Agenda Item Wording:
title
Amended Resolution - Adopt amended Resolution 2024-24 to place a cannabis tax measure on the November 2024 general election ballot.
body
Deadline for Action: 7/15/2024
Submitting Department: Community Development
Contact Name and Phone Number: Devon Jones, 713-4190
Department Recommendation:
Adopt amended Resolution 2024-24 to place a cannabis tax measure on the November 2024 general election ballot. The amendment is necessary in order to meet the California Election Code’s required 75 word maximum for ballot language and to provide additional clarifying information as to the ballot argument submittal process, the title of the measure, the need for the measure and potential uses of the funds.
The ballot question in the previously approved version is actually at 76 words due to “$10/square…” being two words according to CA Election Code, section 9, Counting of words. The new version simply deletes “and” from “and which would only be levied if state law mandates”, bringing the final word count to the required 75 word maximum. Here is the new proposed language for Resolution 2024-24:
“Shall the measure to fund general governmental services such as public safety, emergency response, youth programs, addressing homelessness, and maintaining public spaces, by taxing cannabis businesses at a rate not exceeding 10% of gross receipts, or up to $10/square foot for cultivation, raising approximately $500,000 annually, requiring spending disclosures, which would only be levied if state law mandates or the Council approves an ordinance allowing such businesses, lasting until ended by voters, be adopted?”
The proposed title of the measure is “Visalia Cannabis Tax Authorization for Maintenance of Essential Services”. The Mayor is being designated as the City Council member that shall submit the written argument for publication in the voter information guide in accordance with the County Elections Code. Additionally, several new ‘whereas’ statements have been added to further clarify the need to establish the tax and to illustrate the possible uses of any funds that may be generated from a potential tax.
Background Discussion:
Senate Bill (SB) 1186, the “Medicinal Cannabis Patients’ Right of Access Act” was signed into law in late 2022. This state law, which became effective on January 1, 2024, prohibits local agencies from enforcing any local regulations that prohibit the retail sale by delivery of medicinal cannabis. After this date, “delivery only” (i.e., delivery of medicinal cannabis) businesses will be permitted, subject to reasonable zoning regulations for public health and safety, within the City of Visalia. This means that warehouse-based businesses could legally operate in the City of Visalia as long as they sold medicinal cannabis via delivery only (i.e., no retail store front).
On July 17, 2023, Council authorized staff to initiate a zoning ordinance update to implement reasonable zoning regulations in response to SB 1186. On November 20, 2023, Council conducted the second reading and adoption of Ordinance No. 2023-13 for Zoning Text Amendment No. 2023-02, a request by the City of Visalia to amend Visalia Municipal Code Chapter 17.25, add Section 17.32.167, amend Chapter 8.64, and add Chapter 5.66 in order to address upcoming state mandated changes as a result of the passage of SB 1186, and to establish objective standards for permitting delivery only medical marijuana retail establishments within the City of Visalia. To date, staff is aware of one such business type interested in Visalia and many others amongst storefront retail cannabis operators.
Also on July 17, 2023, Council authorized staff to hire a consultant through sole source contract process to assist staff with the preparation of a potential local tax measure specifically for cannabis sales for the 2024 general election and to identify potential revisions to cannabis regulations in Visalia so the City would be ready in the event additional state mandates prevent local agencies from restricting other types of cannabis businesses, or should the Council later decide to permit such businesses to operate in Visalia.
The local tax measure would not be proposing to legalize other types of cannabis sales, the tax would only authorize the City of Visalia to collect additional tax revenue from cannabis sales that state law has authorized to be conducted in Visalia or if the City Council, at a later date, decided to allow cannabis sales. Applicable local taxes can be charged under SB 1186, but no specific excise tax for cannabis currently exists within the city. At this time, should any applicable delivery only medicinal cannabis retailers open in the city only the normal business license fees and general sales tax apply.
In November 2023, Council authorized the City Manager to award a contract to HdL Companies for an amount not to exceed $35,000, with a total budget of $40,000, and a contract to Fairbank, Maslin, Maullin, Metz & Associates (FM3 Research) for an amount not to exceed $39,500, with a total budget of $45,000, and appropriate $85,000 from the General Fund. FM3 Research was tasked specifically with public opinion research to inform the potential local tax measure efforts.
FM3 Research presented their survey findings on May 6th and identified, among other things, that the majority of Visalia residents support allowing cannabis businesses to operate in Visalia and support the passage of a local tax measure on cannabis businesses. Council then authorized staff to continue working with HdL on the preparation of the tax measure materials and to appropriate $20,000 from the general fund for the development of informational materials for the potential tax measure.
HdL Companies is tasked specifically with development of the cannabis tax measure, including drafting of the ordinance, preparation of the ballot resolution, revenue estimates, and assistance with the ballot statement. They will also assist with drafting the regulatory framework should the state mandate local agencies to allow other types of cannabis businesses or the council later decide to allow such businesses. HdL Companies conducted their initial presentation to Council on May 20th to gather input to prepare the draft business tax ordinance that was adopted on June 17th. The first reading of this ordinance was conducted on June 3rd. Major elements of the cannabis business tax ordinance include:
- The Cannabis Business Tax is a general tax enacted solely for general, governmental purposes of the city and not for specific purposes. All of the proceeds from the tax imposed shall be placed in the city's general fund and be available for any lawful city purpose.
