1. Cannabis Tax Ordinance
Finance Committee/City Council
February 26, 2018

2. Cannabis Tax Ordinance
Overview of Proposed Ordinance
Review Fiscal Analysis
Review Cumulative Tax Calculation
Tax Policy Discussion
Declaration of Fiscal Emergency
Next Steps

3. Proposed Ordinance 5.28.050 Definitions 5.28.060 Taxes Initial Rates
Maximum Rates
Council Increases Rates
CPI Increases
Quarterly reporting to Finance (Tax Administrator)
Penalties and interest for late payment
Administration
Appeals
Audits
Does Not Authorize Unlawful Business

4. Tax Policy on Cultivation
Square footage based on approved permit
Reduction for unused square footage, partial year
Square footage of cultivation, not of building
Deferred payment to match cash flow associated with harvest
Predictable, stable revenue stream for financing on-going City costs

5. Rate of Tax High enough to generate proceeds to offset costs
Low enough to avoid over-taxing and ensure sustainability
Ability to match tax rates with neighboring jurisdictions
Encourage licenses in short supply
Flexibility options
City Council may increase or decrease rate
Index for inflation
Minimum and Maximum rates

6. Proposed Initial Rates
LICENSE TYPE
RATE
Cultivaton: Indoor, artificial lighting
$7.00 SF
Cultivaton: Indoor, mix lighting
$4.00 SF
Cultivaton: Outdoor
$2.00 SF
Cultivaton: Nursery
$1.00 SF
Testing Laboratory
1% GR
Retailer
4% GR
Distribution
2% GR
Manufacturing
2.5% GR

7. Fiscal Analysis - Cultivation
Total Sq. Ft.
# of Businesses $7 $9
$10
Permit 1
5,000 3
15,000
$105,000
$135,000
$150,000
Permit 2
10,000
30,000
$210,000
$270,000
$300,000
Permit 3
22,000
66,000
$462,000
$594,000
$660,000
$777,000
$999,000
$1,100,000

8. Fiscal Analysis - Manufacturing
Gross Receipts
# of Businesses
Total GR 4% 5% 6%
Scenario 1
$2.5m 2
$5.0m
$200,000
$250,000
$300,000
Scenario 2 4
$10.0m
$400,000
$500,000
$600,000
Scenario 3 6
$15.0m
$750,000
$900,000

9. Fiscal Analysis - Retailers
Gross Receipts
# of Businesses
Total GR 4% 5% 6%
Scenario 1
$3.2m 2
$6.4m
$256,000
$320,000
$384,000
Scenario 2 4
$12.8m
$512,000
$640,000
$768,000
Scenario 3 6
$19.2m
$960,000
$1,152,000

10. Fiscal Analysis - Distribution
Gross Receipts
# of Businesses
Total GR 4% 5% 6%
Scenario 1
$2.0m 2
$4.0m
$160,000
$200,000
$240,000
Scenario 2 4
$8.0m
$320,000
$400,000
$480,000
Scenario 3 6
$12.0m
$600,000
$720,000

11. Fiscal Analysis – Testing Labs
Gross Receipts
# of Businesses
Total GR 4% 5% 6%
Scenario 1
$1.5m 2
$3.0m
$30,000
$37,500
$45,000
Scenario 2 3
$4.5m
$56,250
$67,500
Scenario 3 4
$6.0m
$60,000
$75,000
$90,000

12. Fiscal Analysis - Combined
Conservative Estimate - $1.47m
Moderate Estimate - $1.86m
Aggressive Estimate $2.14m

13. Cumulative Tax

14. Declaration of Fiscal Emergency
Article XIII C, Section 2(b) of the California Constitution
Declaration of Fiscal Emergency specifically related to the regulation and enforcement of the cannabis industry
Must be unanimous vote of the City Council

15. Next Steps Update ordinance based on City Council direction
Approved ordinance
Adopt resolution declaring fiscal emergency
Adopt resolution calling the election.
Continue finalizing regulatory framework
Tax measure appears on June 5th ballot