Cannabis Licensing and Municipal Revenues

Municipal license policy has shaped the early roll-out and business outcomes of Proposition 64. Several stakeholders identify license availability as a key constraint to future cannabis market growth in California. Recent studies explore local cannabis licensing policy; however, key questions remain around municipal revenues, business location, and the role of supporting cannabis business ownership. Our paper explores the impacts of cannabis licensing on business locations and municipal taxable revenues. We use publicly-available Department of Cannabis Control licensing data to examine business locations using GIS analysis, conduct a regression analysis of city-level licenses and Department of Tax and Fee Administration revenues across California, and forecast potential municipal taxable revenues in South Bay Los Angeles. We find that licensed cannabis businesses appear to develop in Los Angeles County and are located close to borders of cities not issuing licenses, in areas of favorable zoning, in densely populated locations, and areas with higher poverty and minority populations. Our regression analysis suggests that city population drives municipal taxable revenue, indicating that business follows demand.