- The maximum tax rate is ten percent (10%) of gross receipts.
o The actual tax rate can be set lower by Council at a later date and vary by industry segment.
- The tax will apply to retailers both in and outside the city (delivery into the city).
- Taxes are to be remitted monthly.
- Audits will be allowed by the city or third party designee.
- Personal cultivation for personal consumption is not subject to the tax.
- The option for a tax rate per square footage for cultivation businesses should the Council later decide to allow, or the state mandate that the city allow cultivation type businesses as well as retail.
On June 3rd, Council also adopted Resolution 2024-24 to place a cannabis tax measure on the November 2024 general election ballot. The cannabis tax would not have any effect unless the tax measure is approved by the voters on November 5th.
Fiscal Impact:
None at this time. However, if a local cannabis business tax measure is approved by the voters in November and the state mandates that the city allow other cannabis business types beyond medicinal delivery only/non-storefront retail, or the Council later decides to allow other cannabis business types to operate in the city, initial revenue estimates for retail sales range from $500,000 to $1 million annually (depending on tax rate) plus approx. $200,000 in additional sales tax annually. These amounts are based on estimated potential cannabis retail sales of $12 million annually.
Prior Council Action: Click or tap here to enter text.
• On June 17, 2024, Council conducted the second reading and adoption of Ordinance No. 2024-06, adding Chapter 3.14 (Cannabis Business Tax) to Title 3 of the Visalia Municipal Code to establish a tax on cannabis business activities within the city.
• On June 3, 2024, Council conducted the first reading of Ordinance No. 2024-06, adding Chapter 3.14 (Cannabis Business Tax) to Title 3 of the Visalia Municipal Code to establish a tax on cannabis business activities within the city and adopted Resolution 2024-24 to place a cannabis tax measure on the November 2024 general election ballot.
• On May 20, 2024, Council authorized staff to present an ordinance to include a local cannabis tax measure for voter consideration on the Tulare County November 2024 General Election ballot.
• On May 6, 2024, Council authorized staff to continue working with HdL to develop a local cannabis tax measure and ballot language to be included on the November 2024 ballot and appropriated $20,000 from the general fund for the development of tax measure informational materials.
• On November 20, 2023, Council conducted the second reading and adoption of Ordinance No. 2023-13 for Zoning Text Amendment No. 2023-02, a request by the City of Visalia to amend Visalia Municipal Code Chapter 17.25, add Section 17.32.167, amend Chapter 8.64, and add Chapter 5.66 in order to address upcoming state mandated changes as a result of the passage of SB 1186, and to establish objective standards for permitting delivery only medical marijuana retail establishments within the City of Visalia.
• On November 11, 2023, Council authorized the City Manager to award a contract to HdL Companies for an amount not to exceed $35,000, with a total budget of $40,000.
• On November 6, 2023, the City Council authorized the City Manager to award a contract to FM3 Research for an amount not to exceed $39,500, with a total budget of $45,000.
• On July 17, 2023, Council directed staff to initiate a zoning ordinance update to implement reasonable zoning regulations in response to SB 1186 and hire a consultant, via a sole source contract, to assist staff with the preparation of a potential tax measure specifically for cannabis sales for the 2024 general election and to identify potential revisions to cannabis regulations in Visalia.
Other: N/A
Alternatives: Per Council direction.
Recommended Motion (and Alternative Motions if expected):
recommendation
I move to adopt amended Resolution 2024-24 to place a cannabis tax measure on the November 2024 general election ballot.
end
Environmental Assessment Status: Exempt from California Environmental Quality Act, Public Resources Code Sections 21000 et seq. (“CEQA”) and 14 Cal. Code Re. Sections 15000 et seq. (“CEQA Guidelines”).
CEQA Review: This item is exempt from the California Environmental Quality Act, Public Resources Code Sections 21000 et seq. (“CEQA”) and 14 Cal. Code Re. Sections 15000 et seq. (“CEQA Guidelines”). The calling and noticing of an election for the submission of a ballot measure to voters is not a project within the meaning of CEQA Guidelines 15378. The tax submitted to the voters is a general tax that can be used for any governmental purpose; it is not a commitment to any particular action or actions. As such, under CEQA Guidelines Section 15378 (b)(4), the tax is not a project within the meaning of CEQA because it creates a government funding mechanism that does not involve any commitment to any specific project that may result in a potentially significant physical impact on the environment. If revenue generated by the tax were used for a purpose that would have such an effect, the City of Visalia would undertake the required CEQA review for that particular project. Therefore, pursuant to CEQA Guideline Section 15060 CEQA analysis is not required.
Attachments: Amended Resolution 2024-24, Ordinance No. 2024-06 - Cannabis Business Tax