Speaker 2: Okay, motion carries. Thank you. We're now moving on to the next item. And the next item is item 25. Madam Clerk.
Speaker 1: Report from City Manager Recommendation to receive and file a report on the fiscal and jobs impact of reducing cannabis business license, tax rates for manufacturers, distributors and testing laboratories to one, two or 3% of gross receipts citywide.
Speaker 2: Thank you. We're going to go ahead and start with the staff report.
Speaker 12: Thank you, Mr. Mayor. Kevin Jackson, deputy city manager A.J. COLLURA will be giving the staff report.
Speaker 11: Thank you, Tom. And mayor and member of the City Council, Jay Cleary. We'll go.
Speaker 0: Ahead. We'll jump right into the report. Jay. Here we go. Good evening, Mayor, and members of the City Council. My name is Jay Cleary and I work for the Office of Cannabis Oversight in the city manager's office. I'm here to present the findings of a report on the fiscal and jobs impacts of reducing cannabis business license. Tax rates for manufacturers, distributors and testing laboratories. Whoever is in the back, can you go forward one line? Before getting into the findings of the report, I'd like to provide a quick refresher on the cannabis industry in Long Beach. Currently, the city offers licenses to five different commercial cannabis business types dispensaries which sell cannabis products directly to consumers. Cultivators which grow and harvest cannabis plants manufactures which extract essential oils from the plants and use that oil to create other types of consumer goods distributors which warehouse and transport cannabis products, and finally testing laboratories which test cannabis goods for mold, pesticides and other types of contaminants. On July 2nd, 2019, the City Council directed staff to prepare a fiscal and jobs impact analysis on adjusting tax rates for manufacturers, distributors and testing laboratories to 1%, 2% or 3% of gross receipts. These business types are currently charged a business license tax rate of 6% of gross receipts. Pursuant to the Long Beach Municipal Code, the City Council has the authority to adjust cannabis business license tax rates by ordinance subject to the maximum and minimum rates approved by Long Beach voters. This slide provides a summary of business license tax rates currently charged to cannabis businesses, as well as the maximum and minimum rates authorized by the Long Beach Municipal Code as seen in the table. Manufacturers, distributors and testing laboratories are currently charged a business license tax rate of 6% of gross receipts, with a maximum rate of 8% and a minimum rate of 0%. The one, two and 3% rates under consideration by the City Council fall within this allowable range. Generally speaking, Long Beach cannabis tax rates remain competitive with many cities in California, including Santa Ana, Costa mesa, San Diego, San Jose and other cities identified in the Fiscal Impact Report. However, there are some notable exceptions which we highlight on this slide. First, in Southern California, you have the city of Los Angeles, which charges significantly lower tax rates than Long Beach for manufacturing, distribution and laboratory testing. This is noteworthy for the fact that L.A. is our direct neighbor and widely considered to be a future hub of commercial cannabis activity. In the second table, you have three Northern California cities which charge lower tax rates than Long Beach for manufacturing, distribution and lab testing. These cities include Sacramento, Santa Rosa and San Francisco. Although these cities are located in Northern California, their cannabis businesses do compete directly with Long Beach operators. For example, cannabis products may be grown and manufactured in Sacramento, tested in Santa Rosa, and distributed out of San Francisco before being transported to a Long Beach dispensary. As a result, while these cities may not be comparable from a geographical standpoint, they do operate within the same supply chain as Long Beach and therefore should be considered as parts of the broader cannabis tax rate discussion. This slide.
Speaker 6: Summarizes Long.
