Municipalities across Ontario are following Toronto's lead and calling on the province to fund local policing efforts and other responsibilities once new marijuana laws come into effect.

"We're where the rubber meets the road," said Association of Municipalities of Ontario (AMO) president Lynn Dollin.

Ontario became the first province to propose legislation regulating how recreational marijuana will be sold, with plans to introduce an LCBO-style network of more than 150 stores by 2020.

Meanwhile Ontario Attorney General Yasir Naqvi has vowed to crack down on illegal medical marijuana dispensaries across the province, an effort municipal police forces warn could be costly.

There are currently 17 illegal pot dispensaries in Ottawa, and as fast as police shut them down, they open back up.

Ottawa police Chief Charles Bordeleau said local police forces need more money and better tools to deal with the problem, and the AMO agrees.

"We'll be making sure we get full cost recovery," Dollin said.

List of demands

Lynn Dollin is deputy mayor of the town of Innesfil, Ont., and president of the Association of Municipalities of Ontario. (Amanda Pfeffer/CBC) The AMO, which represents more than 400 cities and towns outside Toronto, has been tasked by its members to stickhandle negotiations on the issue with the province, and has come up with a list of demands on their behalf.

"We need the cost provided by the province. It shouldn't be borne by the property tax payer," Dollin said.

Among the changes the AMO is requesting are new powers to use zoning bylaws to put the dispensaries out of business for good.

Jessica Martin, senior communications adviser to Finance Minister Charles Sousa, said the province is meeting with municipalities to discuss "costs associated with legalizing marijuana."

"At this stage, it would be premature to establish a framework, given that the federal taxation approach has not yet been disclosed," Martin wrote in an email to CBC.

Marijuana task force

Rideau-Vanier Coun. Mathieu Fleury is a member of a marijuana task force struck by the AMO to get a better deal for cities. (CBC) Mathieu Fleury, the Ottawa city councillor for Rideau-Vanier, is a member of a task force struck by the AMO to delve into the issue.

Fleury agreed it's too early to discuss figures, but said new sources of revenue will be required. He said the task force is weighing some of the experiences of other North American cities including Denver, Colo., the first jurisdiction on the continent to legalize marijuana.

Denver has introduced a 3.5 per cent dedicated sales tax on retail sales of the drug, generating $10.5 million in 2016.

That money is used to fund the growing costs of policing, regulation, education and affordable housing.

"New revenue streams are attractive," Fleury said.

However Ontario doesn't allow municipalities to levy new taxes. What's more likely is a negotiated share of the provincial pot tax.

Tax concerns

Ivan Ross Vrana, a former Health Canada employee who worked on the marijuana file, said governments should be very careful when it comes to taxation.

"It's going to have to be a delicate balancing act," said Ross-Vrana, now a vice president with the public relations and consulting firm Hill and Knowlton Strategies.

"It will be very easy [for buyers] to go to a black market, which will undercut the price if the price is too high," Ross-Vrana said.

That could mean little in the way of new revenue for cities unless provincial regulators can find the sweet spot when it comes to pricing.

"We acknowledge that pricing is an important component of how provinces and municipalities will achieve the core objectives of legalization with respect to public health and reducing the illicit market," Martin wrote.