Administrative
Report
L.1., File # 22-4965 Meeting Date: 11/1/2022
To: MAYOR AND CITY COUNCIL
From: BRANDY FORBES, COMMUNITY DEVELOPMENT DIRECTOR
TITLE
PUBLIC HEARING TO CONSIDER RESOLUTION 2211-092 TO ADD A CANNABIS TAXATION ORDINANCE AS A BALLOT MEASURE FOR THE MARCH 7, 2023 ELECTION PROCEDURES:
1. Open public hearing and take testimony;
2. Close public hearing and deliberate; and
3. Adopt the following resolution by title only:
ADOPT BY TITLE ONLY RESOLUTION 2211-092, A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF REDONDO BEACH, CALIFORNIA, SUBMITTING TO THE CITY VOTERS A BALLOT
MEASURE TO ESTABLISH A BUSINESS TAX ON BUSINESSES WHICH SELL, DISTRIBUTE,
MANUFACTURE, AND CULTIVATE CANNABIS INCLUDING INDUSTRIAL HEMP AND HEMP PRODUCTS; REQUESTING THAT THE LOS ANGELES BOARD OF SUPERVISORS AUTHORIZE
THE COUNTY REGISTRAR RECORDER/COUNTY CLERK OFFICE TO RENDER SPECIFIED
SERVICES TO THE CITY OF REDONDO BEACH RELATING TO THE CONDUCT OF THE
ELECTION, AND REQUESTING ADDING THIS ELECTION WITH THE GENERAL MUNICIPAL ELECTION TO BE HELD ON MARCH 7, 2023
EXECUTIVE SUMMARY
As part of the City’s ongoing local effort to implement cannabis regulatory ordinances, City Council approved an agreement with HdL Companies (HdL) to review the City’s draft cannabis regulatory Ordinances and other cannabis-related procedural tasks, including preparation of a cannabis tax ordinance. The contract with HdL was approved at the June 21, 2022 City Council meeting.
HdL has since reviewed the City’s draft cannabis regulatory Ordinances and provided staff with recommendations and comments. The Ordinances were amended to address HdL’s recommendations and City Council adopted the ordinances on September 6, 2022. Additionally, HdL has helped prepare a draft cannabis business tax Ordinance. At the September 20, 2022 meeting, City Council discussed the draft tax Ordinance and provided direction to staff on changes, to be returned to City Council with a resolution to consider the cannabis taxation Ordinance as a ballot measure for the March 7, 2023 municipal election.
BACKGROUND
In order to analyze and identify the cannabis regulations appropriate for Redondo Beach, a Cannabis
L.1., File # 22-4965 Meeting Date: 11/1/2022
In order to analyze and identify the cannabis regulations appropriate for Redondo Beach, a Cannabis Steering Committee was appointed by the previous City Manager comprised of representatives from the law enforcement community, RBUSD, BCHD, and other outside interest groups familiar with common best practices for commercial use regulations of cannabis, including storefront siting, taxation, delivery and development agreement options. The Steering Committee met multiple times over several years, and on October 5, 2021 presented their recommendations to the City Council.
Following their recommendations, Council directed staff to begin preparing a draft ordinance designed to regulate commercial cannabis activity in the City. Per City Council direction, the Planning Commission reviewed the draft cannabis ordinance at a public hearing held on March 3, 2022. The Planning Commission provided several recommendations at the hearing including that the City engage a consultant with experience advising the municipal regulation of the cannabis industry to assist in the review of the City’s draft Ordinance.
On May 10, 2022 the City Council considered the Planning Commission recommendations and provided direction to staff on the final preparation of ordinances. The Council, as part of that direction, also asked staff to prepare an agreement with HdL to review the City’s draft cannabis regulatory Ordinances and other cannabis-related procedural tasks, including preparation of a cannabis tax ordinance. The contract with HdL was approved at the June 21, 2022 City Council meeting.
HdL has since reviewed the City’s draft cannabis regulatory Ordinances and provided staff with recommendations and comments. The Ordinances were amended to include the Planning Commission recommendations as directed by City Council and the HdL recommendations supported by City staff. City Council adopted the ordinances on September 6, 2022.