Speaker 0: Beach General Fund. Cannabis tax revenues received in fiscal year 2018 and estimated in fiscal fiscal years 2019 and 2021. Notable trend in this table is the significant year over year growth in overall cannabis tax revenues, which nearly tripled between F, y 18 and f y 19. Cannabis tax revenues are expected to increase further in FY 20, although at a lower rate than the previous year. When looked at by business type. However, this growth is due almost exclusively to dispensaries, which account for a greater share of tax revenues than all other license types combined. Conversely, manufacturers, distributors and testing laboratories have under-performed relative to other business types in Fy18. These three business types collectively accounted for only 7% of total cannabis tax revenues in Fy19 in Fy20. They are projected to account for 5% and 11% respectively. Given this trend, the fiscal impact of reducing tax rates for manufacturers, distributors and testing laboratories is limited in the short run by the small amount of gross receipts currently being generated by these business types. The next two slides cover the estimated fiscal impacts of a cannabis tax rate reduction for manufacturers, distributors and testing laboratories. Within these projections, the City Council asked staff to account for a potential increase in the rate of business openings. In theory, reducing tax rates may make Long Beach a more competitive destination for cannabis businesses, resulting in increased investment within the city. However, local tax rates are only one of many variables that businesses consider when determining where to locate. Therefore, it is unclear the extent to which businesses may respond to reduced rates by increasing investment locally. Given this uncertainty, we identified various business growth scenarios summarized on this slide, which are intended to capture the range of responses that the cannabis industry might have to a reduction in tax rates. The scenarios are based on the number of businesses that have already received a license, plus some fraction of businesses currently going through the application process. Looking at the table, the current projections, ROE shows the number of licensed businesses we expect to open in FY 20 under the existing tax rate of 6% of gross receipts. The low growth scenario assumes that an additional five businesses will receive a license to operate due to a reduction in tax rates. The medium growth scenario assumes that an additional 25 businesses will receive a license to operate following a rate reduction. And finally, the high growth scenario assumes that an additional 50 businesses will receive a license to operate following a rate reduction. Using these growth scenarios, we projected the fiscal impacts of reducing cannabis business license, tax rates for manufacturers, distributors and testing laboratories to 1%, 2% and 3% of gross receipts. In nearly every scenario, the general fund projects a net revenue loss due to a tax rate reduction, specifically using the current projection scenario. We estimate a revenue loss of between 220000 to $350000, depending upon the rate selected under the various low, medium and high growth scenarios. The impact is somewhat mitigated by the increase in business activity, but in most scenarios still results in a revenue loss in the range of 100000 to $200000. I should emphasize, however, that cannabis tax revenues are extremely volatile and subject to change with every quarter that the data is collected. For this reason, we are not able to provide fiscal impact. Projections for a tax reduction in FY 21 are beyond. Next, the city council asked staff to prepare a job study on the cannabis industry. Specifically, the City Council requested information on the types of employment opportunities available, the range of salaries offered the average number of employees per business and the estimated number of jobs that might be created through a reduction in cannabis tax rates. Unfortunately, very little of this data is publicly available given the emerging nature of the cannabis industry. Therefore, to gather this information, we worked with the consultants to conduct an online survey of local cannabis businesses. The city received a total of 60 responses to the survey, with the results summarized in the Jobs Impact Report. I'm going to highlight a few of the key findings in the next couple of slides. First the average number of employees by license type. As you can see in this table, testing laboratories hire on average the greatest number of employees, with the vast majority of those employees being full time. Dispensaries hire the second most employees on average, followed by cultivators, distributors and manufacturers. Bear in mind, however, that these are averages based upon survey responses. The actual number of employees will differ by business. Based upon these survey results, we estimate that there are currently 674 employees working directly in the Long Beach cannabis industry today. Next, we asked cannabis businesses to estimate the salary data for senior and mid-level and entry level employees as seen in this table. Wages can vary significantly by business type. Testing laboratories pay by far the have the highest average salary across all position types. This is primarily due to the minimum educational requirements to work at a testing lab, which usually starts at bachelor's degree or higher. Next, cultivators, distributors and manufacturers offer similar salaries in the range of 35000 to $95000, depending upon the position. Finally, dispensaries pay the lowest average salary across all