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Council orders ordinance to align city code with state law after SB 1059; city estimates $3M–$4M hit this fiscal year
Summary
City council instructed the municipal attorney to draft an ordinance to change local code after state Senate Bill 1059 took effect Jan. 1, 2025; finance staff estimated a $3 million to $4 million reduction in business tax revenue for the current fiscal year and $6 million to $8 million annually thereafter.
The City Council voted to instruct the municipal attorney to prepare an ordinance to change the city code so it complies with state law enacted in Senate Bill 1059, which took effect Jan. 1, 2025. Councilmember Padilla, Councilmember Di and Councilmember Jurado voted to approve the instruction.
The finance office told the council the new state law removes state excise tax from the local taxable receipts base for cannabis businesses. A finance office representative said the city currently estimates a $3 million to $4 million reduction in business tax revenue for the remainder of this fiscal year (because the law took effect Jan. 1) and a likely $6 million to $8 million reduction annually in the next fiscal year.
The council discussion focused on two items: (1) the mismatch between the city code’s definition of taxable receipts and the new state standard established by SB 1059, and (2) the fiscal impact of that mismatch. The finance presenter explained that under the previous local calculation the state excise tax paid by consumers on cannabis sales was included in the receipts base used to compute the city business tax; SB 1059 prohibits cities from including state excise tax in that base.
Councilmembers discussed next steps. The finance office recommended the council instruct the municipal attorney to draft a narrow change to the city code—removing or carving out language so the local receipts tax will exclude the state excise tax in line with SB 1059. The council approved that instruction and referred the matter to the municipal attorney for an ordinance; the council also indicated the ordinance would proceed through the usual budget and ordinance process.
City staff said the law is already in effect and that the first month to show reduced tax receipts will be February, when January activity is reported. The finance office representative also noted that the state-law change affects only registered, legal cannabis businesses (those registered with DCR); unregistered or illicit sellers were not subject to these taxes previously and therefore are unaffected by SB 1059’s change.
The council did not approve or adopt an ordinance at the meeting; it only directed the municipal attorney to prepare the required ordinance language to reconcile city code Section 21-51-4 with SB 1059. The council’s vote on that instruction was recorded as approved by the members present.
