Costa Mesa leaders are factoring in a new revenue stream as they plan the next city budget: Taxes on the sale of cannabis.

The city’s first retail pot shops are expected to open in the coming months, and in the budget the City Council will vote on next month, $2.5 million in revenue from a 7% local tax on their business is being projected.

And as more shops are approved, that revenue is expected to grow over time – Santa Ana, the first city in Orange County to allow retail sales is this year expecting to generate $18 million in revenue.

Costa Mesa leaders already have plans for how a portion of the money will be spent: 1% will be split evenly between a program to help first-time homebuyers in the city and a citywide plan to boost arts and culture. The other 6% of the cannabis tax will go into the city’s general fund, which pays for police, parks, street paving and other day-to-day operations.

The City Council decided last year to fund the arts (“City of the Arts” has been its motto since 1984) and the homebuyer program as a way to show residents a return on Measure Q, the 2020 ballot proposal that authorized retail cannabis shops, Mayor John Stephens said.

“The voters voted for this, and in part they voted for it because of the revenue,” he said. “Both these programs are a way to point back and say the community is directly benefiting from this new revenue in a very tangible way.”

It’s not yet clear how many people hoping to buy homes in town will benefit from the funding, but Stephens said it’s intended for those who grew up in the city and want to move back, or who already live in Costa Mesa and want to put down roots.

The arts portion of the cannabis revenue will pay for initiatives in the city’s master plan for arts and culture, which was created several years ago with input from arts organizations and residents. The city’s first-ever arts coordinator, who was recently hired, will help bring the plan to fruition.

Goals of the plan include creating more arts-related opportunities for youth, giving residents more access to arts and culture throughout the city, adding more public art, and supporting arts and cultural businesses and organizations in Costa Mesa.

The new fiscal year will be the second year of the five-year master plan, with new initiatives set to launch such as an “art crawl” event, free tickets to performances at the Segerstrom Center campus for city residents, installation of several large-scale temporary public artworks, creation of an “artist laureate” position, and offering more free public concerts and performances at city parks.

Stephens said the arts plan will help make the city a more beautiful place, but he believes the coming cannabis shops also will improve the aesthetics of some commercial corridors by bringing new investment. For example, one proposed business waiting for approval would go into a storefront that’s now sitting vacant and fenced off.

The City Council will hold a hearing on the proposed 2022-23 budget June 7.

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