will make decisions about cultivation and manufacturing, about where and when and how much to allow,” said Councilman Jay Schenirer, who is leading the effort to use a pot tax to improve youth services. “This initiative passing does not lead to additional manufacturing. If that activity happens, we will tax it and this is where the money will go.”

Sacramento now collects nearly $3 million a year from a 4 percent tax on the city’s 30 medical marijuana dispensaries. Measure Y would assess a 5 percent tax on commercial cultivation if the City Council ultimately approves facilities for indoor grows. That is higher than the city’s normal business tax of 4 percent. Schenirer said Measure Y could bring in $5 million annually for youth programs.

Jay (Schenirer) is a very good council member and very dedicated to our youth. But this was the wrong way to go about it.

Sacramento City Councilwoman and mayoral candidate Angelique Ashby

The contributions flowing in from the cannabis industry drew criticism from Councilwoman Angelique Ashby, who signed the ballot argument against Measure Y. Ashby, who is running for mayor, said she believes many cannabis businesses favor the initiative because the 5 percent tax is lower than some other proposed assessments that have been floated.

“I think it draws the question: Why is the cannabis community so supportive?” Ashby said. “It’s because the cannabis community has an interest in being able to set this tax relatively low.”

Ashby said she opposes Measure Y because she believes any marijuana tax revenue should go into the city’s general fund, and because she would like to see a greater share of the revenue going to city-funded youth services rather than private community programs.

“Jay (Schenirer) is a very good council member and very dedicated to our youth. But this was the wrong way to go about it,” she said.

The campaign committee for Ashby’s mayoral opponent, former state Senate leader Darrell Steinberg, donated $5,000 to the “Yes on Y” campaign.

Other contributions include $10,000 from a Sacramento real estate investment firm, North County Holding. Local developer Mark Friedman contributed $5,000, as did Friedman’s mother, philanthropist Marcy Friedman. Commercial real estate developer David Taylor contributed $2,500.

The campaign took in $5,000 from an environmental law firm, the Thomas Law Group, and $2,500 from Plumbers & Pipefitters Local Union No. 447 of Sacramento.

Marijuana’s effects can vary from person to person, and scientists are not quite sure what to make of the common distinction users and growers make between cannabis sativa and cannabis indica.

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