Costly Creation

San Francisco Mayor Edwin Lee proposed a number of changes to the city’s cannabis regulatory system in order to handle its colossal amount of cannabis businesses. San Francisco has pioneered cannabis regulation since the nation’s first public dispensary opened there in 1992. On June 13, the mayor proposed the creation of the “Office of Cannabis.” The $700,000 office would issue permits for recreational cannabis operators. On that same day, Mayor Lee also proposed a Cannabis Tax Task Force, which would decide whether to impose a local city tax on adult-use sales.

Mayor Lee proposed the costly creation of the Office of Cannabis to help tackle the implementation of adult use sales. “Up until now, San Francisco has only regulated one piece of the cannabis industry—medical cannabis dispensaries,” Ellen Canale, Chief Deputy Communications Director for the mayor told CULTURE. “With the passage of Prop. 64, the city must adapt to a new state landscape, and develop a local infrastructure that encompasses the entire cannabis industry—including cultivation, manufacturing, distribution and sales; from seed to sale.” The Office of Cannabis would fall under the Office of the City Administrator, a seat that is filled by Naomi Kelly. The director of the office would be appointed by Kelly.

“With the passage of Prop. 64, the city must adapt to a new state landscape, and develop a local infrastructure that encompasses the entire cannabis industry—including cultivation, manufacturing, distribution and sales; from seed to sale.”

The expense to set up the office is included with Mayor Lee’s proposed FY 2017-18 omnibus budget bill. The new budget sets aside $389.5 million for the City Administrator’s Office, which is $24.7 million higher than the FY 2016-17 budget, which set aside $364.8 million. The Office of Cannabis is expected to include three new staff positions at a cost of $472,465.

The proposed formation of the Office of Cannabis, however, is being criticized by some members of the cannabis community, who say that the bureaucratic permitting process is already too much of a hassle. San Francisco already has a Cannabis State Legalization Force, which is going into its second year. The city’s Planning Department and Department of Health already play a heavy hand in the decision-making of California’s upcoming adult-use market. The Planning Commission handles land use, but the Office of Cannabis would handle operator issues. Critics have expressed the belief that there are too many bureaucratic steps already.

The Cannabis State Legalization force recommended no more than a one percent local tax on already-burdened cannabis businesses. If taxes are too high, it would only revert consumers back to the illicit black market. Californians will pay a 15 percent excise tax on cannabis purchases, creating billions for the state economy. A local tax could produce up to $1 billion in tax revenue, after permitting processes die down.

Other positions will be filled in other city departments to inspect various aspects of the cannabis industry. “This infrastructure will cross land use, health, permitting, inspections, social justice and enforcement,” Canale added. “This is a big undertaking, and the centralized office will ensure we leverage and coordinate existing processes and are able to monitor and adjust to this emerging industry. At its core, this office will be a navigator for the public, businesses, and city agencies in the rapidly evolving cannabis landscape.” The city plans on releasing additional proposals to regulate other issues such as zoning or home growing by September 1.