Costa Mesa may soon be profiting off retail marijuana sales. 

Recreational marijuana dispensaries and deliveries are illegal in Costa Mesa but voters could change that by adopting a ballot measure that would allow the businesses and enable the city to tax and regulate them.

If approved, the initiative could potentially generate millions in tax revenue for a city facing a $30 million deficit because of the global coronavirus pandemic. City staff estimate revenues of up to $3.1 million to come in depending on how many dispensaries are permitted and the tax rate. Cannabis sales could be taxed between 4% to 7%. If voters approve the ballot measure, Costa Mesa would join Santa Ana, the only other city in Orange County to have already legalized marijuana retail sales.

City Council members are set to vote on a resolution in support of the measure at their 6 p.m. Tuesday meeting. In July, council members voted to allow residents to decide to legalize and regulate recreational marijuana businesses.

“It’s really critical that we’re looking at every possible chance to get more revenue streams as we don’t know how long COVID is going to last for,” Councilman Manuel Chavez said at the July meeting.

Following the business closures caused by the pandemic, cities across Orange County looked at cannabis sales as a way to offset budgets pummeled by a loss of sales tax revenue. 

In 2016, Costa Mesa voters approved a medicinal marijuana measure which allowed cannabis to be manufactured and distributed in what was designated the “Green Zone,” located in the northern part of the city. The new measure would expand to retail uses and would keep such shops away from schools, childcare facilities, playgrounds and homeless shelters.

The City Council voted mid-March to lower the tax rate on existing enterprises, right before the economic fallout caused by the coronavirus business shutdowns. 

Numerous unlicensed weed shops in the city have been selling cannabis products unregulated and untaxed. Enforcing a ban on cannabis dispensaries and delivery services has proven to be a burdensome and costly task, according to city staff.

“We have a huge demand for cannabis products in Costa Mesa,” said Councilman John Stephens at a meeting on the measure in July. “The only way to address that problem of unregulated, unsafe products and untaxed products coming to our consumers in Costa Mesa is to create a regulated legal market.”

“People in our community are going to get good jobs from that market.”

Councilman Allan Mansoor was not convinced that legalizing weed shops would bring an end to unlicensed shops operating in the shadows of the city and voted against the measure in July.

“Are we really going to be able to eliminate the illegal ones? I’ll believe it when I see it,” Mansoor said.

The measure will be on the Nov. 3 ballot.

Hosam Elattar is a Voice of OC Reporting Fellow. Contact him or on Twitter @ElattarHosam.

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