A bait-and-switch on marijuana taxes could leave cities like Cleveland and Lakewood empty-handed

OG Article

• Sean McDonnell

03-11-2025

The state is holding onto $10.9 million in taxes that Ohio cities are due from marijuana sales. Now, Gov. Mike DeWine and state lawmakers are seeking to take some or even all those taxes away from local governments.

Ohio’s law initially enticed municipalities to allow recreational marijuana dispensaries within their city limits with the promise of extra tax dollars. But this bait-and-switch could leave those cities empty-handed.

“We’re very concerned that the rules of the game would basically change in the middle of the game,” said Kent Scarrett, director of the Ohio Municipal League, an organization that represents city governments.

Ohio’s marijuana laws gave municipalities the final decision on whether to allow dispensaries within their borders. It also taxed sales at 10% and gives 36% of those taxes to the towns that said yes.

But state officials say Issue 2, the citizen-initiated statute legalizing recreational marijuana and rationing the tax, didn’t create the appropriate mechanism for divvying up those tax dollars.

DeWine Spokesman Dan Tierney said this is because Issue 2 lacks the legal language that would allow the state to send that money.

Tierney blamed marijuana lobbyists, saying they didn’t consult state lawmakers or the budget office when they wrote the ballot issue.

It isn’t clear why the state didn’t address this sooner, Scarrett said. But now municipalities are waiting for the state’s budget to be passed in June to sort out the issue.

The state has already collected $30.3 million in recreational marijuana tax revenue since sales started in August. Pete LuPiba, spokesman for the Ohio’s Office of Budget and Management, said he could not reveal how much each city was supposed to receive under Issue 2’s language because of taxpayer confidentiality reasons.

Austin Davis, a senior strategist for Cleveland Mayor Justin Bibb, estimates that Cleveland is due about $410,000 just from 2024 sales because of its six dispensaries. He said the state’s marijuana law clearly indicates that municipalities should be receiving tax dollars.

In neighboring Lakewood, officials have not even tried to come up with an estimate of how much money the city could receive from its two dispensaries because of the uncertainty in Columbus.

City Council on Monday unanimously passed a resolution that called the efforts of DeWine and state legislators to strip cities of their share of cannabis taxes a “betrayal” of the 81.2% of Lakewood voters who approved Issue 2.

“I think a lot of us who voted for and voted to endorse Issue 2 did so with the idea that the funds would stay here in Lakewood, and Lakewood residents would benefit from having these businesses in Lakewood,” City Council President Sarah Kepple said at the meeting.

The fate of those dollars, however, and any future collections depends on what legislation gets passed, LuPida said.

The fear, though, is that lawmakers may decide to make their policy retroactive, Scarrett said. If that happens, the money the state is holding onto would never make it to cities.

And because recreational marijuana was passed as a state statute, and not as a constitutional amendment, lawmakers can probably do that, Scarrett said.

“The legislature can do whatever they want,” Scarrett said. “They have the power of the pen.”

State lawmakers proposed changes

DeWine’s budget proposal, which was released in February, would change Ohio’s marijuana law and redirect tax dollars away from cities.

The governor’s proposal would raise the sales tax on marijuana to 20%. Tierney said the proposal would then send the proceeds to places that are adversely affected by marijuana being legal.

That includes money for county jails, police training, and mental-health initiatives, Tierney said. This would be a change from today’s marijuana law, which lets municipalities choose how to spend the tax dollars.

DeWine, Tierney said, believes that when the state provides funds to local governments that they should be spent in a targeted way — not given to municipalities as discretionary funds.

He said voters wanted recreational marijuana, but didn’t necessarily want the whole bill or the taxes it created.

“Nobody, I think, cast a ballot in Ohio based upon some of the minutiae that was in the bill,” Tierney said.

State lawmakers have their own ideas about how to change Ohio’s marijuana laws.

Legislators in the Ohio House introduced a bill Thursday that would keep marijuana taxes at 10%. But it would reduce municipalities’ share of that revenue from 36% to 20%.

Euclid City Council on Monday passed a moratorium on new dispensaries and other recreational marijuana facilities, in part, due to fears that lawmakers will strip municipalities of control over them.

Law Director Patrick Cooney said that, while the city has had no issues with its two dispensaries, council wants to see what policy the Statehouse settles on before allowing any more to open.

“If there’s not as much revenue, that might factor into the equation,” Cooney said. “That’s too early to tell.”

Tierney said that if municipalities thought dispensaries were bad for their communities, they shouldn’t have allowed them, even with tax dollars flowing in.

“If they want to change their mind because they think (marijuana) is a scourge, they have every right to do so,” Tierney said.

Once a dispensary is established, however, it’s unclear if municipalities have any way to close those businesses.

Lakewood City Councilman Tom Bullock said it’s not about whether dispensaries are a “scourge.” In fact, he said the city has had no safety or blight issues with its two dispensaries, which he described as “successful and high-quality businesses.”

“You can’t change the deal on local communities who are dealing with traffic, zoning, construction and parking impacts,” Bullock said. “Part of the terms of the deal was any costs are offset by the stated share of tax receipts.”

Bullock said he remained optimistic that the issue would come to an “amicable solution,” pointing to comments that Senate President Rob McColley made to Gongwer News Service on Thursday, expressing support for keeping cities whole.

But, he added, “don’t change the deal midstream, please.”