The city of Sacramento is inviting would-be commercial marijuana producers to agree to pay 1 percent of revenues into a “neighborhood responsibility” fund intended to support community programs and offset impacts of the businesses.
Officials say the plan approved by the City Council this month is to be expanded to other marijuana entities as the capital city extends current business licenses for cannabis dispensaries and enacts new licensing rules to permit pot-product manufacturers, distributors and delivery services to open over coming months.
Councilman Eric Guerra, who has complained about a likely high concentration of marijuana-cultivation businesses in industrial parks in his southeast Sacramento district, introduced a resolution last week to conduct a study to determine adverse economic or community impacts the businesses may have and impose fees to address them based on the study results.
“This resolution acknowledges that there are still some perceptions, there are still some unknowns,” Guerra said before the council approved the plan Jan. 19. “There may be not just primary but secondary effects (from marijuana growing). Even the industry and cultivators want to make sure everyone around them is benefiting.”
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Guerra’s resolution would order the businesses to pay into a fund that would direct money to community programs in individual council districts based on the scale and number of marijuana businesses.
The city plan invites pot producers to pay up front by pledging 1 percent of gross revenues to the neighborhood fund. By agreeing to do so, they would be exempted from paying more if eventual neighborhood-impact fees set by the city are higher. But the businesses wouldn’t get a discount in future payments if the city decided to set lower fees.
That’s causing some confusion with marijuana businesses on whether they want to agree to payments in advance or to wait.
“We are discussing this with all organizations I’m involved with,” said Kimberly Cargile, a medical marijuana advocate who runs A Therapeutic Alternative dispensary in East Sacramento and also is a board member for a cultivation venture that is seeking a commercial license from the city. “We are all split. I am personally split.
“I want to give the 1 percent,” she added. “I want to give back to our surrounding communities. I want to support the neighborhood associations and business associations. However, I want to see what our impacts are. I am absolutely conflicted on which way to go.”
The fees paid to the neighborhood-responsibility fund would be in addition to still-to-be-determined permit fees that will be charged on marijuana cultivators. The City Council, which in November approved rules to allow commercial marijuana cultivation, is expected to set the permit fees on Feb. 28.
Randi Knott, the city director of governmental affairs, said those fees are intended to pay for local government oversight of marijuana businesses, including “all of the people we need to gear up and keep this program running” and costs of policing as well as code-enforcement efforts to close cultivation operations that are acting without city permission.
Knott said cultivators seeking commercial permits may well be motivated to agree to the 1 percent gross-revenues payments as “an act of goodwill to surrounding neighborhoods” before public hearings on conditional-use permits, whose approval is required for the businesses.
The city’s invitation for pot cultivators to pay the gross revenues fee is stirring debate over whether the city is attempting to impose a special tax, which can only occur with a public vote passed by a two-thirds majority.
In June, a ballot initiative to raise money for youth programs by imposing a special 5 percent business tax on marijuana cultivators won 65 percent of the vote but was defeated because that was short of the required two-thirds margin.
Councilman Jay Schenirer, who championed the initiative, Measure Y, argues that the city’s neighborhood-responsibility fee is a development fee – not a tax. He said the money could pay for neighborhood revitalization and beautification programs as well as youth programs, including “education on cannabis safety” to curb marijuana use by minors.
“I think what we have seen is a strong desire by a lot of (marijuana business) operators who are in neighborhoods to contribute to the overall well-being of the neighborhood,” Schenirer said.
He said the council will consider extending the neighborhood-responsibility program – and fees – to other marijuana businesses including existing dispensaries and future city-permitted cannabis manufacturers, kitchens, distributors and delivery services.
The city’s 30 dispensaries already pay a 4 percent local business tax, which produced $4 million in tax revenue during the 2015-16 fiscal year. Licensing of cultivators and other cannabis businesses is expected to bring millions more into city coffers and potentially position Sacramento as a regional pot-production hub.
But Cargile said she is concerned that the additional fees – and the city’s planned impacts study – wrongly assume that cannabis businesses are a “blight” on communities and thus create a need to offset negative effects. She said many of the businesses contribute to neighborhood safety with added security and lighting.
“We want a study based in reality, showing the true impacts, not on this idea that we’re going to bring blight to our communities,” Cargile said. “That’s where the conflict comes in.”