RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF COTATI AMENDING THE
INITIAL TAX RATES FOR AN ADDITIONAL THREE- YEAR TERM
WHEREAS, the City of Cotati has responsibly and proactively managed its finances and its taxpayer dollars through transparent budget and decision-making processes and recently enacted Measure S to ensure the City’s long-term fiscal stability; and WHEREAS, on November 5, 1996, the California voters enacted Proposition 215 to legalize medical use of cannabis, and in October 2015, the Governor signed into law the Medical Marijuana Regulation and Safety Act (now known as the Medical Cannabis Regulation and Safety Act or “MCRSA”), establishing a state licensing framework and authorizing local regulation of the medical cannabis industry; and WHEREAS, on November 8, 2016, California voters enacted Proposition 64 to legalize adult recreational use of cannabis and to allow businesses that support such cannabis use to operate legally, subject to regulations imposed by state and local public entities; and
WHEREAS, the State of California Governor’s Office proposed a series of amendments to the state’s regulatory structure during the budget process, known as “SB 94”, “the Governor’s Trailer Bill,” in order to better align the requirements of MCRSA and Proposition 64, now known as the Medical and Adult Use Cannabis Regulation and Safety Act or “MAUCRSA,” WHEREAS, the voters of the City of Cotati authorized a cannabis business tax on November 7, 2017 with a 78.8% “yes” vote, to permit and support of the cannabis industry, in association with the earlier passage of Proposition 215, and the recent enactment of MCRSA and passage of Proposition 64; and
WHEREAS, the existing cannabis business tax, adopted by the City Council on August 8, 2017 (Resolution 2017-46), contingent on voter authorization of the cannabis business tax, supports regulation of the industry and is an important source of funding and financial stability for essential services such as police and fire protection, 911 emergency response times, streets and road maintenance, recreational programs and other general city services; and
WHEREAS, it is in the interest of the citizens and the City that all cannabis businesses contribute to local cannabis business taxes to support the aforementioned programs and services for the community; and
WHEREAS, the City recognizes the continuing volatility as the legal market matures, high state excise tax, and limited federal tax write-offs, as well as continuing competition from the unregulated illegal cannabis market and will therefore amend and continue the limited initial tax rates to balance the financial needs of the City and the desire of the City to support and encourage the industry to engage in the regulated market.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF COTATI
RESOLVES AS FOLLOWS:
Section 1. Recitals.
The Recitals set forth above are true and correct and are incorporated into this Resolution by this reference.
Section 2. Cannabis Business Tax Rates.
The cannabis business tax rates shall be set as follows for a minimum term of three (3) years:
1. Cultivation Rate: two percent (2%) of gross receipts or $5.00 per square foot of cannabis cultivation area, at the taxpayer’s election, except that vertically integrated businesses, as defined in Section 5.30 of the Cotati Municipal Code, must use the per square foot rate.
2. Manufacturing Rate: one percent (1%) of gross receipts
3. Distribution Rate: zero percent (0%), except that cannabis business that are distribution only businesses shall be taxed at two percent (2%) of gross receipts.
4. Retailers Rate: three percent (3%) of gross receipts. Sales to persons with a physician’s recommendation or a state issued medical identification card, issued for medical purposes, shall be excluded from the calculation of gross receipts for the purpose of the cannabis business tax. Physician’s recommendation means a recommendation by a physician and surgeon that a patient use cannabis provided in accordance with the Compassionate Use Act of 1996 (Proposition 215), found at Section 11362.5 of the Health and Safety Code. State issued medical identification card means a document issued by the State Department of Public Health that identifies a person authorized to engage in the medical use of cannabis and the person’s designated primary caregiver, if any, in accordance with Section 11362.71 of the Health and Safety Code.
Section 3. Effective Date.
This Resolution shall take effect on July 1, 2022.
IT IS HEREBY CERTIFIED that the foregoing resolution was duly adopted at a regular meeting of the City Council of the City of Cotati held on the April 12th, 2022, by the following vote, to wit:
Approved:________________________________
Mayor
Attest:____________________________
Kevin Patterson, Deputy City Clerk
Approved as to form:
____________________________
City Attorney