Background Info on Commercial Cannabis Tax in City of Pinole

City staff recommends City Council to review background info on commercial cannabis tax, explore tax imposition, consider tax rate, revenue sharing, and impact on revenue budget. Pinole Municipal Code, Proposition 64, and local regulations are key factors in decision-making.

• City of Pinole
• Cannabis Tax
• Municipal Code
• Regulations
• Revenue Budget

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1. City of Pinole Background Information on Commercial Cannabis Tax City Council Meeting September 5, 2023

2. Staff Recommendation City staff recommends that the City Council receive a report of background information on commercial cannabis tax and provide direction as appropriate. Background Information on Commercial Cannabis Tax 2

3. Background Information On November 8, 2016, California voters passed Proposition 64, the Adult Use of Marijuana Act (AUMA). This proposition legalized the use of nonmedicinal cannabis for adults over 21 years old. The State of California developed state-wide regulations for recreational cannabis, allowing licenses for adult-use businesses effective January 1, 2018 Background Information on Commercial Cannabis Tax 3

4. What is a Commercial Cannabis Tax? A tax imposed on the purchasers of cannabis and cannabis products from cannabis retailers Can be a general (simple majority vote) or special tax (2/3 voter approval) Background Information on Commercial Cannabis Tax 4

5. Pinole Municipal Code Pinole Municipal Code prohibits marijuana dispensaries (5.64.030) and commercial marijuana cultivation (5.64.040) Voters could impose a tax on cannabis businesses if the City permitted them to operate amending the municipal code Background Information on Commercial Cannabis Tax 5

6. Considerations Type of Tax General or special; or revenue-sharing agreement Type of Retail Storefront or non-storefront Selection of Cannabis Retailers Request for proposals or open application process Tax Rate Appropriate tax rate to impose on retail cannabis sales Tax Receipts The amount of revenue generated from cannabis sales Tax receipts as a Percentage of the Revenue Budget Tax receipts compared total General Fund revenue budget Background Information on Commercial Cannabis Tax 6

7. Other Considerations The rates at which retail cannabis sales are taxed at the State and local levels State imposes a 15% excise tax on gross receipts Many jurisdictions have been decreasing and suspending their cannabis tax rates There is a fair amount of experience with local commercial cannabis taxes An estimate for Pinole would have to make certain assumptions about retail business activity Background Information on Commercial Cannabis Tax 7

8. Jurisdictions with Commercial Cannabis Taxes Benicia Berkeley El Cerrito Emeryville November 2018 Hayward Martinez November 2018 November 2010 (updated to include recreational use in 2018) General Storefront and Non- Storefront Information not accessible 5% per $1,000 gross receipts Not applicable November 2016 (updated to include recreational use in 2018) General Storefront and Non- Storefront No, open application process 6% of gross receipts; voters approved up to 15% of gross receipts Not applicable Voter Approval Date General Storefront Not applicable Storefront General Storefront Not applicable Storefront and Non- Storefront Yes Type of Tax Type of Retail RFP Issued to Select Operators? Information not No, open application process Yes accessible Up to 6% of gross receipts Up to 6% of gross receipts Community benefits agreement (details not accessible) Community benefits agreement (revenue sharing): Five percent (5%) of annual gross receipt sales between $1.00-$4,999,999, four percent (4%) of annual gross receipt sales between $5,000,000- $9,999,999, and three percent (3%) of annual gross receipt sales greater than $10,000,000. The following benefits to the community are included in the agreement: workforce development, collective bargaining agreement with a labor organization that represents California cannabis workers, community contributions in the form of donations to non-profit organizations, local hiring, career development/apprenticeship program, and volunteer hours to non- profit organizations. Tax Rate Background Information on Commercial Cannabis Tax 8

9. Jurisdictions with Commercial Cannabis Taxes (continued) Benicia Berkeley El Cerrito Emeryville FY 2020/21 Actual: $544,192 FY 2021/22 Actual: $466,937 FY 2022/23 Estimated: $400,000 FY 2023/24 Budget: $400,000 Hayward Martinez FY 2020/21 Actual: Not available FY 2021/22 Actual: $450,000 FY 2022/23 Estimated: $400,000 FY 2023/24 Budget: $225,000 FY 2020/21 Actual: $1,712,641 FY 2021/22 Actual: $1,250,792 FY 2022/23 Estimated: $1,122,351 FY 2023/24 Budget: $1,000,000 FY 2020/21 Actual: Not applicable FY 2021/22 Actual: $330,425 FY 2022/23 Estimated: Not available FY 2023/24 Budget: $600,000 FY 2020/21 Actual: $442,000 FY 2021/22 Actual: $843,000 FY 2022/23 Estimated: $1,100,000 FY 2023/24 Budget: $1,100,000 FY 2020/21 Actual: $800,000 FY 2021/22 Actual: $1,794,908 FY 2022/23 Estimated: $1,600,000 FY 2023/24 Budget: $1,600,000 Tax Receipts Percentage of General Fund Revenue Budget 0.4% 0.4% 1.2% 1.0% 0.6% 4.5% Background Information on Commercial Cannabis Tax 9

10. Next Steps Consulting firm, Baker Tilly, to assist with identifying local tax options City Council direction to staff Background Information on Commercial Cannabis Tax 10

11. Thank You Questions/Comments? Background Information on Commercial Cannabis Tax 11