NorthwestJune 13, 2015

Lawmakers wrestle with marijuana tax distribution and city/county bans

Local control and the ability of Clarkston and other Washington cities or counties to ban marijuana businesses has become a potential bargaining chip in the budget negotiations taking place in Olympia.

Midway through a second special session, state lawmakers still haven't reached an agreement on the 2015-17 budget, although they're reportedly getting closer.

While the broader discussion has focused on how much to spend and whether to raise taxes, other issues have joined the mix. One of those is the marijuana market reform bill, which proposes a number of changes in the state's recreational marijuana laws.

Besides replacing a multi-tiered marijuana excise tax system with a single 30 percent excise tax at the retail level, the bill would also distribute as much as $20 million in marijuana revenue to cities and counties each year, based on their population and amount of retail sales.

The measure pre-empts local control as well, requiring cities and counties to hold a public vote if they want to ban marijuana operations in their jurisdiction.

The bill initially passed the House 67-28, but failed to advance through the Senate before the end of the regular session. It passed the House again, 70-25, during the first special session, but has yet to be taken up in the Senate.

"I think it will definitely be part of the final budget negotiations," said Rep. Joe Schmick, R-Colfax. "But there's no clear consensus yet. There's a wide disparity in the Senate on how the money should be spent. The House also put some money towards prevention and education; the Senate didn't, but they're going to have to bend on that. We absolutely have to have that."

The House and Senate have widely differing views on the pre-emption issue as well, he said. That provision was added in the House, but the Senate Ways and Means Committee removed the language during the regular session.

"The bill keeps evolving," Schmick said. "I'd like cities and counties to have that choice (to ban the businesses), but if they're going to do that, they aren't going to see any (revenue sharing) money. I think that's the one thing everyone agrees on."

More than 100 Washington cities and 11 counties have banned marijuana businesses or still have moratoriums in place nearly 18 months after the first state licenses were issued. It has been almost three years since voters approved Initiative 502, which legalized recreational pot.

Bill Meinig, a legal consultant for the Municipal Research and Services Center in Seattle, said there have been five lower court decisions so far in lawsuits challenging local bans. All five have upheld the right of cities and counties to prohibit marijuana businesses - a position shared by Washington Attorney General Bob Ferguson.

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At least one of those rulings has been appealed, Meinig said. It will likely be heard later this year.

Francis Benjamin, a member of the Pullman City Council and current president of the Association of Washington Cities, said pre-emption is an even bigger concern for local governments than revenue sharing.

"That's because if we start down that road, what other things is the Legislature going to take away?" he said.

Although cities and counties were advocating for a share of marijuana revenues even before I-502 was approved, they're willing to compromise on that issue to avoid the threat of pre-emption.

"Because that's the most important piece to us, we've taken the stance that it's OK to tie the money to (local bans)," Benjamin said. "If a city doesn't want marijuana businesses, then that should affect the amount of revenue they receive."

Together with the Washington Association of Counties, the association of cities has proposed two pots of money: one that goes to all cities and counties regardless of their local decisions - because the effects of legalized marijuana extend statewide - and a second that's only available to jurisdictions that have a licensed store, processing facility or growing operation.

That concept was proposed three months ago, however, so it's unclear what might actually prevail by the end of the second special session.

"Everything is in play," Benjamin said. "The pre-emption piece and the local funding, they're both moving targets. It could all change in the next hour."

The concern now, he said, is that the longer it takes lawmakers to reach a budget agreement, the more likely it is that cities and counties will lose whatever ground they've gained.

"What tends to happen is if they can't come up with an agreement, they look to local governments and higher education to balance the budget," Benjamin said. "The longer this goes on, the less likely it is they'll limit the agreement to the funds they have access to, and more likely it is that they'll start passing costs on to local governments."

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Spence may be contacted at bspence@lmtribune.com or (208) 791-9168.

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