Nearly 600 Michigan communities have reportedly opted out of allowing recreational marijuana businesses, which experts say is the result of uncertainty clouding the 2018 ballot initiative.
Unlike the state’s medical marijuana law, questions remain on the specifics of how communities could limit certain recreational marijuana businesses and how much tax revenue they would eventually see, said Jennifer Rigterink, legislative associate with the Michigan Municipal League.
“Proposal 1 was not written by policy wonks,” Rigterink said. “There are a lot of questions and a lot of gray area we’ll have to wait for the courts to decide.”
When municipalities opt in to the state’s medical marijuana law, it’s clear they can limit the type and number of facilities, such as growers, provisioning centers and processing centers. But Rigterink says the recreational law is ambiguous about whether types of facilities can be limited and — if they are limited in quantity — how they are selected.
She said it’s also uncertain how much revenue local governments would receive from the state’s 10 percent excise tax on recreational marijuana, since those revenues are distributed proportionately based on how many licenses are issued.
Rigterink said this uncertainty has prompted many communities to take a “wait and see approach” until after the state issues final regulatory guidelines, which are expected in early December.
Eric Lupher, president of the Citizens Research Council, agrees that local governments are “putting up fences at this point, thinking it’s easier to take them down than to allow businesses to come in and decide at some point in the future they made a wrong decision. It’s going to be easier to change from restrictive to permissive than to go the other direction.”
Proposal 1 includes a 10 percent excise tax on cannabis sales at retailers on top of the state’s 6 percent sales tax. After financing administration and enforcement, revenues are distributed to municipalities (15 percent) with retail stores and micro-businesses, counties (15 percent), the School Aid Fund (35 percent) and the Michigan Transportation Fund (35 percent). Estimates have shown combined annual revenue between medical and recreational marijuana could exceed $160 million.
Theoretically, local governments could also see an increase in property tax revenue with rehabilitated properties, but Rigterink said this is limited by cap increases under the Headlee Amendment.
Lupher says potential tax revenue — though a selling point for cannabis advocates — doesn’t appear to be playing much of a role in local decisions to opt out.
“If they were, you’d expect a lot more local governments to get on board,” he said.
While voters can force a referendum to overturn a community’s decision to opt out of recreational marijuana, three local elections this month in Highland Park, Vanderbilt and Crystal Lake failed to overturn local officials’ decision.
“I think a few people were a little bit surprised those didn’t pass with flying colors,” Rigterink said.