The Fiscal Impact of the Legalization of Cannabis on

The following are the California State marijuana laws: • 11357a: possess concentrated marijuana (hashish)- felony • 11357b: possess less than one ounce of marijuana- infraction • 11357c: possess more than one ounce of marijuana- misdemeanor • 11357d: possess marijuana specific circumstances- misdemeanor • 11357e: possess marijuana specific circumstances- misdemeanor • 11358: cultivation of marijuana- felony • 11359: possess marijuana for sale- felony • 11360a: transportation of marijuana over 28.5 grams- felony • 11360b: give/transport marijuana/hashish under one ounce- misdemeanor • 11361b: furnish, et cetera, minor with marijuana- felony

The Santa Cruz County District Attorney uses the equivalent of one Assistant District Attorney (salary about $108,000/year plus benefits) to prosecute marijuana-related offenses. In 2007 the District Attorney filed 31 misdemeanor and 114 felony charges for marijuana offenses; in 2008 those numbers were 45 and 132.

The Santa Cruz Narcotics Enforcement Team employs two detectives (salary about $101,000/each/year, plus benefits) and one sergeant (salary about $136,000/year including 14 ∫ Santa Cruz County Grand Jury Final Report 2009-2010 overtime, plus benefits). About 40 percent of the task force’s time is spent on marijuana offenses, for a total of $135,200 in salaries and benefits. Calculation: $101,000 * 2 = $202,000 + $136,000 = $338,000 * .40 = $135,200

The table below shows the number of marijuana charges filed in the four incorporated cities in the County in 2007 and 2008. California Capitola Santa Cruz Scotts Valley Watsonville State Laws 2007 2008 2007 2008 2007 2008 2007 2008 11357a 3 4 17 31 1 7 3 3 11357b 53 28 302 545 40 32 105 233 11357c 7 5 7 13 3 3 3 4 11357d 1 5 1 11357e 22 37 5 14 13 11358 1 6 2 10 2 3 2 11359 1 2 34 48 1 2 10 10 11360a 8 17 1 1 11360b 9 13 1 1 3 11361b 1 5 Totals 65 45 403 724 47 52 139 269

The approximate amount of officer time required in Capitola to process each marijuana-related case is as follows: • 11357a: 85 minutes • 11357b: 61 minutes • 11357c: 76 minutes • 11358, 11359, 11360: major cases lasting several hours to several days

Using the amount of officer time required in F5 for Capitola and applying that figure to the charges filed in all four cities, we calculate that for the three offenses 11357a, 11357b, and 11357c, a total of 567 officer hours were spent in 2007 and 947 officer hours were spent in 2008 to process these marijuana related cases.

1,500 inmates in California State prisons are there for marijuana-only offenses, and the cost per inmate is roughly $50,000 per year. This puts the annual cost of incarceration of marijuana-only offenders in State prisons at $75 million. The number of marijuana-only related offenders in Santa Cruz County jails is unknown as the County computer system does not list marijuana-related offenses as a separate category.

Approximately $200 million is spent annually in California to arrest, prosecute and incarcerate marijuana offenders. (This figure includes the $75 million from F7 above.) Allocating that cost to Santa Cruz County on a per capita basis would result in annual costs of $1.36 million. The Fiscal Impact of the Legalization of Cannabis ∫ 15 Calculation: CA population of approximately 38 million people Santa Cruz County population of 260 thousand people or 0.68 percent 0.68 percent of $200 million = $1.36 million in annual costs Revenue Findings

The Santa Cruz Narcotics Enforcement Team seized approximately $150,000 in cash and property in 2008 and approximately $370,000 in cash and property in 2009. The Santa Cruz County Sheriff’s Department received a $30,000 grant in 2009 from the Federal Drug Enforcement Administration (DEA) under the Federal Domestic Cannabis Eradication and Suppression Program (DCESP) specifically to pay for overtime hours, training, and the purchase of equipment specific to marijuana-related crime enforcement.

Santa Cruz County collects an unknown amount of revenue from marijuana-related fines; revenue is unknown because it is not tracked on a per offense basis. The fine for possession of less than one ounce of marijuana (11357b) is up to $270. However, since the County system doesn’t track fines per offense and since the fine amounts vary, the Grand Jury cannot estimate the current revenue for pot offenses.

Based upon our assumptions about legalization and taxes, the State of California would collect approximately $400 million in additional sales tax revenue; the Counties would collect about $990 million in excise tax revenue. The State of California would collect additional income tax revenue from people working in the cultivation, production, and sales of marijuana.

