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City of San Leandro <br />Meeting Date: March 20, 2017 <br />Staff Report <br />Agenda Section:File Number:17-113 ACTION ITEMS <br />Agenda Number:10.A. <br />TO:City Council <br />FROM:Chris Zapata <br />City Manager <br />BY:Jeff Kay <br />Assistant City Manager <br />FINANCE REVIEW:David Baum <br />Finance Director <br />TITLE:Staff Report for a Resolution Setting the Cannabis Business Tax at 7% of <br />Gross Receipts Until June 30, 2019, and Increasing to 8% of Gross Receipts <br />on July 1, 2019 and 9% of Gross Receipts on July 1, 2021 <br />SUMMARY AND RECOMMENDATIONS <br />The City Manager recommends that the City Council consider the attached resolution that <br />would set the Cannabis Business Tax rate at 7% of gross receipts. Beginning July 1, 2019, <br />the tax would then automatically increase to 8% of gross receipts, and on July 1, 2021, it <br />would automatically increase to 9% of gross receipts. <br />BACKGROUND <br />In November 2016, Measure NN (the "Cannabis Business Tax") was approved by a majority <br />of San Leandro voters, enacting new cannabis business tax provisions as part of Chapter <br />2-21 of the Municipal Code. The results of this election were subsequently certified by the City <br />Council on December 19, 2016. The provisions of the measure allow the City to impose a tax <br />on all businesses located within the City that make use of any component or derivative of the <br />cannabis plant, at a maximum rate of 10% of gross receipts. Measure NN does not legalize or <br />otherwise permit cannabis businesses in San Leandro and the cannabis business tax is in <br />addition to the annual permit fee that is designed to recover the City’s costs in regulating <br />these businesses. <br />Prior to bringing Measure NN before the voters, City officials and staff declared during various <br />public meetings and community events that the intention of the “up to 10%” language was to <br />provide flexibility in the rate at which the tax would be imposed. Factors supporting such <br />flexibility include: <br />·ensuring that local cannabis businesses maintain their competiveness with other <br />neighboring communities, <br />·recognition of the significant up-front costs with starting up a cannabis business, and <br />Page 1 City of San Leandro Printed on 3/13/2017 <br />172