VisaliaCannabis Policy Study SessionVisaliaCannabis Policy Study Session Mark LovelaceSenior Policy AdvisorHdL Companies
About HdL•Municipal finance consulting firm providing revenue and economic insights to local governments•HdL Serves:•303 cities•48 counties•108 transaction districts•We provide sales tax, property tax, business licensing, economic development, and cannabis management•HdL has provided consulting services to over 175 local agencies to help develop cannabis policies•Team includes former policymakers, law enforcement and cannabis regulators with State, county and local level experience2 OBJECTIVES OF DISCUSSION•Provide brief overview of cannabis policy in California, the Cityof Visalia and the surrounding region•Outline local tax measure process ahead •Take comments and input from Council members on key provisions for tax measure3
CULTIVATORMANUFACTURER
TESTING LAB
DISTRIBUTOR
RETAIL
TESTING LAB
CONSUMER
CANNABIS BUSINESS CATEGORIES
4 CA CANNABIS LICENSES AS OF 1/6/20245,490 Cultivation 755 Manufacturer1,243 Retailers465 Retailers Non-Storefront1,139 Distributors154 Distributor Transport Only402 Microbusinesses38 Testing Labs46 Cannabis Event Organizers9,732 Total5
CANNABIS BUSINESSES IN THE NEARBY REGION
6 STATUS OF OTHER AGENCIES IN THE REGION:•Farmersville– Retail, Cultivation, Manufacturing, Distribution, Testing•Lindsay –Retail, Cultivation, Manufacturing, Distribution, Testing •Woodlake– Retail (storefront), Manufacturing, Distribution, Testing•Porterville– Retail•Tulare– Retail (storefront only)•Tulare County– Storefront retail, Cultivation (both medicinal only)7
8 Cannabis Taxes/Fees in the Visalia RegionCity or County Cultivation Nursery Distributor Manufacturer Retailer Microbusiness Testing LaboratoryFarmersville$7/sf 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Lindsay$6/sf$2/sf 4.0% 4.0% 5.0% By Activity 0.0%Woodlake$25/sf $25/sf10.0% 10.0% 10.0% 10.0% 10.0%PortervilleN/AN/A N/A N/A 1.0% N/A N/ATulare$10/sf$10/sf 10.0% 10.0% 10.0% 10.0% 10.0%Tulare County N/AN/A N/A N/A N/A N/A N/AHdL Standard Rates2.0% 2.0% 2.0% 2.0% 4.0% to 6.0% 2.0% 2.0%
REVENUE GENERATING STRATEGIES
9 FEES•Application fees•Regulatory fees•Limited to cost recovery onlyTAXES•% gross receipts•$ per square foot•Requires voter approvalAGREEMENTS•Provide agreed-upon benefits to the City or community CANNABIS RETAIL TAX REVENUEAnnual Retail Cannabis Tax Revenue Potential cannabis retail sales:$12 millionPotential cannabis tax revenue:$500,000 to $1 millionDepending upon tax ratePlus $200,000 in sales tax10 FM3 SURVEY
11 “Shall the measure to fund, for general governmental uses, services such as: maintaining emergency response times; supporting youth programs; helping attract businesses; cleaning public areas; addressing homelessness; by taxing cannabis businesses’ gross receipts not exceeding 10% on retail, delivery, manufacturing/testing; raising approximately $1,000,000 annually, requiring spending disclosures, and which would only be levied if state law imposes mandates or the city approves an ordinance allowing such businesses, lasting until ended by voters, be adopted?” DIRECTION FOR TAX MEASURE•July 17, 2023•City Council directed staff to hire a consultant to assist with the preparation of a potential local sales tax measure specifically for cannabis sales for the 2024 election.•Initiated a zoning ordinance update to implement reasonable zoning regulations in response to SB 118612 PROCESS FOR PLACING MEASURE ON THE BALLOT•Provide direction and general parameters to develop draft tax measure•Staff and consultant develop draft tax ordinance•First reading before the Council•All ballot materials must be received by the County elections office no later than 88 days before the election (August 9)13 IF THE MEASURE PASSES•City under no obligation to allow cannabis businesses•Tax measure would provide protection in the event the state requires the City to allow cannabis retailers•The Council could adjust the tax rates as it sees fit, up to the maximum rate.•IF the City wanted to allow some types of cannabis businesses, the City would have a great deal of control over the time, place and manner of regulations14 REVENUE POLICY CONSIDERATIONS•All City costs for permitting and regulating cannabis businesses would be paid for by the business through regulatory fees•All revenues from a cannabis tax would be available for general City expenses•Additional community benefits could be required through operational agreements15 OTHER POLICY OPTIONS•As an option, the City could develop a regulatory ordinance and defer implementation into the future.•The ordinance could address all cannabis business types but set the allowable number of each to zero.•The City Council could then revisit those numbers at any time in the future and adjust them as the Council sees fit.16 KEY DECISIONS FOR A TAX MEASURE•Where in the Municipal Code would the ordinance be placed?•Tax by gross receipts, square footage, or other?•What will the maximum tax rates be?•Set the initial rates now or by resolution?•Remit monthly or quarterly?•Will the City require audits?•Who will hear appeals?•Charge a fee for issuing the business license?•$750,000 annual revenue estimate? •State mandate or no mandate? 17 Questions?18