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Regular-General Government # 3.
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| Board of Supervisors |
County Administrator |
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| Subject |
| Introduce by title only, waive first reading, receive public comment, and direct staff to return on March 6, 2018 for a second reading and potential adoption of an ordinance making minor, clarifying amendments to the recently adopted ordinance imposing a general tax of 1-15% of gross receipts on commercial cannabis activities, with an initial rate of 4% of gross receipts of cultivation activities and 5% of gross receipts on all other commercial cannabis activities in the unincorporated area of Yolo County to be placed on the ballot at the June 5, 2018 election. (Potential annual general fund increase in the low millions of dollars) (Blacklock/Tengolics) |
| Recommended Action |
| Introduce by title only, waive first reading, receive public comment, and direct staff to return on March 6, 2018 for a second reading and potential adoption of an ordinance making minor, clarifying amendments to the recently adopted ordinance imposing a general tax of 1-15% of gross receipts on commercial cannabis activities, with an initial rate of 4% of gross receipts of cultivation activities and 5% of gross receipts on all other commercial cannabis activities in the unincorporated area of Yolo County to be placed on the ballot at the June 5, 2018 election. |
| Strategic Plan Goal(s) |
Operational Excellence
Thriving Residents
Safe Communities |
| Reason for Recommended Action/Background |
Background
At the February 6, 2018 meeting, the Board adopted an ordinance imposing a gross receipts tax at a rate range of 1-15% of gross receipts on all commercial cannabis activities. Under the ordinance, the County would tax cultivation at an initial rate of 4% of gross receipts and automatically increase to a rate of 5% of gross receipts on July 1, 2020. The County would tax all other commercial cannabis activities including but not limited to nurseries, dispensing/retailing, processing, manufacturing, laboratory testing, distributing, or delivery of cannabis in the unincorporated area at an initial rate of 5%. The Board would have discretion to set the rate anywhere within the previously described range, but the Board could not alter the rate more than once in a 12 month period or by more than two percentage points.
Reason for Current Action
Staff recently learned of a pending state ballot measure (A.G. No. 17-0050) that will, if passed in November, retroactively change the requirements for any taxes adopted in 2018 (Attachment C). Specifically, the ballot measure would require that a tax ordinance include a separate, stand-alone section containing a statement that the revenue raised by the tax can be spent for "unrestricted general revenue purposes". The current ordinance has a stand-alone section but the language is slightly different and reads that the revenue shall be spent for general governmental purposes, which is the language historically used in general tax ordinances. Because the ballot measure requires that any new tax adopted in 2018 strictly comply with that requirement, staff feel amending the ordinance accordingly would best protect the tax measure from later invalidation if it passes.
Also significant is that the initiative would require that all general and special taxes pass by a 2/3 majority (rather than just 50%). The ordinance contains a few edits to delete references that passage of the tax measure will require a majority vote of the voters voting at the election. Instead, not knowing what the final requirement will be, it simply references that passage will require the legally required number of voters to support it.
Language Clarification
This amendment also includes clean-up language in the definition of "gross receipts". The ordinance does not tax transactions that occur between units of the same business, but staff added language to clarify that, for the exemption to apply, the transactions must occur entirely within Yolo County. Otherwise, if the last unit of a vertically integrated business is located outside the County, the units of the business located and doing business in Yolo County would avoid the Yolo County cannabis business tax altogether.
Attachments
Attached as Attachment A is the amended ordinance. Attachment B is the original ordinance, with the changes referenced in this report tracked. Attachment C is the Statewide Initiative Measure. |
| Collaborations (including Board advisory groups and external partner agencies) |
| County Administrator's Office, County Counsel, Department of Agriculture, Department of Community Services, Department Financial Services, Grower Representatives |
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| Fiscal Impact |
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| Source of Funds for this Expenditure |
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Explanation (Expenditure and/or Revenue) |
| Further explanation as needed: |
| Potential annual general fund increase from tax measure in the low millions of dollars. |
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