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June 5, 2018 — California Primary Election
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County

County of San Luis Obispo
Measure B-18 Ordinance - Majority Approval Required

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Election Results

Passed

62,823 votes yes (76.37%)

19,436 votes no (23.63%)

100% of precincts reporting (144/144).

87,470 ballots counted.

Shall an ordinance be adopted imposing a Cannabis Business Tax of up to 10% on gross receipts of cannabis businesses operating in unincorporated areas of San Luis Obispo County, estimated to initially raise between 1.4 to 5 million dollars annually, depending on amount of gross receipts, with funds staying local for unrestricted general revenue purposes, including but not limited to public safety, health, environmental protection and addressing industry impacts, unless repealed or amended by voters?

What is this proposal?

Measure Details — Official information about this measure

Summary

 

 

Impartial analysis / Proposal

Rita L. Neal County Counsel

This measure is placed on the ballot by the Board of Supervisors (“the Board”) of the County of San Luis Obispo, and will determine whether an ordinance imposing a tax on commercial cannabis business activities within the unincorporated area of the county shall be enacted by approval of a majority vote of the qualified electors of the county voting on the measure.

                In November 2017, the Board enacted a cannabis ordinance, establishing comprehensive regulations upon cannabis activities in the unincorporated area of the county. At the same time, the Board also enacted an ordinance requiring the issuance of a license before any cannabis business may operate within the unincorporated area of the county.

                The Board has determined that commercial cannabis business activities within the county will necessarily impact code enforcement, law enforcement, policy development, public health and education, and environmental clean-up. Costs associated with these services may not be fully funded through the collection of business license fees. The Board has determined that an additional funding source will be needed in order to address the risks and adverse impacts of legalized cannabis within the county while also maintaining existing general government services funded through the county’s general fund. Therefore, pursuant to the authority provided by California Revenue and Taxation Code section 7284, the Board proposes, through the approval of this measure, that an ordinance be enacted providing for a general purpose tax to be imposed annually on all commercial cannabis business activities within the unincorporated area of the county.

                If approved, effective July 1, 2018, through June 30, 2020, the initial tax rate shall be set at 4% of gross receipts per fiscal year of each commercial cannabis business operating within the unincorporated area of the county, and shall increase annually thereafter, commencing July 1, 2020, in 2% increments not to exceed 10% per fiscal year. In any year after the tax is approved and imposed, the Board, by three-fifths vote, may maintain the tax rate without any increase or reduce the rate for the next succeeding fiscal year. In addition, the Board may establish varying tax rates for different categories of cannabis businesses, subject to the maximum 10% tax rate on gross receipts. The proposed ordinance defines “gross receipts” to mean the total amount actually received or receivable from all sales, and the total amount or compensation actually received or receivable for the performance of any act or service for which a charge is made or credit allowed. Testing laboratories are exempt from the tax.  The measure imposes penalties and interest for the failure or refusal to pay any tax required by the ordinance.

                In accordance with Article XIIIC, section 2(b) of the California Constitution and California Government Code section 53723, the imposition of the proposed tax must be approved by a majority vote of the electors of the county voting on the measure. If the tax is approved, revenue derived from the tax will be deposited into the county’s general fund and may be used for general governmental purposes.

Financial effect

James P. Erb, CPA County Auditor-Controller-Treasurer-Tax Collector

Ballot Measure B-18, if approved, would allow for a Cannabis Business Tax (CBT) of commercial non-medical and medical Cannabis Related Businesses (CRB’s) in the unincorporated area of San Luis Obispo County (“County”).  The measure will increase County general revenues while the collection and administration of the tax will have a relatively small impact on County expenditures.  The CBT would be based on gross receipts and would apply to all CRB’s unless exempted by this measure or by the County Board of Supervisors.  The CBT will be a general tax which requires a 50% plus 1 vote of the public to be enacted into law.  Use of general tax revenue is under the discretion of the Board of Supervisors and meant to fund general government activities such as public safety, health and human services, and land use compliance.

If approved, the CBT will begin July 1, 2018 at 4% of gross receipts and automatically increase 2% a year beginning July 1, 2020, to a maximum of 10%.  This ballot measure provides flexibility to the Board of Supervisors to modify the overall tax collected or exclude specific CRB businesses by a 3/5th vote so long as the maximum of 10% is not exceeded.  The Board of Supervisors determined testing of cannabis products is a public health function and is specifically excluded from the CBT.  The CBT is expected to generate approximately 1.4 million dollars in the first year of implementation.  Over time, as the cannabis industry becomes established, the revenue may increase.  Consultants hired by the County to estimate revenue from the CBT provided a low estimate of 5.3 million dollars and a high estimate of 28 million dollars a year at 4% when all 141 licensed cultivators are commercially growing and selling cannabis.  As the County Auditor-Controller-Treasurer-Tax Collector (ACTTC) I believe these estimates are high and point out there are many unknown variables such as the actual number of licensed cannabis operators in the County, consumer demand for cannabis, competition from CRB’s located in other jurisdictions, the market price of cannabis, and the accuracy in reporting of cannabis sales.

Expenditures related to Ballot Measure B-18 are minimal and would consist mostly of collection efforts which are currently covered by existing staff in the Auditor-Controller-Treasurer-Tax Collector’s Office.  Should additional staff be required, costs are expected to be less than $200,000 per year.  These costs would be funded by County general revenues.

 

 

Published Arguments — Arguments for and against the ballot measure

Arguments FOR

With the passage of Proposition 64, which legalized recreational cannabis, local governments were given the responsibly to provide oversight and regulate the legalization within their communities.

The San Luis Obispo County Board of Supervisors recently completed a multi-year process to review and approve local regulations for land use, public safety, licensing, and other cannabis-related issues in the unincorporated areas of our county. After numerous public hearings and meetings, the Board adopted ordinances that allow San Luis Obispo County to ensure public safety while overseeing this growing industry. Local ordinances create buffer zones around schools, parks, residential neighborhoods, and other sensitive areas and locations, and mandate odor controls.

Legalization leads to needed enforcement, education, and other related services. San Luis Obispo County needs to tax the cannabis industry in order to effectively enforce our ordinances and fund critical services such as the Sheriff’s Department, District Attorney, mental health services, public health, and other important services.

Opponents may claim that the money will simply go into the general fund. What they usually leave out is that the general fund is used to pay for important services like those listed above, plus other services such as County Fire, parks, and road maintenance.

Whether you agree with the legalization of cannabis or not, it is imperative that we tax the industry to ensure compliance with existing laws and deal with the black market.

The proposed starting tax rate of 4% in Measure B-18 is fair to cannabis businesses and consumers, and is much lower than the rates already approved in other jurisdictions such as Grover Beach and Monterey County.

Please join us in supporting Measure B-18 to ensure that cannabis does not create a burden that takes money away from existing programs and services.

The undersigned authors of the primary argument in favor of Ballot Measure B-18 at the Statewide Direct Primary Election for San Luis Obispo County to be held on June 5, 2018, hereby state that such argument is true and correct to the best of their knowledge and belief.

Board of Supervisors of the County of San Luis Obispo

s/ John Peschong,

Chair, District 1, Board of Supervisors,

County of San Luis Obispo

s/ Adam Hill,

District 3, Board of Supervisors,

County of San Luis Obispo

Arguments AGAINST

NO ARGUMENT AGAINST MEASURE B-18 SUBMITTED

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