The contract with HdL also includes the preparation of a cannabis business tax Ordinance as well as assistance with preparation of the subsequent ballot measure. The current, adopted cannabis regulations do allow for developer agreements to include fees, though this option would sunset in the event a tax measure is approved.
There are numerous advantages to establishing a cannabis business tax as opposed to administering developer agreements. A cannabis business tax would allow the City to collect taxes on all cannabis sales within the City, including deliveries originating outside City limits. A cannabis business tax would also address and capture hemp business sales.
At the September 20, 2022 meeting, City Council discussed the draft cannabis tax Ordinance and provided direction to staff on changes, to be returned to City Council with a Resolution to add the cannabis taxation ordinance as a ballot measure for the March 7, 2023 municipal election.
The revised draft cannabis taxation Ordinance is attached and includes the following components as directed by City Council at the September 20, 2022 meeting:
· Creating flexible tax ranges for the different types of businesses · Clarifying the definition of hemp by referencing the California Health and Safety Code 11018.5.
City Council requested that this information be provided in this Administrative Report. The definition is as follows:
o 11018.5 (a) “Industrial hemp” or “hemp” means an agricultural product, whether
L.1., File # 22-4965 Meeting Date: 11/1/2022
o 11018.5 (a) “Industrial hemp” or “hemp” means an agricultural product, whether growing or not, that is limited to types of the plant Cannabis sativa L. and any part of that plant, including the seeds of the plant and all derivatives, extracts, the resin extracted from any part of the plant, cannabinoids, isomers, acids, salts, and salts of isomers, with a delta-9 tetrahydrocannabinol concentration of no more than 0.3 percent on a dry weight basis. (b) Industrial hemp shall not be subject to the provisions of this division or of Division 10 (commencing with Section 26000) of the Business and Professions Code, but instead shall be regulated by the Department of Food and Agriculture in accordance with the provisions of Division 24 (commencing with Section 81000) of the Food and Agricultural Code, inclusive.
· Requiring registration, reporting, and remittance of tax · Addressing delinquency of tax, including penalties and interest · Clarifying that personal cultivation is not taxed
· Establishing audit and examination of records requirements · Clarifying that payment of tax does not authorize unlawful business · Specifying that violation of the Ordinance is deemed a misdemeanor This agenda item provides for a public hearing and consideration of a resolution to add the cannabis taxation Ordinance as a ballot measure for the March 7, 2023 municipal election.
COORDINATION
This agenda item was prepared by the Community Development Department in coordination with the City Manager’s Office, Financial Services Department, Treasurer’s Office, and the City Attorney’s Office. The City’s consultant, HdL, prepared the draft Ordinance which was reviewed and revised by the City Attorney’s Office.
FISCAL IMPACT
The fiscal impact to the City for regulating cannabis sales and delivery in Redondo Beach is not fully known at this point. There are many variables to consider including 1) the number and types of licenses to be issued, 2) the volume of business and sales from future local cannabis operations, 3) the specific franchise fee or tax rate charged for cannabis sales in Redondo Beach, 4) the amount of staff time allocated to regulatory and enforcement activities, and 5) the potential for legal challenge to the City’s licensing activities.
Notwithstanding the above variables, staff’s initial estimate is that each licensed site in Redondo Beach could provide $500,000 to $900,000 in additional annual General Fund revenue, provided the City moves forward with the proposed tax (9% on retail, 3% on all else) and/or the developer agreement fee (5% of all gross receipts) included in the City’s Ordinance. The preparation of the Ordinance and staff report are within HdL’s contract scope and the annual budgets of the Community Development Department, City Manager’s Office, and the City Attorney’s Office.
APPROVED BY:
Mike Witzansky, City Manager
ATTACHMENTS
· Reso - Placing Ballot Measure on the March 7, 2023 General Municipal Election Ballot to
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establish a Cannabis Business Tax within the City of Redondo Beach · Exhibit A - Ordinance adding Cannabis Business Tax within the City of Redondo Beach · Proof of Notice Public Hearing, October 20, 2022