Pasco City Council Reviews Cannabis License Cap and Revenue Options

License Cap Review on the Table

Pasco currently operates under a license cap set when Washington's recreational program launched in 2014, and council members are now weighing whether to authorize additional retail locations. Washington's Liquor and Cannabis Board (LCB) allocates retail licenses by population formula. Pasco's growth since 2014 has created headroom for new permits. The city hasn't disclosed how many additional licenses it might authorize or whether it would impose local zoning restrictions beyond state buffer rules.

State law caps total retail licenses statewide at roughly one per 33,000 residents. Cities may impose stricter local caps or decline to authorize any licenses. Pasco's existing retailers operate under a 3% local sales tax in addition to the state's 37% excise tax.

Revenue Projections Under Discussion

City staff presented revenue models showing how additional licenses could affect Pasco's cannabis tax collections, which currently total approximately $1.2 million annually from local sales tax on existing stores. Each new retail location could generate an estimated $150,000 to $250,000 in annual local revenue, depending on sales volume and market saturation. No vote occurred during the workshop.

Washington's 37% state excise tax flows to the state general fund, education programs, and the LCB's regulatory budget. Cities receive only the local sales tax share, which varies by jurisdiction. Pasco's 3% rate is typical for mid-sized Washington cities.

Market Saturation and Operator Concerns

Existing Pasco retailers have historically opposed license expansion, arguing that additional stores would dilute per-store revenue without meaningfully increasing total market size. Washington's cannabis market has seen declining wholesale prices and retail margins since 2022. Oversupply is one culprit. So is competition from unregulated hemp-derived THCA products sold in convenience stores and online. The LCB hasn't adjusted the statewide license cap in response to hemp market pressure.

The hemp-loophole question looms over every licensing discussion in Washington now — cities are weighing whether to expand regulated retail at the same time unregulated THCA products are pulling customers out of the legal channel.

Pasco hasn't enacted local restrictions on hemp-derived intoxicating products, which remain legal under Washington state law as long as delta-9 THC content stays below 0.3% by dry weight. THCA converts to delta-9 THC when heated, creating functionally identical intoxication at unregulated price points.

Next Steps and Timeline

The council will consider a formal ordinance at a future meeting if it decides to expand the license cap, with public hearings required before any zoning or licensing changes take effect. No timeline was announced. Washington's LCB must approve any new retail licenses even after local authorization. The agency's current processing time for new applications averages 90 to 120 days.

For full background on Pasco's cannabis program, see the CannIntel topic hub on Pasco Washington Cannabis Program.

The political variable nobody can model is whether Washington's legislature will act on hemp-THCA regulation in the 2027 session. If the state closes the loophole, licensed retailers' market position improves overnight. If not, adding licenses may simply divide a shrinking pie.