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November 8, 2016 — California General Election
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City of San Diego
Measure N Referendum - Majority Approval Required

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Election Results


351,088 votes yes (68.68%)

160,109 votes no (31.32%)

If California voters approve Proposition 64 legalizing marijuana in the state, shall the City adopt an ordinance imposing a gross receipts tax, for general revenue purposes, on non-medical cannabis (also known as marijuana) businesses operating in the City, initially set at 5% and increasing to 8% on July 1, 2019, having a maximum rate of 15%, generating an undetermined amount of revenue and continuing indefinitely?

What is this proposal?

Pros & Cons — Unbiased explanation with arguments for and against

Information provided by League of Women Voters San Diego

The Situation


If California voters approve Proposition 64, legalizing recreational (Non-Medical) marijuana in the State, there may be additional societal problems for the City of San Diego to deal with. The City Council deems it prudent to tax non-medical cannabis businesses in San Diego to defray, in part, the cost to the City of the legalization of non-medical cannabis.

The Proposal

What it would do:

If California voters approve Proposition 64 (legalizing recreational marijuana), and if City of San Diego voters approve Measure N, the City will adopt an ordinance imposing a gross receipts tax on recreational marijuana businesses.

Note that a gross receipts tax is different from the 15% sales tax imposed by Proposition 64.

The proposed gross receipts tax would initially be 5%, and would be raised to 8% on July 1, 2019. The City Council would then have the option of raising that tax as high as 15%, or lowering it, at its discretion.

Supporters say

  • The City needs to be able to recover the increased cost that will be borne by the regulation and enforcement necessary as a result of legalization of marijuana. The intent is to insure that the City is not diverting resources away from things like infrastructure repair, and other City priorities.

  • There is flexibility built in to this tax measure, where the initial 5% tax can be adjusted over time, up or down to allow for some changes associated with future costs and implementation of government services that oversee and regulate this new marijuana industry.

  • This local tax will not affect medical marijuana sales or dispensaries.

  • There is a maximum 15% cap on the Gross Receipts of legal cannabis businesses. It cannot be increased without voter approval.


  • San Diego can benefit from the increased revenue from marijuana sales like other communities in states that have legalized recreational marijuana. Marijuana sales in Colorado this year are projected to reach 1 Billion dollars. Denver, Colorado took in 29 million dollars last year from all sales by taxes and licensing fees. That money goes into their General Fund. These proceeds pay for Denver's increased marijuana regulation duties, legal enforcement, public health and education priorities.

Opponents say

  • This local tax on legal marijuana, in addition to the State 15%, and 8% California sales tax will be too high. This will continue the high demand for black market sales of marijuana to continue.

  • None of these tax revenues have been earmarked for drug rehabilitation or recovery treatment services including education, outreach and housing. City revenues from marijuana gross receipts that go into the General Fund should not be used to pave roads or other city services.


  • There are no current cost projections by local law enforcement as to how much more money it will take in preserving public safety with marijuana becoming legal. Likewise, there are no monetary projections regarding the increased costs for public health.


  • Some opponents against this tax are just categorically opposed to legalization of marijuana and don't want any part of the government sanctioning it by expanding the city's tax base, to further legitimize the recreational use of marijuana.   

Measure Details — Official information about this measure


San Diego City Attorney

This measure would amend the San Diego Municipal Code to authorize the City to impose a tax of up to 15% on the gross receipts of non-medical cannabis businesses operating in the City of San Diego. Cannabis is also known as marijuana. This tax would only be imposed if voters also approve a statewide initiative, Proposition 64, Marijuana Legalization Initiative Statute, which also appears on the November 8, 2016 ballot. 


San Diego City Attorney

The City Council proposed this measure and approved its placement on the ballot. If approved by voters, the measure would become effective after the City Council adopts a resolution certifying the results of the November election.

Impartial analysis / Proposal

San Diego City Attorney

This measure seeks voter approval to allow the City of San Diego to impose a new Cannabis Business Tax of up to 15% on the gross receipts of non-medical (recreational) cannabis businesses operating in the City. Cannabis is also known as marijuana.

