Voters in Surf City may soon decide if they want to let cannabis businesses set up shop on their shores depending on whether attempts to get legalization on a future ballot are successful or the council puts the question before voters themselves.

A majority of Huntington Beach City Council members decided to ask voters in June if they want to tax cannabis shops in the city – opening the door for a potential vote to formally legalize the shops, if one of two ballot measure efforts are successful or if the council takes its own action after the June election.

It’s a question that has been posed and welcomed by some Orange County voters in recent years, generating new sources of tax revenue for cities that have legalized such shops and could potentially do the same in Huntington Beach.

Other nearby cities have already allowed taxed retail cannabis to operate within their borders including Santa Ana and Costa Mesa in recent years.

Michael Moussalli, who owns two manufacturing and distribution facilities in Costa Mesa, spoke in support of retail cannabis at the Huntington Beach City Council meeting last week.

“What I can tell you over the last four years of being in the legal cannabis market is that there’s a lot of benefits that come with it for the city. The first and foremost being, it cleans up the illicit market and unfortunately, there’s quite a few illegal dispensaries operating in Huntington Beach,” he said.

“We’ve seen that market get cleaned up in Costa Mesa quite a bit, there’s only a couple left.”

Meanwhile, a similar debate on legalizing marijuana dispensaries is also taking off in Dana Point.

[Read: Are Cannabis Businesses Coming to Dana Point?]

Currently, Huntington Beach prohibits medical and recreational cannabis shops in the city. 

Joseph Thomas Flexen and Philip Archer, two residents, at the end of last year launched separate efforts to put a ballot measure before Huntington Beach voters, asking them if the city should regulate and legalize cannabis.

According to Robin Estanislau, Huntington Beach’s City Clerk, Flexen was approved to start circulating his petition.

“However, I have not seen any petition activity in town. Archer never filed an affidavit of publication, and therefore has not been approved to circulate a petition,” she said in a response to a records request.

According to public records, Flexen has until May 16 to file his petition and must collect over 13,000 signatures from registered voters in the city.

While Estanislau said the June ballot measure does not negate Flexen and Archer’s attempts, Council members Dan Kalmick and Rhonda Bolton said in a letter to their colleagues that the June tax measure could stunt Flexen and Archer’s efforts.

In the meantime, the two council members said they can fashion an ordinance and ballot question asking voters if they want to allow cannabis shops in the city, or have it enacted by the city council. 

“Note that voting to place the Special Tax on the ballot for June does not preclude the Council from placing the completed ordinance on the November ballot if the Council decides it does not want to pass the ordinance and adjust land use through the regular process,” reads the letter.

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Santa Ana was the first Orange County city to ask voters if they wanted to legalize pot shops in 2018 through Measure Y, which received support from a little more than 70% of voters.

Costa Mesa joined Santa Ana after 65% of its voters approved legalizing retail cannabis in November 2020. 

The measure also received support from Costa Mesa city council members who saw legalization as a way to drive out illegal operators in the city and drum up tax revenue.

[Read: If Approved, Costa Mesa Retail Cannabis Measure is Expected to Bring Financial Windfall]

Grace Yoon-Taylor, the city’s senior administrative analyst, said at the Huntington Beach City Council Meeting last week the two separate private cannabis industry groups were behind the effort.

“In response to this movement, the city council agreed that the city should position itself to establish its own law to regulate the cannabis businesses in the city,” she said.

So that’s what council members are looking to do.

At the March 1 meeting, Huntington Beach City Council Members voted 5-2 to call for a special election to put a measure on taxing cannabis businesses in Surf City on the June statewide primary ballot.

“It keeps us in the driver’s seat. It keeps our control. If we choose to do nothing, the industry is going to drive this and the industry is going to set a very pro-industry ballot initiative for our voters,” said Councilman Dan Kalmick at the meeting.

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Councilmembers Erik Peterson and Mike Posey were the dissenting votes who said the question on legalization and on taxation should be presented to voters as one package rather than separately.

“There’s a much better way to do this,” Peterson said at the meeting. “We can get a good strong solid ordinance with the tax in there and give that to the voters … it should all be in one package rather than this.”

Posey concurred with Peterson at the meeting.

“The handwriting is on the wall that cannabis is coming, legalization is coming and that the best thing that the city council can do is get out in front of it,” he said

Yoon-Taylor said in order for the measure to be on the June ballot the special election had to be consolidated with the primary, and can only be conveyed to the voters as a special tax.

If voters approve the cannabis shop special tax measure in June, the potential money these businesses could generate would be used towards police and homeless and behavioral health services.

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City staff estimates that with a tax rate of up to 6% on cannabis retailers and up to 1% on other cannabis businesses, the legalization of cannabis businesses could rake in about $300,000-$600,000 annually.

A special tax would need two thirds of voter support to be approved and will cost between $317,000-450,000 to be put on the June ballot.

“I think the cost of the election will vastly be recouped,” Kalmick said. “This is an investment in future revenue for the city and regulation.”

Yoon-Taylor clarified that even if voters approved a special tax on these types of businesses it doesn’t automatically mean that pot shops will be legal in Huntington Beach.

“If successful, it could indicate the level of (Huntington Beach) residents’ interest in allowing cannabis businesses in the city and if the measure passes and cannabis businesses become legal in Huntington Beach at a later time, a tax will be already in place to capture city revenues,” she said.

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

This story was updated to include the letter from Council members Dan Kalmick and Rhona Bolton to their colleagues detailing a potential ordinance or ballot question to allow for cannabis shops in the city.

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