Slowly but surely, municipalities across the Interior are firming up local policy on marijuana regulation. Delta Junction, the most recent community to vote on the issue, became the first Interior community on the road system to exercise the local option to disallow growing or retail sale of the drug. The cities of Fairbanks and North Pole have opted to allow both cultivation and sale of pot and have adopted sales taxes of 5 percent and 6 percent, respectively, that should pay for any incidental expenses related to the drug’s impact on city business. The Fairbanks North Star Borough, for its part, has been proactive in zoning and regulation of potential marijuana businesses.
There’s just one major item left to be settled in the Fairbanks area: Does the borough plan to levy its own pot tax? If so, it should do so as soon as possible so rules are in place before businesses are up and running.
Though no borough marijuana tax has yet been passed, that hasn’t been for lack of trying. The Borough Assembly hurried to get a tax ordinance ready at the end of summer in 2015, as new borough taxes must be approved by local voters and the assembly was pressing up against the deadline to add an item to the October municipal ballot. Plans to vote on the tax in the fall were thwarted, however, when the assembly’s members split on whether to levy a 5 percent tax — the same as the municipality’s tax on alcohol — or 8 percent, the same as its tax on tobacco. Ultimately, both proposals failed and there wasn’t time to put the matter to voters.
The failure of the tax vote led to an awkward situation for the borough, which is now left with no marijuana tax outside the city limits of Fairbanks and North Pole. That’s the opposite of the more prudent outcome, which would set the borough tax rate at least as high as that of the cities to avoid a glut of marijuana businesses moving into outlying areas to avoid tax liability.
With that in mind, the borough has two options: to move a tax proposal for inclusion on the fall ballot or to hold a special election on the marijuana tax issue alone.
Assembly members might be tempted to let the matter lie until the October election to avoid the cost of a special election — recent ones have cost Alaska municipalities between $30,000 and $60,000. But the tax gathered between the advent of legal commercial marijuana sales and the time when it could be collected if the body waited for a regular election might well pay for the cost of administering the special election. What’s more, setting the rate of local taxes for marijuana businesses in the spring (special elections can take place 75 days after a Borough Assembly vote to hold them) rather than in October would provide fiscal certainty for local firms applying for licenses, which will begin being issued in early summer.
Those looking to determine a location for their businesses should know what they’re getting into with regard to tax rates, and if the borough waits until October to put the matter to voters, they could have a tax of a yet-unknown rate sprung on them after setting up shop and opening their doors. Whether the borough decides to charge 5 percent, 8 percent or some other rate, businesses would be far better served knowing what that number will be before they start taking customers.
The cost and inconvenience of a special election can’t be denied, but local residents and prospective businesses would be ill-served by waiting on a tax decision. The borough should hold a special election to decide the issue of local marijuana taxes outside the city limits.
— Fairbanks Daily News-Miner,