Back in 2016, Prop 64 was passed. This proposition legalized the possession, use, and sale of recreational cannabis to adults 21 and over. The idea of high tax revenue earnings and the eventual disappearance of the illegal cannabis market served as motivation to pass the prop. Unfortunately, illegal markets are still very much present in California. It seems that more action is needed to fully address the existence of these markets. Earlier this year, Costa Mesa was determined to address and eliminate all of the illegal cannabis shops in their area. At that time, Costa Mesa had not yet allowed the legal retail sale of cannabis. City officials decided it was time to allow it. Costa Mesa addresses illegal cannabis markets through regulation change. 

Costa Mesa Addresses Illegal Cannabis Markets

Illegal cannabis businesses can undermine the goals of establishing a legal and regulated market of cannabis. There are many dangers and downfalls to the illegal cannabis market. First, they can distribute unregulated products to consumers. Second, they provide no tax revenue for the city in which they are established. Third, they harm and burden surrounding businesses and taxpayers. 

Costa Mesa’s law enforcement considered illegal cannabis dispensaries a top priority. Along with the California Division of Investigation’s Cannabis Enforcement Unit, The Costa Mesa Police Department worked to shut these illegal shops down. The Cannabis Enforcement Unit falls under the Bureau of Cannabis Control. Additionally, they belong to the state’s Department of Consumer Affairs. 

Eventually, they were able to locate and raid unlicensed cannabis shops in Costa Mesa. Approximately $1.4 million in products were seized from a singular shop. This high-value bust demonstrates at what rate these illegal cannabis markets are functioning. 

Passing Regulations to Decrease Illegal Cannabis Markets in Costa Mesa

City officials recognized that something needed to be done to gain control and eliminate the illicit cannabis shops. Thus, they pushed forward with the notion of establishing a regulated market in the city. 

Back in November 2020, 65% of Costa Mesa voters approved retail cannabis shops and delivery services during the election. This emphasizes the demand for cannabis in the city, as well as the support from the community. This demand is being fulfilled by illicit shops with no regulation. As previously mentioned, these pose a threat to consumers. 

Costa Mesa officials passed a new law that would allow conditional permits for cannabis dispensaries. These would have to be reviewed by the city planning commission. This process ensures that all legal dispensaries are located at an appropriate distance from schools, parks, playgrounds, homeless shelters, and child daycare centers. Additionally, it guarantees no new business exists where an illegal business once operated. 

Tax Revenue from Legal Cannabis Shops in Costa Mesa

Aside from abolishing illegal cannabis markets in Costa Mesa, establishing a legal and regulated market would allow the city to earn tax revenue from cannabis. Many officials see this as an opportunity for the city and county. 

California has one of the largest cannabis economies in the United States. Therefore, it makes sense that the tax revenue earned from cannabis is equally as large. Costa Mesa officials believe that this could be advantageous for the city. They plan to place a 7% tax on all cannabis products. Aside from that, there will be a 15% state excise tax and a 7.75% sales tax. From these taxes, officials plan to use 1% to fund citywide arts master plans and a first-time homebuyer program. 

Many industry experts are placing their input on the suggested high taxation. They advise against it, due to the consequences it may have on sales. Industry experts suggest that having high taxes can cause consumers to shop at nearby cities instead, such as Long Beach and Santa Ana. These cities tax at 6% for recreational use and 5% for medical use. 

Kandice Hawes emphasizes that having really high tax rates can boost black market sales. Hawes is the executive director of the O.C. chapter of the National Organization for the Reform of Marijuana Laws (NORML). If high taxes drive the rise of the black market, then it would work against the initial goal of establishing a regulated market in Costa Mesa. 

Neighboring Cities in Orange County 

Neighboring cities in Orange County are also moving towards establishing a regulated cannabis market. Santa Ana is a prominent city for cannabis sales. Amongst the first few to establish a regulated market, it’s booming with several legal, dispensaries. 

La Habra is another city that is moving forward with establishing a regulated market. On March 1, the La Habra City Council voted to approve the cannabis business permit process. Additionally, they began to provide information guides for eligible applicants. 

On the other hand, there are still many cities that are not yet ready to accept and establish a regulated cannabis market. For example, Fullerton recently repealed an ordinance that would have allowed cannabis storefronts.