Cash-strapped Long Beach considers taxing marijuana

Faced with an $18.5-million deficit, Long Beach is considering whether to join several other California cities in seeking to make money by taxing marijuana.

The City Council voted 8 to 1 on Tuesday to hold a public hearing next month on whether to place a measure on the November ballot that would levy a 5% tax on medical marijuana collectives.

The explosive growth of pot dispensaries in recent years — and the drug’s potential legalization statewide — has presented a rare opportunity for cities desperately searching for new sources of revenue.

Oakland already taxes medical marijuana, and Berkeley, Sacramento and San Jose are considering similar measures that would tax collectives 2.5% to 5%.

For some members of the Long Beach City Council, which voted in May to regulate medical marijuana collectives, taxation is the next logical step.

“We tax alcohol. We tax cigarettes. Why wouldn’t we look at taxing marijuana?” said Councilman Patrick O’Donnell. “We’re turning over every rock to find new revenues, and under one of those rocks may be marijuana.”

In addition to the tax on medical marijuana dispensaries, Long Beach’s plan, drafted by the city’s Department of Financial Management, also calls for another 10% tax on other marijuana businesses that would go into effect only if California voters also pass Proposition 19, which would legalize marijuana for recreational use.

Medical marijuana cultivation sites also would be taxed by the square foot.

Critics, however, say such a tax could unfairly target medical marijuana patients.

Americans for Safe Access, the nation’s leading medical marijuana advocacy group, opposes taxing medical marijuana because it believes the drug should be treated the same as other doctor-prescribed medications, which are untaxed.

If a tax must be enacted, spokesman Kris Hermes said, “the tax burden should be removed from the patient to the extent possible.”

“It’s difficult to tell cities that are cash-strapped in tough economic times that you can’t tax this substance,” he said. “But there are other methods that local governments could use to raise the money; one of those methods is to tax the production side.”

Long Beach has at least one other city to look to as an example.

Oakland began collecting taxes from medical marijuana dispensaries in 2008 and expects to reap up to $1 million this year from a 1.8% tax on just four licensed dispensaries.

Several Los Angeles City Council members last year floated a proposal to tax medical marijuana, but the plan probably will not appear on a ballot until 2011, according to Councilwoman Janice Hahn’s office.

Los Angeles’ medical marijuana ordinance — one of the state’s most restrictive — went into effect last month, requiring the shutdown of more than 400 dispensaries.

In March, Long Beach passed its own sweeping ordinance regulating the dozens of pot dispensaries that have cropped up in recent years, establishing buffer zones of 1,000 to 1,500 feet around schools and barring the dispensaries from operating within 1,000 feet of one another.

City officials don’t have an estimate yet for how much money they could raise by taxing the city’s 30 dispensaries.

Approving a marijuana tax in Long Beach would require a public hearing in August, unanimous passage by the City Council and voter approval this fall.

Since no local offices are up for election in November, the city would have to declare a fiscal emergency to get the measure on the ballot. The special election could cost as much as $450,000.

tony.barboza@latimes.com