Law and Legislation Report
915 I Street, 1st Floor
Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2022-01188 June 21, 2022
Title: Business Operating Tax (BOT) Rates for Cannabis Businesses
Location: Citywide
Recommendation: Receive and file.
Contact: Davina Smith, Cannabis Manager, 916-808-4772, [email protected], Zarah Cruz, Program Specialist, 916-808-8925, [email protected], Office of Cannabis Management, Office of the City Manager
Presenter: None
Attachments:
1-Description/Analysis
Description/Analysis
Issue Detail: On May 31, 2022, Council considered and approved the package of policy proposals from the Law and Legislation Committee (Committee) pertaining to the issues of ownership, land use, and taxation. The policy proposals were developed from a series of Committee workshops on the Sacramento Comprehensive Cannabis Study (Study), which was released on March 8, 2022.
One of the nine policy recommendations approved by Council pertains to allowing a differentiation in cannabis Business Operations Tax (BOT) rates, with the possibility of seeking voter approval in November. Council referred the item to the Committee to discuss the language for a proposed ballot measure, with the goal of having the flexibility to make adjustments in the future, or to offer other ways to alleviate tax burdens by establishing a rebate program for Cannabis Opportunity Reinvestment and Equity (CORE)-owned businesses.
However, the flexibility sought by Council already exists in the City Code; adjustment of tax rates to a lower rate may be implemented through a resolution approved by Council.
Sacramento City Code, § 3.08.205(A)(2) provides that:
Notwithstanding the [4%] tax rate imposed in subsection (A)(1), the city council may, in its discretion, at any time by resolution implement any lower tax rate it deems appropriate, and may by resolution increase such tax rate from time to time, not to exceed the maximum rate established under subsection (A)(1).
Further consideration of a resolution to change the tax rates by cannabis business permit type will be developed at the direction of the Council. Tax relief options for Cannabis Opportunity Reinvestment and Equity (CORE)-owned businesses will be evaluated as part of the City’s current equity study and brought to the Committee, as warranted.
Policy Consideration: This item is receive-and-file, intended to update the Committee and stakeholders on the authority provided in the current City Code. Resolutions modifying the current cannabis BOT according to business type and CORE status may be brought forward at a future meeting for the Committee’s, and subsequently the Budget and Audit (B&A) Committee’s and Council’s, consideration.
Economic Impacts: None.
Environmental Considerations: California Environmental Quality Act (CEQA): The activity described herein is not subject to CEQA because it will not result in a direct reasonably foreseeable indirect physical change in the environment, and it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment. (CEQA Guidelines 15060(c)(2) and (c)(3)).
Further, the direction is not a project subject to CEQA as it includes continuing administrative or maintenance activities, such as general policy and procedure making; the submittal of proposals to a vote that does not involve a public agency sponsored initiative; and organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment. (CEQA Guidelines 15378(b)(2), (b)(3), and (b)(5)).
Lastly, in the alternative, the activity would be exempt as a project as it is covered by the common sense exemption that CEQA only applies to projects which have the potential for causing a significant effect on the environment. (CEQA Guidelines 15061(b)(3)).
Sustainability: Not applicable.
Commission/Committee Action: The Committee held a series of workshops on the Study on March 15
th, April 5th and April 19th and May 10th with tax-related issues including a potential tax ballot measure discussed during the last two workshops. A package of policy recommendations was forwarded to Council on May 31, 2022. Council approved the entire package and directed staff to place the proposed tax measure before the Committee for discussion and to return to Council with a proposed language to amend City Code, if needed.
Rationale for Recommendation: None, as this item is receive-and-file only.
Financial Considerations: None at this time. In the event Council directs consideration of modifications to the current cannabis BOT rates by business types or a rebate program for CORE members is proposed for consideration, any resolution brought forward to change tax rates or apply rebates would include an analysis of financial considerations and impacts to the General Fund.
Local Business Enterprise (LBE): Not applicable.