City Council Shelves Medical Pot Sales Tax—Still Wants Money From Recreational Pot

The Portland City Council has backed away from a somewhat controversial plan to levy a 5 percent sales tax on medical marijuana alongside a hoped-for 10 percent levy on sales of recreational pot—assuming Measure 91 passes this fall and no other legal hurdles arise.

The seemingly unanimous decision came during this morning’s city council meeting, where commissioners were asked to choose between competing ordinances—one (pdf) that would tax all pot sales in Portland and one (pdf) that would leave out sales of pot covered by the Oregon Medical Marijuana Program. Mayor Charlie Hales and the city’s Revenue Bureau had contemplated the medical pot tax as a backstop against pot users and purveyors turning to the OMMP as a means of avoiding a recreational tax.

But that broader ordinance was pulled back by Hales after pushback from his colleagues, who were concerned about the precedent that a tax on medicine would set, and testimony from citizens, including a few medical pot patients. Overall, the city still expects $1.7 million to $4 million in net annual revenue from recreational pot, with some of that money kicked over to its general fund. The medical tax would have paid $796,000 to $1.8 million, according to a city report (pdf) obtained by the Mercury.

“I appreciate this consensus on medicine,” Hales declared.

Hales and other commissioners instead signaled they’d be asking legislators to tighten controls on medical pot, potentially treating it like a proper prescription drug instead of the quasi-legal gray market currently laid before Oregonians. Because legalization, if it’s approved, wouldn’t take effect until 2016, city officials believe they’ll have plenty of time to win that argument.

“We’ll be telling the Legislature that if they do not enact regulations on medical marijuana so it’s treated more like a regular prescription drug,” Commissioner Steve Novick said, “They’re putting us in a position where we either tax a medicine, which we don’t want to do, or there’s a greater likelihood for a black market developing.”

But for all the compassion shown on medical pot, commissioners seem no less steadfast about pushing ahead with the recreational tax, joining several other cities rushing to put something in place before Measure 91—again, if it’s approved—is certified. Measure 91 won’t allow new local marijuana levies, but it’s not been settled whether it also would ban any pre-existing local levies, no matter how little time they’d been on the books.

That could be the subject of a court fight. But it might also be something else the Legislature—which would be free to make technical adjustments to Measure 91—will be asked to take up. A city hall source says discussions with lawmakers about changes would “largely” wait until after the election, but that clarification on local taxes could be on the list of subjects to explore.

Hales and Commissioner Amanda Fritz both talked about the need for revenue to cover the costs of marijuana legalization and a presumed spread of retail outlets, costs ranging from enforcement to regulatory paper-shuffling and inspections.

Details about those costs, however, were murky.

Thomas Lannom, director of the Revenue Bureau, supplied city commissioners with a handout that forecast nearly $1 million in new expenses. The Office of Neighborhood Involvement, which helps oversee liquor and bar issues in the city with just one worker, has said it might need 2.5 positions to cope with pot and wants an additional $345,000 annually.

“If this recreational use comes to be,” Fritz said, reminding the room that the city’s relationship with the Oregon Liquor Control Commission has occasionally been strained, then ONI “would need to be significantly more staffed to handle the whole regulatory and intoxicant issue.”

But Lannom wasn’t sure about the specific regulatory differences Portland might see, after Commissioner Nick Fish noted we already have medical dispensaries all over the city. And Commissioner Dan Saltzman dug in for even more specifics about what kind of work requested positions would be asked to do.

“That seems a little high,” Saltzman said of the $1 million figure. “I’m always pushing back on efforts to implement things.”

Lannom said he didn’t ask for details about the ONI request, beyond assurances the jobs would be helping manage some workload around complaints. Saltzman was told by Hales and Lannom that he ought not worry… not yet at least. Any new positions would be further detailed in a formal budget request and could change.

There was some confusion at the end of the debate, before commissioners agreed to send the recreational-only ordinance on to a vote next week. Hales and others had assumed the ordinance bore an “emergency” label, meaning it would take effect immediately. But that’s not allowed for tax measures, which means the tax won’t go on the books until 30 days after next week’s presumed vote. That’s after the November 4 election, but still before Measure 91—again, if it passes—is certified by the Secretary of State. But barely. That process that can take three weeks.

Hales cited Measure 11, which imposed mandatory minimum sentences and significant public safety costs on local governments, in defending the city’s proactive approach to pot.

“We should learn from experience,” he said, “from previous state and local relationships that have stuck us with extra costs even while establishing the will of the people.”