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Finance Committee forwards 2-point cannabis tax increase to City Council, removes medicinal storefronts for further review
Summary
Staff recommended raising local cannabis taxes for storefront and delivery sales from 6% to 8% to generate an estimated $200K–$400K annually; after debate over potential customer migration and impacts on medicinal patients the committee voted 2–1 to send the proposal to council with medicinal storefronts excluded for refined analysis.
Assistant Finance Director Lindsay Moss told the Finance Committee that the city’s municipal cannabis tax—approved by voters in 2016 and capped at 20%—has been a declining revenue source since a FY2021 high near $2 million. Moss said current municipal rates for storefront and delivery sales are 6% and staff is proposing a two-percentage-point increase to 8% for those categories to help offset the city’s fiscal shortfall.
"Through this process ... we're expecting a range of somewhere between $200 to $400,000 a year in increased revenue," Moss said, noting the projection assumed flat retail sales and cautioned that raising the local tax could push some customers to nearby jurisdictions with lower combined tax burdens.
Moss and staff walked the committee through the tax stacking that affects consumer prices: local cannabis tax, state excise tax (temporarily reduced from 19% to 15% through June 30, 2028), and the local sales tax. Staff noted that excessive increases risk driving retail sales outside city limits and recommended a modest increase aligned with nearby communities.
Members debated whether to include medicinal storefronts in the rate increase. Member Harmon said patients should be protected and proposed removing medicinal storefronts from the increase if administratively feasible; the city attorney and staff said the committee could direct staff to prepare options and legal findings to preserve patient access. Member Santa Maria and others raised concerns that the industry is in decline and that higher local rates could accelerate retail losses to neighboring cities.
Member Harmon moved, and the motion was seconded, to forward the staff recommendation to City Council but with medicinal storefronts removed from the proposed increase and with a finding that the exemption advances patient access. The motion passed 2–1 (Member Santa Maria recorded opposed). The item will appear on the City Council agenda for further consideration and ordinance drafting.
What happens next: staff will update the draft ordinance to reflect the committee’s direction, prepare outreach materials for cannabis businesses, and return the measure to council with options clarifying medicinal vs. recreational treatment, anticipated revenue, and implementation timing.
