Local marijuana sales will be banned in Unalaska after the city council passed an ordinance prohibiting commercial pot for a second time.
The move came despite analysis from the city manager that commercial marijuana sales, which could bring in nearly $1 million a year, could generate as much as $240,000 a year in taxes for the city — and in the face of a pledge by a local activist to launch a ballot initiative to overturn the new ban.
As in the ordinance's first reading, councilors were deadlocked 3-3, with Mayor Shirley Marquardt casting the tie-breaking vote.
City Manager David Martinson, in a memo to the mayor and council, provided a scenario on sales and taxation that assumes 8 to 10 pounds of marijuana sold per month based on a current black market price of $500 per ounce.
At the low end with 96 pounds sold per year at a street price of $8,000 per pound, a store would have annual revenues of $768,000, with local tax revenues varying by percentage, from $76,800 from a 10 percent tax, to $192,000 for a 25 percent tax.
On the high side, 120 pounds sold annually would earn the store $960,000, with local revenues of $144,000 at 15 percent, and $240,000 in city taxes at 25 percent, according to the city administration's research, Martinson said.
Voting in favor of allowing cannabis businesses were David Gregory, Alejandro "Bong" Tungul and Yudelka Leclere, who supported locally regulated commercial sales, growing, testing and manufacturing. Opposed again were Roger Rowland, and Frank Kelty who voted from out of town by teleconference as did Zoya Johnson.
The second reading of the new ordinance passed 4 to 3, the same as the first required vote on Jan. 26.
In one slight change, Frank Kelty said he "strongly" supports a ban as a quality of life issue, although last month he was deeply conflicted.
Rowland apologized for saying at the last meeting that the votes of local residents on the statewide ballot question in 2014 didn't matter. He said he failed to say that it didn't matter for commercialization, although the referendum question legalized personal use.
The 2014 ballot question legalized the personal use of marijuana, but left the decision to allow or prohibit commercialization in the hands of local officials. Jerry Swihart, a local in favor of commercialization, has promised to the put the question on the ballot of the next local election in hopes that the voters will once again disregard the views of the mayor and the three opponents on the city council.
The city council by a 5-1 vote in 2014 advised local voters to oppose legalization, but local residents disagreed 369 to 271 in preliminary results. Swihart, a city public works employee, complained of elected officials opposed to legal cannabis only citing subsequent public comments, which were evenly split, and not the election results, which were heavily in favor.
Council member Leclere reported a similar situation at the Unalaska Christian Fellowship, with church leaders opposing commercialization at public meetings, but not representing all members' views. Leclere who supports local sales, is a member of the church. She said the congregation is evenly divided. "UCF is split 50 percent/50 percent, we have had members speak in support and against," she said in an email to the local newspaper.
When it comes to local marijuana taxes, Martinson said it's best to start high.
"Administration believes it is better to establish a tax rate higher than the normal city tax rate on marijuana sales," Martinson wrote on Jan. 20, noting it's the city council's decision. The local sales tax rate is 3 percent.
"We believe it is best to be prepared for higher costs in police, education and health-related areas. While we do not know if any higher costs will be incurred we do believe that a higher tax rate upfront allows the city to be proactive instead of reactive. If higher costs do not materialize, administration is prepared to reduce the tax rate to be more in line with city tax rates," according to Martinson.
The manager's memo described where various marijuana businesses would be allowed by city zoning rules. Growing operations were the least restricted, potentially allowed in high-density residential, general commercial, and marine-related industrial zones. Testing and manufacture of oils would only be allowed in marine-related industrial zones.
Manufacture of other items, like brownies, would be allowed in both marine-related industrial and general commercial zones, because bakeries are allowed in general commercial.
Unalaska Department of Public Safety Director Michael Holman warned of fire hazards in the manufacture of marijuana concentrates known as "hash oil" and "wax."
"The methods which are the most efficient and produce the highest concentration of THC involve the use of volatile chemicals or solvents," including butane, propane and acetone, according to Holman's Jan. 18 memo to the city manager.
"Issues that should be considered relate to zoning, building codes, regulations on hazardous waste storage and disposal, and safety regulations for using volatile substances in enclosed spaces," Holman wrote.
Holman said the state government will require local fire departments to inspect and certify the equipment used in extraction operations. "This seems to put the responsibility and cost of inspecting these facilities on the local governments," he said.
This story first appeared in The Bristol Bay Times/Dutch Harbor Fisherman and is republished here with permission.