Item 28 - OC Grand Jury's Report, Findings, Recs. Regarding Santa Ana's Cannabis Program

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“Pot Luck”: Santa Ana’s Monopoly on Licensed Retail Adult-Use Cannabis in Orange County 2020-2021 Orange County Grand Jury Page 6 Financial Impact In November 2018, residents of the City of Santa Ana approved Measure Y by a vote of 71% Yes to 29% No. Measure Y is a tax on Retail Adult-Use Cannabis businesses operating in the City that provides for a tax of 25 cents to 35 dollars based on the gross square footage of the business and a sales tax of up to 10% for retail sales. The City estimates that Measure Y will generate $11-14 million a year to fund city services. On December 4, 2018, the Santa Ana City Council adopted Ordinance NS-2959 (see Appendix 5), establishing a “Cannabis Public Benefit Fund”. The fund derives almost all of its money from Measure Y and requires that the city allocate all money received from the sale of Retail Adult- Use Cannabis as follows: one third to the General Fund, one third to Enforcement Services, and the final third to Youth Services. Some of the City of Santa Ana Council members and staff interviewed by OCGJ informed the OCGJ that there is no true, viable oversight regarding disbursement and use of cannabis money received. The OCGJ learned that there is no clearly identifiable accounting for residents to see how this money is spent. Furthermore, the COVID pandemic has caused a shifting of money from previously planned programs to others. Money received by the Retail Adult-Use Cannabis businesses for the last two years from the Measure Y tax has been in excess of $20 million. The General Fund money can be allocated to projects or programs in any City department, and expenditures from this fund cannot be specifically attributed to the Cannabis Public Benefit Fund. It has also been difficult to secure specific information about how the money for Enforcement Services has been used. Interviews with City staff indicated that various departments rely on Measure Y funds for their enforcement efforts. For example, the Police Department has funded the Vice Unit with Measure Y proceeds and the Planning and Building Agency, especially the Code Enforcement Division, also relies on Cannabis Public Benefit Fund money to staff some positions. However, the OCGJ has not received a clear breakdown of how the Enforcement Services money has been used by the various city agencies. Expenditures related to Youth Services are much more transparent. The following programs and projects are anticipated to be funded from the Cannabis Public Benefit Fund and undertaken in the following year for the benefit of Santa Ana youth: • Library Services Book/Techmobile Digital Collection for Teens Laptop Dispenser Kiosks Wireless Hotspots • Library Improvements at the Newhope Branch Library • Library Playground at the Main Branch