HomeMy WebLinkAbout3B - Presentation0State of Cannabis Agenda Item #3B
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October 26, 2023
Item 3B - Page 1
Cannabis in Palm Springs
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On September 26, 2023, Staff presented to Council an
overview of the Palm Springs Cannabis Industry.
•Federal, S tate, and Local challenges to the industry were presented.
•Council requested Staff return with recommendations to address the
local challenges.
Item 3B - Page 2
Local Challenges
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•Local Tax Rates
Palm Springs Local Tax Rates:
10% Gross Receipts for Retail Sales
$5/ per square foot of Canopy for Cultivation
2% Manufacturing
0% Distribution
•Over Concentration of Retail Dispensaries
Item 3B - Page 3
Local Tax Recommendations
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•Reduction of Retail Tax from 10% to 5% of Gross Receipts
•Implementation of a 2% Distribution Tax
•No change to Current Cultivation and Manufacturing Tax
•Revision to Definition of Gross Receipts and Cannabis Accessory
•Cannabis Equity Tax Incentive
•Allocation of Local Tax Revenue for Social Good
Item 3B - Page 4
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Reduction of Local Retail Tax consistent with other local Coachella Valley Tax Rates.
Coachella Valley Cannabis Tax Rates:
•Cathedral City 5% Recreational and Medical
•Coachella 6% Recreational and Medical
•Desert Hot Springs 10% Recreational and Medical
•Indio 6% Recreational and Medical
•Palm Desert 5% Recreational and Medical
Local Tax RecommendationsRetail Tax Reduction
Item 3B - Page 5
Local Tax RecommendationCannabis Distribution Tax
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I
•February 2019 City suspended the distribution tax setting the rate to 0%, with the right
to reinstate and resume collection.
•The previous 10% retail tax rate would cause financial hardship to the distribution
business model.
•At the time of suspension, Distributors collected retail and cultivation taxes for the
State.
•Staff recommends a moderate 2% tax on gross receipts.
Item 3B - Page 6
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Cannabis Distribution Gross Receipts Fiscal Year 22/23
Cannabis Distribution Gross Receipt Totals FY 2022 - 2023
Month/Year Gross Receipts Reported
Jul-22 $ 1,142,725.21
Aug-22 $ 970,373.40
Sep-22 $ 803,167.73
Oct-22 $ 997,766.92
Nov-22 $ 714,389.70
Dec-22 $ 678,184.39
Jan-23 $ 592,892.16
Feb-23 $ 182,155.26
Mar-23 $ -
Apr-23 $ -
May-23 $ -
Total $ 6,081,654.77
Average $ 760,206.85
The implementation of 2% Distribution Tax would generate approximately $200,000
local tax revenue.
Item 3B - Page 7
•Cathedral City 0% Must have a permit for Cultivation or Manufacturing
(does not permit distribution independently).
•Coachella 6% Recreational and Medical
•Desert Hot Springs 0% Recreational and Medical
(Staff is requesting a 1% tax effective FY 23/24)
•Indio Does not Permit Distribution
•Palm Desert 0% Recreational and Medical
(does not permit distribution independently).
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Coachella Valley Distribution Tax Rates
Item 3B - Page 8
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Local Tax Cultivation and Manufacturing
Staff Recommends no Changes to Local Cultivation and Manufacturing Tax Rates.
•FY 22/23 $ 265,000 Cultivation Local Tax Revenue
There are presently six (6) cultivation projects in the permitting
process, with a total of 22,400 proposed cultivation canopy and
a projected local cannabis tax revenue of $112,000 annually.
•FY 22/23 $ 33,192 Manufacturing Local Tax Revenue
Item 3B - Page 9
Local Tax Definitions and Allocations
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•Revise definition of Gross Receipts to remove the State’s excise tax from the
definition.
•Addition of definition of Cannabis Accessory. Presently, there is not a definition of
Cannabis Accessory, it is important to provide; as, State and Local cannabis tax is
applicable to cannabis accessories.
•An allocation of local tax revenue for the City’s Equity Program.
•An allocation of local tax revenue for Social Good.
Item 3B - Page 10
Oversaturation
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The City of Palm Springs has 33
Cannabis Retailers permitted to
operate in the City.
There are 27 Cannabis Retailers
operating in the City, this includes
23 Retail Storefronts, 2 Delivery
Only, and 2 Microbusiness with a
Retail Component.
Presently, there is 1 dispensary
per every 2,100 residents.
Item 3B - Page 11
Over Saturation- Staff Recommendations
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•Establish a Cap on Retail Dispensaries.
•Prohibit the sale and/or transfer of dispensary permits.
•Non-renewal of Non-Operational Dispensaries.
•Implement a one-owner-one dispensary rule. Current operators with more than
one dispensary will be grand-fathered.
Item 3B - Page 12
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Coachella Valley Dispensary Overview
Local Retail Dispensary Caps
•Cathedral City 20
•Coachella 10
•Desert Hot Springs 16
•Indio 5
•Palm Desert 6
Item 3B - Page 13
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Urgency 45-Day Moratorium
Staff is recommending a 45-Day Urgency Moratorium on the City’s approval of new
applications and transfers of cannabis retail permits.
•Moratorium would allow the City to study amendments to the Municipal Code and Local
Regulations affecting the Cannabis Industry.
•Establish a Cap for Retail Dispensaries.
•Moratorium can be extended 10 months and 15 days, pursuant to a future Council
Ordinance, if needed.
Item 3B - Page 14