Recommendation to request City Manager to investigate the feasibility of repealing the tax for cannabis cultivation in Long Beach, including fiscal and workforce impacts, and present to the Budget Oversight Committee in 90 days.
All right. Item 14. Communication from Councilman Austin, Councilwoman Allen, Councilwoman. Price Recommendation to request City Manager to investigate. The feasibility of. Repealing the tax for cannabis cultivation in Long Beach. All right, I'll recognize the motion. So moving in motion often. John Allen went off the air before. Thank you so much. And so I just wanted to bring this motion forward. This item aims to understand the impact of eliminating the cannabis cultivation tax in Long Beach. Well, actually, since voters passed the measure in May in 2016, our city's cannabis cultivation businesses have been charged $12 for every square foot of product under cultivation. They also pay $161 per pound of dried cannabis flower to the state over the tax overtaxation. Obviously can be a barrier for potential cultivators and is a burden to current operators in our city's cannabis industry. So I'm told fees associated with cannabis cultivation also affect profits for businesses. I'm sorry. They they affect profits for businesses. Wages for a local workforce. And prices for consumers. Further, there's no precedent for this tax. No other industry in Long Beach is taxed based on the cultivation of its products. Imagine taxing local farmers for every fruit or vegetable harvested. Not only would private the profits of prices at your local farmers markets increase, but the grower is essentially being fined for successfully growing food. The only groups subjected to this tax are local cannabis cultivators who should not face additional obstacles because of what they decide to grow and the crop that they grow. Previous the reduction of cannabis business license taxes approved by this Council in 2019 led to an uptick in active non-retail licenses and likely contributed to a match to massive financial gains the city has seen since 2020. The same thing. Elimination of cultivation tax could spur unprecedented growth in this sector and provide a net benefit for all involved. These potential impacts merit an investigation and ask to look at. This is why I brought this item before us today. We need to do our due diligence on this topic for the consumers and business community. I also like to just point out that since we began collecting revenue in 2019, our city has brought in over $50 million over the past five years through cannabis, retail and revenues. We've also brought in an additional $8 million. I know we have a pending social equity program, which I want to reemphasize is a priority for me. And so I'm asking for, obviously, the Council to support this item this evening. I want to thank council members Pryce and Allen for their support on this item. But again, I want to reemphasize, we have been working on this process with this industry for some time, several years now. It's a very fluid, intense industry. We know today things that we didn't know two years ago or even five years ago. And so I want to acknowledge that. And I do think that we have to get it right. This is an emerging industry. This is an emerging job creator in our city. And we need to do all we can to ensure that that we have a success in this industry here in the city of Long Beach. So, again, I want to thank you for allowing me to present this item, encourage my colleagues support on it. Thanks. Thank you. I have a secret list of Alan Longo. Is there anyone else would like to speak on it and is going to keep a list? It's. Okay. Season three has anyone else? Okay. Councilwoman Allen. Yes. I just want to say thank you to Councilmember Austin for introducing this item, and I was so happy to sign on to it. I've heard from so many folks in the cannabis industry that operators are overtaxed and burdened by various regulations, and cannabis businesses are taxed sometimes 40% more than other businesses, and we need to have equal treatment under the law. I think looking into whether we can repeal the cultivation tax is just a way that we can help businesses succeed and keep jobs in the cannabis industry. So I will be supporting this item. I wanted to ask Councilmember Austin if he would also consider standing when the presentation comes back, if it can also be presented to the committee as well. I know that there's been a lot of work done in that committee, if that's possible. Thank you very much. And I just a great item and it's commend Councilmember Alston and price for signing on to this. Thank you. Thank you. Woman. Thank you. I want to start by saying that I will be supporting the item tonight, but I would like to bring some information to the forefront of the discussion. I've reached out to landlords and to cannabis business owners, both in the city of Long Beach and outside the city of Long Beach. And it's important to note that the market in Long Beach has been flooded, and that is one of the reasons why the cost per square foot for some of these facilities on the rental side has declined. If we decreased the tax, it would probably help the landlords more than it helps the growers because then they would be able to sustain a higher price per square foot of the places that they're leasing. So one of the things that I will say, though, that both the landlords and the business grow, the grower business