Canyon Lake sets 6% community benefit rate for commercial cannabis; suspended dispensary owes past-due payments

The Canyon Lake City Council on a unanimous roll call adopted a resolution authorizing the city manager to amend community benefit agreements so commercial cannabis businesses pay 6% of gross revenues to the city.

Council members said the change is intended to make local cannabis retail financially sustainable while preserving the city’s ability to collect what businesses already owe. City Manager Aaron Brown and the city attorney outlined the history of the city’s cannabis permits, the financial shortfall at one permit holder and the practical reasons staff recommends a 6% uniform rate.

Brown told the council the first permit holder, Culture Cannabis Club, had projected annual gross revenue of about $15.29 million, with a promised community contribution equal to 15% of gross revenues or $1.2 million annually (whichever was greater). Brown said Culture’s actual sales were “just under $3,000,000” before it closed and that Culture’s permit was administratively suspended when the business stopped serving customers. Brown said any past-due amounts remain owed at the contractual (pre-change) rate and must be paid if Culture seeks to reopen; moving forward, a reopened business would pay 6%.

Brown and the city attorney described the 6% figure as a practical compromise. Staff presented that several jurisdictions have lower rates and that “6% is right at that number where this business is sustainable,” making the local retail market more likely to operate without repeated turnover, audits or renegotiations.

Council members asked whether the other newly awarded permit-holder, identified in staff materials as the Syndicate, could open while Culture remains suspended. Staff confirmed the two permit holders are separate and that Syndicate could proceed with its own permit process; Syndicate had earlier proposed a higher community benefit share (cited in staff comments as 13.5%), which staff said was unlikely to be viable in the current local market.

City staff told the council they have enforced the suspension and are assessing interest, penalties and possible offers in compromise. The city attorney said that while staff cannot unilaterally accept less than the full amount owed, any offer of compromise would be brought to the council for decision.

The council voted by roll call (Mayor Pro Tem Castillo: Aye; Council Member Smith: Aye; Council Member Steber: Aye; Council Member Welty: Aye; Mayor Terry: Aye) to adopt the resolution setting the 6% rate and authorizing the city manager to execute amendments to existing community benefit agreements.

The measure does not change obligations to make any previously promised civic or nonprofit contributions tied to individual community benefit agreements; staff said those contractual obligations remain in force at the rates in effect when they were incurred.

A staff summary given during the item reviewed state-level tax mechanics for cannabis (including the 15% state excise tax and applicable sales taxes), noted practical monitoring limits for deliveries into the city, and said the city’s current approach uses third‑party audits of dispensary sales to verify what is owed.

What’s next: the city manager and city attorney said they will continue discussions with the suspended permit holder and will bring any offer-in-compromise back to council. Syndicate and other applicants remain able to proceed through the standard permit and site-selection process under the city’s rules.