San Diego officials brace for falling cannabis revenue

City officials in San Diego expect tax revenue from cannabis sales to fall sharply this year as California’s regulated marijuana market continues to face difficult headwinds.

The San Diego Union-Tribune reported Tuesday that “San Diego officials say they now expect cannabis tax revenue for the current fiscal year, which ended on 30 executives who say is “the main driver of their ‘double-digit’ sales declines are illegal delivery services, which they estimate account for about half of the region’s cannabis market.”

“The legal industry faces tremendous competition from the illegal industry,” said Phil Rath, executive director of the United Medical Marijuana Coalition, a trade group that represents a number of marijuana dispensaries, as quoted by the San Diego Union-Tribune . “Delivery services are an ongoing challenge for the city.”

Plunging revenue in San Diego is symptomatic of a statewide problem in California, where the nearly seven-year-old legal cannabis market has gone bust.

In November, Politico reported that tax revenue from the state’s licensed and regulated marijuana market “slumped to below $130 million in the third quarter, down nearly $100 million from the same period last year.”

“Legal recreational and medicinal pot sales in California have steadily shrunk from their peak of over $1.5 billion in the second quarter of 2021 as licensed retailers continue to lag behind an expansive underground market that has reached as high as $8 billion. dollars,” Politico reported to Die Zeit. “California residents purchased $1.27 billion worth of licensed cannabis products in July, August and September, generating $128 million in excise taxes, according to the California Department of Tax and Fee Administration. That represents a decrease of $18 million sequentially and a decrease of $52 million from the all-time high.”

In a separate article that month, Politico reported that “California’s black market has undermined its own legal industry,” noting that six years after the state voted to legalize recreational cannabis, “illicit sales have far outpaced the regulated market.” , and many operators have done this business closed.”

“High taxes, opposition from local government and competition from the underground market have stifled the success of the legal cannabis industry in the nation’s most populous state,” Politico added.

Lawmakers and other officials across the state have been looking for solutions to bolster the legal cannabis market.

Earlier this month, a Democratic representative in California introduced a bill that would allow the state’s licensed cannabis consumption lounges to serve food and beverages, which he says could be a boon for the embattled industry.

“California’s small cannabis companies are struggling,” said Matt Haney, the lawmaker who sponsored the bill. “Issues like oversaturation, high taxes, and the thriving black market are hurting cannabis companies that play by the rules and pay taxes.”

In San Diego, city officials “also lowered their long-term projections for cannabis tax revenue, which was expected to fund dispensary enforcement and a new cannabis equity program aimed at giving people of color an edge in the industry through the negatively impacted on the drug war,” according to the Union-Tribune.

“Just over a year ago, long-term estimates for cannabis tax revenue were projected at $31.5 million in fiscal 2025, $33.3 million in fiscal 2026, and $33.8 million in fiscal 2027,” reported the newspaper. “In November, these were revised down to $26 million for fiscal 2025, $28.4 million for fiscal 2026 and $28.9 million for fiscal 2027.