City leaders in La Mesa are moving forward with plans to raise the cannabis business tax by a percentage point after the city reached its zoning cap on dispensaries.
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Home to the highest concentration of licensed cannabis dispensaries in East County, La Mesa now has 13 legally operating cannabis retailers. Under current zoning rules, the 14th — now under construction at University Avenue and 70th Street — is the final available space.
The La Mesa City Council voted unanimously Tuesday to direct city staff to prepare an ordinance to modify the cannabis business tax rate.
As it stands, La Mesa’s 4% cannabis business tax rate is the lowest in the county. The ordinance, brought forward by Councilmember Lauren Cazares, would raise the city’s tax rate to 5% — still significantly lower than the city of San Diego’s 10% rate.
“Consumers choose to shop in La Mesa because our cannabis prices remain significantly lower than neighboring jurisdictions, and I believe that competitive advantage will continue,” Cazares said.
Officials said the proposed tax increase could bring in $750,000 more in revenue each year.
On top of the city’s estimated $2.5 million in annual cannabis tax revenue, Cazares said the “modest” hike would diversify city funds and allow more spending on public services.
“We’re facing a challenging fiscal environment,” she said. “Sales tax revenues have not kept pace with expectations, while the cost of providing essential public services continue to rise.”
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La Mesa’s current zoning rules require dispensaries to be 1,000 feet from other cannabis retailers and locations like churches and schools.
In 2016, 53% of La Mesa voters oped to legalize medical marijuana dispensaries, cultivation and manufacturing. In 2018, a wide majority greenlit a city tax on commercial cannabis. And a year later, city officials allowed recreational and medical cannabis to be sold at the same storefront.
In April, city leaders approved a proposal that will let cannabis retailers identify as “dispensaries” in their signage, a move officials hope will give them better visibility.
La Mesa resident Becky Rap said she supported the tax hike and called it a “great way to push back on (illegal sales) and on public safety.”
She suggested the new revenue go toward public education about the potential risks of cannabis use.
“At the end of the day, this is all about balance,” Cazares said. “Every dollar of locally generated revenue helps reduce pressure for future discussions about broader taxes that would directly impact La Mesa households.”
After a draft ordinance is prepared, it will get a vote by the full city council.
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