City staff recommended the council maintain the city's cannabis cultivation tax rate at $2 per square foot, and council members present signaled concurrence without taking formal action to change the rate.

Finance staff said voters originally authorized a cultivation tax in two measures (cited in the presentation as measures in 2016 and 2017) that allow the city to set a rate up to $5 per square foot; the city currently taxes cultivation at $2 per square foot. Staff reported that cultivation taxes have averaged about $258,000 annually over the past five years, representing roughly 14.5% of the city's general fund revenue.

Why it matters: cultivation tax revenue, staff said, funds critical services including street maintenance and police operations. Staff quantified revenue loss scenarios: reducing the rate to $1.50 per square foot would lower revenue by about $64,500 annually; reducing it to $1.00 per square foot would lower revenue by about $129,000 annually. Staff noted regional developments including Humboldt County's suspension of cannabis taxes for 2025 and other jurisdictions enacting credits or reductions.

Council comments were mixed: some council members argued growers knew the tax environment when they entered the industry and favored keeping the rate, while others raised concern that lower cultivation activity could reduce sales tax and other economic activity.

Council did not place a rate change on the agenda and staff said no council action was required to maintain the current rate; the matter remains at the existing $2-per-square-foot rate unless council brings a future action.