This tax would be imposed only if such businesses become legal in the State of California, if California voters also approve Proposition 64, the Marijuana Legalization Initiative Statute, on the November 8, 2016 statewide ballot.

Existing state law does not authorize the sale of non-medical cannabis. This measure does not permit businesses to engage in activities that are otherwise illegal. The City also does not currently permit non-medical cannabis businesses to locate or operate in the City.

If approved by voters, the City measure would amend the San Diego Municipal Code by adding a new Article 4 to Chapter 3 of the San Diego Municipal Code to allow the City to impose the tax.

Cannabis businesses are defined in the ordinance as businesses involved in the distribution, delivery, dispensing, exchanging, bartering or sale of cannabis. This includes transporting, manufacturing, cultivating, compounding, converting, processing, preparing, storing, packaging, and wholesale or retail sales of cannabis and cannabis products.

Medical marijuana consumer cooperatives licensed by the City would be exempt from the cannabis business tax, as would certain transactions involving patients and primary caregivers under the Compassionate Use Act.

Gross receipts is generally defined as the total revenue or compensation received by a cannabis business without any deduction for the cost of operating the business.

The maximum tax rate permitted by the measure would be 15%. Upon the effective date of the ordinance, the tax rate would be set at 5%, increasing to 8% on July 1, 2019. The City Council may, by ordinance, decrease or increase the tax rate at any time thereafter.

The ordinance includes provisions specifying how the tax administrator, the City Treasurer, would issue cannabis business tax certificates and collect the tax, which would be remitted by cannabis businesses to the City on a monthly basis. The measure also includes provisions for handling delinquencies, penalties, appeals and for the enforcement of the taxing provisions.

If approved by voters, the ordinance could be amended by the City Council so long as amendments do not raise the maximum tax rate in excess of 15% of gross receipts and do not tax businesses or activities that were previously not subject to the tax.

It is not possible to calculate the amount of revenue that could be generated by the tax as it is unknown how many businesses will be allowed to operate in the City, nor is it possible to estimate their gross receipts. If imposed, the tax would continue indefinitely unless it is repealed by the City Council or the voters.

Financial effect

San Diego City Attorney

This measure would establish a Cannabis Business Tax (CBT) on non-medical cannabis (marijuana) businesses in the City of San Diego to raise revenue for general governmental purposes of the City. Because non-medical cannabis businesses are currently illegal in California, this measure is contingent on the passage of Proposition 64, the Adult Use of Marijuana Act, which also appears on the November 2016 ballot. Should both items be approved by voters, the CBT would become effective after certification of the election results. Should Proposition 64 fail to be approved by the voters statewide, the local CBT measure would become null and void.

Approval of this measure would establish a gross receipts tax on non-medical cannabis businesses that operate or provide services within the City, including retail stores, delivery services, cultivators, and distributors. Upon passage of the measure, the CBT rate would be set at 5% of gross receipts. On July 1, 2019, the tax rate would increase to 8%. The City Council would have the authority to either decrease or increase the CBT by ordinance at any time, subject to a maximum rate of 15%.

This measure’s impact would be limited to the effects of a City-imposed gross receipts tax on non-medical cannabis. It would not affect other State-imposed taxes, nor would it affect land use regulations related to medical or non-medical cannabis businesses.

Fiscal impacts associated with this ballot measure include increased General Fund revenue from CBT paid to the City, as well as increased General Fund expenditures on administrative costs related to tax collection. These increased revenues and costs depend on a number of unknown factors, making them difficult to project. These variables include:

  • The number of non-medical cannabis businesses permitted in the City, which has yet to be determined, and the rate at which the industry develops.
  • The consumer demand for non-medical cannabis within the San Diego region, including availability in neighboring jurisdictions.
  • The price of non-medical cannabis, which may change over time.

For illustrative purposes, the City and County of Denver, CO, which has roughly half the population of the City of San Diego, currently taxes non-medical cannabis sales. In 2015, Denver reported gross retail cannabis sales (excluding medical) of approximately $220 million from an average of 128 retail outlets. Adjusting Denver’s sales for San Diego’s population gives an estimated hypothetical sales figure for San Diego of $440 million. If the proposed CBT were applied to this amount at the initial rate of 5%, the tax would raise approximately $22 million annually. At 8%, annual revenue under this scenario would be approximately $35 million. Actual revenue would be significantly less or more depending on the unknown factors described above.

