Staff urges council to backstop cannabis pilot with 15% tax while keeping development agreements and conditional use permits

City staff asked the Dixon City Council to give directional feedback on whether the city should remove the pilot label from its cannabis program or strengthen the existing framework by enforcing the voter-approved municipal tax of up to 15% while preserving development agreements and conditional use permits.

"The voters of Dixon approved a tax to allow us to go up to 15%... it is going to be my recommendation that we actually enforce that 15%," said Mr. White, the city attorney, outlining his staff recommendation and arguing that development agreements would remain attractive because they can provide reduced rates for operators who comply.

Staff described the two-part approach as an enforcement and legal-backstop strategy: development agreements and conditional use permits would continue to bind operating conditions and allow quicker administrative action for noncompliance, while the 15% tax would apply to out-of-district operators who do not follow local requirements. Mr. White said the conditional use permit gives the city a fast path to close noncompliant operations, while development agreements memorialize additional contractual obligations.

Council members raised concerns about the economic effects of increasing the effective tax burden on businesses, including the compounding effect with state excise taxes. One council member urged caution, saying higher taxes could push smaller operators out of business and recommended staff explore alternatives such as a modest tax increase or reduced minimums.

Staff will return with detailed options after collecting more financial documentation and recommended auditing enhancements to ensure monthly public-benefit reporting is verifiable.