Facing Economic Hardships, More California Cities Warming to Weed

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Across the state, local leaders are hoping one type of green will mean more of another.

 

The economic fallout of COVID-19 continues to worsen. For countless towns and cities across the United States, a moment of fiscal reckoning may soon arrive. In some areas, the moment has perhaps already come.

Even if the country’s unemployment rate did fall by over 3% from April to May (as a controversial report from the Bureau of Labor Statistics suggests), that still means 13.3% of Americans do not currently have a job. Compounded by the abrupt closure of many businesses in compliance with government-issued orders to stay at home, things are looking grim.

Entering the second week of June, a number of places are now in the process of re-opening some portion of their local economy. At the same time, there is reason to fear it may not be enough.

As local officials frantically search for solutions to formidable financial woes, some have started sniffing at the idea of calling in cannabis to help. In some cases, this newfound passion for pot also represents a seismic, if unsurprising, change in tune from previously anti-weed parties.

Why, one might ask, would a city in California need to allow for cannabis when a legal, recreational market was established across the state in 2018? The reason only 180 of California’s 482 municipalities (and 29 of its 58 counties) presently allow for brick-and-mortar cannabis businesses is due to the language of Proposition 64.

Prop 64 passed in 2016, with the recreational market going into action at the start of 2018. While the bill did legalize the sale and consumption of cannabis across California, it deferred much of the burden to the city and county level. Essentially, rather than forcing the entire state into compliance, Prop 64 allowed local officials who so wished to ban brick-and-mortar pot shops within their borders.

Nearly two-thirds of California decided to do just that.

Though the ban only applies to physical storefronts, some cities have even argued that delivery should be bannable as well. In 2019, 25 of them — including Beverly Hills and Santa Cruz — banded together to sue the state in hopes of accomplishing this goal. Yes, even within one of the world’s epicenters for cannabis, aversion to the plant remains strong. One thing, however, appears to be even more alluring than the prospect of outlawing weed: money.

In March, California surpassed $1 billion in cannabis sales. Though many initially projected the state would reach this benchmark far sooner, the figure has clearly hit home for some areas missing out on the action. So far, at least two cities that have previously put the kibosh on cannabis are now reconsidering their stance.

Will Mickey Mouse soon be blazing? That might be a stretch, but in May, Anaheim’s City Council debated the idea of allowing cannabis companies to operate locally. In Northern California,  Silicon Valley-adjacent Milpitas may finally be opting for an upgrade of its own. Last month, the Milpitas City Council restarted a debated over whether to give voters a chance to allow local weed businesses this November.

To be fair, the prospect of pot riches are not without their perils.

Earlier this month, Gov. Gavin Newsom announced lowered projections for what California’s cannabis excise tax is expected to bring home. Originally, the figure was $479 million for 2020 and $590 million for the fiscal year. On June 6, Newsom’s new budget revised those numbers to $443 million and $435 million, respectively.

“While similar products like alcohol and tobacco tend to be recession-resistant,” the new budget notes, “the forecast assumes that cannabis businesses will be more negatively impacted by the COVID-19 pandemic. Cannabis businesses have less access to banking services that could provide liquidity, have a younger consumer base likely to be disproportionately affected by the COVID-19 recession, and still must contend with competition from the black market.”

Indeed, California’s black market — which raked in an estimated $8.8 billion in 2019 — remains perhaps the biggest foe facing the state’s legalized industry today. However, far from serving as a potential deterrent to cities like Anaheim and Milpitas, their choice to “open their borders” to cannabis would actually go a long way towards solving the problem entirely.

Part of the reason illicit cannabis sales are so massive stems from an obvious lack of access to a legal alternative. When two-thirds of the state won’t permit legal recreational dispensaries, people find another option. Now, in a twist of a fate, places that had previously turned their noses up at the prospect of peddling pot are suddenly looking for a new home advantage.

Whatever their rationale may be, the unmistakable smell of progress appears to be wafting over California once more. Here’s hoping it won’t blow by.

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