While administrative costs are uncertain and would vary based on the number of regulated cannabis businesses, the City Treasurer estimates CBT administration costs could necessitate increased contractual expenditures and the hiring of six new positions at a cost of approximately $650,000 annually.

Published Arguments — Arguments for and against the ballot measure

Arguments FOR


Measure N will impose a gross-receipts tax on recreational marijuana businesses operating within the City of San Diego only if voters statewide choose to legalize marijuana by passing Proposition 64, the Adult Use of Marijuana Act. The purpose of Measure N is to ensure that the city has the resources to properly regulate the marijuana industry without hurting our investment in core city services, such as neighborhood infrastructure and public safety.

Most large California cities either already have or are considering a similar measure in anticipation of the likely passage of Proposition 64. By passing Measure N, San Diego will be aligned with the best practices of other California cities preparing for the inherent strain on the city's budget caused by marijuana legalization. For example, San Jose, Los Angeles, Sacramento, and Santa Cruz all impose a similar tax on marijuana to deal with the impacts to their cities' budgets for first responders and code compliance.

Measure N is fiscally responsible, timely, and prudent. In recent years, the City of San Diego has been able to increase investment in core city services by anticipating new costs, efficiently managing new revenues, and making cost-cutting reforms. Measure N is consistent with this philosophy. By proactively imposing a gross-receipts tax on recreational marijuana, the city's budget will be protected from any new costs associated with marijuana legalization, and protect resources for investment in streets, sidewalks, parks, police and firefighters.

Measure N is the right policy at the right time for San Diego, which is why it received bipartisan support from the San Diego City Council.

We respectfully request a Yes vote on Measure N.


Councilmember MARK KERSEY

Council President SHERRI LIGHTNER

— San Diego County Registrar of Voters

Arguments AGAINST


The marijuana tax percentages recommended in this ballot measure will NOT compensate in any way for the increased teen marijuana use, drug addiction, marijuana impaired driving, poisonings from marijuana concentrates and edibles, and mental health problems, that will come from increased recreational use of marijuana.

City government's first priority is the public health and safety of its citizens and neighborhoods, not facilitating drug use.

The tax money will be dropping into the general fund (the black hole, as described recently by a city councilman) and NOT going to support code and law enforcement actions or DUI prevention, treatment programs, or student prevention education.

As Colorado's Governor Hickenlooper learned too late regarding that state’s big hopes for marijuana taxes: "We are not making any extra revenue from this”.

The City does not have now nor will have in the future via marijuana taxes, the resources to track down marijuana dealers to collect unpaid taxes from mainly cash transaction, This has been demonstrated by the continuing operations of 40 plus unpermitted and illegal marijuana storefronts.

A proposed tax on recreational marijuana infers that the City Council will support the sale, manufacture, and neighborhood cultivation of recreational marijuana in our City. The City Council should first engage the public in a conversation regarding such a dramatic and far reaching public policy. This is a significant change from their public stance that they support marijuana as medicine but not the general sale, cultivation and advertising of recreational pot.

San Diego should not legitimize the sale, manufacture, unregulated neighborhood cultivation of pot, and marijuana advertising on billboards, TV, radio and social media, all in a cynical scheme to profit from the recreational use of marijuana. Vote No on Measure N.


San Diegans for Safe Neighborhoods and Small Business Owner

San Diego State University Professor Emeritus, Ed.D.

Pastor, Visions of God Ministries and Pre-school Administrator

President of Pacific Beach Town Council


— San Diego County Registrar of Voters

Replies to Arguments FOR


— San Diego County Registrar of Voters

Replies to Arguments AGAINST


— San Diego County Registrar of Voters

Who supports or opposes this measure?

Yes on Measure N

Organizations (2)

Elected & Appointed Officials (0)
No on Measure N

Organizations (1)

Elected & Appointed Officials (0)

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