Legal marijuana businesses in Los Angeles will soon face increased renewal fees, as the City Council approved a measure on Tuesday to address declining tax revenue from the industry. The new fees are part of an effort to support the city’s Department of Cannabis Regulation, which is tasked with recouping its expenses through fees or other charges.
City Councilmember Imelda Padilla described the fee hikes as “a difficult but necessary action” to avoid further strain on the city’s General Fund. However, some business owners, like Luis Rivera, who has seen two of his three marijuana delivery businesses close, worry that the increased fees could threaten their survival. Rivera stated, “There’s nowhere to pull the money from. The fees will be disastrous.”
The new fees, expected to generate about $6 million this year, come as the city’s cannabis tax revenue has dropped from over $100 million annually to around $90 million in 2024. Factors contributing to this decline include high state and local taxes, limited access to traditional banking, and competition from illegal cannabis markets. According to Bryan Bergman, an attorney for cannabis businesses, “The fee increases are coming at a really bad time for industry folks.”
The ordinance also introduces a new category of “severe” violations, with fines reaching $34,000 for actions like diverting cannabis to unlawful establishments. Meanwhile, fines for major violations, such as delivering goods outside allowable hours, have been reduced.
The Department of Cannabis Regulation, which oversees nearly 1,100 licenses, argues that the fee increase is necessary to match operational costs. Since 2020, the department’s staff has grown from 37 to 63 members, and salaries have increased by 19%. The department’s budget is $8.6 million, with an additional $19 million allocated to other city government parts for marijuana-related work.
To support social equity program participants, a state grant will cover about $3.1 million of the new fees. This grant will assist 317 social equity license holders and new applicants. Despite the financial challenges, the department remains committed to serving the community effectively and equitably, as stated by Executive Director Michelle Garakian.
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