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The legal marijuana business in Los Angeles pays thousands more dollars in renewal fees, the city council decided Tuesday, bringing new financial difficulties to an already shrinking market.
City officials said fee increases would be needed to compensate for the decline in tax revenue from the marijuana industry when the city is in the dire financial straits.
“This is a difficult but necessary action due to the continuous function of [the cannabis department] City Councilman Imelda Padilla said in a statement.
But some struggling business owners say the increased fees could threaten their survival.
Luis Rivera previously ran three marijuana delivery businesses in the city, two of which have appeared. He is currently considering closing the remaining one to authentic delivery in Sun Valley.
“There’s nowhere to withdraw money,” Rivera said. “The fees are miserable.”
The new fees unanimously approved by the council are expected to bring about $6 million to the city’s Department of Cannabis Regulation this year.
According to Cannabis Bureau data, after the fourth consecutive year when marijuana sales exceeded $100 million, it fell to about $90 million in 2024.
Similar to competition with the illegal cannabis market, the state’s high taxes and local taxes and business costs are high due to lack of access to traditional banking and funding and competition with the illegal cannabis market, according to Brian Bergman, a lawyer who works in the cannabis business.
This is because illegal clinics often lower legal stores prices, pay no tax or fees, and were also a hotbed of crime, according to law enforcement.
“The price hikes are coming at a really bad time for people in the industry, and it’s been rising so much,” Bergman said.
Cannabis products sold at Bonafide Delivery in Sun Valley.
(David Butow / For the Times)
The Cannabis Bureau’s budget is $8.6 million this fiscal year, and is expected to pay another $19 million to other areas of the city government, including the City Attorney’s Office for marijuana-related work.
Increases in marijuana operations fees, but the new ordinance will reduce fines for major violations of city rules and regulations. For example, if you deliver marijuana items outside of the allowable time, you will be fined between $42,000 and $23,000.
The new ordinance will also create new categories of “severe” violations, including diverting cannabis to illegal facilities, and fined $34,000. Officials with the Cannabis Bureau said the goal is to avoid excessively heavy fines.
Los Angeles has the largest municipal cannabis division in the United States, overseeing nearly 1,100 licenses for brick and mortar, delivery and growth businesses.
Department officials argued that fees, which had not risen since 2020, did not match operating costs. After the department was first allowed in 2020, its staff has grown from 37 to 63 members. Through collective bargaining agreements, their salaries have also increased by 19% since 2020.
The most widespread hit for the marijuana business comes from the renewal fees you have to pay each year.
License renewals jump from $8,486 to $12,617. Temporary approval renewals will go from $4,233 to $6,294, while record breaks will increase from $1,829 to $2,719.
The new ordinance also includes other fee changes, such as increased business diagram change review fees and lower price for change review fees for ownership structures.
A Cannabis Bureau spokesperson said participants in the Social Equity Program, which provides support to cannabis operators from the most hurtful communities in the drug war, have some of the increased fees for money from state grants.
During a city council committee meeting Tuesday, Jason Killeen, assistant executive director of the Cannabis Bureau, said the grant would cover a new fee of around $3.1 million. Over half of the money covers the difference between old and newer renewal fees for 317 social equity license holders. The remaining grants will be sent to new applicants for a social equity license.
Prices will increase as cities suffer from a budget crisis that is likely to continue for several years. This year’s budget will close the gap of around $1 billion through layoffs and other cuts.
The city council has approved a rise in ticket prices for the LA Zoo and has taken steps to increase the garbage fees for around 740,000 customers. The city may also increase parking meter fees and extend opening hours.
The Cannabis Bureau acknowledges that new fees will be difficult for businesses.
“Please understand that this fee investigation is necessary by law and is central to DCR’s ability to continue to serve this community effectively and equitably,” Director-General Michel Garakian wrote in a breaking news report in July. “It’s easy to feel like no one in town cares, but DCR guarantees you. DCRs need to navigate limited resources, competing needs and make challenging decisions.”
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