owners have acknowledged that they are losing money because the initial projections were much higher or demand locally than they ended up being. And I think that that has a lot to do with our inability to stop the large volumes of marijuana coming into Southern California from non. Registered grows those. I know all growers are illegal because the Federal Government hasn't yet authorized marijuana yet. But I'm just. Saying that illegal in the sense of the term of non certified by a city or authorized by the state of California. So I think that we're really talking about a two part piece. So what I would also propose is a friendly amendment to include an initialization reduction. So a tiered taxation. So may be if you're willing to start a cannabis, grow in Long Beach and employ a certain number of people, perhaps your taxes are a third of the price for the first three years. Then it could be a serious escalation. Therefore, the landlords would not take advantage of that and then build in a higher price on the cost per square foot than recouping the money that the taxpayers are giving up. So just something to think about because it is a supply and demand curve and once the tax isn't there, the landlords will pick it up on the other side to be comparable with other cities. Thank you very much. Thank you. Companies that they are. Thank you, Mayor. Vice Mayor. I want to say thank you to Councilmember Austin for bringing this very important item forward. I'm really, really happy to see our city council receiving two cannabis related items in a row. Last week we voted on the city more funds for our city's cannabis equity program. And today we have the opportunity to receive the feasibility or request the feasibility report for the changing of our cultivation tax in Long Beach. I think that this is very important, and I think that if we're moving towards equity, which within the industry we really need to pay attention. So I am very, very supportive of this item and look forward to the report when it comes from. Thank you. I'll just add my my support for the item here. I think the councilman will. I think your comments about cultivation and how it's unique to this and how be treated if it were. Give me a mute how it would be treated if it were a farm. I think that truly resonates, so I'm happy to support this. I would also say that we have some history with this. We know it was a very different environment when we had the first discussion about reducing cannabis taxes and originally there was some apprehension because we thought it would reduce our revenues. What we actually saw happen was we reduced the taxes, we extended operating hours. You know, we sort of relaxed the rules a bit. That didn't work when we originally set up the program. And what we what we saw happen was the opposite. We brought in more revenue by taking those steps. And so we certainly learned and so did the city manager, as we do this study, I would say was a factor in what we learned. But also, I would say, you know, the first time we reduced the taxes, you know, the idea was it was a pilot, right. To see how it worked. I think we at some point need to get to a restructuring of the way that our retail tax taxes should as well. I don't know if that's something tackled here, but that's certainly something I'm open to and those are my comments. So before you go to public comment, I heard I heard two friendlies. Councilman Mongo, what was your. Do you want to restate that just so we're clear? That's just to include some analysis on what market pressures are at bay so that even if it's just a few phone calls to some of the landlords on what their price per square foot is and then comparable, a lot of these landlords own warehouses in multiple jurisdictions, and you'll see that they have various prices based on the city, based on the city's taxation rate. And so if we're going to reduce the tax rate and then the landlords are just going to swoop up that variance. I don't think any of us want that to be what's happening. I would rather collect the tax and reinvest it back into the businesses for them. Just something to think about. Great. So include some analysis on sort of the impact of the market demand on on the real estate. Yeah. And consider a step by step step process where the first three years, maybe you have like a fraction of the tax so that those first three years when you're doing your startup costs and you're getting your customers and all those things, you're relieved of that additional cost burden. And then as you get your feet underneath you and you're becoming more successful, and that's often when these different businesses have like a structure themselves and the grows, they're more successful then they can afford that tax and the landlords can't build in that high price because then they wouldn't sign the lease in the first place because they know that tax increase is coming. Okay. And? And Councilman Allen was there friendly. If my friendly was to ask to make a motion, if the report would also or could also be presented to the the enact committee in addition to the Budget Oversight Committee. Got it. Councilman, often reactions to too friendly. I definitely want to accept the friendly for the Indian F committee. And I think during that process, Councilmember Mongeau, who I believe chairs that committee, can can further examine her ideas about the the compensation tax so and impacts on the the