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Item No. 2.
| MEETING DATE: 05/17/2021 |
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| TO: | HONORABLE MAYOR AND COUNCILMEMBERS |
| FROM: | JIM SADRO, CITY MANAGER By: Mel Shannon, Director of Finance |
| SUBJECT: | DULY NOTICED PUBLIC HEARING TO RECEIVE AND FILE A SUPPLEMENTAL AGENDA REPORT AND APPROVE THE SECOND READING AND ADOPTION OF AN ORDINANCE ADDING CHAPTER 5.58 ("CANNABIS BUSINESS TAX") TO TITLE 5 OF THE LA HABRA MUNICIPAL CODE |
RECOMMENDATION:
That the City Council:
A. Receive and file the Supplemental Agenda Report; and
B. APPROVE THE SECOND READING AND ADOPTION OF ORDINANCE NO. 1834 ENTITLED: AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LA HABRA, CALIFORNIA, ADDING CHAPTER 5.58 ("CANNABIS BUSINESS TAX") TO TITLE 5 OF THE LA HABRA MUNICIPAL CODE.
DISCUSSION:
On April 5, 2021, staff presented Chapter 5.58 (Cannabis Business Tax) to the City Council for review and approval. Chapter 5.58 establishes business tax rates for cannabis warehouse distribution, laboratory testing, and non-storefront (delivery only) retail dispensary facilities. The City Council conducted a public hearing for the first reading of the ordinance. During deliberations, City Council asked how the proposed gross receipts tax rates were determined. Staff indicated that the proposed rates were the result of surveys of other cannabis tax rates established by other cities in the region, along with an analysis conducted by the City's revenue consultant, HdL. If approved, the proposed rates would pertain to currently permitted cannabis business types, as well as other types of cannabis businesses not currently approved for operation in La Habra, but that could be permitted by future action of the City Council.
In the event the City Council were to allow additional types of cannabis businesses in the future, staff would conduct additional tax surveys to determine the range of rates for each type of new cannabis business, and would return to Council with recommendations at that time. Mayor Espinoza made a motion to approve the first reading, which was seconded by Mayor Pro Tem Medrano and approved by Council.
Attached to this Supplemental Report is the City Council staff report, with attachments, from April 5, 2021 (Attachment 1). It is recommended the City Council conduct a public hearing on the second reading and adopt an Ordinance adding Chapter 5.58 (Cannabis Business Tax) to Title 5 of the La Habra Municipal Code.
NPDES
The proposal has been reviewed pursuant to the requirements of the City’s National Pollutant Discharge Elimination System (NPDES) Municipal Permit, the Local Implementation Plan (LIP), and the model Water Quality Management Plan (WQMP), Section 7.2. Since the Cannabis Business Tax does not disturb any soil, it is exempt by the Water Quality Ordinance from the preparation of a WQMP.
CEQA
The proposed action is exempt from the California Environmental Quality Act by the California Environmental Quality Guidelines Section 15378, (b), (4), “The creation of governmental funding mechanisms or other governmental fiscal activities which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.” No land use improvements result from the proposed ordinance and therefore the proposed ordinance is exempt from CEQA.
Public Notice
Government Code 54954.6 requires special noticing for the consideration of this tax ordinance. Specifically, subsection (b)(1) requires the tax to be considered at a public meeting and then again at a public hearing after publication is made in the newspaper. The public meeting must be at least 10 days after the first publication and the public hearing must be at least 7 days after the public meeting and at least 45 days after the first publication.
In the event the City Council were to allow additional types of cannabis businesses in the future, staff would conduct additional tax surveys to determine the range of rates for each type of new cannabis business, and would return to Council with recommendations at that time. Mayor Espinoza made a motion to approve the first reading, which was seconded by Mayor Pro Tem Medrano and approved by Council.
Attached to this Supplemental Report is the City Council staff report, with attachments, from April 5, 2021 (Attachment 1). It is recommended the City Council conduct a public hearing on the second reading and adopt an Ordinance adding Chapter 5.58 (Cannabis Business Tax) to Title 5 of the La Habra Municipal Code.
NPDES
The proposal has been reviewed pursuant to the requirements of the City’s National Pollutant Discharge Elimination System (NPDES) Municipal Permit, the Local Implementation Plan (LIP), and the model Water Quality Management Plan (WQMP), Section 7.2. Since the Cannabis Business Tax does not disturb any soil, it is exempt by the Water Quality Ordinance from the preparation of a WQMP.
CEQA
The proposed action is exempt from the California Environmental Quality Act by the California Environmental Quality Guidelines Section 15378, (b), (4), “The creation of governmental funding mechanisms or other governmental fiscal activities which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.” No land use improvements result from the proposed ordinance and therefore the proposed ordinance is exempt from CEQA.
Public Notice
Government Code 54954.6 requires special noticing for the consideration of this tax ordinance. Specifically, subsection (b)(1) requires the tax to be considered at a public meeting and then again at a public hearing after publication is made in the newspaper. The public meeting must be at least 10 days after the first publication and the public hearing must be at least 7 days after the public meeting and at least 45 days after the first publication.
FISCAL IMPACT/SOURCE OF FUNDING:
In November 2020 La Habra voters approved local Measure W to establish a Cannabis Business Tax. Measure W indicated the tax would fund municipal services including fire protection, 911/emergency medical response, public safety/senior programs/preserve open space/address homelessness/retain small businesses/other general services. The proposed tax rates allow the City to be competitive in attracting cannabis distribution (warehousing), laboratory testing and non-storefront (delivery only) retail dispensary operators in Southern California thereby generating tax revenues to assist in providing needed services to the community. At this time it is unknown how much these recommended cannabis tax rates will generate in revenue for the City’s General Fund, however, if all licenses are issued and full operations are reached, the amount would likely be in excess of $1 million per year.
GENERAL PLAN RELEVANCE:
Action on the Commercial Cannabis Ordinance implements the following General Plan Policies:
ED 9.1 Balanced Fiscal Practices
ED 9.2 Long-Term Infrastructure Viability
ED 9.3 Reciprocal Fiscal Benefit
ED 9.1 Balanced Fiscal Practices
ED 9.2 Long-Term Infrastructure Viability
ED 9.3 Reciprocal Fiscal Benefit