The Anchorage Assembly on Tuesday night approved a ballot measure that will ask voters in April whether marijuana retail sales should be taxed, starting at 5 percent.

The ballot measure would authorize the Assembly to increase the tax up to 12 percent without going back to voters again, but only once every two years and by a maximum of 2 percent each time. For the first three years, the revenue would fall outside the city tax cap.

After nearly an hour of debate, the Assembly voted 9-2 to approve the measure, with Patrick Flynn and Amy Demboski in opposition.

During the hearing, several industry representatives voiced concern about the structure of the tax and the city's assumptions about needing a tax to cover enforcement costs.

Bruce Schulte, who was representing the Alaska Marijuana Industry Association, told the Assembly the association would support a 5 percent tax, but he called the prospect of future tax escalation a "new and troubling precedent." He also said there wasn't enough evidence to support arguments that the state would not have enough resources to regulate the industry, and that more Anchorage police officers would be required.

After the vote, however, Schulte and other industry members said they didn't expect an organized campaign against the ballot measure, at least at this point.

"I'm not excited about the prospect of having a 12 percent tax, because eventually that's what it's going to be," said Kim Kole, of the Coalition for Responsible Cannabis Legislation. "But I appreciated (Assembly members) who said they would only do it if there was justification."

A spreadsheet provided by the city treasurer in December projected average annual revenues of $1.3 million in the first full year with a 5 percent tax, running from June 2016 to July 2017. If the Assembly chose to increase the tax to 9 percent after six years, the projected annual revenues would rise to $3.2 million, the document shows.

Assembly member Ernie Hall, who chairs the Assembly's committee on marijuana regulation and taxation, stressed that the 2 percent increase is not automatic, and would require public input and Assembly action. While he said he expected the tax would cover costs associated with regulating the local industry, he also said the tax would generate revenue for general government.

But some Assembly members, including Bill Starr, said they weren't comfortable with or didn't expect the city to collect the money for reasons other than covering local enforcement costs.

One other contention among Assembly members was whether the city should take more of a "wait and see" approach when it comes to taxing the nascent industry.

City budget director Lance Wilber said the city is estimating the cost of marijuana enforcement at between $1.5 million and $1.75 million annually.

He said there are still "many variables and unknowns" about local costs associated with the new industry. He added: "Obviously we'll refine and revise the estimate as better information becomes available."

Flynn, at the start of the meeting, disclosed that he has been helping a former colleague develop a plan for a cannabis business. He said he had not yet invested money or signed contracts related to the venture, and Chairman Dick Traini ruled that Flynn did not have a conflict of interest in voting on the tax.

During the Assembly's debate, Flynn put forward an amendment to hold off on a vote until Nov. 15. He cited his involvement so far with the new industry, and argued that the city didn't understand the economics well enough yet to tax it.

But Hall and other Assembly members said they didn't think the city should be playing catch-up on taxation.

While voicing general support for a 5 percent sales tax, Schulte said his association would be lobbying vigorously against a proposed local license that would be issued in addition to a state license.

The Assembly also approved putting five bond propositions before voters in April, which include:

  • $36.6 million for roads and drainage, including $13.8 million for the second phase of Spenard Road reconstruction, from Hillcrest Drive to Benson Boulevard.
  • $3.4 million for parks, trails and recreational facilities.
  • $2.1 million to replace the roof at Anchorage police headquarters.
  • $900,000 for a new Anchorage fire engine.
  • $900,000 for four new ambulances.

The Assembly voted 9-2, however, to table a $49.3 million school bond until the meeting of Jan. 26, the last day the Assembly can add anything to the April 5 ballot. That meeting is also set to include a hearing on a ballot measure that would provide police protection in Girdwood.

Late Tuesday night, the Assembly voted 7-4 to reject a ballot measure proposed by Assembly member Bill Evans that targeted the city's tax cap calculation. In October, the Assembly changed the methodology for calculating the tax cap, setting the base for calculating next year's taxes as the amount levied in the previous year by the Assembly, as opposed to the amount collected in the current year.

The change meant the city could collect about $1 million more in taxes than it otherwise could. Evans sought to reverse the change, saying voters should have the chance to decide one way or another.

Assembly member Hall, who voted in the majority, said the issue of the tax cap calculation was too confusing to put before voters.

Evans' change may still appear on the ballot, however. A initiative application co-sponsored by former Mayor Dan Sullivan was filed last week with the city clerk's office, attempting to undo the Assembly's action last fall through a charter amendment.