Like it or not, the Cannabis Industry has been lucrative for Cathedral City

CATHEDRAL CITY — With the passage of Proposition 64 by California voters, Cannabis businesses became fully legal for both medicinal and adult use. The full implementation of Prop 64 became effective January 1, 2018. The industry continues to grow and mature in Cathedral City.

In calendar year 2021, total cannabis taxes paid to Cathedral City were $4.9 million, according to a staff report City Manager Charles McClendon prepared. Retail cannabis taxes collected in 2021, however, declined compared to the previous year.

Cathedral City is not alone. The demand for cannabis is growing.

Just 12% of American adults were active cannabis users in 2019, leaving significant room for growth, according to Flowhub and Gallup. Nationwide cannabis sales increased by 67% in 2020, and support for legalization is at an all-time high of 68%. Some 14% of American adults reported using CBD, for things such as pain, anxiety, sleep issues, arthritis and headaches. According to Marijuana Business Daily, experts anticipate the cannabis market will continue to grow, in light of the designation of cannabis businesses being “essential” during the pandemic, and the fact that investor interest remains high.

Against this backdrop the City Council will meet in special session Wednesday to discuss Cannabis Regulation and Tax Update. The meeting begins at 2 p.m. in the City Council Chambers, 68-700 Avenida Lalo Guerrero. This item is presented for information, discussion and direction only, according to the agenda.

So, how did the City Council get to this point?

On Sept. 8, 2021, staff provided an update to the City Council at its study session, covering the history of tax collections in Cathedral City and discussed a request from a business owner to consider a retail “tax holiday.” At that time, the City Council
declined to proceed with a tax holiday.

But could a tax holiday now be on the horizon?

A tax holiday is a government incentive program that offers a temporary tax reduction or elimination to consumers or businesses. State tax holidays generally last from two to seven days, according to a list compiled by the Federation of Tax Administrators.

After the last Cannabis Task Force meeting held on Nov. 29, 2021, staff provided an update to the City Council in study session on Jan. 12, 2022 and reviewed the discussions of the Task Force. As result of that meeting, Council asked staff to conduct a full review of the City’s Municipal Code provisions related to Cannabis, the tax and fee structure and related data.

The data and staff suggestions resulting from that review were presented to the Cannabis Task Force during a meeting on April 11, 2022. All task force members were present for the discussion and the primary topics of the meeting will be reviewed with Council during the presentation on this item on Wednesday.

The City Council might look to clean up and clarify language in the existing ordinance. It could also look at the issues of inspection, enforcement and more.