Los Angeles Moves to Halt Smoke Shop Expansion Near Schools, Raises Cannabis Buisness Fees
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Los Angeles is taking a two-pronged approach to regulating the cannabis and smoke shop industries, responding to community concerns about proximity to sensitive areas and addressing city budget shortfalls. A temporary moratorium on new smoke shops is being considered, while existing cannabis businesses face substantially increased licensing and renewal fees.
Community Concerns Drive Moratorium Proposal
In response to growing anxieties from residents of the Harbor Area regarding the increasing number of smoke shops near schools, parks, and daycare centers, Los Angeles City Councilman Tim McOsker introduced a motion on Tuesday to temporarily halt the establishment of new businesses within his 15th Council District. If approved, the motion would initiate an Interim Control Ordinance, effectively pausing the opening or expansion of smoke shops for 45 days across the district, which encompasses San Pedro, Wilmington, harbor Gateway, harbor city, and Watts.
The proposed ordinance would task the Department of City Planning, with support from the City Attorney’s Office, to investigate best practices from other cities – including Redondo Beach, Long Beach, San Francisco, and New york City – regarding zoning, licensing, buffer zones, youth-access controls, and permitting for tobacco and smoke-shop businesses. According to the councilman’s office, the moratorium could be extended beyond the initial 45-day period.
“I applaud the Wilmington residents, educators and activists who
Cannabis Business Fees Soar
Concurrently, the city is significantly increasing fees for cannabis businesses. New license fees will jump from $1,829 to $2,719.
The ordinance also introduces a tiered system for fines, ranging from $3,000 for “low” violations to $34,000 for “severe” violations. Previously, fines were structured differently, with a minor violation resulting in a $7,004 fine, a moderate violation at $21,013, and a major violation at $42,026.
Equity Program offers limited relief
While the increased fees pose a challenge for many cannabis businesses, some relief is available through the city’s Social Equity Program. According to Jason Killeen, assistant executive director of the Department of Cannabis Regulation, approximately $3.1 million in state grant funding can be used to cover renewal fees and new licenses for participants in the program, which supports individuals disproportionately impacted by the war on drugs.
Industry Concerns Over Taxes and Regulations
Despite the equity program, many marijuana business owners express concerns that the cumulative effect of high fees, burdensome taxes, and strict regulations is making it increasingly challenging to operate profitably in Los Angeles.The city imposes a 9.75% sales tax and a 10% business tax, in addition to a 19% state cannabis excise tax.
Tak sato, president of STIIIZY, the largest cannabis company in California, has advocated for easing the city’s buffer zone rule, which he argues is far more restrictive than regulations in 95% of other jurisdictions.”Not only is it making it unachievable for applicants to find compliant properties, it’s allowing landlords to use the scarcity to hike up prices up to three to six times market value,” Sato explained. “In addition to the illegal dispensaries, I believe … the high market rent that the landlords are charging existing operators is the main issue causing so many cannabis operators to fail.”
Councilwoman Imelda Padilla has proposed examining potential tax relief options, acknowledging the financial strain on businesses. Jerred Kiloh, president of the United Cannabis Business Association, emphasized that the issue extends beyond Los Angeles, impacting the entire county. “I love to see that people think that the cumulative tax is 39%, but the customer also is the one who is going with their dollars,” Kiloh saeid. “They’re going to other places. They’re going to new illegal shops as the price is just 50% cheaper.” He concluded, “There’s no incentive to be a legal cannabis operator in the city of Los Angeles any longer.”