The County of Santa Cruz hypothetically would receive $129,200 in marijuana sales tax revenue from the state. This number was calculated with an assumption of 19 million ounces of annualized statewide consumption allocated on a per capita basis to Santa Cruz County with a minimum sale price of $100 per ounce. Calculation: CA population of approximately 38 million people Santa Cruz County population of 260 thousand people or 0.68% 0.68% of 19 million ounces = 129,200 ounces * $100/ounce 1% of sales tax revenue is returned to the County Sales tax to Santa Cruz County of $129,200

The County of Santa Cruz hypothetically would receive $6.46 million in marijuana excise tax revenue if the County collected $50 per ounce. This number was calculated with an assumption of 19 million ounces of annualized statewide consumption allocated on a per capita basis to Santa Cruz County. Calculation: CA population of approximately 38 million people Santa Cruz County population of 260 thousand people or 0.68% 0.68% of 19 million ounces = 129,200 ounces $50 per ounce * 129,200 ounces = $6.46 million excise tax 16 ∫ Santa Cruz County Grand Jury Final Report 2009-2010 Conclusions C1. Although the federal government recently announced that it would no longer prosecute medical marijuana patients and providers whose actions are consistent with State laws, it has continued to enforce its laws on non-medical marijuana activities. To the extent that the federal government continued to enforce existing federal laws, it would inhibit the legal cultivation, sales, and use of marijuana in California even if the State legalized it for recreational purposes. C2. Santa Cruz County spends considerable resources, roughly $1.36 million based upon statewide estimates, enforcing existing marijuana laws through law enforcement, the courts, and jails. If marijuana were legal, it could result in savings to our local government by reducing the number of marijuana offenders incarcerated, reducing the associated time and costs for enforcement of marijuana-related offenses, and also the handling of related criminal cases in the court system. Costs associated with new marijuana regulations and the County’s collection of excise taxes are unknown. C3. Legalizing marijuana may result in the reduction of County revenues from fines for marijuana infractions, and it could reduce the cash and property seized by the Santa Cruz Narcotics Enforcement Team. It is unlikely that the county would receive another DCESP grant from the DEA. The County could impose additional fines and fees associated with a new law, but the net monetary effect is unknown. C4. The State of California would realize additional revenues from sales taxes generated by retail sales of legal marijuana. Some of those sales taxes, $129,200 based on the assumptions in this report, would come back to the County. The State also could realize additional income tax revenue from people involved in the business of marijuana cultivation, production, and sales. Santa Cruz County would derive some indirect benefit if the State were in better financial health as a result of marijuana legalization and taxation. Finally, Santa Cruz County would gain direct monetary benefit, $6.46 million based upon the assumptions in this report, from a $50 per ounce excise tax. The chart on the next page provides a summary of the Grand Jury’s calculations to provide a net estimated increase in revenue to Santa Cruz County of over $7.5 million if marijuana were legalized for recreational use. C5. It seems clear that, legal or not, millions of ounces of marijuana are going to be smoked each year in California. The Fiscal Impact of the Legalization of Cannabis ∫ 17 Changes in Revenues and Costs Associated With the Legalization of Marijuana Inc/(Dec) In Revenues (Inc)/Dec In Costs Revenues: Sales Tax: Price per ounce $ 100 Estimate # of ounces to be sold 19,000,000 Total Sales $1,900,000,000 Santa Cruz County population as a % of total CA population 0.68% Sales attributed to Santa Cruz County $ 12,920,000 Santa Cruz County portion of sales tax 1.00% Sales tax to Santa Cruz County $ 129,200 $ 129,200 Excise Tax: Estimated # of ounces to be sold 19,000,000 Santa Cruz County population as a % of total CA population 0.68% # of ounces attributable to Santa Cruz County 129,200 Estimated excise tax per ounce $ 50 Excise tax to Santa Cruz County $ 6,460,000 $ 6,460,000 Revenue lost: Loss of fines related to marijuana $ Unknown Loss of DCESP Grant $ (30,000) Estimated Cash and property seized based on 2008 actual – no longer available $ (370,000) Costs: Amount spent annually in CA to arrest, prosecute, and incarcerate marijuana offenders $ 200,000,000 Allocate to Santa Cruz County based on CA population 0.68% Estimated cost savings to Santa Cruz County $ 1,360,000 $ 1,360,000 Additional possible costs related to legalized marijuana: Licensing and collection of taxes, etc $ Unknown Others $ Unknown ____________ Net Estimated Increase in Revenue to Santa Cruz County $ 7,549,200 18 ∫ Santa Cruz County Grand Jury Final Report 2009-2010