Marijuana license fees going up, possibly way up

The Mayor’s proposed budget quietly included an increase to the fee for a marijuana business license. Now the Council is looking at making that a much bigger increase, and people are now paying attention.

Currently the “Title 6” license fee for a marijuana business located in Seattle is $1000, and for one located outside Seattle (but still doing business within city limits) is $500. The Mayor’s proposal would raise that by 50%, to $1500 and $750, respectively. The rationale behind the increase is that the fees don’t cover the costs of regulating the marijuana industry.

But according to a proposal underwritten by Council member Tim Burgess, the increased fees still won’t come even close to covering costs, and should be raised to $3,410 and $1,705 in order to provide full cost recovery.

Council staff produced a summary of the direct and indirect regulatory costs to the city, which are projected to total $730,700 in 2017 and $747,277 in 2018.

In addition to license fees, the city also gets a share of the state’s marijuana-related tax revenues. That is expected to generate $942,000 in 2017 and $1.28 million in 2018 into the city’s coffers, according to the City Budget Office’s projections. That means that the city isn’t losing money by having a local marijuana industry, but it cuts deep into the economic benefits that the industry was advertised to bring to communities.

Representatives from Seattle’s marijuana industry showed up to Wednesday morning’s budget committee hearing to voice their disapproval with the large increase. A common theme among their comments was that people believe they are bringing in huge revenues when, they claim, the business is much more modest — and many proprietors are losing money.

Council President Bruce Harrell also spoke to his concerns about the increase, noting that he saw this as a punitive action on a growing industry (no pun intended). Council member Herbold asked for further information as to whether there are other industries for which Title 6 license fees are used to fully fund regulation, and after the meeting Burgess noted that it was not a standard practice. It is worth noting, however, that earlier in the budget process Herbold proposed creating a new regulatory fee on all businesses with 10 or more employees to fully fund the Office of Labor Standards’ oversight of labor laws, suggesting that her concern may be more about equitable treatment of all businesses rather than opposition in principle to charging businesses fees to fund regulatory oversight.

Burgess told me after the committee meeting that given the opposition and concerns, he thought it likely that his proposal would be removed from the Council’s budget package. That would return the marijuana license fee to the Mayor’s proposed $1500/$750 level — and no doubt make the local industry much happier.