Nanaimo seeks assurance on tax revenue prior to rezoning for pot

NANAIMO – Uncertainty around how medical marijuana operations can be taxed has city council proceeding with caution on zoning changes

A potential tax loophole has Nanaimo city council thinking twice about rezoning land for a medical marijuana grow operation.

U.S.-based Privateer Holdings is hoping to get land rezoned at the Duke Point industrial park to make way for its first Canadian medical marijuana production facility. Time “is of the essence” according to the company’s chief executive officer, who wants to plant a crop 90 days before Health Canada’s regulations for medical marijuana come into effect April 1. A building on the property still needs to be renovated.

But Nanaimo city council isn’t prepared to allow rezoning before B.C. Assessment makes a final determination on how medical marijuana operations can be taxed. They passed the first two readings to rezone the property Monday to give city staff members time to resolve tax concerns. According to the City of Nanaimo, the assessment authority has indicated production of medical marijuana will be considered an agriculture use, but has yet to make a final decision.

Mayor John Ruttan says if the city allows the company to rezone the land from I2 to I4 for marijuana production and it applies for farm status, Nanaimo could lose out on higher tax revenues. Erosion of the industrial tax base is also considered a ‘serious risk.’

Privateer Holdings has indicated interest in signing a legal document promising never to apply for agriculture status, but Nanaimo city staff have not yet found a legal method to prevent the company from changing its property designation.

“We have a finite amount of industrial land available,” said Ruttan.“I can only speak for myself, but if there is a mechanism that you [Privateer Holdings] or any company can come along and apply under agriculture and get it exempt and not pay a dime in taxes, I’d have a real problem with that. This is expensive land and … if it’s gone, we can’t get it back.”

Ruttan said he does not support the legalization of marijuana and is cautious about a sanctioned medical production facility. But he would find the operation more palatable if it compensated the city fairly for industrial land.

Coun. Diane Brennan said the new industry is an interesting opportunity city council might seize, but “without giving the applicant false hope that we are going to solve this tax revenue issue.”

Privateer Holdings, a private equity firm for the cannabis industry, is the first to apply for medical marijuana growing in Nanaimo. The company has been looking across Canada for an entity or medical marijuana facility to invest in and found an “ideal” property at Duke Point. At the time, it didn’t realize it wasn’t zoned I4, the only kind of property medical marijuana production is allowed.

Kennedy said his company likes the close proximity of Duke Point to the Lower Mainland and the relative isolation from city neighbourhoods, whose residents might be concerned about living close to a production facility.

“We liked the Duke Point area and on Vancouver Island historically there are a lot of people that have been involved in this industry and there is a lot of knowledge of this industry and the product. So … you have a skilled workforce,” said Kennedy, who hopes to offer 20 to 40 full-time jobs.

The company would start growing in February so it can begin shipping to patients when Health Canada brings in its new Marijuana for Medicinal Purposes regulation in April. It will continue to look at other sites while Nanaimo contemplates the tax issue.

If rezoning moves ahead, the production facility will go to a public hearing.