position types. This is likely due to the fact that dispensary jobs are retail jobs, which may require less education and training than other types of positions. This last slide includes projections for the number of jobs that may be created due to a reduction in cannabis business license, tax rates for manufacturers, distributors and testing laboratories. As with the fiscal impact projections, employment projections are based upon a range of low, medium and high growth scenarios due to the uncertainty inherent in predicting the response that businesses will have to a reduction in tax rates under the current tax structure. We project that a total of 350 full time and 71 part time workers will be employed by cannabis manufacturers, distributors and testing laboratories in Long Beach in fiscal year 2020. Should the City Council decide to reduce tax rates for these license types, we projected that employment opportunities will grow on the low end. We projected that a total of 379 full time and some of the eight part time workers will be employed by manufacturers, distributors and testing laboratories in FY 20. On the high end, we projected that a total of 672 full time and 139 part time workers will be employed by these license types in 2020. To summarize the key findings of the report. City Council has the authority to reduce cannabis business license, tax rates for manufacturing, distribution and laboratory testing to 1%, 2% or 3% of gross receipts. Reducing rates may improve the competitiveness of Long Beach relative to other California cities, including Los Angeles. We project a net revenue loss of 220000 to $350000 in Fy20 as a result of reducing cannabis tax rates for these business types, we also projects possible job creation of 35 to 390 workers as a result of reducing rates. As requested by the City Council during its meeting of July 2nd. The Fiscal and Jobs Impact Analysis also provides information in the following policy areas. This includes statistics on Green Zone, real estate vacancies, comparable tax revenue and jobs data for non cannabis businesses in the city. Additional information on the plan review and construction phase of the application process. Background information on the cultivation square footage tax. And finally, the estimated impact of a tax rate reduction on the illicit market. Given the breadth of topics, I will not attempt to summarize the report findings in each of these areas. However, I do want to point out that these City Council questions were addressed within the broader fiscal and Jobs Impact Report. Next steps include staff's recommendation to receive and file the fiscal and Jobs Impact Report. In addition, we are seeking input and policy direction from the City Council on setting appropriate cannabis business license tax rates in Long Beach. Ultimately, this will require the City Council to decide how best to balance the potential for economic and job growth in the cannabis industry, with the projected impact on general fund tax revenues, which are used to support general city services. That concludes my presentation and I am available for questions.
Speaker 2: Thank you. We're going to go to public comment first at the request of the maker of the motion. When I call your name, please come forward. I have ten speakers and so it's down to 90 seconds. First five speakers are Larry Goodhue or Mayor SA, Sarah Evans and Robert Coda. Please, in that order. First two speakers Larry Goodhew, Amir SAR, Sara Evans and Robert Koda. Please come forward and line up on the microphone in that order. Please begin.
Speaker 0: What's this city council should do? Is set the rate. So it is the highest in this country. No ifs, no and no buts, period. What would be next? You're going to legalize prostitution. All right. And underage prostitution. Give that some thought. I would hope the council I know there's some that don't have the character to recognize what a disaster this would be. If you want to say that we want to make a name for yourself and raise that rate as high as possible. Drive that out of the city, right out of the city, and show the people of this city and this country that you've got backbone and character and are not going to subject your children or your neighbor's children. To the downside. This demented. Project. And parallel paradigm of. It's an absurd cannabis concept.
Speaker 2: Thank you Omega SA here and please lineup is former SA Sara Evans and Robert Coder could please line at the podium. Great.
Speaker 11: Thanks. My name is Omer. I am co-founder of Feel Good Distribution, a company located here in Long Beach. I've spoken to most of you and met with most of you in person and you've received many emails since. So whether you're looking to create jobs. I think it's fair to say that you'll create more jobs with more businesses in the city. And if those businesses are thriving and growing, they'll need more people. If you're looking to raise tax revenue, you're going to need businesses in the city that are thriving and succeeding. And I think that the last two years have shown us in black and white what the current tax revenue is doing. If you're concerned about the safety of the residents and you want to put out the black market, making licensed businesses more competitive will help do that. So I'm not sure where the downside is, but what I can tell you firsthand is the current tax revenue is absolutely killing us. It's put most businesses out of business and the rest of us that are hanging on are hanging on by a thread and will not be here. And if you guys don't choose 1%, those of us that are around will go somewhere else. Right.
