Agenda Item Wording:
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Authorize 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 FM3 Research for an amount not to exceed $39,500, with a total budget of $45,000, to assist in the preparation of a potential local sales tax measure for cannabis sales for the 2024 general election and identify potential cannabis regulations, and appropriate $85,000 from the General Fund.
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Deadline for Action: 11/6/2023
Submitting Department: Community Development
Contact Name and Phone Number:
Devon Jones, Economic Development Manager, devon.jones@visalia.city <mailto:devon.jones@visalia.city>, (559) 713-4190
Paul Bernal, Community Development Director, paul.bernal@visalia.city <mailto:paul.bernal@visalia.city>, (559) 713-4025
Department Recommendation:
Authorize 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 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.
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 becomes effective on January 1, 2024, will prohibit 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).
Applicable local taxes can be charged under SB 1186, but no specific excise tax for cannabis currently exists within the city. At this time, when the law becomes effective on January 1, 2024, only the normal business license fees, at the same rate as other types of delivery businesses such as sales tax, could be charged. Given upcoming changes due to SB 1186 and further potential erosion of local control regarding cannabis sales within the State of California, staff acquired direction from Council on July 17, 2023 to seek out a consultant (via sole source) to draft a potential cannabis sales tax measure, which would be subject to review and approval by Council, and if authorized by Council, would be placed on the general election ballot in 2024 for consideration by the voters. The 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, decides to allow cannabis sales.
In addition, the consultant could assist staff with potential cannabis regulations and processes so the City would be ready in the event additional state mandates prevent local agencies from restricting other types of cannabis businesses. These potential updates would require separate approval to be implemented but would be prepared to provide the City with an outline of an ordinance, primarily a selection process, in case future state law modifications require local agencies to broadly allow cannabis sales but allow for restrictions in the number of businesses. Business selection has been a contentious issue in other jurisdictions and City staff does not want to be unprepared if state law changes.
Staff is recommending contracting with two vendors to provide the services necessary:
1. HdL Companies: assists in the development, implementation, and enforcement of cannabis management programs for local governments in California. They have assisted over 175 cities or counties in California on cannabis related programs, including ordinance development and review, community outreach and education, merit-based application and permitting processes, cost recovery studies, compliance inspections, revenue audits, fiscal analyses and law enforcement training. Locally, they assisted the City of Hanford to establish their cannabis program. Staff would recommend contracting with HdL to develop the commercial cannabis tax measure, and draft regulatory framework for a potential program.
HdL’s proposal is for $30,000. However, staff is recommending a not to exceed amount of $35,000, with a total budget of $40,000, to accommodate additional billable hours for potential staff or council consultations and program design, public outreach, and in-person meeting attendance.
2. FM3 Research (Fairbank, Maslin, Maullin, Metz & Associates): provides public opinion research and strategy to assist with local tax measure efforts. The City has worked with FM3 on a number of occasions in the past and would recommend their services in this instance. As HdL does not provide these particular services offered by FM3, and public opinion research and strategy is critical for local tax measure efforts, staff is recommending contracting with FM3 as well.
FM3’s proposal is for $35,500 for 400 interviews and $39,500 for 500 interviews. Additional costs could include travel associated with any in-person meeting attendance requested. Staff is recommending a not to exceed amount of $39,500, with a total budget of $45,000.
Both proposals are attached for reference.
Fiscal Impact:
Staff is recommending that Council appropriate a total of$85,000 from the General Fund for services requested.
Prior Council Action:
On July 17, 2023, the City Council directed staff to initiate 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 sales 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 authorize 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 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.
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Environmental Assessment Status: N/A
CEQA Review: N/A
Attachments:
1. Professional service agreement - HdL
2. Professional service agreement - FM3
3. Service proposal - HdL
4. Service proposal - FM3
5. City Council staff report dated July 17, 2023