Currently, cannabis operators in Vancouver pay a one-time application fee of $99 and $33,958 for a business licence for a total payout of $34,057, according to a city staff report that went before council this week.
Council unanimously approved Tuesday a staff recommendation that will see a new retailer in 2022 pay a one-time application fee of $2,500 and $13,500 for a business licence; an existing retailer will only pay the $13,500 fee to operate.
That $13,500 fee could be further reduced to $5,000 in 2023, although that will require a vote of the new council that will be in place after next fall’s municipal election.
Staff will also re-evaluate the $5,000 recommendation based on the state of the city’s overall budget, which continues to face pressures related to pandemic-triggered revenue loss.
In comparison, a number of B.C. cities, including Abbotsford, Port Coquitlam and Victoria charge an annual flat fee for cannabis retailers that range from $1,500 to $10,000.
In Chilliwack, where there is no one-time application fee, a business licence costs $10,000 but will be reduced to $2,500 next year.
Sarah Hicks, the city’s chief licensing inspector, explained the rationale to council Tuesday for the recommendation to reduce fees, with the reason largely related to decreased costs of implementing the cannabis retail program in Vancouver.
Costs were $660,000 in 2019 and will be approximately $276,000 by year’s end.
To date, the city has collected $1.6 million in cannabis licence fee revenue, which is used to fund bylaw enforcement.
“With the growing amount of cannabis licences, the city is now earning a surplus and therefore in a position to consider new approaches to the fee,” said Hicks, noting a decrease in costs related to property inspections and legal enforcement.
Eight illegal dispensaries
The cost reduction in administering the cannabis retail program does not include what the Vancouver Police Department spends on investigations or work related to cannabis retailers, with eight illegal stores still operating in the city as of Aug. 31; that cost was not included in the staff report.
At the same time, the city has shut down 65 illegal operations over the past two years while 53 legal cannabis retailers are doing business in Vancouver, including Sunrise Cannabis on Kingsway, where Ehren Richardson is a director.
Richardson told council he would have supported the move to reduce fees, but only if the one-time application fee was higher and the renewal fee lower. His view is that established cannabis retailers shouldn’t be charged with an expensive renewal fee.
“To this day, I struggle to understand how our business sector is somehow so vastly different than all the other business types that we incur the largest business licence fee, even in this new proposal by staff,” said Richardson, arguing the fee structure should have been revised when cannabis was legalized in 2018.
More than 80 per cent of all licensed businesses in Vancouver pay an annual licence fee of less than $200.
Richardson said cannabis retailers want to be given “a fair shake,” noting the dispensaries were deemed an essential service early on in the pandemic. When asked by Coun. Rebecca Bligh what a one-time application fee should be set at, he deferred to staff but suggested it should be thousands of dollars more than $2,500.
“If it means additional thousands [of dollars], then so be it,” Richardson said. “The folks that have gone through the licensing process and are operating and doing things in good standing with their communities shouldn’t have to be paying the biggest licence fee across Canada for operating a retail business.”
Excise tax revenue
Part of the reason Vancouver and some other municipalities haven’t lowered their fees is because they aren’t receiving cannabis excise tax revenue from the provincial government.
Despite pressure applied from council on the government, staff concluded in its report that “there is no indication that the province will enter into a revenue-sharing agreement with municipalities.”
Municipalities in Ontario do not charge licence fees because — unlike in B.C. — cannabis retailers are exempted from any municipal licensing requirements, and they are provided a share of the cannabis excise revenue tax from the Ontario government.
In Alberta, municipalities are not required to provide input on a provincial cannabis store licence application. The staff report said cannabis retail licence fees range from zero in Toronto to $317 in Calgary.
“These municipalities are able to charge much lower licence fees than Vancouver due to differing statutory requirements on cannabis retail for local governments,” the staff report said.
In Vancouver, a prospective cannabis retailer has to first obtain a development permit from the city that meets distancing requirements from schools, playgrounds and other community spaces.
As part of the permit application, there is a public notification process to allow residents to provide feedback on the proposed cannabis store. Once a development permit is obtained, the applicant can apply to the Liquor and Cannabis Regulation Branch for approval to open a business.
The regulation branch will then notify the city and request comments, but the final decision on an application is left to the branch. If granted, the applicant can then apply to the city for a business licence.
“The city will not issue a licence until all required building and occupancy permits are issued and a final city inspection of the premises has been completed,” Hicks said. “Through this process, often times staff will have multiple touch points with both the applicant and the [regulation branch] staff.”
Coun. Sarah Kirby-Yung asked Hicks whether she thought lowering the fees would reduce the number of illegal cannabis stores in Vancouver, suggesting the reason those operators continue to flout the law is because of the combined $34,057 cost.
Hicks: “I'm not sure that the fee will necessarily be the item that brings those particular individuals to the legal market.”
Kirby-Yung: “What I'm hearing from you is it's more the philosophy or the point of view of those operators as opposed to the amount [of the fees]?”
Hicks: “From what we’ve seen to date, I believe that to be true.”