65A - RPT - REGARDING MEDICAL MARIJUANA INITIATIVE

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CHAPTER 5 FISCAL IMPACTS Fiscal Impact of the Santa Ana Medical Cannabis Restriction and Limitation Act Costs Associated with Initiative Direct costs associated with the potential passage of the initiative revolve around the need to: (1) coordinate enforcement efforts and fulfill functional administrative and ministerial duties; (2) maintain an adequate enforcement program to mitigate secondary impacts in connection with registered medical marijuana dispensaries; (3) administer, audit, and collect the 2% gross cannabis business license tax; and (4) monitor proper reporting, remitting, and allocation of local sales tax The initiative's amendment of the City's Business License Tax Code (SAMC Chapter 21) to add a 2% gross receipts Cannabis Business License Tax Rate and provide for quarterly installment payments of the tax, together with its declaration that the City may claim any sales tax collected by the California State Board of Equalization gives rise to a requirement to administer and collect the Cannabis Business License Tax and to audit the reporting and remitting of both the 2% business license tax and the corresponding 8% sales tax (1 % of which is allocable to the City). Since marijuana dispensaries are by their nature primarily cash businesses, business license and sales tax audits will need to be performed at least bi-annually. Assuming 12 hours per audit, fully burdened staff time at $51.53 (plus $400 to cover vehicle, equipment, and supplies), and auditing of half or 11 registered dispensaries per year, the annual cost to the City is estimated at $7,000. The total cost to audit the 22 registered dispensaries is $14,000 for the two year period. Revenue Generation Revenue from the operation of 22 registered medical marijuana dispensaries is extrapolated from 3 sources (Exhibit 4 - Medical Marijuana Dispensaries: 2% Gross Receipts Cannabis Business License Tax / 1% Sales Tax / $500 Dispensary Registration Fee Calculation of Estimated Revenue): (1) a 2% Gross Receipts Cannabis Business License Tax, plus Business License Tax Application Processing Charge (estimated for FY 2014-15 at $32 per dispensary); 20 65A-26