Los Angeles Set to Vote on Moving Forward with Comprehensive Cannabis Regulation

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On March 7, 2017, Los Angeles City residents will vote on whether the city should repeal and replace Proposition D or amend it to allow for the regulation of cannabis businesses within city limits. The City implemented Proposition D in 2014 with the intent of limiting the number of dispensaries within city limits to 135,

Proposition M (“CETRA”)

The City Council created Proposition M, also known as the Los Angeles Cannabis Enforcement, Taxation, and Regulation Act (“CETRA”). The City drafted it in response to Voter Initiative N, discussed below.

CETRA calls for the regulation and taxation of cannabis businesses in light of Proposition 64, passed last November. CETRA would give the City the authority to repeal Proposition D and establish new regulations, taxation requirements, and enforcement measures for cannabis businesses within city limits. Proponents argue that CETRA provides much needed oversight for the industry. However, CETRA also would enable the City the ability to ban commercial cannabis altogether.  Essentially, CETRA allows the City to create a regulatory scheme for cannabis, but it does not require the City to do so.

Mandatory or not, Section of the proposition states the City’s intent to adopt a comprehensive regulatory scheme for all cannabis-related activity, including cultivation, processing, distribution, and sale, by September 30, 2017. CETRA would require the City to hold public hearings on the development of rules and ordinances necessary to regulate and ensure the safety of commercial cannabis.

Given CETRA’s breadth, its actual language is surprisingly brief, coming in at around 12 pages. It does, however, clearly define proposed taxation rates for cannabis:

  • Retailers: $100 tax per $1,000 of gross receipts (but medical marijuana collectives continue to pay the tax of $50 per $1,000 of gross receipts, as established in 2011 under Municipal Code section 21.50)
  • Transporters: $10 tax per $1,000 of gross receipts
  • Cultivators and Manufacturers: $20 tax per $1,000 of gross receipts
  • Businesses otherwise relating to the commercialization of cannabis: $20 tax per $1,000 of gross receipts
  • Testing facilities to pay a business tax of $10 for each $1,000 of gross receipts.

Voter Initiative N

In contrast, Voter Initiative N (“Initiative N”) is a competing initiative not sponsored by the City. Passage of Initiative N would restrict the City’s ability to create and alter the rules for operation of cannabis businesses.

Initiative N outlines the process for obtaining a Collective Cannabis Activity Permit from the City, giving priority to dispensaries already in compliance with Proposition D. Under Initiative N, the Los Angeles Department of Medical Marijuana Regulation would issue permits for cannabis dispensing, cultivating, manufacturing, testing, distributing, and transporting.

Like CETRA, Initiative N would tax cannabis based on gross receipts. Initiative N, however, would do so at the same rate of $80 per $1,000 of gross receipts for all cannabis businesses, regardless of the size or nature of the business.

Unlike CETRA, Initiative N addresses issues like zoning requirements, operational requirements, renewal requirements, and enforcement regulations. According to the 2017 Los Angeles Voter Information Pamphlet, however,

“Even the original backers of Initiative N now agree that Proposition M will make Los Angeles a safer and more secure city and urge you to vote yes on M and no on N.”

If both CETRA and Initiative N pass on March 7th, the initiative with the highest number of votes will become law.

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