With the COVID crisis hammering county coffers — an estimated $50 million for additional costs and lost revenues combined — cannabis sales remain about the only revenue source where the numbers are going up. Third quarter tax revenues from the county’s cannabis operators — from January through March — totaled $2.6 million, about 60 percent higher than the same time last year. Put another way, the county has now raised more tax revenues from its controversial cannabis industry during the first three quarters of this year than it did in the four quarters of last year. County bean counters are projecting total annual revenues of $9.2 million this year, often delivered to the tax collectors in large satchels bursting with old $20 bills.
The debates that are bound to arise over proposed new land-use restrictions generated by the county’s 113 cannabis operators will certainly be colored by all that money. One of the criticisms of the new industry is that they’ve been allowed to self-report their revenues with no oversight by county tax collectors. Twenty-three don’t file any reports at all; 44 reported zero gross receipts; and 46 reported taxable income.
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Bernard Melekian, the county administrator charged with bird-dogging the cannabis industry, will be notifying those operators who filed no reports at all for two consecutive quarters that they will be in danger of losing the county letters of authorization upon which their state licenses are based. Melekian said he did that once before and that such letters successfully rattled a few cages.
In related news, an attorney representing the owners of a downtown cannabis dispensary have sent a stern warning letter to city councilmembers and city administrators should they entertain a proposal from Teddy Cabugos and property owner Ray Mahboob to locate a four-story cannabis emporium — with two levels of indoor cultivation and one level of museum space dedicated to cannabis-related themes — and an outdoor rooftop consumption café at the site now occupied by Forever 21 at the corner of State and Canon Perdido streets.
Cabugos has twice raised the idea at recent council meetings and has been meeting personally with councilmembers. In less stressed times, such an outside-the-box proposal probably would have been dead on arrival, but given the dire COVID-related problems confronting State Street and City Hall’s diminished coffers, some councilmembers had expressed interest in the idea. The time to consider newer and more audacious solutions, some say, is at hand.
Representing the owners of the Coastal Dispensary located on Chapala Street, attorney Cameron Gharabiklou urged the councilmembers to “reject any attempt to grant approvals for the operation of a cannabis consumption lounge within city limits,” unless other operators had been given a chance to compete for the same concession and all had been thoroughly vetted.
Coastal Attorney Gharabiklou argued that Cabugos’s proposed cannabis café would still qualify as a dispensary even if none of the product sold was allowed offsite; as such, he argued, it could not be approved without violating the terms of the city’s exhaustive review process, which ultimately allowed only three dispensaries to be opened within city limits. Cabugos and Mahboob have argued that such an emporium would draw new shoppers to downtown, generate foot traffic for nearby businesses, and generate revenues for a city government now looking at a $30 million shortfall over the next two years. Cabugos is still polishing the details of his final proposal and nothing has been officially submitted for City Hall review. It remains to be seen just how chilling the Coastal warning letter will be, but the road ahead for Cabugos definitely tilts more uphill.
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