For decades, cities have spent untold sums of money trying to prevent people from possessing and consuming drugs. With Oregon potentially poised to legalize marijuana, the state’s largest city is already taking steps to benefit financially from pot being freely sold. However, there are concerns from Portland officials that legal weed still won’t pay off.
In July, the Oregon Secretary of State’s office announced that an initiative seeking to legalize marijuana had qualified for the November ballot. Sponsored by a well-funded group called New Approach Oregon, the initiative would legalize recreational sales of pot, assigning the Oregon Liquor Control Commission, OLCC, a regulatory role.
Portland Mayor Charlie Hales is already preparing for legalization. According to Josh Alpert, director of strategic initiatives for the mayor’s office, Hales has assembled a task force of 20 and growing City Hall staffers encompassing a wide range of bureaus and offices, including police, revenue, neighborhood involvement, development services and others. Alpert says that the task force was initially formed in response to a new state law that allows for medical marijuana dispensaries, but was broadened to examine the effects of outright legalization.
“It’s really such a massive topic that we’re just trying to get our arms around it,” says Andy Smith, Portland’s state government relations manager.
Smith says that one of the big issues Portland will be grappling with if marijuana is legalized this fall, is how much tax revenue it will bring in for the city. He points out that the initiative that will be on the ballot this fall prohibits local governments from taxing marijuana.
The way the initiative is written, the OLCC is responsible for collecting taxes, which will run $35 per ounce on all “marijuana flowers,” $10 per ounce of all “marijuana leaves” and $5 per “immature plant.” The money collected by the OLCC will be passed along to the state treasurer. From there, 40 percent will go the Common School Fund, 20 percent will go to mental health and addictions treatment, 15 percent to the state police to assist local law enforcement to help out with its new duties and 10 percent shall go to the cities. And that’s where things get tricky.
The initiative lays out a complicated formula for calculating how much of that 10 percent each city gets, which is calculated by population and the number of pot retailers.
“It’s really hard to estimate what the dollar distribution is,” says Scott Karter, audit and accounting division manager at the Portland Revenue Bureau. “The revenue picture is very unclear at this point.”
Although Colorado and Washington have legalized pot, he says that it’s hard to look to those states to see how things could play out in Oregon because their legalizing initiatives are so different. One key way they differ is that the Colorodo and Washington laws allow local governments to tax pot sales.
Earlier this year, Gresham, Fairview and Clackamas County all passed one year bans on medical marijuana dispensaries. The legalization initiative allows local governments to ban pot shops from opening in their jurisdictions. If these cities ban retailers, Karter says it’s possible that more shops will open in Portland, which will bring in more revenue for the city.
In July, economic consulting firm ECONorthwest released a study that found that if Oregon voters legalize pot this fall, it could generate $38.5 million in excise tax revenue during the first fiscal year and $78.7 million in the first full biennium of tax receipts. However, the study does not examine how legalization might affect courts, police and jails.
The initiative assigns most of the regulatory authority to the OLCC, and, if approved, will give local governments few tools to regulate marijuana retailers. Smith says the city has faced a similar scenario with alcohol.
“We’ve had challenges on the alcohol side, where bars and clubs can go and how they lose their license,” he says. “If they are bad actors, we don’t have a lot of control over that.”
Portland has a “Time, Place and Manner” ordinance in place that allows it to place some restrictions on problem bars and require them to go through an abatement plan. However, the OLCC retains much of the licensing power over bars. Alpert says the city might adopt a similar ordinance to regulate legal marijuana facilities.
Smith points out one key way that Portland’s challenges with regulating alcohol might differ from regulating pot.
“Historically on the alcohol side, the costs are higher than what we get in revenue,” he says. “I don’t know if it’s fair to say that’s going to be the same with marijuana.”
