South Lake Tahoe City Council to consider cannabis regulations, tax question | TahoeDailyTribune.com

South Lake Tahoe City Council to consider cannabis regulations, tax question

In this June 27, 2017, photo, popcorn shaped marijuana nuggets are seen in a plastic container at the Higher Path medical marijuana dispensary owned by Jerred Kiloh in Los Angeles. On a typical day, $15,000 can change hands in his dispensary, where a steady stream of customers pick from shelves stocked with products, from cannabis-infused lip balm to potent concentrates that look like thin sheets of amber-colored ice.

The foundation for allowing the recreational cannabis industry in South Lake Tahoe will come before City Council Monday, however, several factors beyond council's control could disrupt those plans.

The ordinance that council will consider July 2 would allow for two retail businesses, two cultivation businesses (limited to less than 5,000 square feet of grow area), unlimited testing facilities and two micro-businesses — the last of which is a single license that allows for a minimum of three activities, such as manufacturing, retail and cultivation.

At the same meeting, council will consider putting a cannabis tax question before voters in November. Staff is recommending the question include a tax range that council could adjust with a vote by a minimum of four out of five councilmembers.

The high end of that range is designed to keep the cumulative tax rate — a number that includes state taxes — below 30 percent.

Staff is recommending that council set the starting rate at the low end. For retail sales, both medicinal and recreational, the rate would be set at 4 percent of gross receipts. That number would be 2 percent for distribution businesses and 1 percent for testing businesses.

The rate for cultivation varies based on the type of lighting, with the highest rate being set at $7 per square foot of canopy space.

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Based on the limitations outlined in the ordinance, the city predicts the tax question, if approved by voters, could generate $435,000 and $700,000 annually.

However, a statewide initiative could make approval of the cannabis tax more challenging.

The California Tax Fairness Transparency and Accountability Act will ask voters to raise the threshold for raising taxes to 2/3 of the electorate, rather than a simple majority. If approved by California voters, the act would be retroactive, negating any tax measure approved by less than 2/3 of the vote after Jan. 1, 2018.

If California voters approve the accountability act and the cannabis sales tax receives less than 2/3 of the vote then it would be dead.

The other unknown concerns a citizen initiative that would permit all state cannabis licenses within the city without restricting the allowable number of businesses.

An El Dorado County election official told the Tribune that signature verification results for the initiative would be sent to the city clerk on Friday. Those results were not available as of press deadline.

Tahoe Wellness Cooperative's Executive Director Cody Bass spearheaded the initiative.

Bass, whose business is the lone medical marijuana dispensary on South Shore, has been in a protracted legal battle with the city.

He has publicly pleaded with council to bring an amicable end to the legal battle, offering at one point to drop the initiative. Council has not acted on those requests. It is scheduled to discuss the litigation in closed session prior to the 9 a.m. start of Monday's meeting.