property owners or landlords for commercial property owners. And so I'd like to accept. Councilmember. Allen's friendly and ask that councilmember Mongo I think you know that's a very detailed I'm trying not to conflate this issue. I want to bring it back kind of clean on its own. And if this is another issue that we can agenda at a later time or study more through the committee process, I'm happy to to work with you on that. Thank you. Council member. We meet regularly, so it shouldn't be a problem. Great. All right, that sounds perfect, but we'll get some input from the idea and maybe even factor some of that in. Let's go ahead and go to Bob. Mr. Vice Mayor, I wanted to comment as well after. I'm sorry. That's okay. I apologize. I didn't tell you ahead of time, so no need to apologize. I just. I wanted to I wanted to take a moment to acknowledge Councilman Allen's friendly because I know there's been a lot of committee work that's done. And I really appreciate the fact that a lot of the details get studied at the committee level and hopefully get incorporated into what comes back to council. And I think that's really important. I do want to say for me, ultimately, I hope the report very clearly identifies what the bottom line impact to the budget would be because I'm supportive of this item, I'm happy to support it tonight, looking forward to having the report. But ultimately, the reasons why we discussed attacks tax to begin with were all related to city revenue and what's generated. So that's ultimately what we need to know that information as we move forward so that we know what what shifts need to be made if in fact we do make a change here, which it might make total sense to do. But I just want to know what that specific hit is going to be, not just for the next year, but, you know, preferably based on trends in the next five years. So I want to thank staff in advance for clearly identifying that in the report. Thanks. All right. Thank you. Any further council deliberation before we go to the comment? All right, let's have Google come in. If there are any members of the public that would like to speak on item 14, please line up at the podium. Or if you're attending virtually please use the raise hand feature or dial star nine. Seem more than ten speakers. We have 90 seconds. Thank you. Good evening. My name is Steven Cortez. I'm employed in the city of Long Beach. I'm here today in support of lowering cannabis taxes through the Elimination of Cultivation Tax. Last year, I began my first job working in the cannabis industry as a bartender for Cutler's Cannabis Co. Prior to working for cannabis, I was working as a mental health worker. I recently had the experience of reuniting with a former patient I had cared for. He reminded me that two years ago he had he had crippling pain and was taking four OxyContin and six Percocet pills every day. This type of regimen landed him in the local community hospital, now allowing him to play with his grandchildren or do anything really besides sit in a fog. He stated he had given all that stuff up and doesn't take it anymore and now has a life worth living again through the incorporation of a THC CBD sublingual tincture regimen . I share this story to say that by lowering cannabis taxes down the entire California supply chain, we can begin to address the massive need for safe, affordable retail access and to better focus on truly serving the will of the people and our well-intentioned local farmers through systemic relief. I want to remind everyone that most California cannabis consumers do not buy cannabis from state licensed shops, according to market observers such as Global Growth Analytics, which estimate that illegal cannabis sales in California total 8 billion a year, double the amount of legal sales. And one reason for black market staying power is that many Californians do not have easy access to legal retailers. For example, according to Scott Hacker, the reason California has only two licensed dispensaries for every 100,000 residents, compared to about 18 in Oregon and 14 in Colorado. And thanks to rising inflation in 2021 and cultivation taxes jumped at the beginning of 2022, even though the market value of cannabis had declined. All told, taxes increases. The 90 seconds has expired. Oh, I'm sorry. Thank you. I just want to quickly say that I urge my city council to investigate the feasibility of appealing the cultivation. Your time has expired, sir. Thank you. All right. Hello, counsel. My name is Samantha Koehler. I'm a resident of Long Beach and a worker and advocate for the cannabis industry. The industry was here to save me in the middle of the pandemic when I was displaced from my previous career in restaurant marketing, the cannabis industry offered me a chance to survive all during those very uncertain times with the addition of union representation and employee benefits. I'm here today in support of a giant agenda item 14. Unfair taxes are driving the cannabis industry to the point of near collapse, especially our farmers. No other industry in Long Beach is taxed based upon the cultivation of its products because of high taxes. Millions of pounds of products are being wasted every year due to the inability to compete with the low prices of the black market and overbearing taxes. This means millions of dollars of tax revenue lost that could improve public safety, fix roads and fund youth community programs. I want