HomeMy WebLinkAboutInformational Report - 1st Yr of Commercial Cannabis Business OperationsX11111'N
STAFF REPORT
CITY OF PALM DESERT
COMMUNITY DEVELOPMENT DEPARTMENT
DATE: November 14, 2019
PREPARED BY: Eric Ceja, Principal Planner
REQUEST: Receive and file an informational report for the first year of
commercial cannabis business operations in the City of Palm
Desert.
Recommendation
Receive and file an informational report on the first year of commercial
cannabis business operation in the City of Palm Desert.
Background Analvsis
On October 12, 2017, the City Council adopted Ordinance No. 1329, establishing a
comprehensive set of cannabis regulations allowing the following:
1. No more than six (6) retail cannabis licenses; only one (1) for El Paseo.
2. Allow cultivation, manufacturing, and distribution in limited locations.
3. Allow for testing and research facilities.
4. Require a 1,500-foot separation requirement from other cannabis businesses.
5. Require a Conditional Use Permit (CUP) and Cannabis Regulatory Permit.
Following that meeting, the City Council adopted Resolution No. 2017-74, establishing
selection criteria in which to review CUP applications based on their merit and priorities
identified by the City Council. Applications that received the highest score and met all
separation requirements were awarded a CUP to establish a cannabis business. Based
on the commercial cannabis business regulations and permit requirements, all six (6)
cannabis retail licenses were issued and five (5) additional licenses were issued for
cultivation, manufacturing, and distribution.
During the City Council's consideration of the cannabis ordinance, staff offered to
provide an informational update after one (1) year of cannabis business operations.
Commercial Cannabis Operations
Due to the timing of application review and selection, and build -out of tenant
improvements, the first two (2) cannabis retail businesses opened in October 2018.
Since then, another three (3) operators have opened for business. The sixth cannabis
November 14, 2019 — Staff Report
Palm Desert Cannabis Ordinance Update
Page 2 of 3
retailer is completing building improvements with plans to open for business in
December 2019.
Of the five (5) licenses issued for non -retail operators, two (2) licenses were issued for
cultivation, and three (3) licenses were issued for manufacturing and distribution. To
date, one (1) of the manufacturers has opened, and the other two (2) anticipate
opening in January 2020. Cultivation operators have yet to open mainly due to the
amount of product in the market and the drop in price for cannabis flower.
Retailers are active members of the Chamber of Commerce and each has expressed
gratitude for a cooperative City Council, City Staff, and business community. Retailers
are also finding business success in Palm Desert and continue to provide unique retail
experiences through seasonal sales, events, and business partnerships.
Code Compliance & Public Safetv
Two main concerns when contemplating cannabis businesses were odor control and
public safety and security. Due partly to strict packaging requirements and robust odor
control filtration, cannabis odor at cannabis retail establishments has not been an issue.
The Code Compliance Division has responded to a single odor inquiry, and upon
inspection, deemed it unfounded. Although odor has been a non -issue at retailers, it is
unknown the impact of odor from cannabis cultivators and manufacturers, as none are
in operation.
Since cannabis businesses have been in operation, there have been zero (0)
responses to public safety or security concerns. Staff believes this is due to security
parameters in place at each cannabis business, the professional and retail nature of
each cannabis business, and the Sheriff Department's outreach efforts to build positive
relationships with the operators.
Fiscal Analvsis
On November 6, 2018, Palm Desert voters passed Measure Q supporting a tax on
cannabis businesses. Subsequently, the City Council adopted Resolution No. 2018-89
establishing the following tax rates:
Business Type
Cultivation
Manufacturer
Retail and Delivery
Research and Testing
Max. Amount Allowed
under Measure Q
$20 per square foot
3 % of gross receipts
15% of gross receipts
No Tax
Adopted Rates
$13 per square foot
2 % of gross receipts
10 % of gross receipts
No Tax
At the time of adoption (2018), City staff estimated that $3,600,000 in taxes,
approximately $3,000,000 coming from retail sales, would be collected once all
GAPlanning\Eric Ceja\Case Files\ZOA\ZOA 17-027 Cannabis\Cannabis Informational Report (11.14.19).doc
November 14, 2019 — Staff Report
Palm Desert Cannabis Ordinance Update
Page 3 of 3
businesses were operating. To date, $1,096,019, or 31 % of the estimated $3,600,000
has been collected. This is based on the following factors: cultivators are not currently
operating, one (1) retailer is not open, and we have not completed a single year in
which all cannabis businesses are operational.
In preparing the FY 19/20 annual budget the Finance Department estimated
$1,051,000 from cannabis revenues. Year to date, the City has collected approximately
$45,000, or 4%, more than estimated.
Summary
The cannabis industry has been slow in fully utilizing all licenses approved by the City.
Retail operators are finding business success in the City, and are paying their share of
taxes. Public safety and odor control concerns seem to be adequately addressed, and
there have been no known issues surrounding those concerns at the existing cannabis
businesses. Taxes collected to date are below the estimated amount; however, not all
licensees are operating, and we have not had a full year of tax collection. Staff believes
the licensees have integrated well into the City's business community, and we are not
proposing any amendments to the City's cannabis business regulations at this time.
LEGAL REVIEW
N/A
Robert W. Hargreaves
City Attorney
DEPT. REVIEW
Ryan Stendell
Director of Community
Development
FINANCIAL REVIEW ASSISTANT CITY
MANAGER
�� j
et Moore(��
Director of Finance d;, Firestine
A stant City Manager
City Manager, Lauri Aylaian:
ATTACHMENTS: 1. MAP - Cannabis business location
GAPlanning\Eric Ceja\Case Files\ZOA\ZOA 17-027 Cannabis\Cannabis Informational Report (11.14.19).doc
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