By: Zachary Lopez (ZachNews)
Source: City of Needles (Information and Agenda Item Packet)
Needles, California: Members of the Needles City Council will be discussing and possibly voting on a proposed November 2022 ballot measure for a Cannabis Square Foot Tax Ordinance during their regular meeting scheduled for 6:00 p.m. PT on Tuesday, June 14th, 2022 inside the Needles City Council Chambers located at 1111 Bailey Avenue near J Street.
According to information from the Needles City Clerk’s Office, the current Marijuana Tax was overwhelmingly approved by the voters of the City of Needles in 2012. Over the past 9 years the tax has generated approximately $9,009,125 which has been used for a variety of critical City needs including streets and sidewalks, law enforcement, Municipal Code compliance, Audits, parks recreation facilities and repairs, and a portion to assist the private creation of new non-cannabis businesses and jobs. The projected revenue expected from this tax may represent approximately 39% of the City’s General Fund revenue for the upcoming fiscal year.
The tax is collected as an excise tax based upon the gross receipts of all cannabis businesses from cultivation to retail sales of processed products. The tax is collected by the business owner based upon their total sales each month and submitted to the City along with records demonstrating those sales. Additionally, each cannabis company is inspected at least monthly for compliance with the tax requirements, plus any and all other state and local laws and regulations. The current methodology is cumbersome and requires the businesses to identify their gross sales and the value of the products sold. A bigger problem is that the cannabis industry is a “cash-only” business with employees, materials, supplies, utilities, inventory, rent and other expenses paid in cash with no corresponding bank records against which financial audits normally occur. Further complicating this approach is the lack of availability of corresponding State tax data with which to compare the gross receipts reported to the State with the tax reported to the City.
Many jurisdictions that permit cannabis businesses have utilized a taxing methodology in which the cannabis business pays a tax based upon the square footage of their business. This is particularly true of cultivation operations where the size of the facility more than any other factor determines the quantity of product grown and sold. The City engaged the consulting firm of HdL to develop a tax based upon the square footage of cultivations that would generate the same or similar amounts as the tax based upon gross receipts. Their May 2022 report analyzed local cultivators’ revenue generation based upon the current methodology and converted it to a square foot methodology. The report recommends a square foot tax of $20/sq’ to $28/sq’ depending upon the maximum size of the facility or the canopy.
After the City Council received the report, staff met with the cultivation community and there were significant questions, support and opposition. There was no consensus which indicates that more work is essential prior to submitting this matter to the voters.
As for any fiscal impact to note, the City of Needles states the similar to tax receipts to date, potential under collecting of what is owed.
According to information from the Needles City Clerk’s Office, the recommendation for members of the Needles City Council is to continue to work on a new taxing methodology that overcomes the deficiencies of the current system. Work to perfect the existing self-reporting system to assure that the City is receiving the tax amounts owed and as directed by the voters in 2012. Continue to update the Marijuana provisions of the Municipal Code in order to stay current with the ever-changing State law.
The agenda item was submitted by Rick Daniels, Needles City Manager and Patrick Martinez, Needles Assistant City Manager and Needles Development Services City Management.
*** Agenda Packet Information (PDF File Download): ***
The mayor and City council members may be attending this meeting via Microsoft Teams.
The public may attend the meeting but masks are encourage or can attend via Microsoft Teams.
The public may submit any comments in writing prior to noon on the day of the meeting by emailing: email@example.com
To join the live Microsoft Teams meeting log into the City of Needles website at: https://cityofneedles.com/ to access the agenda and the meeting.
If asked, enter the following: Meeting ID: 217 048 915# or listen in and participate by calling Microsoft Teams: 1-323-488-2227 – Meeting ID: 217 048 915#.
The meetings are being recorded by the City of Needles.
ZachNews will be broadcasting live at ZachNews on Facebook or recording to post later on ZachNews this portion of the regular meeting regarding this agenda item.
For more information, please contact Dale Jones, City Clerk at the City of Needles at: 1 (760) 326-2113.