City Council
MEETING DATE: 7/13/2016
TITLE:
Title
Submission to the Voters of a Question Proposing an Amendment to Chapter 3.48 of the Municipal Code related to the Cannabis Tax
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FROM:
Charles P. McClendon, City Manager
Erica L. Vega, Assistant City Attorney
Tracey Martinez, Deputy City Clerk
RECOMMENDATION:
Recommendation
Staff recommends the City Council approve a Resolution Calling and Giving Notice of the Submission to the Voters of a Question proposing an amendment to Chapter 3.48 of the Cathedral City Municipal Code modifying the existing Medical Cannabis Business Tax to impose the tax on all cannabis businesses and to provide tax calculations for cultivation, manufacturing, dispensary and other businesses.
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BACKGROUND:
The voters of the City of Cathedral City approved Ordinance No. 742 imposing a tax on medical marijuana in November 2014. The tax approved by the voters requires "every person engaged in operating or otherwise conducting a cannabis or marijuana collective and/or dispensary" to pay a 15% tax on gross receipts. The tax is codified in Chapter 3.48 of the Code. The City Council is authorized to levy the tax at a lower rate, and in August 2015 Council adopted Resolution 2015-50 reducing the rate to 10%. Earlier this year, the City Council adopted Ordinance 775, which amended Chapter 3.48 to include additional administrative procedures, clarify the meaning of "gross receipts," and revise terminology for consistency purposes.
At the time Ordinance No. 742 was approved by the voters, dispensaries were the only medical cannabis uses permitted in the City. Now, the City allows cultivation and manufacturing activity as well. As such, the Council directed staff to explore whether the tax should be amended to tax cultivation and manufacturing activity differently than dispensaries. On May 11, 2016, the City Council held a study session on this issue and directed staff to bring back for a study session proposed language amending Chapter 3.48 to tax cultivation and manufacturing on a basis other than gross receipts, and to suggest any other desirable amendments to the tax. On June 29, 2016, Staff presented to the City Council, during Study Session, a draft Ordinance to be presented to the voters of Cathedral City in the form of a Measure. The City Council discussed minor changes and directed staff to meet again with the sub-committee and present a final draft of the Ordinance at the July 13, 2016, City Council Meeting for approval. The subcommittee met again on June 30 and the proposed ordinance is the result.
The proposed Ordinance amending Chapter 3.48 is a general tax which must be proposed by an ordinance or resolution of the City Council as a "Measure" to the voters of Cathedral City. The ordinance or resolution proposing the general tax ("Measure") must include the type of tax and rate of tax to be levied, the method of collection, and the date upon which an election shall be held on the issue. The Measure may not be presented at the election unless the ordinance or resolution proposing the tax is approved by a two-thirds vote of all members of the City Council, which means at least four members must approve the placement of the Measure on the ballot.
DISCUSSION:
The Draft Ordinance is an amendment to Chapter 3.48 of the Cathedral City Municipal Code modifying the existing Medical Cannabis Business Tax to impose the tax on all cannabis businesses (Medical and Non-Medical) and to provide different tax calculations for cultivating, manufacturing and dispensing cannabis. As directed, the Sub-committee met on June 30, 2016 to finalize the language of the Ordinance, which is attached for your review.
The following is a list of changes that were made to the draft ordinance that was presented to the City Council on June 29, 2016, after the Sub-Committee held their meeting:
- The tax rate for cultivation is set at $20 per square foot per year
- The tax rate for cannabis concentrate produced or manufactured is set at 50 cents per gram.
- The tax rate for each unit of cannabis-infused product other than cannabis concentrate produced or manufactured and packaged or intended for individual sale is set at 50 cents.
- The tax rate for dispensaries and other cannabis businesses remains at 15 cents per dollar of gross receipts.
- In every case these tax rates constitute the maximum that may be charged and Council can adopt lower rates by resolution.
- The ordinance also clarifies that the cultivation tax on multi-story buildings applies to the combined square footage of floor space on all stories.
If the City Council approves the draft Ordinance ("Measure") a Resolution will also need to be approved calling and giving notice of the submission to the voters of a question proposing an amendment to Chapter 3.48 of the Cathedral City Municipal Code modifying the existing Medical Cannabis Business Tax to impose the tax on all cannabis businesses (Medical and Non-Medical) and to provide different tax calculations for cultivating, manufacturing and dispensing cannabis, which is also attached for the Council's review.
The City Attorney will prepare an impartial analysis on the Measure that explains the effect of the Measure on existing law as well as the operation of the tax.
Pursuant to Elections Code Section 9282, the City Council, or any authorized City Council Member(s), or any individual voter who is eligible to vote on the Measure, or bona fide association of citizens, or any combination of voters and associations, may file a written argument for or against the proposed measure. No argument shall exceed 300 words in length. Arguments are titled either "Argument In Favor Of Measure ____" or "Argument Against Measure ____", accordingly, the blank spaces being filled in only with the letter or number, if any, designating the measure. The Riverside County Registrar of Voters assigns letters to the Measures as they are received.
Elections Code Section 9282 provides that any or all members of the City Council, or an individual member of the City Council so authorized by the body may prepare the above-described written argument. The proposed Resolution provides that any or all members of the City council may prepare the arguments for or against.
The City Clerk, as the City's Elections Official, arranges for arguments for and against the measure to be printed along with the following statement on the front cover, or if none, on the heading of the first page, of the printed arguments: "Arguments in support or opposition of the proposed laws are the opinions of the authors." Ballot arguments must be accompanied by the printed name(s) and signature(s) of the person(s) submitting them, or, if submitted on behalf of an organization, the name of the organization and the printed name and signature of at least one of its principal officers. No more than five signatures may appear with any argument. (Elections Code Section 9283).
As noted in the Elections Code Section 9287, if more than one argument for or against the measure is submitted to the City Elections Official within the time prescribed, the City Elections Official must select one of the arguments in favor and one of the arguments against the measure for printing and distribution to the voters. In selecting the argument, the City Elections Official must give preference and priority to the arguments of the following:
1. The City Council or any of its member(s) authorized by that body.
2. The individual voter, or bona fide association of citizens, or combination of voters and associations, who are bona fide sponsors or proponents of the measure;
3. Bona fide associations of citizens; and
4. Individual voters who are eligible to vote on the measure.
If any person submits an argument against a city measure, and an argument has been filed in favor of the city measure, the City Elections Official must immediately send copies of that argument to the persons filing the argument of the city measure. The persons filing the argument in favor of the city measure may prepare and submit a rebuttal argument not exceeding 250 words.
The City Elections Official must send copies of the argument in favor of the measure to the persons filing the argument against the city measures, who may prepare and submit a rebuttal to the argument in favor of the City measure not exceeding 250 words. The rebuttal argument must be filed with the City Elections Official not more than 10 days after the final date for filing direct arguments. The proposed Resolution specifically allows for the submission and inclusion of rebuttal arguments.
FISCAL IMPACT:
The proposed amendments to Chapter 3.48 are anticipated to increase the potential tax revenues to the City from cannabis businesses. At this time staff is not able to estimate the amount of any increase as there are no cultivation and manufacturing businesses presently operating in the City.
ATTACHMENTS:
Draft Ordinance
Proposed Resolution