The Ontario government has affirmed their plan to invest $31 million over the next three years to take on illegal cannabis stores. 

As part of Ontario’s 2024 economic and fiscal outlook in brief, the provincial government is committing to investing $31 million over the next three years to support the Provincial Joint Forces Cannabis Enforcement Teams (PJFCET). This OPP-led centralized enforcement unit focuses on the cannabis file.

This investment, says the government, would enable the PJFCET to “respond to the challenge of illegal online operators and crack down further on the production, sale and distribution of illegal cannabis in the online and offline space.”

The new economic and fiscal outlook in brief is an affirmation of the province’s previous 2024 budget, which had referenced the $31 million commitment. 

Earlier this year, Toronto City Council passed a motion asking the province to undertake a comprehensive review of the Provincial Cannabis Control Act, 2017. The motion says a review is “imperative to ensure the effective regulations and enforcement of cannabis-related matters” in Ontario.

Municipalities need more tools and resources to address these illegal cannabis businesses, the motion read, including “exploring options to strengthen enforcement measures, increase penalties for non-compliance, and improve collaboration between municipalities and provincial authorities.”

The illicit market in Ontario has been growing considerably in the past year, and many retailers and other cannabis industry participants have been calling on the province to do more. By some estimates, several hundred new, unlicensed retailers have begun operating in different parts of Ontario in the past year, with close to 100 in Toronto alone. While some have faced enforcement, many have not, causing frustration for licensed retailers who incur numerous fees in order to operate with the province’s approval. 

Toronto cannabis store owner Paul McGovern, a former police officer with Toronto Police Services who stepped down in 2018 to open Vertie Cannabis, told StratCann earlier this year that he believes Ontario needs more of a province-wide approach to enforcement, similar to the approaches provinces like British Columbia and New Brunswick have taken.

McGovern also argues that public awareness is an issue. While store owners might follow this closely, the general public, municipal and provincial lawmakers, and the legal system in general might not. While some in the justice system might still think the landscape is similar to the wave of stores opening in the years before legalization, he says the arguments that might have held up in court then will not now. 

“I get the impression that maybe not everybody in the justice system is aware of what’s going on. We’re hyper focused on this in our industry but I don’t think the same is true for the general public or for police agencies. So part of the challenge is helping them understand how different things are today than in, say, 2016.”

Raj Grover, CEO of High Tide, which operates more than 70 of its Canna Cabana retail cannabis locations in the province, welcomed the new announcement in the budget. 

“As Canada’s largest cannabis retail chain with 72 stores + over 700 employees in Ontario, we at [High Tide] welcome the Ontario gov FES commitment to help law enforcement crack down on illegal cannabis promotion/advertising,” wrote Grover in a Tweet. “We look forward to seeing more details as they are released.”

Ontario’s portion of the federal cannabis excise duty, which is 75% of every dollar collected, is expected to be around $379 million in 2024-2025. The province brought in $215 million in 2021-2022, $310 million in 2022-2023, and $344 million in 2023-2024 (interim figure). 

The Ontario Cannabis Store brought in $186 million in 2021-2022, $234 million in 2022-2023, $242 million in 2023-2024, and is projected to bring in $225 million in 2024-2025.

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In 2018, Ontario set aside $40 million over two years to help cities manage the implementation and oversight of cannabis legalization. The first $30 million was distributed in 2019, with $10 million set aside for unforeseen costs. Ontario also invested $3.26 million to support municipalities through enhanced enforcement against illegal cannabis operations.

This plan, called the Ontario Cannabis Legislation Implementation Fund (O.C.L.I.F.), was to be used for increased enforcement (e.g. police, public health and by-law enforcement, court administration, litigation), increased response to public inquiries (e.g. 311 calls, correspondence), increased paramedic services, increased fire services, and by-law/policy development (e.g. police, public health, workplace safety policy).

Ontario has distributed four payments from this fund, with cities receiving at least $5,000 each payment. Toronto received just over $3 million for its first payment, $3.7 million for its second, and $1.5 million for its third, and just last month received the fourth and final payment of $747,954 for a total of just under $9 million.

The cost of policing and enforcement has been a major part of municipal budgets all across Canada, with a significant portion of cannabis tax revenue and other related funding going to police, enforcement, fire and emergency services as it relates to cannabis legalization. This is in addition to costs associated with developing and maintaining municipal zoning rules and bylaws.

Toronto police asked for an additional $1.5 million from the city in 2021 to address the cost of cannabis-related enforcement in the department.

Toronto Police Services’ (TPS) 2022 operating budget noted that the department had a balance of $3 million in reserve, with an expected $500 million in funds withdrawn that year. It was projected to have just over $1 million in reserve for these funds in 2023 and just over $500,000 in the beginning of 2024.

Those numbers were updated in the 2023 budget to an expected $136,000 after withdrawing nearly $2 million. 

When negotiating for a 75% share of all federal cannabis excise taxes collected, provinces argued that the costs of addressing the new cannabis laws in Canada would largely be borne by themselves, cities, and law enforcement. 

According to the Federation of Canadian Municipalities (FCM), municipal administration and local policing costs linked to the legalization of cannabis will total $3-4.75 million per 500,000 residents. 

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