HANFORD – Now that Hanford officials appear willing to grant an operating permit to a medical marijuana cultivation business by the end of 2017, attention is turning to the idea of taxing the business to generate money for other projects the city wants to pursue.
The business, a San Jose-based operation called Caliva, wants to put a cultivation/manufacturing hub in the Kings Industrial Park south of Hanford-Armona Road.
Like leaders in other cities who have entertained similar business proposals, Hanford officials want to impose a tax on medical marijuana production facilities that want to locate in city limits.
In order for the tax to become law, Hanford voters have to approve it. The earliest chance for them to do that is the general election in November 2018.
The structure of the tax hasn't been established yet, but according to Caliva CEO Larry Thacker, it could generate in the neighborhood of $10 million annually for the city.
"I can't envision anything less than $10 million annually," he said.
Thacker said the details haven't been worked out yet. He said he's also uncertain what kind of tax the state will impose.
"I recognize that it is important for [Hanford] to have this tax measure pass in order for the community to get comfortable with the industry," he said.
With several tax increase proposals having failed in Hanford in recent years – most notably Measure K last year – Hanford officials are receptive to the idea of a tax that would apply to medical pot businesses only and wouldn't come out of the average Hanford resident's wallet.
The City Council has already decided not to allow retail medical marijuana product sales in Hanford. Caliva's product would be shipped out of the area.
"We are facing so many obstacles, and all of those obstacles come down to one thing: Money," said City Councilman Martin Devine. "Taxing medical cannabis could be the answer to a lot of our problems."
"Instead of maybe trying to raise property taxes and sales taxes, how about being a little bit innovative?" said Hanford Mayor David Ayers. "I think it's something other cities are doing. The idea is, some of the revenue will go back into the community and help the quality of life in the community."
Rand Martin, a governmental affairs advocate working with Caliva, said the company is ready and willing to work with city leaders.
"Caliva is prepared to find any assistance the city needs in order to get [a tax measure] on the ballot and passed by voters," Martin said.
Martin said Caliva paid for a campaign flyer last month in the Southern California city of Bellflower advocating for the passage of Measure B, a medical marijuana business tax.
The proposal passed March 7 with 74 percent of the vote.
Caliva is planning to open a retail sales/distribution center in Bellflower and has been working with city leaders there to do so.
Thacker said Caliva needs to find a sweet spot in terms of how much taxation the company can absorb in Hanford.
Thacker said that if the tax is too high, it would make legitimate medical cannabis businesses unprofitable and could "drive the industry back into an underground state."
"There has to be a balance that is struck," he said.
On April 4, the Hanford City Council approved an agreement with Southern California-based consulting firm HdL to "develop a tax measure ... that will provide the city maximum economic benefits but at the same time ensure long-term stability for the cannabis business operators."
HdL will also help the city update its ordinance to allow for commercial medical cannabis cultivation businesses.
Currently, such businesses aren't permitted in city limits.
HdL will also craft an agreement by which Caliva will pay for all costs, such as additional law enforcement expenses, that the city is expected to incur once the facility is operational.
As far as the tax proposal goes, the thinking among city leaders is that tax-averse Hanford voters are more likely to support it than a general sales tax increase on the whole population.
"We're only taxing the cannabis facilities," said City Councilman Francisco Ramirez.
"It improves the probability of the tax passing, yes," Ayers said.
"I tend to think it would be likely to pass," Devine said. "Honestly, I can't complain about revenue coming into the city's coffers."
According to Thacker, the likelihood of it passing will be greater if Caliva can get up and running in Hanford well before November 2018.
That way, city leaders would be able to look at how much money Caliva is bringing in and give Hanford voters an estimate of how much the city would get annually from the tax.