Speaker 2: Thank you. Next up, sir Evans, sir Evans. Monaco. Officer Evans. Okay. Robert Cota.
Speaker 11: Hi. Good afternoon, City Council. My name is Robert Cota. I'm an employee of a cannabis manufacturing company. As a cannabis employee, I'm here tonight to ask your help in doing the most we can to help the Long Beach cannabis community flourish. It is of the utmost importance to lower the tax and low wage to 1%. For me and many in this room, this emerging industry is a career choice. It's our passion. Our livelihoods depend on this. And with the current high tax situation, there is no possibility of creating a proper workforce or growing our business. So I thank you for reviewing the situation. I'm going to need to.
Speaker 2: Next speakers, I'm going to have Stefan. Stefan Burson solo ha dad Stephen Contreras and Elliott Lewis. Please line up in that order. Stefan Berson, Sue Lo Haddad, Steven Contreras and Elliott Lewis. Please line up in that order.
Speaker 0: Good evening. Members of the City Council again for your attention to this issue. Crafting good public policy.
Speaker 11: Takes time and constant tinkering, and I'm glad that we can cordially address specific issues where we can make this system better work for all the stakeholders of the city.
Speaker 0: When voters approved measures may.
Speaker 11: In this council pass Long Beach Municipal Code 5.9 to.
Speaker 0: Demonstrate the city's collective decision to create a highly regulated.
Speaker 11: Local monopoly for commercial cannabis, including these policies will restore a commitment to preventing underage sales, enacting labor.
Speaker 0: Standards and.
Speaker 11: Unionization.
Speaker 0: Ensuring purity of products at.
Speaker 11: The local level. Given the absence of the FDA in this matter and providing a local tax revenue to offset any increased regulatory burden on the city with regards to taxes, it must be said that this industry has consistently warned about the high tax threshold in the city. Specifically, we were concerned regarding the customer choice to participate in the licensed retail market and be preserving a competitive advantage for all non-retail businesses in the state. As it stands today, business in the city and businesses in the city are suffering on both points. An immediate modernization is necessary. Cities such as Oakland, Berkeley, West Hollywood and Palm Springs will drastically lower their tax rates to match the falling price per pound of wholesale legal cannabis.
Speaker 0: With regard to the specific regulatory.
Speaker 11: Burden, I actually want to praise a city in the bureaucracy for their service to keep these projects chugging along, despite the constant changing regulations at the state level. Our is also clear that we need additional resources in order to complete necessary inspections. Again, thank you. Count the Council members for your willingness to continue sharpening this policy in place. Seek out more ways to improve it.
Speaker 2: Have a good night. Thank you very much, Dad.
Speaker 0: Dear City Council, my name is Herb Hadad. I am the CEO of Greenpoint Holdings. We are a cannabis manufacturer and distributor located in District nine. I would like to thank the City Council for being proactive in reviewing the burdensome tax code placed on our businesses by local and state regulations. I'm here to request the city lower the cannabis supply chain tax to under 1%. California's regulated market is spiraling down towards a collapse from taxes on businesses and consumers, widening the price gap between the illicit and regulated products, which will further drive consumers to the illicit market at a time when the illicit products are putting people's lives at risk to the operators in the industry. It's obvious overregulation, high taxes, limited retail touchpoints, lack of enforcement, no access to safe banking are suffocating the industry. And the recent wave of cannabis industry layoffs should be a wake up call to everyone. The illicit market does not pay business taxes. They don't care about building codes, obtaining licenses, ensuring consumers are over 21 follow product safety regulations. They do not ensure fair wages or work environments, and they do not participate in community or social equity. Unfortunately, local cannabis is taxed at every step in the supply chain. We don't even have a cost of goods deduction allowed in the city. Even the state allows a cost of good deduction and they don't tax the supply chain. They only tax cultivators, industry and retailers.
Speaker 2: Thank you very much, sir. Thank you. And our last one, we have four final speakers in this order. If I can, please have you line up Stephen Contreras, Elliott Lewis, Ed Wilson and Greg Levine, if you guys to please line up in that order. Steven Contreras. Elliott Lewis. Ed Wilson. Greg Levine. Mr. Contreras.
