Committee continues cannabis fee study, instructs CAO to model budget without fee increases amid social‑equity concerns

The Department of Cannabis Regulation (DCR) presented an updated comprehensive fee study to the Government Operations Committee on May 6 recommending fee increases to achieve full cost recovery for licensing, inspections and regulatory services. Committee members heard updated attachments with additional fiscal years, overhead breakdowns and processing‑time averages and then instructed follow‑up work before acting.

Zach DeCourse, chief management analyst for administration at the Department of Cannabis Regulation, and Jason Killeen, acting executive director, told the committee they had added 2021–2024 data and additional charts, and provided a breakdown of overhead costs and average processing times consistent with the ordinance and fee study methodology.

Committee members questioned when the CAO and mayor’s office were made aware of the proposed fee increases; DCR said the work began in prior budget cycles and the department included anticipated revenue in its November 2024 budget submittal. Susie Rios Belenot of the City Administrative Officer’s office said the CAO focuses on general fund savings and that DCR’s proposed budget removes general‑fund support for illegal enforcement, relying on special funds and fee revenues for core operations.

The committee asked for further analysis and changes to the DCR materials. The chair said the committee would continue the item and issued three instructions: (1) CAO to provide a budget memo that models an alternative DCR budget that does not assume the proposed fee increases (the CAO committed to releasing that memo before Thursday, May 8, 2025); (2) CAO to provide an economic impact analysis of the fee increases on the city’s cannabis excise tax revenue; and (3) DCR to add a column showing actual processing times in days to Attachment 3 and to make timing measurements consistent across the report.

The committee also asked about a $10 million general fund allocation that had appeared in the proposed budget to cover possible grant clawbacks related to the Local Jurisdiction Assistance Grant (LJAG). CAO staff said the $10 million should not have been included in the proposed 2025–26 budget and the Controller’s office (CLA) will recommend removing it as a technical amendment; DCR staff said the state extended its review deadline and the department had not been asked to return funds as of May 6.

Several social‑equity applicants and licensed operators spoke in public comment, urging the committee to delay fee increases, investigate management of LJAG funds, and address delays and administrative challenges. Speakers said grant administration, fee waivers and staffing decisions have not delivered promised relief to social‑equity applicants and that some DCR salaries and administrative expenditures raised concerns.

The committee continued the item to allow CAO and DCR responses and additional documentation before any vote on fee rate changes.