to urge my City Council to investigate the feasibility of repealing the tax for cannabis cultivation and help save the cannabis industry from the brink of collapse due to these crushing taxes. Thank you, council members Austin, Cyndi Allen and Susie Price for supporting this initiative. Thank you for your time. Good evening. Councilmembers My name is Jose Hernandez and I work here in the city of Long Beach. So I just want to, first of all say that I'm in solidarity and support for the cult with the cultivators and the growers that are the backbone of the cannabis industry. You know, for a long time there was reefer madness. There was a racially oriented attack against people that would smoke cannabis or, you know, be around cannabis, brown people in particular. That's why they call it marijuana. And now cannabis people are still in jail, literally locked up while folks are making millions of dollars off of that. You know, it's it's important to know who was with us and make sure that those folks that when it was not as politically convenient that were with us. And so we want to definitely highlight and think our Austin Susie Price and Cindy Allen for being their champions and supporters of this issue. You know, and a lot of the issue comes to taxation right now. It's a new industry and like the oil industry doesn't get this kind of treatment. Other industries, liquor, tobacco. Why cannabis? Like, why are we the scapegoats to try to solve all the problems in the state, in the city. So I would definitely want to last thing to say is that that woman that spoke earlier about social equity was absolutely right. It's time that we highlight and we streamline the process so that we can have black and Brown owned businesses be have a, you know, a seat at the table so that we can make right all the wrongs that happened for years. And. Good evening, City Council. My name is James and I want to add that the exorbitant taxes are a challenge and seen as another hindrance, which makes it counterproductive to the impact that it has on the community and city overall comprehensively. From the museum's millions, it has added as not only a financial stimulus to the city's budget, but also the employment that it provides the mental and medical health benefits of those citizens residing within the city of Long Beach. At this moment, I would like to issue a call to action to the whole city council at this moment to delve deeper into the barriers and challenges that hinder its citizens and remove those barriers for all in order to allow its citizens and voters to truly prosper for support of Agenda Item 14. Furthermore, it impedes those social equity recipients, like the lady who spoke earlier of the opportunity to engage and run a flourishing business, which is her American. Right. Thank you. Good evening, Mayor and City Council first. So I'm happy to hear that you're considering getting rid of the cultivation tax. Second, we need to lower the tax on kind of a sales period by enforcing these oppressive taxes. Not only are you doing a disservice to the social equity program, but you're also doing a disservice to your constituents. The more legal sales, the more tax revenue will be collected. 15% of 14 billion is more than is more than 30% of 7 billion. Simple math. You guys think you. Good evening, city Council. Thanks, Councilman Austin, for bringing this forward. Councilwoman Price. Councilwoman Allen. I'll do my best in a minute. Through anybody who knows me, I could go on this topic for an hour, but was created with this high tax policy is an 80% black market. This is 300,000 jobs that are in the black market that should be in the legal market. All we would have to do is drastically reduce taxes and these jobs will be legal. This is worker rights issues. Most of these workers in the retail especially are unionized. It's a women's rights issue. Someone came up here and spoke about women's rights. This is a women's rights issue. You know, I interview everybody we hire. And in the trap market, there's a lot of good people on the black market, but it's very common the women get creeped on. These are protections that we need in the legal market under OSHA. Also, I'd say this, these local cannabis businesses, I've been to a mall. These are not big businesses. There's one that's owned by a guy and his wife and the niece. There's a couple of young kids that are only half built out because of the oppressive tax system. There's another family business, its own. Another couple of gentlemen that have both been incarcerated. And the other thing that everybody forgets and this is the patient. They use this as a medication. This is for veterans. This is for patients. This is for customers. And it's for weed for the people. Let's get the price down. Hello, Mayor and city council members. My name is. Natasha Brown, but I am a licensed. Cannabis cultivation operator. In the city of Long Beach called Bud. I am one of the first adult. Use cultivation licenses to get up and running. Three years. Ago and I'm an active member of the. CAA. As an organization, we pushed for tax modernization to broaden the tax base on the supply chain in. 2019 and advocated for extended retail business hours in lieu. Of a of a retail. Increase, both with successful outcomes. Of more tax revenue for the. City, increased jobs and. More cannabis business. In actual operations. They'll support the tax modernization for cannabis