Speaker 0: Good evening, City Council. Welcome. Mary's in the house. My name is Steven Contreras. I've worked in the cannabis industry and at dispensaries for the past two years. I am here tonight to ask for your help. I know that we all want to make sure that we do everything we can to make sure that the cannabis industry succeeds in the city of Long Beach. You are concerned with maximizing the revenue for the city and the taxpayers, and I understand that. But I see things differently.
Speaker 6: To me, this cannabis industry is a career path.
Speaker 0: I rely on this industry to support my family and my future. My employer provides union wages.
Speaker 6: Affordable health care and job protection. If the city does not lower the cannabis tax rate, it will make.
Speaker 0: It impossible to compete with the illicit market, which does not provide any of those things. But I also see.
Speaker 6: This industry as an opportunity to develop.
Speaker 0: My own skills. I would like.
Speaker 6: There to be a pathway to better jobs in the cultivation and manufacturing.
Speaker 0: Sectors. Those jobs are those jobs are paying better, but they are very they're in very short supply because companies aren't.
Speaker 6: Investing in the high tax rate.
Speaker 0: When new jobs aren't available, opportunities stagnate. I'm asking you to lower the tax rate to 1%.
Speaker 6: Please do your part to allow this new industry to reach.
Speaker 0: Its full potentials and support workers like me who see this as a career. Thank you.
Speaker 2: Thank you very much. Louis.
Speaker 10: Good evening, City Council. Thanks for having this issue and allow me the opportunity to speak. I've been fortunate enough to.
Speaker 11: Be involved in six retail dispensaries in the city of Long Beach. We have five open. We're working on the sixth one. This is about 80 jobs.
Speaker 10: Or so that we provided, maybe a little bit more. We have open permits that are approved in the manufacturing and distribution. We're just sitting on those products. We're not able to get around those projects.
Speaker 11: We're not able to get anybody to invest. All the cities.
Speaker 10: In Southern California, with one exception, have brought their tax rate down substantially. And we have fortunate enough to have opportunities in all.
Speaker 8: These different municipalities.
Speaker 10: We're waiting for Long Beach to do the right thing, bring it down to 1%. I want to emphasize that 1%. I think that you would see an explosion of growth. I know everybody's focused on the fiscal impact I have as far as the taxes, and I think it's a very hard.
Speaker 11: Analysis to do. But I want to make two points.
Speaker 10: Number one, it's a safety issue. There's been absolutely zero legal cannabis long illnesses for manufacturing zero. And right now, with the taxes are issues, we can't compete with the illicit market. It's a safety issue. Nationally, people are going to go to buy the cheaper product. They go to buy the cheaper product.
Speaker 11: And, you know, it's a health risk.
Speaker 0: The other issue is jobs.
Speaker 10: I think if you if you did bring this to down to 1%, again, I emphasize the 1%. You'd see a big job growth as well as those being all union jobs. Thanks.
Speaker 2: Thank you very much. Mr. Wilson.
Speaker 11: Good evening. Mayor Garcia. Vice Mayor Andrews. Councilmembers. Congratulations. Councilmembers in the House. City Manager. Acting City Manager and staff. My name is Ed Wilson. I'm a current councilmember and five times former mayor of the city of Signal Hill. I've had the privilege to serve continuously for the past 23 years on the city council. In all those years. This is only my second time coming here to address the Long Beach City Council at a council meeting. Through. I appreciate it and thank you. Normally we have our council meeting on the same night. So I am currently also the Comptroller of One on LLC, an indoor cultivator in Long Beach. I'm in the master's program for urban planning at USC. I've attempted invite all you to come and have a tour of the facility. And I want to thank everyone that had the opportunity to adjust their hectic schedule and come there. And for those that haven't had an opportunity. The invitation is still open. Beaumont has 22,000 square feet under canopy. Make it into one of the largest, if not the largest cultivator in the city. On it invested over 28 million before having one harvest. Hugely notable, Wal-Mart is the largest employer of the Long Beach social equity program. We have over 125 employees. Of the $293,219.
