Legal cannabis will cost the City of Winnipeg an additional $1.8 million a year, according to a new report that says the city could recover the money through new fees or business taxes.

Cannabis will be legal in Canada on Oct. 17. In a report published Wednesday morning, Winnipeg chief corporate services officer Michael Jack predicts the Winnipeg Police Service will spend an additional $1.2 million a year as a result of legalization, while other city departments will incur almost $600,000 in new costs.

Jack notes Manitoba has not agreed to share new cannabis revenues with Winnipeg, even though the province is charging a six per cent social-responsibility fee on cannabis revenue and Manitoba Liquor and Lotteries is charging a nine per cent tax on wholesale cannabis sales.

Ottawa is also adding an excise tax to cannabis, split 75-25 between the provinces and the federal government. The two levels of government have come to an agreement on the share of the excise tax, but the paperwork hasn't been signed yet.

As a result, the city is considering new licensing fees for cannabis distribution and sales — or a differential business-tax rate for cannabis-related businesses.

There is no mention of how these proposed measures would affect the retail price of cannabis, which the province hopes to keep down to prevent black-market sales.

Jack told reporters the city is concerned about driving up the cost of legal weed in Manitoba.

"Any business that faces a new tax or a new licence fee presumably needs to pass that cost on to their customers. So that would be the inevitable conclusion," Jack said.

"We think it would make a lot more sense to have a contribution from the provincial level, rather than the city being forced to find revenue elsewhere.

In a statement, Municipal Relations Minister Jeff Wharton said provinces will bear the largest costs of legalizing cannabis, including regulation changes, health care, addictions and public safety costs.

"Revenues during the first year of legalization will fall short of the expected costs to the province. It would be premature to discuss revenue sharing when it is not yet apparent whether there will be any net provincial revenue," Wharton wrote.

Once cannabis is legalized, the province will ask municipalities to track their costs, and use that to make decisions going forward, he said.