City marijuana tax expected to generate $2 million+ a year. Where should the money go?
The 3% city sales tax on marijuana was approved by voters in November, but collection of the money did not begin until last month. With general sales tax trends on the books since the legalization of both medical and recreational marijuana, Springfield's Department of Finance is estimating the tax could generate $2.25 million annually.
Revenue from the tax is slated for four priorities: housing, mental health services, substance abuse services and public safety. Allocating specific amounts and determining particular projects or initiatives the money will go toward is left up Springfield City Council to decide. The city's projections estimate marijuana sales totaling about $70 million annually in the city. Recreational marijuana products sold within the city limits are taxed at a combined rate of 17.1%, which includes the city sales tax, state recreational marijuana tax and the new 3% tax.
As council enters budgeting season, decisions regarding these revenues are looming but specifics may be harder to nail down due to the broad nature of the categories.
Considering funding options
City fiscal years run from July to June, and the new budget year will start with an estimated $1 million already in the marijuana tax fund from the start of 2024. Director of Finance David Holtman said at Tuesday's council meeting this extra money can be an opportunity to kickstart something that relates to the areas of funding.
Multiple ideas were thrown out as possibilities for projects the tax could fund, including a new municipal court building and a jail diversion program. Council tasked the Public Information Office with reviewing past public engagement results to help narrow down possible ways to focus in on particular projects.
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Councilwoman Monica Horton noted that the overarching budget does not explicitly focus on housing, making this sales tax an opportunity to do so. City Manager Jason Gage noted that it was not added within the budget overview to avoid getting ahead of the council's discussion about adding housing as a standalone priority at a retreat in April.
"To be impactful, it may be better to focus on one or two specific areas," Holtman said. "Because as you start splitting that out four ways, if that's how you chose to do it, it obviously wouldn't have as much of an impact."
Only a start to the budget process
The final budget is scheduled to go before council for a first reading May 20. While council will continue discussion of the budget as a whole and the specifics of the marijuana sales tax revenue, the budget does not need to include specific allocations for the money.
Springfield is very dependent on sales taxes for revenue, meaning the city's budget is especially vulnerable to instability in the economy, Councilman Craig Hosmer noted, suggesting that the city should consider ways to diversify revenue streams beyond sales taxes.
Holtman said the city is at an "important junction" when it comes to the 3/4-cent Police-Fire Pension sales tax that is set to sunset March 31, 2025. While council had discussed replacing the tax with a new one to be used for other purposes, council members have not come to a consensus about what that could be, or whether to submit a proposal to voters. Council is expected to revisit the topic later.
Marta Mieze covers local government at the News-Leader. Contact her with tips at mmieze@news-leader.com.
This article originally appeared on Springfield News-Leader: Springfield marijuana sales tax could bring in $2 million each year
