Willows council directs staff to draft cannabis business tax ordinance with 10% cap and flexible implementation

A majority of the Willows City Council directed staff on March 10 to draft a citywide cannabis business tax ordinance that would include all types of cannabis businesses, permit the council to set active rates by resolution after voter approval, and set a maximum allowable rate of 10%.

The direction followed a presentation by Mark Lace, senior policy adviser with municipal finance consultant HDL, who told the council there are currently no licensed cannabis retailers within 30 miles of Willows and that two stores already proposed or opening in town would likely capture most sales in Glenn County. "We generally recommend retail tax rates fall in the range of 4 to 7% and a 5% initial rate is a good fit for Willows," Lace said, adding that a 5% local rate combined with other sales taxes could yield roughly $400,000 annually for the city under HDL’s market assumptions.

Why it matters: Lace highlighted that local taxes stack with the state excise tax and sales taxes, creating a cumulative tax burden much larger than a single percentage might suggest. He showed that a seemingly modest local tax can increase final purchase prices by more than the local rate alone once state excise and sales taxes are applied.

Council members pressed on policy and competitive effects. Vice Mayor Thomas asked whether a minimum written into the ordinance would bind future councils; Lace recommended placing only a maximum in the ordinance to give the council flexibility to set the active rate by resolution. Council Member Pride and others voiced concern that including all business types in the ordinance could be misread by residents as automatically permitting cultivation or manufacturing in the city; Lace said ordinance language and the ballot resolution can make clear the inclusion is to avoid future re-balloting and does not automatically allow new business types.

Several members argued for greater fiscal headroom. "We have a revenue problem," one council member said, arguing for a higher cap. The council’s discussion landed on drafting an ordinance with a 10% maximum (cap), no binding minimum, and the council retaining authority to set the initial active rate after voter approval. Staff said drafting and internal review would proceed to meet the county’s 88-day ballot-materials submittal timeline if the council chooses to place a measure on the November 3, 2026 general election ballot.

The balance between taxes and CBAs: Lace explained differences between community benefit agreements (CBAs) negotiated with individual businesses and a uniform tax. CBAs can vary business by business and sometimes favor larger operators; taxes apply evenly to all permitted businesses and require voter approval. He also noted CBAs often include non-monetary benefits (volunteer hours, event sponsorships) while taxes require upfront ballot work and cannot be used to negotiate terms case-by-case.

Next steps: Staff and HDL will prepare a draft ordinance reflecting council direction (include all business types in the measure, allow differential rates by business type if desired, set a maximum rate of 10%, do not set a binding low rate in the ordinance, and set the active rate later by council resolution). The council did not take a formal binding vote on the ordinance language at the meeting; the record shows council consensus to proceed with drafting and to return for future readings and ballot materials if desired.