Speaker 2: To discuss with you if we can just the time is up, but I want to let you wrap up.
Speaker 11: So we can quickly do so in the 220 19 of the 293,000 in cultivation tax, we paid 264,000 of that. Okay. So I will be brief and I'll get to the bottom line.
Speaker 2: So I'm going to give you a little bit more time. But we actually have to follow our council rules. And I know you do the same thing.
Speaker 11: That we train or we try to get you allow the public to speak, especially on something that's extremely important.
Speaker 2: So it comes more readily. I'm going to let you just finish your last statement and then I've got to move on to the next speaker.
Speaker 11: Okay. So in your report, the assumptions are critical. It uses the misnomer stating that you will lose revenue if you lower taxes because the assumption in that is that you already have those taxes. You don't. This is an emergent industry. You have measure email, which is a extremely powerful tool.
Speaker 2: Thank you very much. I've got I've got to follow the council. I'm sorry about that. Thank you very much. And so going to the last speaker. Thank you.
Speaker 11: Hi, my name is Gregory Larkin. I want to say hello to the council. Thank you. And the city staff. And congratulations to Councilwoman Landers. I'm a CEO of Chronic Pain Relief Center on the West Side in the First District primary. And I'm also on the board of directors for the Long Beach Collective Association and really want to thank you guys all for the time that you've put into all these reports and all the conversations we had. I currently employ 30 people and that's only on the retail. I'm a vertically integrated business and the tax restrictions are really burdensome too, to grow that number more. One thing that I do want to just add on that I know Mr. Wilson was trying to for me when he was saying is that I'm not I'm not an economist or actually not good at math, but I know that 1% of something is much more than 6% of nothing in a lot of these businesses are having trouble getting off the ground. So I would please, just like to give you considerations on getting it to one, we can at least be competitive with our neighboring cities like Los Angeles, which is that 1% for distribution. That would be great. And I would leave it to you guys.
Speaker 2: Thank you. Thank you for that very crucial fact. That concludes that concludes public comment. And we have a motion and a second, Councilman Richardson.
Speaker 8: Thank you, Mr. Mayor. Thanks, everybody who came out and spoke on this. And thanks to the staff for putting together a very, very interesting report that gives us a lot of good the numbers and good sort of things to weigh as we think about the balance that you talked about in your presentation. So a little bit of background. So this, you know, we took this issue up and are at our committee, the Economic Development and Finance Committee, to pose a question. And the question was, if we brought the taxes in line with other municipalities, similar municipalities, can we spur investment? That was the question. It went from, you know, an unanimous vote there at the committee to city council. City council added additional considerations in terms of jobs and economic impact, and it was voted unanimously at that step. Staff has gone, conducted the research, they've taken their time, done their diligence, and now here we are to give direction on where we should go. So all of that leads to a number of follow up considerations for myself. So, you know, one of them is is this, you know, one of them, you know, the things we got to understand and grapple with is this industry real and does it create real jobs? We have a report. That codifies and talks about the numbers of those jobs. And it tells us that, you know, we potentially have 800, 800 jobs. Hard to pinpoint what they are, but based on what city staff can identify, we're talking about a universe of about 800 jobs. What kind of jobs are we talking about? The arranging. If you take out the dispensary, which is not in consideration here and talk about these three business types, we're talking about salaries from 34 K to 162 K. And let's get even more specific and talk about manufacturing. So this report, the study we commissioned, said that 65% of the manufacturing jobs and a salary between 61,070 1000, $75,000 a year. Those are saying that those are good salaries for for this industry. And this is our own survey. You don't want to see it for myself, right? When as these, you know, as these, you know, permits and notices go out, the public hears about them. All they see is a cannabis related business. So I wanted to go visit some of them myself as a number of people said they have facilities in my district. I took about three tours. I accepted Wilson's invitation to visit Walnut LLC, and I was completely blown away with what I witnessed there. What I saw was a