Farmersville sets cannabis tax rate well below max
City sets $12 per square foot, or 8.75% of total sales, tax rate for cannabis cultivators, hires firm to navigate commercial cannabis laws
By Crystal Havner
Special to the Sun-Gazette
FARMERSVILLE – After passing their tax on cannabis whole sellers last month, the Farmersville City Council was forced to decide how much to actually tax businesses coming into town. Per the tax the Council could set the cannabis tax rate at the cap of $25 per square foot for up to 3,000 square feet and then $10 per for every square foot after that. They could also tax cultivators 10% of gross receipts.
However, there was not a lot of consensus on where to set it between city staff, the City Council or at least one potential grower.
“Startup costs will be in the millions here since it has to be an indoor grow. I ask that you not go over $10 a square foot and that might work,” Charles Woody, a potential grower, said in an address to the Council. “You could possibly raise it a little each year, but we need a break to start a business. Growers are only going to come to this area for the tax break.”
Provided that there is not much of a commercial cannabis market this late in 2017, there are not a lot of “tax breaks” to be had. The only other city in Tulare County welcoming commercial cannabis is Woodlake and they are yet to set their tax rate when it comes to dispensaries and cultivators.
“We got into this business to make revenue for the city. If the businesses come then good, if they don’t then it’s not the end of the world,” Mayor Paul Boyer said. “We are in financial desperation, that’s why we asked the voters to pass Measure P and Measure Q. I want to do what is best for the city, but I don’t want to give away the store either.”
Interim City Manager and Police Chief Mario Krstic warned that the max tax rate on cannabis businesses could dissuade them from locating in Farmersville. A point which councilmember Greg Gomez addressed as well.
“To tax the maximum would be short-sighted,” he said. “The cannabis business would not only generate tax revenue for the city, but create local jobs. We have done a lot of work on this Measure and we can’t start back peddling now.”
Additional support came from council member Rosa Vasquez. She said that the City needs to bring in additional businesses and not scare them away with higher taxes.
After some additional debate the council approved a $12 per square foot tax or 8.75% tax on gross sales, whichever is greater.
A heads-up move by the City Council was to contract with Hinderliter de Lamas and Associates (HDL). HDL will create and manage the City’s commercial cannabis policies, procedures and schedules.
“We are entering new territory with the cannabis laws and this company has a history of dealing with it since cannabis was medically legalized. Instead of hiring extra staff and having to learn as we go I think it would be better to go with a company that knows what they are doing,” Krstic said.
In other news
The council also gave the green light to Southern California Edison to replace all existing streetlight bulbs with more efficient LED bulbs. The change will save the City about $837 a year. SCE will still own and maintain the streetlights.