Staff recommends keeping cannabis cultivation tax at $2/sq ft; council signals concurrence

Finance Director Trevor Samuel presented an analysis of the city’s cannabis cultivation tax and recommended maintaining the current rate of $2 per square foot. Council members discussed the history of the tax, its revenue role and market pressures affecting cultivators.

Samuel told the council that voters first authorized cultivation taxes in 2016 (measure referenced in presentation) and again in 2017, the latter with roughly 81% approval, and that the voter authorization allows taxes of up to $5 per square foot. Staff said the current rate has not changed in more than six years and that cultivation taxes generated an average of $258,000 annually over the last five years—about 14.5% of the general fund—funding services such as road maintenance and police operations.

Samuel presented estimates showing lower rates would reduce revenue materially: dropping to $1.50 would reduce annual revenue by roughly $64,500 and reducing to $1 would cut about $129,000 annually. He noted regional moves by other jurisdictions—Humboldt County suspending cultivation taxes for 2025 and other places offering credits—but said the city’s rate remains competitive and that retail taxes and hardship relief mechanisms differ from cultivation tax treatment.

Council members expressed differing views in public discussion. Some argued the original voter mandate and the city’s reliance on the revenue stream argue for keeping the rate, while others raised concerns about the local industry’s decline and urged consideration of temporary relief. The mayor asked for public comment; none of the councilmembers moved a formal change. Staff noted that technically the recommendation requires no formal council action; the council indicated concurrence and moved on.