FISCAL NOTE

Date Requested: February 12, 2019
Time Requested: 01:10 PM
Agency: Treasurer's Office, WV
CBD Number: Version: Bill Number: Resolution Number:
3242 Introduced HB3129
CBD Subject: Economic Development


FUND(S):

Special Revenue

Sources of Revenue:

Special Fund

Legislation creates:

Creates New Revenue, Creates New Expense, Creates New Program, Creates New Fund: 6 new special revenue funds are created; see list under Fiscal Note Summar



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


Summarize in a clear and concise manner what impact this measure will have on costs and revenues of state government. List of Special Revenue Funds created: Cannabis Transfer Tax Fund Teacher Compensation and Public Employees Insurance Agency Fund Best Virginia Infrastructure Fund Law-Enforcement and Community Fund Entrepreneur and Small Business Fund Respect Your Elders Fund The purpose of this bill is to legalize cannabis, provide for taxation of cannabis and allow cannabis market activity as regulated by the Department of Commerce. As to revenue, the Department of Commerce is authorized under the BEST Act to establish and collect application, licensing and renewal fees, using the amounts and procedures set forth in legislative rules. As this is a totally new endeavor in West Virginia, we have no way of estimating the fees that will be set or the amount of revenues that will be collected. Half of the application fees are to be remitted to the county and municipality in which the operation will occur. Application, licensing and renewal fees and the 17.5% of sales price excise taxes, are to be deposited into the Cannabis Transfer Tax Fund. The bill allocates moneys in the Fund each month to five newly created Funds. In addition, municipalities may assess a local sales tax of 6% on all cannabis derived products. Municipalities are to receive the taxes within 30 days of collection. The bill authorizes the Department of Commerce to collect the taxes. We would suggest that the Tax Division of the Department of Revenue be authorized to make the collections of the sales taxes as Tax currently collects sales taxes for counties and municipalities. This would reduce the costs of the Department of Commerce in establishing procedures for the collection and verification of the taxes. The Tax Division has authority to deduct a set percentage of the amounts it collects for its expenses. The Department of Commerce is authorized to deduct its operating costs from the Fund. The State Treasurer’s Office is not authorized to charge fees or seek reimbursement for banking expenses it incurs in processing the funds. Until the Treasurer’s Office can bank the moneys to be collected under the Act, implementation will be delayed. When a financial institution meeting the requirements for a state depository, which exclude credit unions and non-bank financial institutions, will accept the moneys, we anticipate a lot of the amounts collected will be in cash. Cash collections are much more expensive than electronic payments or even payments by check. When the cannabis related businesses are able to bank their moneys and the bank handling the state concentration account will accept cannabis related funds, the banking costs will decrease dramatically. Municipalities are to review applications for a registration to operate a marijuana establishment. No fees for the review process are authorized in the bill. The Department of Commerce is to promulgate legislative rules by June 1, 2019, to establish application, licensing and renewal fees and for the collection of taxes under the Act. We do not believe that deadline is feasible. Only emergency rules could be promulgated by June 1, 2019, which are not authorized in the bill. Standard rulemaking procedures for legislative rules will not permit the rules to go into effect until after authorization by the 2020 Legislature. The State Treasurer’s Office examined the various banking services we expect would be required for the collection and payment of funds under the BEST Act and under the Medical Cannabis Act. We also reviewed current pricing for those services, and estimated the cost of the additional risks to the financial institution. We estimate the direct banking costs will be at least $350,000 per year and personnel costs of $100,000 per year. We suggest fiscal information be requested of the Department of Commerce and the Tax Division of the Department of Revenue.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2019
Increase/Decrease
(use"-")
2020
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 450,000 450,000 450,000
Personal Services 100,000 100,000 100,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 350,000 350,000 350,000
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


Please explain increases and decreases in personal services, current expenses, repairs and alterations, assets, other costs and revenues, including assumptions and data sources and delineation between start-up and ongoing costs. Please also include a long-range schedule of costs and revenues if fiscal impact is expected to vary in future years. The expenses listed above are just the estimated expenses of the Treasurer's Office in providing banking services. The Department of Commerce and possibly Tax, if the bill is amended to allow Tax to collect the taxes, will have expenses as well. Also, see the Fiscal Note Summary above.



Memorandum


Please identify any areas of vagueness, technical defects, reasons a bill would not have a fiscal impact, and/or any special issues not captured elsewhere on this form. See Fiscal Note Summary above.



    Person submitting Fiscal Note: Diana Stout
    Email Address: diana.stout@wvsto.com