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File Number: 20-431 <br />·ensuring that local cannabis businesses maintain their competitiveness with other <br />businesses operating in neighboring communities; <br />·recognition of the significant up-front costs associated with starting up a cannabis <br />business; and <br />·ensuring that the cumulative federal, state, and local taxes imposed on such businesses <br />would not serve to further incentivize the unregulated market. <br />Effective July 1, 2020, the following City Council adopted-tax rates are in effect: <br />·5% of gross receipts for retail cannabis businesses (i.e. dispensaries) <br />Due to the Schedule I status of cannabis at the federal level, cannabis businesses across the <br />United States continue to experience significant challenges accessing the nation’s <br />federally-regulated banking systems; a large proportion of their sales activity and transactions <br />involve cash. In order to ensure that cannabis businesses are tracking their sales receipts and <br />remitting the appropriate level of tax that is owed to the City, it is common and necessary to <br />conduct annual financial audits of these businesses. Furthermore, such audits were envisioned <br />from the outset of the City Council’s decision to authorize cannabis businesses to operate in the <br />City of San Leandro and relevant provisions allowing such audits are already codified in the San <br />Leandro Municipal Code. More specifically, Section 4-33-500-16(b)(5) includes the following <br />requirement: <br />The Dispensary shall allow the City or the City’s designated agent to <br />access the books, records, accounts and all data relevant to its operations <br />for purposes of conducting an audit or examination to determine <br />compliance with the Municipal Code, Administrative Regulations, <br />conditions of approval, and applicable laws. <br />To move forward with the financial audits, staff recommends that the City Council authorize the <br />City Manager to execute the proposed agreement. <br />Analysis <br />The proposed services would be provided by Muni Services/Avenu Insights, with partnering <br />support from ICF International. Staff recommends these vendors based upon several factors, <br />including their distinct subject matter expertise as well as San Leandro-specific knowledge that <br />was obtained through previous work supporting San Leandro’s cannabis dispensary program. <br />More specifically, ICF International served as San Leandro’s lead consultant that supported the <br />implementation and execution of San Leandro’s selection process for its three existing cannabis <br />dispensaries. ICF is already well-acquainted with these specific businesses and has previously <br />reviewed and analyzed their business plans and proposals in advance of operating permit <br />issuance. <br />Avenu Insights also provides similar services for several other cities in California and discussions <br />with the staff members managing those contracts on behalf of those cities indicates they have <br />been satisfied with the services provided. This staff recommendation also follows a competitive <br />Page 2 City of San Leandro Printed on 9/30/2020 <br />77