Oregon Marijuana – The Opt Out Game

Sandy, Ontario, Vale, Nyssa, Sutherlin, Brownsville, Jordan Valley, John Day, Creswell, Sweet Home, Manzanita, Adrian, Elgin, Island City, Junction City and Baker City. These Oregon cities have prohibited state licensed marijuana facilities. And then there are the counties: Douglas, Umatilla, Harney, Malheur, Crook and Wheeler. The list is long and growing.

Many in Oregon will not have the choice to get legal cannabis locally
Many in Oregon will not have the choice to get legal cannabis locally

We have written about the ability of Oregon cities and counties to opt out under HB 3400 here, here and here. To summarize, the new law allows any city or county in Oregon to ban commercial marijuana activity under a “Local Option” if 55 percent or more of the county’s voters opposed Measure 91 for marijuana legalization. All of those “qualifying” cities and counties are east of the Cascades. For non-qualifying locales, like most of the western Oregon cities and counties, any proposed ban must be approved by local voters (meaning, the same local voters who endorsed Measure 91).

By opting to continue prohibition, the 23 jurisdictions listed above are doing something local governments almost never do – turn away tax revenues. Under HB 3400, local governments that opt out cannot tax marijuana licensees at a rate of up to 3%, like other cities and counties under the new law. Do we expect pretty much every single non-dry county to levy this tax? You bet.

If passing on a share of marijuana taxes does not sound like a big deal, consider this: the Colorado Department of Revenue reports that in June of 2015 alone, it collected $9.7 million in taxes related to marijuana sales. In the five months before that, Colorado schools received $13.6 million in pot tax revenue. As Governor John Hickenlooper observed, “the people who were smoking marijuana before legalization still are. Now they’re paying taxes.”

Oregon’s opt-out cities and counties are keeping their pot smokers but turning away vital tax revenues. In addition to ignoring this potential new revenue stream, the opt-out cities and counties are saying no to economic development at large. They are passing on infrastructure funding, local jobs and tourist dollars. As for their citizens, it seems obvious that if the legal marijuana market is banned, pro-pot locals will take their money elsewhere (unless they choose to remain at home and purchase on the black market).

It will be interesting to see which cities and counties that opt out of marijuana are able to sustain prohibition, and for how long. Back in August, State Senator Todd Ferrioli, who championed the Local Option, acknowledged that the provision “won’t solve problems.” At best, it will give certain jurisdictions the opportunity to observe whether the black market continues to operate in their communities, and what effect that has on law enforcement costs, public safety and quality of living. Two years from now, don’t be surprised if most of these jurisdictions opt right back in.