STAFF REPORT - CITY COUNCIL/SUCCESSOR AGENCY/PUBLIC FINANCE AUTHORITY

The City of Coalinga established regulations for Commercial Cannabis Operations. The regulations include  authorizing the City Council to adopt specific fees related to the taxing, licensing, and on-going monitoring of said operations. In September of 2016, the City Council established annual regulatory license fees for commercial cannabis operations permitted in the City. Included in the fees are direct City related fees such as personnel costs, infrastructure costs and ongoing enforcement of the regulations. The other part of the annual fee is the consulting support provided by SCI consulting for ongoing monitoring and compliance of the facilities. These services include record keeping, product tracking,  video surveillance, and monthly physical inspections of the facilities. 

As part of the recommended fee updates, there will be no change to the amount the City of Coalinga retains for its services. The adjustment in fees are directly related to the contracted consulting fee to reflect the level of time needed to conduct the required inspection and monitoring tasks.

Microbusiness Fee

At the time the City set its initial cannabis fees, the State did not have a complete picture of what a microbusiness was and how it was going to operate. Now that there is a clear picture of what a microbusiess is the City is more prepared to establish a fee for an annual license. A microbusiness is a cannabis operation where there are three cannabis activities operating on one premises. This would typically be manufacturing, distribution and cultivation since retail is not permitted at this time. SCI prepared a task sheet that broke down all the related fees for a microbusiness which resulted in a fee of $44,178. The City will continue to charge its related fee of $29,750 for a total annual microbusiness fee of $73,928.

Cultivation (Excluding Nurseries) Fee Consolidation

The City currently has three different license fees for cultivation, however, with the permitting of cultivation canopy essentially being unrestricted at the local level in Coalinga, staff wanted to create a better formula for establishing the consulting fee related to onsite inspections and ongoing monitoring to reflect the nature of the operation. Therefore, staff is recommending a percent reduction per 10k canopy to directly reflect the costs related to scaling a project. SCI found that when cultivation operations increase canopy, monitoring oversight demand increases by about 25% and all other operational characteristics remain the same. The City will continue to charge its annual rate of $29,750 as originally established since scaling will not effect the City's costs. Below are the recommended total fees broken down between the consultant fees and City Fees. Please note that nursery fees will not be effected by this change and will remain the same. Nurseries will still be treated as a separate activity.  

Existing Fees

Proposed Fees

*NOTE: Cultivation - For each additional increment of 10k canopy, add 25% of Consultant fee. For example, a 15,000 s/f canopy cultivation facility would be 46,977 + (25% of $17,227 = $4,306.75) for a total fee of $51,283.75.

• The City Council may choose not to consolidate the cultivation fees and/or establish microbusiness fees and direct staff accordingly.