Willows council directs staff to place cannabis business tax ordinance on November ballot, sets 10% maximum in draft

The Willows City Council on May 26 received a presentation and extensive public discussion on a draft ordinance that would create a municipal cannabis business tax to appear on the November 3, 2026 general election ballot. The draft ordinance, prepared by HDL Companies and presented by senior policy adviser Mark Loveace, would add chapter 3.12 to the city code and establish a voter‑approved general tax with a maximum rate of 10% of gross receipts.

Loveace said the ordinance is written to give the city flexibility while protecting administrative clarity. "The ordinance specifies that it would be a general tax to provide revenue for general governmental purposes," he said, adding the measure would allow the council to set the initial rate after voter approval. The draft would apply to all cannabis business types (even those not currently authorized) and to retail sales delivered to addresses in Willows, he said. Administrative provisions would require monthly remittance, three years of records retention for audits, and appeals to be heard by the city manager or the manager’s designee.

The presentation included technical provisions to prevent tax avoidance: revised definitions to capture intoxicating THC derivatives from hemp under state law and a non‑arms‑length transaction clause designed to capture value transferred between related corporate divisions. "We included non‑arms‑length transactions so businesses can't move product among related entities to escape taxation," Loveace said.

Council members pressed HDL and staff on enforcement and business impacts. Vice Mayor Thomas asked how the city would identify and tax deliveries originating outside Willows. Loveace described investigative approaches used in other jurisdictions — researching businesses that advertise delivery to Willows addresses and notifying them they must hold local licenses — and noted practical auditing challenges for out‑of‑jurisdiction licensees. He also recommended monthly remittance for better revenue stewardship but agreed the finance director could be given limited flexibility to set billing frequency up to quarterly.

Retail operator Melissa White, owner of the downtown dispensary Cali Love, urged caution on rate setting and warned of the compounding effect of multiple taxes. "Putting a 10% tax on the people of Willows would tax me out of business," White said in public comment, and she disputed an earlier $5 million revenue estimate as unrealistic for the local market. White told the council that the new storefront has brought significant foot traffic downtown but said high local rates would push shoppers to Chico or unregulated sources.

After discussion, the council directed staff to introduce the ordinance for first reading on June 9, 2026, and to prepare ordinance text, an impartial analysis, and ballot materials for consideration on June 23, 2026, leaving the ordinance’s 10% maximum in place to preserve flexibility. The motion to direct staff passed by voice vote with all council members voting in favor.

Next steps: the city attorney will prepare the impartial analysis and election materials; the county elections office deadline cited in the presentation is July 14 for ballot material submittal. The council will return on June 9 for the ordinance introduction and possible modifications before any final decisions on the specific tax rate.