Cannabis revenue projections lower than estimated

Finance minister tells KTW it remains to seen what a revenue-sharing arrangement with municipalities may look like

As cannabis revenue projections decrease, B.C.’s finance minister is taking a wait-and-see approach in determining how much money municipalities could see as a result of the new legal industry.

Based on Ministry of Finance projections and the call by municipalities for 40 per cent of tax revenue the province gets from Ottawa (based on a 75/25 per cent province/federal government cannabis tax revenue split), municipalities would share little more than $9 million per year over the next three years.

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“We’re having very good conversations with UBCM [Union of BC Municipalities] and I think it really is just a matter of waiting until we see the revenue coming in, until we have a few months of operation, and then coming back to those conversations about who has what responsibilities, who is taking on what roles and what are the costs in that,” Finance Minister Carole James told KTW.

“Making sure we do that based on fact.”

Initial projections forecast $50 million coming to the province in the 2018-2019 fiscal year (which ends on March 31) as a result of the federal excise tax that gives provinces 75 per cent of cannabis tax revenue and the federal government the remaining quarter.

However, B.C.’s finance ministry revealed after the budget was released in February updated projections of $68 million over the next three years. In a statement to KTW, the ministry said: “It’s important to recognize that the B.C. government does not expect to generate substantial net revenues from legalization as expenses currently surpass potential revenue.”

James said the decreased projection is due to the federal government’s delay of 3.5 months in legalizing cannabis. Cannabis was legalized on Oct. 17, but July 1 was the initial target date.

James also pointed to delays that resulted from municipal elections, which were held on Oct. 20, three days after legalization.

“That meant that the revenue expectations had to be adjusted for this year,” James said. “And I think that’s really what you’re seeing. You’re seeing, you know, now you’re starting to see licences approved, you’re starting to see stores open, but that’s taken some time, again, to get councils into place and to get those processes going in communities.”

Meanwhile, local governments await word on their slice of the pie. The UBCM has called for 40 per cent of what the province receives from the federal government.

UBCM president and Kamloops Coun. Arjun Singh called it a “principled” request that would cover costs incurred by municipalities and more. He cited business licensing, zoning and policing as local government costs, noting rural areas in the province have hired staff.

Kamloops Mayor Ken Christian has been calling for a share of revenues to cover city costs in adjudicating cannabis licence applications.

Caole James
Finance Minister Carole James.

The city’s property-use inspector, Dave Jones, estimated costs so far by the City of Kamloops amount to about $150,000, due primarily to staff time.

“The fact of the matter is that local governments all across the province are incurring real costs,” Singh said, noting the province also receives provincial sales tax from cannabis.

It remains unclear whether First Nations and municipalities that do not allow cannabis sales would be included in a revenue-sharing agreement,

The UBCM was hoping for an agreement prior to the release of last month’s budget. Singh said members want certainty before edibles are introduced into the equation this summer.

James said the province has had some “very good discussions” with the UBCM, which will continue as the province awaits more information and monitors the situation in the coming year.

“We need to do two things,” she said. “One, we need to ensure that we know on a consistent basis what we expect the revenue to be. And then the second piece, of course, will be to determine who is responsible for what?

“To ensure that we have a clear understanding of what supports that municipalities are taking on and what additional supports the provincial government is taking on to determine if there is going to be revenue-sharing, what that looks like.”

Provincial costs for cannabis legalization include the new Community Safety Unit, public education and regulation of the medical cannabis retail system.

© Kamloops This Week

 

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