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.
(1) comment
The reason the cannabis business has a difficult road is not just because of the high taxes. It's because most of the business owners come out of the illegal market and can't face reality. They want to continue making instant fortunes like they did when it was illegal and selling for $300 to $400 an ounce.
Governments also burden the near harmless plant with bizarre "safety" regulations, as if it were uranium instead of a plant that is so safe, it has never caused a death. That makes it safer than aspirin, caffeine and peanuts.
All that magical thinking and hysteria vanished with the RE-legalization of cannabis. As most now know, science and widespread experience have shown cannabis is not addictive and has no notable harms.
For this reason, there is no need for the massive regulation and stand-alone, high security stores. Cannabis is far less intoxicating and vastly less harmful than alcohol, so should not be regulated any more strictly than is alcohol. Much less, actually.
The fraudulently enacted cannabis prohibition will soon collapse under its own dead weight. When it does, the national market will rapidly develop and prices will fall to their natural level, a little higher than fine tobacco, at $25 to $40 an ounce. And it will be sold wherever more harmful beer and wine are available.
That's as it should be. There will still be a few boutique stores for the connoisseurs, just like we still have a few liquor and tobacco stores. But most people will get their cannabis from convenience and grocery stores and discount stores like Walmart.
It's just a non-processed plant. Once we acknowledge that reality, there will be no more obstacles for the market. The only regulation cannabis really needs is to prohibit sales to children and require adequate sanitation, as we do for all produce.
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