Union City, CA: As cannabis shops across the Bay Area shutter their doors amidst a notable slump in pot sales, municipalities like Union City are grappling with the resultant decline in tax revenues. This trend raises important questions about the reliability of depending on recreational marijuana sales as a sustainable source of tax income for local governments.
Over the past few years, the legalization of recreational pot has been heralded as a lucrative opportunity for both entrepreneurs and local governments. The initial surge in pot sales brought a wave of optimism, with many expecting a steady stream of tax revenue to bolster city budgets. However, this enthusiasm has been dampened by recent trends resulting in a significant drop in sales.
The reasons for this slump are multifaceted. The cannabis market, once thriving with novelty and high demand, is now facing stiff competition. The black market for marijuana remains robust, offering lower prices that legal shops struggle to match due to heavy operational costs, losses from theft, and the high cost of security. Additionally, the cannabis industry is subject to stringent regulations that increase operational costs and complicate business sustainability.
In Union City, the impact of declining cannabis sales on tax revenues is palpable. Like many other municipalities, Union City had integrated marijuana tax revenue into its budget projections. The revenue was earmarked for various public services, including infrastructure projects, public safety, and to bolster the city’s general fund. With the decline in sales, the anticipated funds are falling short, forcing the city to reconsider its financial strategies.
In spite of declining revenue from recreational marijuana sales across the state, some members of the city council are hell-bent on authorizing a THIRD pot store in Union City. The city’s efforts to permit Embarc (a state-wide chain of recreational pot stores) to open a location in the Cherrywood Shopping Center (Decoto at Perry Road) was met with strong opposition by local residents, and the proposal was dropped. Now, a new location is being considered, sadly once again in a residential neighborhood.
The proposed location at 35194 Alvarado-Niles Road is a mere 180 feet from residential housing, 1000 feet from a place of worship, 1400 feet from a children’s daycare center, walking distance to Monte Vista Terrace Condominiums, and across the street from the entrance to a school. Children walk in large groups from the Monte Vista neighborhood to school every day, passing right by the proposed pot store location.
The volatility of the cannabis market underscores the inefficiency and unreliability of relying on it as a significant source of tax revenue. Unlike more stable revenue sources such as business and sales taxes from a diversified economic base, marijuana sales are subject to market fluctuations, consumer trends, and black-market competition. This instability poses a risk for local governments that have banked heavily on the cannabis boom to balance their budgets.
Furthermore, the dependency on cannabis tax revenue highlights a broader issue of fiscal planning. Local governments need to diversify their revenue streams to mitigate the risks associated with market-dependent sources. Investing in economic development to attract a variety of businesses, enhancing property values through community improvements, and ensuring a robust sales tax base through a thriving retail sector are more sustainable strategies for financial health.
Mayor Carol Dutra-Vernaci, who has served on the city council first as a council person and then mayor for a total of 25 years, has apparently failed to attract to Union City the kinds of businesses that will not only create more local jobs, but generate sufficient tax revenue to allow the city to be self-sustaining without constantly reaching out to its residents for repeated handouts.
Union City recently released a budget update, projecting continued budget shortfalls of 3 million dollars annually. In typical political flare, the city council is now threatening residents with reduction of “service levels”- top of their list is emergency response and police patrols (at a time when burglaries and person property theft is on the rise) and reduction in infrastructure care, including streets and sidewalks (at a time when many streets are pothole ridden- have you driven down Decoto Road lately?!?).
Part of the council’s misguided answer to the budget shortfall to install a third pot store (which will generate some tax revenue on one end and gobble it up on the other as pot stores increase local crime, requiring higher police intervention (responding to robberies/burglaries), increased police patrols, etc.).
As their solution to the on-going budget mess, the city is offering several proposals- more pot stores in residential neighborhoods, an increase in utility taxes (gas, electricity, internet, telecommunications services), among other proposed tax increases. If you are displeased with your current electric bill, just wait- the mayor has a big surprise for you!
As Union City and other Bay Area municipalities face the repercussions of the cannabis sales slump, there is a pressing need to reassess their fiscal policies. Relying on the cannabis industry, while initially lucrative, proves to be an unstable and unpredictable approach. A more diversified and resilient economic strategy is essential to ensure steady and reliable revenue streams, safeguarding public services and community well-being from the whims of a single industry.
In conclusion, the closure of cannabis shops and the resulting decline in tax revenues serve as a cautionary tale for municipalities. The experience of Union City underscores the importance of financial prudence and the dangers of over-reliance on a single, volatile source of income. Moving forward, the Union City Council must prioritize economic diversification and stability to build a resilient financial foundation capable of weathering market fluctuations and ensuring sustained public service funding.
Balancing the city’s budget is one thing. Attempting to make up for years of over-spending and fiscal mismanagement at the expense of a small residential neighborhood is downright political malpractice. Union City leaders pushing this pot proposal- Mayor Dutra-Vernaci and council members Jaime Patiño and Scott Sakakihara should know better. Be sure to remind them at the polls.
