B.C.’s public safety minister says there’s plenty more work to do before the province’s legal cannabis system can fully overtake the black market and share revenues with municipalities.
Thursday marks a year since cannabis was legalized across Canada, and while Mike Farnworth admits those 12 months have seen some struggles, overall he’s pleased with where the province is at.
“We’re getting where we need to be,” he said on the eve of the legalization anniversary on Oct. 17.
“As we said at the beginning of this, it’s an evolution that is not going to happen overnight. It’s going to take a couple of years to get a fully-functioning retail system up.”
So far, B.C. has 144 private stores up and running alongside seven government-run B.C. Cannabis stores, which are located primarily in smaller cities in the Interior and on Vancouver Island. Nine more government stores are slated to open by the end of the year.
The minister said it was always the plan to let municipalities determine what kind of market they wanted to see, or if they even wanted one at all.
But with so much onus falling on municipalities — including licencing, planning and enforcement — local governments have been calling on the province to share a larger percentage of the revenues with them.
B.C. cannabis market lags behind most of Canada
Under the current framework, provinces and territories receive 75 per cent of tax revenue from cannabis sales that go to the federal government, with Ottawa keeping the remaining 25 per cent.
The Union of B.C. Municipalities has called on the province to cough up 40 per cent of that 75 per cent share during the first two years of legalization, arguing many local governments are losing millions under legalization.
Farnworth says a deal is still being worked on, but it will take some time.
“We were always very clear right from the beginning that it’s not about the revenue in those first few years, it’s about getting the system up and running,” he said. “And that’s what’s taking place.”
He added the province’s community safety units should continue to offset the burden of paying for enforcement, including shutting down illegal stores.
Revenues not as expected
But those provincial revenues have not come in as expected.
The Ministry of Finance now expects to earn $132 million over three years — well below the estimated $200 million over the same time frame, which was written into the province’s 2018-19 budget.
Sales in B.C. have also been well below other provinces, according to Statistics Canada. During the first nine months of legalization, B.C. saw just $19.5 million in recreational pot sales.
Compare that to Alberta, where legal pot racked up more than $123 million in sales during that same time period. Quebec and Ontario saw similar numbers. Only Prince Edward Island — which is home to three per cent of B.C.’s population — saw lower sales at $10.7 million in revenue.
Current revenue numbers for the entire year are expected to be released toward the end of the year.
Farnworth blamed the low sales and revenues on B.C.’s entrenched black market. He compared the situation to Colorado, where legalization took years to whittle the state’s own illegal market to just a 30 per cent share.
Cannabis sales: closing the price gap between the legal and illegal markets.
“What we expect, now that we’re seeing a significant increase in the number of retail outlets, is that you will start to see the revenues start to flow,” he said. “And I expect that we will start to move up those table rankings very quickly.”
That will also allow costs to start falling, Farnworth added, which will help the legal market better compete with the criminal side.
What could also help grow revenues is the incoming edible market, which will become legal on Thursday but won’t be available for sales until two months from then, per Health Canada rules.
Farnworth said promoting small-scale production in B.C., outside of federally-approved mass producers, will also be beneficial to the province.
— With files from Simon Little and Aaron McArthur
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