Apr 19, 2024 - News

San Diego’s cannabis revenue isn’t even that high, man

Data: City of San Diego; Chart: Axios Visuals

San Diego's declining cannabis tax revenue just isn't as fruitful as city officials projected.

Why it matters: City voters approved a range of taxes on cannabis businesses in 2016, when state voters approved recreational use, but legalization thus far hasn't produced a tax windfall.

San Diego's taxes on marijuana businesses ramped up slowly since legalization, as the city issued permits for retail sales and production.

By the numbers: The city collected $2.7 million in the first fiscal year after legalization, and revenue peaked at $23.3 million in the 12 months from July 2020 through June 2021.

  • Tax collections slid to $22.8 million the next year and plunged to $18.2 million last year.

Context: The city charges an 8% tax on cannabis retail sales and 2% on production facilities.

The intrigue: When San Diegans approved the cannabis tax in 2016, the city's independent budget analyst estimated it would generate $22 million in its first year and quickly reach $35 million per year.

Friction point: Tax collections are plummeting because of competition from illegal delivery services, which can undercut the legal market because of lower overhead, industry leaders told the Union-Tribune last year.

Zoom out: There are 61 permitted "cannabisnesses" in the city.

  • 33 of those are retail storefronts, while the others are for production activity — cultivation, manufacturing, packaging, storage, etc.

Zoom in: I-8 might as well be cannabis corridor — there are six permitted marijuana sellers in Mission Valley, another four in Linda Vista and four more in Midway.

  • The city's production facilities are clustered in the industrial areas of Mira Mesa (10 production permits) and Otay Mesa (nine permits).

Catch up quick: The city this year was scheduled to launch a social equity program to provide people criminalized for cannabis opportunities to break into the newly legal industry.

  • The city was planning to issue 18 equity licenses through a lottery.

Yes, but: Mayor Todd Gloria's proposed budget would end that program before it starts, returning an $880,000 state grant that would have boosted it, as Voice of San Diego reported.

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