Cannabis business tax measure may go before Encinitas voters in November
City Council also expected to review budget, hear requests from Equity Committee, ratify firefighters’ contract during meeting Wednesday
Encinitas voters may get their say on a cannabis business taxing measure in November under a proposal the City Council is expected to consider Wednesday, May 11.
The meeting, which is set to start at 6 p.m. at City Hall, has a jam-packed agenda. The cannabis business tax proposal is scheduled to come just after a report from the city’s Equity Committee on ways to make Encinitas more inclusive. And, it comes just before the introduction of the city’s proposed budget for the next fiscal year, the ratification of the firefighters’ employment contract, and the creation of an advisory group to discuss El Camino Real improvements.
Debate on cannabis measures has been of keen interest both to people who work in the industry and to people who oppose cannabis retail sales businesses, and council members have been encouraging them all to turn out for Wednesday’s session.
City officials have been taking steps to allow cannabis business to open in Encinitas ever since city voters approved Measure H in 2020. That citizens’ initiative allows cannabis retail sales, cultivation, manufacturing, kitchens, distribution, and personal use cultivation, subject to certain regulations and restrictions. In the case of retail sales, four business licenses will be issued. By the mid-February deadline, Encinitas had received 200 applications for cannabis retail sales licenses and city officials anticipate conducting a lottery for the four permits later this year.
The taxing proposal going before the City Council calls for cannabis retailers to face a tax rate ranging from 4 percent to 7 percent, while cultivation businesses would pay $2 to $10 per square foot based on their canopy area, a new city staff report states. It adds that a city-hired consulting firm forecasts that each of the four cannabis retail sales businesses could collect an average of $5 million a year in gross receipts, and the city could end up with $800,000 to $1.4 million in annual tax revenue.
“The estimated annual revenues are dependent on all four permitted retail businesses being open,” the staff report continues. “It is unknown at this time when, and if, all the businesses will be operating. Initial revenue is expected to be low and grow over time as businesses open.”
While many California cities that have permitted cannabis businesses use the tax revenue to pay for extra police enforcement and to mitigate any impacts caused by the cannabis businesses, the tax money “can be spent for any lawful general government purpose,” the staff report notes. Area cities with cannabis business or excise taxes include Chula Vista, La Mesa, Oceanside, San Diego and Vista.
To view the staff report and other documents, visit https://encinitasca.gov/Government/Agendas-Webcasts.
The decision to place the Encinitas taxing measure on the Nov. 8 ballot will require a supermajority, or 4/5ths of the council in favor.
Other agenda items before the City Council Wednesday night include:
- Discussing a final report produced by the city’s Equity Committee. The committee’s report lists a series of prioritized recommendations, including hiring a “diversity, equity, inclusion” leader and requiring that at least one woman or person of color be in each applicant pool for city boards and commissions.
- Considering whether to create an advisory task force to make recommendations regarding a now-in-production, El Camino Real corridor planning document.
- Getting an initial overview of the city manager’s proposed operating budget and capital projects budget for the coming fiscal year, which begins July 1.
- Ratifying the tentative agreement between the city and its firefighters’ union. The agreement spells out proposed employee raises and a new COVID-19 vaccination requirement.
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