cultivation. However, the BCA asked us to include retail tax monitor and ization at both medical and adult use points of sale. We are asking for a feasibility study to. Return in 60 days with a presentation to the Economic Development Committee following the same process as the path to successful cannabis talk. Tax modernization information. Thank you. Good evening, City Council. I am an operator in the District six of a cannabis business or manufacturing group here today just in support of the tax modernization and lowering the cultivation tax. Thank you, Councilmember Austin, for championing this effort. I just I just wanted to quickly end and side with some comments that Vice Mayor Richardson made about also including retail tax modernization study, along with this study and also to champion working in passage of said, I think is a good time to include all modernization, not only on cultivation but on the retail level. If we want everyone to succeed, I think is the faster we do tax modernization, the more we improve sales. And all the changes we've been making together will continue to benefit higher tax income. Thank you. Hello again. So, yes, you know, these taxes that you levied on working class people and small businesses, they're not good. You know, why is it that you're not pushing to tax the multi-billion dollar multinational corporations and lump it? You know, you should be taxing them. It shouldn't be taxing the people. And it goes beyond this. But I'd also like to mention, I'm picking up on what the council members and some members of the public said. You know, they is this is a women's rights issue. It's a it's a health issue. So that's like an interesting angle on it, right? It's a health issue. So what is it that you know where the people want in terms of health care? Right. We want something like a single payer system here. So guess what? You are, you know, here in Long Beach, we should pioneer something like that. We should pioneer essentially like a public option for this because to make sure it's truly available and equitable, because as you know, as has been said multiple times, it's about health care . So, I mean, of course, you know, each individual has their own course and their treatments and, you know, what they want to be doing in there with their health care treatment. So it's time to, of course, repeal all of this, all these taxes that, you know, you're just profiting from working class people. You're making them more poor by putting this stuff out there. So you got to just, of course, banish it and. We have seen they can pay. Your 90 seconds began now? Yes. And I think just just to be clear, city clerk, everyone that has to raise their hand and Zoom has to acknowledge their name. So just for decorum sake, if there is the public speakers in the chambers, I think that it's appropriate. That same thing is done. Just for the sake of the recording and down act. That said, I'm calling in support of the modernization of the tax. I think that is a welcomed opportunity to facilitate, you know, the growth of a. Burgeoning. Industry here in the city. And I'm in complete support of it. That said, and thank you to the sponsors. If not in the offices of I afternoon Cindy Allen and Susie Price for bringing that up. To be clear. I would also like. With a junction to this in conjunction of this coming into effect. You know, if we could somehow. Use it as an opportunity to facilitate more African American equity partners within this space, because we're solely. Underrepresented within this industry and being one of the most impacted by the war on drugs. It still bothers me that. There is not a single one. Actually, there was recently one. Thanks to Mr. Trey Sessions and others coming together there. But. Our next speaker is David Jude Aiken. Your 90 seconds begin now. David. Hi. Yes. Hello. Hi. My name is David. You take care of Walmart LLC. We're one of the largest cultivators in Long Beach and they supported the joint recommendations. Help the members of similar smelling cannabis cultivation is in dire straits. Wholesale prices have dropped by 50 to 70% in the last year. And of course, course of to rise. I want to just give you a couple of statistics. We employ about 161 full time employees and 104 men and 67 women. 77 of our people live in Long Beach and 106 in the Gateway Cities hire local. We have a young workforce with an average age of 34, almost make well of a minimum wage. Our employees live in 12 of the city of London. Wal mart facilities are less than one acre. I comparison Toyota Auto Body Company, which has 3038, has just under twice as many employees as I would just say where one acre cultivation is the first step in the cultivation industry. By eliminating unfair tax on cultivation, you'll help the legal cannabis industry by lowering the cost of reducing illegal operations and ultimately increase revenues in the city. That increased legal retail sales last year. Walnut. Edward Wilson. Your time begins now. I. Please begin. Did you see my name? Yes. Hello. Hi, this is Ed Wilson again. I'm going to finish up with my boss. I'm also the controller for Wal-Mart LLC. And so I'll finish what he was going to say. Last year, Walmart paid $3 $13.02 per square foot, which amounted to $290,000 400. With this money, we can employ an additional eight full time employees. Honorable Counsel. Time is of the essence. This is a cost to every. There is a cost to everything, even