City expects province to use pot revenue to cover its legalization costs; province won't commit

City hall is expecting the provincial government to direct some tax revenues from cannabis sales to offset costs civic departments incur after legalization.

The province, however, says it’s not ready to do that.

A new report to city council estimates that legalization will cost city hall about $1.8 million annually.

The report, added at the last minute to Wednesday morning’s executive policy committee agenda, projects the biggest cost, estimated at $1.19 million will be in policing. It's expected several other departments will incur expenses as well, including fleet management, community services, human resources and labour relations, the fire and paramedic service and the property, planning and development department.

The report says the city has few revenue options to offset the costs.

It projects up to $82,000 could be raised by imposing a business-tax rate on cannabis retailers higher than that charged to other business owners, but it isn’t making that recommendation.

The use and commercial sale of cannabis for recreational purposes becomes legal across Canada Oct. 17.

Michael Jack, the city’s chief corporate service officer, told reporters the expenses are projected estimates, adding officials will only know after they’ve been dealing with the issue for a full year.

"I am quite curious to see what it’s going to be a year from now," he said.

City hall had originally said it could face costs of $3 million to $4.75 million, based on figures provided by the Federation of Canadian Municipalities.

Jack said that once city officials spent some time studying the issue, they reduced the projected cost to $1.76 million.

Included in the higher costs, Jack said, would be training of police officers to be able to administer roadside testing of cannabis impairment.

Jack conceded the Winnipeg Police Service will likely see some savings as well, as officers won’t be spending as much time chasing down illegal cannabis operations.

Mayor Brian Bowman said his expectation was that the Pallister government would cover the additional costs incurred by the city.

"I recognize and respect the fact that there are new incremental costs for all three levels of government and accordingly there should be revenue tools that are available for all three levels of government."

Bowman said Ottawa agreed to provide provinces with a greater share of excise tax revenue on cannabis sales with the expectation that money would flow to municipalities, but t here’s been no indication from the Pallister government that will happen.

Instead, Bowman said the Pallister government is imposing a social responsibility tax on cannabis sales.

"There hasn’t been any commitment to date that those revenues will be made available to the municipalities," Bowman said. "I don’t want to see taxpayers and property owners having to subsidize pot. I don’t think that’s fair."

The province said it’s too early to start splitting up the cannabis revenue with municipalities when municipalities don’t know the real costs they’ll be incurring and neither does the province.

"It would be premature to discuss revenue sharing when it is not yet apparent whether there will be any net provincial revenue," Municipal Relations Minister Jeff Wharton said in a statement to the Free Press.

"We have asked municipalities to track their actual incremental costs and any revenues they may generate from municipal business taxes and fees on cannabis retailers," Wharton said. "This information will inform our approach to future discussions on the cannabis industry and its impact on our communities."

aldo.santin@freepress.mb.ca