Government weed production in Nanaimo

On Thursday, December 5, 2013 there will be a public hearing regarding the first ever application to grow medical marijuana or ‘government weed’ in Nanaimo. The application has been received by the City of Nanaimo and has passed first and second reading at council.

Privateer Holdings, based out of Seattle, dubbed as ‘the cannabis industry’s first private equity firm’ has investors who include ranchers in Texas, farmers in Kansas and finance professionals in New York.

Privateer Holdings set up a company called Lafitte Ventures doing business as More or Les Ventures Ltd. to produce medical marijuana in Nanaimo at 100 Maughan Road in Duke Point.  They plan to have the first shipment ready for April 1, 2014, when the only legal way to obtain medical marijuana in Canada will be through producers approved by Health Canada.

BC Assessment has advised that the production of marijuana for medical purposes will be considered an agricultural use and assessed in the farm category.  But, producing marijuana involves an indoor growing operation.

The site that these Americans have chosen is zoned light industrial (I2).  The lot is surrounded by other properties that are zoned industrial (I4).

More or Les Ventures Ltd. could have applied to have this zoned agricultural; one of the qualifying agricultural uses is medicinal plant growing. But the deadline for that application was October 31, 2013. They say they are not interested in applying for agriculture zoning but this would save them a lot of money in taxes.

What are the tax implications of granting medical marijuana production in an industrial zone?

While the City of Nanaimo may consider growing marijuana to be an industrial activity because it is grown indoors, that does not affect how BC Assessment may classify it. They will consider the OCP designation, zoning and actual use in their assessment. Given the lack of an application to BC Assessment at this point, what guarantee is there that the company won’t apply for agriculture use in order to get lower taxes in the future?

Normally the City would collect approximately $49,000 in taxes if the lot is industrial zoned and approximately $500 if zoned agricultural.

The City of Nanaimo may register a covenant to prevent the applicant from applying for farm status or prohibiting farm use but this wouldn’t be enforceable because BC Assessment classifies the land use.

Nanaimo cannot be the only municipality to face this issue.  What is everyone else doing? Why would such a basic issue as zoning be overlooked? This makes a big difference to the tax base of Nanaimo.