Vacaville, CA cannabis prohibition could end on November ballot

The issue of cannabis dispensaries in Vacaville has been hotly debated since before California voters approved their legalization in 2016. It may go before local voters in November if the Vacaville City Council approves a ballot measure to impose a cannabis business tax.

The matter will go before the council at its Tuesday meeting.

In 2016, the council adopted a medical cannabis regulations ordinance that permanently prohibited all medical cannabis businesses and operations and temporarily prohibited the personal cultivation of medical marijuana. It also included a sunset clause regarding the personal cultivation of medical cannabis by qualified patients and primary caregivers which expired in 2018.

In 2017, the council adopted an emergency moratorium ordinance which was set to expire Sept. 26, 2019. In April and May of last year, the city held a community open house and Chamber of Commerce business roundtable respectively to gauge where residents and local business owners stood on the cannabis issues. In between, the council voted 3-1 to continue the city’s cannabis prohibition. The council voted 3-1 in June 2019 to prohibit cannabis while also continuing to observe how such businesses are implemented in other cities and determine whether or not to repeal the prohibition later on.

At its Dec. 10 meeting, city staff presented new information on how other jurisdictions have handled cannabis, the status of the industry in California and requested further instruction as to whether or not the council would like to permit such businesses. The council opted to direct staff to review a potential cannabis tax with the possibility of it appearing on the next election ballot.

According to a staff report by City Attorney Melinda Stewart and Fred Buderi, acting community development director, staff have worked with consultant HdL Companies to put together a cannabis tax ordinance.

“Different tax rates have been set in the ordinance for each type of business to enhance the City’s revenue base while establishing flexibility in the tax rate which will make the cannabis businesses sustainable during various market conditions,” Buderi and Stewart wrote.

The proposed rates are the current prevailing rates for each cannabusiness type in the state and are comparable with cannabis tax rates in other Solano County cities, Buderi and Stewart wrote.

“The evolution of cannabis policy within California has shown that tax rates must not be so overburdening that operators choose to remain in the illegal market,” the authors wrote. “The tax rates proposed, when combined with state taxes, represent a cumulative tax rate of less than 30%. A cumulative tax rate of less 30% has been found to be the optimal rate of taxation, allowing for cannabis businesses to stay competitive in the market while generating positive revenues for the City.”

The tax rates are broken down by each type of business. For retail, each person involved will be subject to a maximum tax rate not to exceed 6 percent of gross receipts. Out-of-town cannabis delivery services selling products in the city would also be subject to the city cannabis tax.

The maximum rate for testing businesses will not exceed 2 percent of gross receipts, and it will be no more than 4 percent for manufacturing businesses and 3 percent for distribution businesses.

For cultivation businesses, the rates will differ by each facility’s lighting. Through Jan. 1, 2024, the annual maximum rate will be $10 per square foot of canopy space in a building that uses exclusively artificial lighting, $7 per square foor of canopy space in a building that uses a combination of natural and supplemental lighting, $4 per square foot in spaces that use no artificial lighting and $2 per square foot for all nurseries.

Beginning Jan. 1, 2024 and for every Jan. 1 thereafter, the maximum annual tax rates would increase by the percentage growth in the Consumer Price Index for consumers in the San Francisco-Oakland-Hayward region as published by the federal Bureau of Labor Statistics. CPI adjustments resulting in a decrease of any tax imposed by a subsection of the ordinance would not be made.

If the measure fails in November, the staff is advised to return to the council for an updated discussion about which types of cannabusinesses should be allowed in the city, if any.

In other business, the council will consider an ordinance amending the contract between the city and Board of Administration of the California Public Employees’ Retirement System.

The council will meet at 6 p.m. Tuesday. Due to the global coronavirus pandemic, the meeting will not be physically held in the Council Chamber but conducted remotely via Zoom and teleconferencing.

First posted on  The Reporter