Politics

Pass it on, provinces: Cities say provincial governments hoarding marijuana tax cash

Some of Canada's largest cities are not getting the money they were promised from taxes on cannabis, despite the increased costs they face from dealing with legal recreational marijuana use in their communities.

Provinces were supposed to share the revenue with cities — but the feds say it's out of their hands

Two men share a joint at Cannabis Culture in Montreal in December 2016. Some municipal governments say they're getting burned by provincial governments on their share of cannabis tax revenue. (Graham Hughes/THE CANADIAN PRESS)

Some of Canada's largest cities are not getting the money they were promised from taxes on cannabis, despite the increased costs they face from dealing with legal recreational marijuana use in their communities.

Six months to the day after pot legalization, municipalities say they're feeling the side effects.

"With the legalization of cannabis, municipalities are, by and large, being shut out," said Winnipeg Mayor Brian Bowman.

Bowman said Winnipeg, a city already struggling with the health and public safety consequences of meth and opioid abuse, is being forced also to absorb the costs associated with legalizing cannabis — stepped-up policing, zoning for new stores, training for police and bylaw officers and bylaw enforcement — while the provincial government refuses to give up a share of the federal excise-tax cash.

"There are lessons to be learned from tobacco and from alcohol," Bowman said. "We've seen mostly provincial governments really cash in for decades on those two substances, and we see history's going to repeat itself once again with cannabis."

This dispute comes down to how the federal excise tax on cannabis is doled out.

For us to take on all the risk and the province to get all the benefit is just not a good outcome.- Calgary Mayor Naheed Nenshi

The federal government keeps 25 per cent of the tax revenue and gives the remaining 75 per cent to the provinces — with the expectation that the provinces will then hand over 25 per cent of the total to municipalities.

According to the Federation of Canadian Municipalities, only three provinces have announced cannabis tax revenue-sharing arrangements with cities. Municipalities in Ontario are getting $40 million per year over two years. Quebec has promised municipalities $60 million over two years, while Alberta is offering $11.2 million over two years.

CBC News reached out to all three provinces to find out how much they expect to receive annually from the federal government in cannabis tax revenue; they haven't yet provided that information.

Last year, the Manitoba government announced it would start charging a six per cent levy on cannabis to cover what it called its "social costs" related to legalization. The province isn't committing to sharing future revenues from that tax with cities either.

"As we have said since Day 1, revenues during the first year of legalization will fall short of the expected costs to the province," Manitoba Finance Minister Scott Fielding said in a written statement. "It would be premature to discuss revenue-sharing when it is not yet apparent whether there will be any net provincial revenue."

Winnipeg estimates pot legalization will cost the city $3.52 million for 2018-19. Bowman said it's unfair to download those costs onto the residents who pay property tax to the city — essentially forcing them to subsidize this new industry.

With 24 retail outlets, Calgary has the highest concentration of cannabis shops of any city in the country. The city estimates its costs will reach more than $10 million between April 2018 and December 2019. The Alberta government is expected to cough up only $3.8 million from its cannabis revenue to the city over that period.

Regarding pot legalization, Calgary Mayor Naheed Nenshi says: 'I know what the costs are. They're really high.' (Christopher Katsarov/THE CANADIAN PRESS)

"My real issue is with the provinces, and particularly with the province of Alberta," said Calgary Mayor Naheed Nenshi.

"They claim, 'Well, we don't know what the costs are, so we can't give up any of the excise tax to the cities because we don't know what the costs are.' Well, here's the thing. I know what the costs are. They're really high and, frankly, for us to take on all the risk and the province to get all the benefit is just not a good outcome."

Mayor Maxime Pedneaud-Jobin of Gatineau, the fourth-largest city in Quebec, said his municipality is satisfied with the funding it's getting from the province's cannabis tax stream now — $682,000 over two years. But he said he has no idea what will happen to that money in two years, when the current funding arrangement expires.

"We were worried about the future because we're talking about short-term expenses, but we need fixed revenues, indexed revenues that we can predict for a long time," Peneaud-Jobin said. "Because if we want to do prevention, we have to know how much money we have."

Customers line up outside a Montreal cannabis outlet on Nov. 1, 2018. (Ryan Remiorz/Canadian Press)

In February 2018, Bill Blair, the federal minister responsible for the legalization project, told the Senate that if Ottawa agreed to give a large portion of the excise tax revenues to the provinces, it would be to "ensure the money goes to the municipalities."

In December, the Federation of Canadian Municipalities wrote to Finance Minister Bill Morneau to warn that most provinces had not yet indicated how they meant to share the excise tax revenue with cities.

Joel Lightbound, Morneau's parliamentary secretary, said it's out of Ottawa's hands.

"It's up to the provinces at this point to step up to what they committed to during those negotiations, which was to get 75 per cent of the excise tax so that they have the room to give the funding to municipalities," Lightbound said.

Nenshi, meanwhile, warns that municipalities' financial situations will only get worse as the legalization of edible cannabis products this fall leads "to more problems" on the streets of Canada's cities, and new challenges for law enforcement.

About the Author

Hannah Thibedeau

Parliament Hill

Hannah Thibedeau is a veteran political reporter having covered the Hill for more than 15 years, both behind the scenes and in front of the camera. She covers politics for CBC TV, CBC Radio and CBC Politics online.

With files from Louis Blouin

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