Formula ‘flawed’: Marijuana Ad Hoc committee urges state to refigure pot share tax distribution

Steven Meland, right, testifies before the House Committee on Economic Development in March of 2019 against House Bill 3096, which would allow the City of Ontario to set a higher local tax on retail sales recreational marijuana. This year, Meland is trying to help the City of Ontario with getting the state to reconfigure its formula for the Marijuana Tax State Share Distribution.

ONTARIO — Another letter has been sent from Ontario to the leader of the House Interim Committee on Revenue regarding the Marijuana Tax State Share Distribution formula used for disbursement of tax revenues from marijuana retail sales, which is solely used for law enforcement.

Because the formula is based on population and not the amount of goods actually being sold, cities that have a higher population but may be selling far less, but stand to gain more revenue.

The newest letter was drafted by Steven Meland, on behalf of the city’s marijuana ad hoc committee, for which he is the chairman.

Regarding a failed attempt to raise the local option tax for Ontario and other similarly demographic areas in the 2019 session, Meland said he thinks “we should be looking at revising the revenue distribution formula, not raising tax.”

Meland states that the formula doesn’t consider the two most important factors: Total local sales and total local tax collected.

In the letter, Meland used the state’s formula to illustrate the “flawed” formula. He compared the cities of Klamath Falls and Ontario. In 2019, he says Klamath County was the #28 grossing county per resident ($6.41 million in total sales) and received a total of $69,046 from the Marijuana Tax State Share Distribution. In contrast, Malheur County was the #2 grossing in the state ($20.27 million) and received a total of $39,443 from the same formula.

His table highlights that “Ontario had 316% more in sales/tax than Klamath Falls did … however illogically we received 175% less money.”

The solution, Meland says, is simple.

“We recommend the state get rid of the 75/25 split and simply split the revenue as it was intended,” the letter reads, and goes on to describe an alternative formula.

The first letter from the Ontario City Council was sent in January regarding the formula, which Ontario Police Chief Steven Romero has said is “totally lopsided” and “not in our favor.” The current formula means Ontario is essentially “subsidizing law enforcement in urban areas with more revenue by virtue of the formula,” said the police chief.

Officials in Ontario hope that the state will take up the matter during the short session, and in order to do so have sent the letters to Rep. Nancy Nathanson, D-District 13, who is the chairwoman of the House Interim Committee on Revenue.

Both letters mentioned that Mayor Riley Hill and City Manager Adam Brown spoke to the House Committee on Economic Development during the 2019 session, and that the matter they wished to address had not been given sufficient attention.

Although the two had been looking for more local sales tax to be added to the 3% max that is currently allowed by the state for retail sales in the city, they also wanted to discuss the Marijuana Tax State Share Distribution.

That formula is based on population and not the amount of retail sales, and based on the fact that Ontario had the second-highest retail sales in the state in 2019 in just three months, the city wants the formula refigured.

The letter suggests Ontario’s location near the Boise metro area was not taken into careful consideration in regard to the structuring of the formula. In the formula, the local share of revenue is 25%, based on the number of dispensaries, and 75% based on population. However, it is common knowledge that dispensary parking lots are often full of vehicles with Idaho license plates.

“Currently, Ontario is being punished for bringing cannabis tourism to our great state of Oregon,” reads Meland’s letter. “I would love the opportunity to work with you all personally should I be appointed to any subcommittee that may be formed to address a redistribution formula.”

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