California cannabis retail stuck in the weeds

First-year sales far below original projections

Los Angeles /
Dec.December 27, 2018 02:00 PM
(Credit: iStock)

It turns out not all Californians are high on the idea of cannabis shops opening in their neighborhood.

After voters approved Proposition 64, proponents projected thousands of storefronts and farms would be licensed, and that cannabis would eventually rival California’s $7-billion wine industry. But the Los Angeles Times reported that first year sales show the market hasn’t performed as well as retailers had hoped. Prop 64 legalized recreational use of pot for adults, and established sales and cultivation taxes.

Officials estimated there would be 6,000 licensed shops in the first few years. But the state has issued licenses for just 547 so far, and officials expect only $471 million in tax revenue – far less than the $630 million projected by Governor Jerry Brown. The state also issued 2,160 cultivation licenses after hoping to see at least 5,000 commercial growers licensed this year.

Only a few cities like West Hollywood are approving dozens of licenses. Business owners say they’ve been bogged down by regulations, high taxes, mounting court challenges, and cities choosing to ban cannabis shops. Of L.A. County’s 88 cities, 82 prohibit retail sale of marijuana, along with more than 80 percent of all cities throughout California.

Legislators hope to ease the tax burden this year. They expect many municipal leaders are waiting to see how the market plays out in places like Los Angeles, which has been a boon for landlords.

And more is on the way. For example, Santa Monica-based development firm Bow West Capital will open its Green Street Building, which will be occupied exclusively by businesses in the cannabis industry – the largest such building in the country. [LAT] — Gregory Cornfield


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