inaction and delay. We would like the Council to consider the two changes in the recommendations that we feel will make it even better. One. Have the analysis come back in 30 to 60 days. We all know that great people meet. Whatever deadline or timeline is assigned. And Long Beach has awesome staff. Second place an immediate suspension on all corporation tax collection until after the council makes the final decision. If the council wishes to vote to maintain the current level of taxes, the city will have ample opportunity to collect the amount in arrears. However, right now, the the cultivation industry is in dire straits. And so we need and would really like. It means some type of immediate action and help. 90 days, six months may be too late. I want to thank you for this opportunity to speak, and I'm available to answer any question. Our next speaker is Jake. No, Till King's. Your time begins now. Hi. My name is Jake. I'm a licensed cultivator here in the city of Long Beach, and we're a small craft operation. And Long Beach has a lot of small operators. If we are able to repeal the cultivation tax, this will have a huge impact on a lot of small operators that run as. Like owner operated businesses. That's what we are. And. I'm just in full support of it. I appreciate the Council for bringing it forward and it would really do a lot, especially for the small operators like us. And Long Beach has a lot of them. And so I try to speak for all of us and say that we do we do support this. And thank you very much for all your time. Our last speaker is Olivia Sweeney. Your time begins now. Hi. My name is Olivia Sweeney. I am a resident of downtown Long Beach and I work in the industry as a receptionist. I'm here tonight in support of Agenda Item 14 because thousands of jobs would be lost if the cannabis stores, growers and distributors go out of business. As my colleagues here have mentioned, many of these jobs are union jobs with health benefits, including mine here at Catalyst Cannabis, which has provided me the support I needed post-COVID. I urge my city council to investigate the feasibility of repealing the tax for cannabis cultivation. Thank you, council members. I'll Austin, Susie Price and Cindy Allen for leading this initiative. Thank you. That concludes public comment. All right. Let's go ahead and have our roll call vote and vote on this one. Actually, Mr. Vice Mayor, can I have a couple comments? Go for it. Thank you. So I want to thank all the speakers for coming out. There was just there was a few comments that were mentioned that I think it's really important for us to acknowledge where we are at this point. You know, we talked about the historical context of this topic, and I think it's important to know that we're in a much different place today when we're talking about cannabis than we were four or five or six years ago. And a lot of that has to do with the legal operators who were provided the opportunity to operate in the city. And what they have done to educate everybody about the legitimate parts of the industry. I think that's been critical, the credibility that's been established there, the understanding that we wouldn't be getting a proposal in front of us that wasn't well thought out, that wasn't prudent. I'm really proud of the prudence that the city has taken on this issue. I know it's been probably slow for some people, but it has allowed us to be able to be very deliberate at every stage with every decision that we've made based on actual data and practical application . I think that's really important. So I want to acknowledge that it's we're in a much different place today than we were years ago. And where we are today and the discussions that we're having, the foundation of all of that was built by the, you know, business leaders in the city who have established cannabis operations and demonstrated the industry and what the impacts of the industry can be and really done their part to mitigate any concerns. And I just want to take a moment to appreciate all of those people, because I know for me, you're never fixed in time with an opinion. You develop and you grow and you learn and you allow yourself the education. And I'm grateful for the people who have, you know, called us in to that conversation and demonstrated credibility. There's no way, I think we would be looking at an item like this today without the history of work with these partners that we've industry leaders and partners that we've had. So I want to thank you guys for that. All right. Any additional comment? I'll just close and say thank you to my colleagues. I want to thank the many public commenters who came out. It sounds like it's unanimous in support of moving forward, at least from the public comment standpoint. And I do think that there are opportunities and this is not the first that we are going to hear about taking another look at our tax structure for cannabis, as should happen here on the local level. But it should also happen in Sacramento, which I expect to be happening as well. And these these conversations happening simultaneously, I think will make for a better industry, a more robust legal industry here in the state of California and in Long Beach . Thanks. All right. Let's go to a roll call vote with District one. My district to. I. District three i. District four. I. District five. I. District six. I. District eight. High District nine. I emotion is carried eight zero.