The City of Seaside is finally reckoning with market forces with respect to cannabis, and reducing the allowed number of cannabis dispensaries from nine to three, while letting the existing six dispensaries continue operating so long as they choose.
When Seaside City Council first approved dispensaries in 2018, the application process called for giving out only three licenses. The city’s staff reviewed those applications, and recommended which three businesses should receive a license.
The City Council approved granting six licenses instead of three. Then, in 2022, council increased the cap to nine, and set a maximum of six, instead of three, on Broadway in the city’s downtown. The idea was that it would generate cannabis tourism, like becoming the Amsterdam of the Central Coast.
But no business ever obtained a new license – while ownership and names have changed in some cases, the licenses are the same as the ones originally granted. And revenue is down. Peak revenue the city received from its tax on cannabis sales – 6 percent, after subtracting the 15-percent excise tax to the state – was in 2021, when the city garnered about $1.4 million in cannabis-related revenue. That number, according to Seaside Finance Director Jessie Riley, is now about $980,000.
Riley thinks it’s possible that the tax rate on cannabis has gotten over the hump of what economists call the “Laffer Curve,” which argues that at a certain point, too much taxation suffocates the market and decreases revenues.
Whether or not that’s true, which dispensaries survive in Seaside will ultimately depend on consumers.