Laserfiche WebLink
File Number: 19-634 <br />In June of this year, the City Council adopted an ordinance regulating short-term rentals (STR) <br />and authorized the hiring of a third party on-line company to monitor STR listings for compliance <br />with the ordinance including paying TOT. Staff does not anticipate significant TOT revenue as a <br />result of this action, though will continue to monitor revenue generated by newly registered listings <br />to ensure they are paying the tax. <br />In Fiscal Year 2018-19, General Fund Transient Occupancy Tax revenue totaled $965,700, and <br />an additional $836,300 was recorded in the Shoreline Enterprise Fund. Of the total TOT revenue <br />of $1,802,000 recorded in both funds, $514,200 results from the increased rate approved by <br />Measure PP. <br />MEASURE NN <br />Cannabis Add-on Tax revenue totaled $53,300 in 2018-19 from Blum San Leandro, the only <br />permitted dispensary thus far to commence operations in the City as of the writing of this report <br />(the cannabis tax is added to the standard business license fee for retailers). This amount is less <br />than the 2018-19 budget of $510,000-reflecting the limited, six-month operation of only one of <br />three previously permitted cannabis retailers. It is also important to note that the dispensary was <br />limited to only medical cannabis sales for the first several months of operation, further <br />constraining its sales activity and corresponding taxable receipts. <br />As in other communities with permitted cannabis operations, the tax in San Leandro is based on <br />the cannabis dispensaries’ annual gross receipts. Given that the specific rates of such taxes vary <br />by jurisdiction, coupled with the rapidly evolving legal and regulatory landscape surrounding the <br />cannabis industry, the ballot measure was structured to provide the City Council with flexibility in <br />the rate that would be applied, up to a maximum of 10% of gross receipts. <br />Given the nature of the legal cannabis industry, it is uncertain how much on-going revenue will be <br />eventually derived from the tax. Based on revenue estimates provided by the three permit <br />recipients (Blum San Leandro, Harborside San Leandro and NUG Wellness Center) as part of <br />their application materials, staff previously estimated that this revenue measure could ultimately <br />generate $500,000 annually. However, these estimates were developed prior to enactment of <br />Proposition 64 that legalized statewide adult use of cannabis and established new regulatory <br />requirements and additional statewide taxes that could not have been foreseen. <br />The City Council authorized a tax structure presently at 6% of gross receipts and that is scheduled <br />to increase over a three-year period to 8%, absent further adjustments. Effective May 1, 2019, <br />the City Council expanded the operational definition of locally permitted cannabis dispensaries <br />(medical only) to also allow adult use sales without a physician’s recommendation letter. <br />Table 3 (Attachment 3) summarizes the 2018-19 revenues received by the City from the <br />voter-approved Measures. <br />Ø Use of the tax revenue and the impact on City operating budget. Include <br />statement on impact of the revenue in reducing the amount of cuts resulting from <br />addressing the budget shortfall <br />Measures HH and OO, PP, and NN <br />Page 4 City of San Leandro Printed on 12/10/2019 <br />56