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Grass Valley preps for cannabis tax vote

Although cannabis businesses are not permitted in Grass Valley, the city is laying down the groundwork for taxing them, just in case that changes.

The Grass Valley City Council approved a resolution Tuesday evening that would put a motion to voters on the November election ballot that, if passed, would allow the city to tax cannabis businesses based on square footage or gross receipts.

Last month the city directed staff to begin work on an ordinance to regulate cannabis businesses in the city, which will include guidelines for permitted locations, amount of businesses allowed in the city, and types of cannabis businesses allowed. While work on that ordinance is still continuing, the city needed to put forward the tax measure first because the deadline to get the initiative on the ballot is today.

“This is just the taxing structure for any portion of the cannabis business, it is not approving the various cannabis businesses within our community,” City Manager Tim Kiser told the council. “That will be done through a separate ordinance and will go through a separate process.”

The measure proposes initial rates and sets maximum tax amounts for each type of business. Depending on lighting source, cultivators would be taxed between 50 cents to $4 per square foot annually, with businesses using exclusively artificial lighting paying most.

Testing labs are taxed at 2% of gross profits, dispensary or delivery businesses at 4% of gross profits, and all other manufacturing, processing and distribution businesses taxed at 2%.

Each year the square footage tax would increase based on the Consumer Price Index, though adjustment would not be reduced based on CPI. Once enacted, the council will also be able to increase the taxes by resolution.

The tax is estimated to generate $250,000 a year and would fund essential public safety services, recreation, streets, parks and other general city services.

A mid-year budget update focused on the likely fiscal impacts of the pandemic projects the city will lose out on about $290,500 in general fund revenue this fiscal year and another $650,000 in the 2020-21 fiscal year before the recovery is estimated to take hold over a two-year period. The city expects to release updated budget projections on its website today.

The tax was modeled after Nevada City’s tax structure, but added an additional 1% tax on gross profits from high-potency cannabis products and a 20% tax on gross profits from sweetened cannabis drinks.

“It’s no secret that over my last numerous years on City Council I have been supportive of allowing legal cannabis businesses within the city of Grass Valley and I will tell you one of my motivations for that is all about the money,” Mayor Lisa Swarthout said. “There’s money that we know it exists in our community. Our city four miles up the road has (legal cannabis businesses) and they are making some good money.”

To contact Staff Writer John Orona, email jorona@theunion.com or call 530-477-4229.

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