Laserfiche WebLink
Ordinance Amendment No. 2022-01 - Commercial Cannabis Regulatory and Tax <br />Updates <br />September 20, 2022 <br />Page 3 <br />2 <br />5 <br />0 <br />8 <br />In 2020, the City of Long Beach reduced its Cannabis supply tax rate from 6% to 1%. <br />Representatives of the Cannabis industry indicated that Long Beach tax collections <br />significantly increased after the rate reduction. Staff obtained revenue estimates from <br />Long Beach and found, in aggregate, that supply businesses in that city are generating <br />roughly the same amount of tax, on a per-percentage basis, as supply businesses in the <br />City of Santa Ana (an average of approximately $8,900 per 1% percent of tax rate, per <br />location). Therefore, it appears that Long Beach’s action in 2020 merely increased tax <br />collections to the same comparative level as Santa Ana. <br />In conjunction with the recommended rate reduction to 1%, staff recommends a reduction <br />of the alternate (minimum) square footage tax rates for commercial cannabis cultivation, <br />distribution, and manufacturing. The proposed square-footage tax-rate reductions are as <br />follows: cultivation from $10 per square foot to $7; distribution from $4 per square foot to <br />$3; and manufacturing from $10 per square foot to $3. <br />At this time, staff does not recommend an adjustment of the 8% Cannabis retail rate or <br />the 6% medicinal rate. The City’s retail Cannabis tax revenue continues to grow. Staff <br />obtained revenue estimates from other jurisdictions and it appears that, on average, <br />Santa Ana Cannabis businesses generate higher sales volume than those in other <br />jurisdictions. In May of this year, the Long Beach City Council directed staff to prepare a <br />report exploring the feasibility of reducing the Long Beach retail tax rate (currently 8%) to <br />align with the medicinal tax rate (currently 6%). The item was presented to the City of <br />Long Beach Economic and Finance Committee on August 18, 2022, recommendation of <br />committee was to “Receive and File”. Long Beach staff did, however, recommend a <br />reduction of the tax rate for eight new equity storefronts to enhance their ability to compete <br />with established storefronts. There was no recommendation to reduce the tax rate for <br />existing Cannabis retail businesses. If desired, Santa Ana City Council could direct staff <br />to return in one year with an updated market analysis, including the latest revenue <br />estimates for further comparison. <br />The State of California recently enacted AB195, which includes tax credits for “high-road” <br />Cannabis employers that compensate employees at or above 150% of minimum wage, <br />provide group health insurance and retirement benefits, provide safety equipment and <br />training, and provide workforce development training to build skills and competitiveness. <br />Because tax credits are available at the state level, staff does not recommend tax credits <br />at the local level at this time. Staff is not aware of any other cities currently considering <br />local tax credits. <br />Proposed Amendments – Financial (SAMC Chapter 21) <br />Table 1 (Proposed Amendments to Chapter 21) describes the finance-related ordinance <br />amendments. Additional details are provided in the subsections that follow.