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File Number: 18-603 <br />These revenue sources align with previously adopted City Council goals and policy priorities, as <br />outlined below. Furthermore, these revenue sources would not directly impact the vast majority of <br />San Leandro residents, as a significant portion would be paid by businesses, and hotel and <br />airport visitors. <br />Overview of Potential Cannabis Business Tax - no revenue as of this report, although <br />the opening of the first dispensary is currently anticipated in January, 2019 <br />Now that the City has issued three cannabis dispensary permits, the City has an opportunity to <br />derive an important new source of revenue from these businesses. Similar to many other <br />communities that have permitted the operation of cannabis businesses, the tax in San Leandro is <br />based on the cannabis dispensaries’ annual gross receipts. Given that the specific rates of such <br />taxes vary by jurisdiction, coupled with the rapidly evolving legal and regulatory landscape <br />surrounding the cannabis industry, the ballot measure was structured such that the tax amount <br />would be “up to” 10% of gross receipts. The language allows the City flexibility to modify the rate <br />over time up to the maximum 10% threshold. The ordinance has also been structured such that it <br />would apply to any business involving the use of any component of the cannabis plant. <br />Given that no permitted cannabis dispensaries are yet operating in San Leandro, there is <br />uncertainty as to how much revenue will be derived from the tax. However, based upon revenue <br />estimates provided by permit recipients (Harborside San Leandro, Blum San Leandro and Davis <br />Street Wellness Center) as part of the submitted application materials for their dispensary <br />permits, staff estimates that this revenue measure could potentially generate more than $500,000 <br />per year based on the current City Council-adopted rate of 6% of gross receipts. <br />On March 20, 2017, the City Council authorized a tax structure that gradually increases over <br />several years to maximum of 8%. <br />Overview of Modifications to the Business License Tax - $1,150,000 received through <br />June 30, 2018 <br />The modifications to the business license tax were designed to align the City’s business license <br />tax rates with City Council priorities to support small businesses located in San Leandro, while <br />also incentivizing the productive use of the City’s industrial areas. <br />Small Business Discount: <br />As structured in the ordinance, the per-employee component of the business license tax for small <br />San Leandro businesses with three or fewer employees is eliminated. Previously, these <br />businesses paid a flat fee of $128.20 per year, plus a per-employee fee that varies by business <br />type. The per-employee fee was waived for small businesses. <br />This modification results in a tax reduction for approximately 2,300 small businesses located in <br />San Leandro and a decrease in business license tax revenue of $106,000 in FY 2017-18. <br />Warehouse Rate Change: <br />Page 3 City of San Leandro Printed on 11/27/2018