factory. I saw a factory. I saw a facility. There were hundreds of people working, and they went through a very sophisticated system where I had to put on scrubs and get sanitized, blown off, you know, blow off all the stuff. And you go in. And I saw people working and very skilled and very skilled work cultivating cannabis in a very sophisticated way. Once you step into the cell, you look like something you see in Silicon Valley. I was really impressed by what I saw these people at work. This is this is a job. People go to work and make good money. That's what I witnessed. I visited a place in my own district, a bottling facility. The bottling plant that. If you know, if approved and opened, walked in, took a look at it was a warehouse where there were no jobs before. And this facility, there's a state of the art assembly line for bottling there. These guys are executives from like Coca-Cola and other places that have gotten into this business with potentially up to 100 people being hired once it's, you know, fully ordered and built out and put it in perspective, 100 jobs, what does that even mean? 100 jobs in this industrial corridor, which we've been focused on for a while, this Paramount Boulevard industrial corridor in a warehouse that wasn't utilized the last time that that place made news prior to the Paramount Petroleum facility was when 100 jobs to ABC lost 100 jobs to Texas. That's Toyota auto body. California, the largest Toyota body shop manufacturing. Toyota manufacturing plant on the West Coast is in North Palm Beach. It made national news when it lost 100 jobs of similar salary union living wage jobs to Texas. And here we are. A few years later, a factory has opened up with living wage manufacturing jobs. If you take away the word cannabis, we're talking about apples to apples winds here, economic witnessing, you know, the balancing. So I visited three facilities. Again, what I saw was investment. What I saw was jobs. What I didn't see was vacant warehouses, and what I didn't see was property values diminishing. I saw property values increasing. I saw absolutely no impact on the local neighborhoods. There were no transactions taking place. These were people going to and from work. Those people go to lunch every day. Those people have to pay rent. They have impacts on local economic. That's what I saw. In addition, you know, our job is to really balance and talk about what is our cost and what is the benefit. And again, thank you, staff, for helping us narrow down what that cost would be. They've given us the range of potentially 220 to.
Speaker 2: £350, and we want to make sure we keep our company also moving. So you've got me thinking.
Speaker 8: I'm concluding. So what I heard was 220,000 a year to 350,000 a year, potential exposure to the general fund. And so I saw that today. It is some back of the napkin. What does that even mean? Sounds like a big number. I put it in perspective to the general fund. Mr.. Mr.. Moat The General Fund, what did you say? Would you say the General Fund is $550 million?
Speaker 12: It's about 550. Yes.
Speaker 8: Oh 550. Just back of the napkin. The low range impact is 0.000. 4% of that general fund that we manage, we budget every year. And the high impact is 0.000.0006 essentially is what the difference is. It's when you put in perspective, it's small, you know, those probably represent junk.
Speaker 2: We want to make sure.
Speaker 8: If we knock the jobs, that's over. Thank you. So probably not 800 jobs. So I'm making the motion here. I think staff needs to get directions from a motion to leave. Director Mr. Mayor, I can't conclude until I do that. So my motion here, the, when I see the difference between 220 and 350 and there's very little impact in general, about 100,000 of a difference in impact, but a difference between 400, 800,800 jobs, I think $100,000 in impact to 400 additional potential jobs makes me think that we should go for that. What creates the greatest impact on jobs, which is 1%? Some emotion would be. My motion. I want to conclude from Mr. Mayor. My my motion is to set is to recommend that the tax rate be set at 1%.
Speaker 0: Thank you. Okay. Thank you.
Speaker 2: Thank you, guys. Let's let's keep we have an agenda. Councilman Austin.
Speaker 10: Thank you. And I was happy the second this motion had it some forethought that there would be a motion to give direction to lower the rates, which I totally support. I think the staff report is very thorough and actually some of the best work that I've seen with great data and scenarios for this council to consider. And after eight years of trying to get cannabis policy right, I think the cannabis industry still presents many unknowns as is rapidly changing. One fact that this seems to be constant is that cannabis is a revenue and jobs generator both in the private and public sectors, including here in Long Beach. And if we're serious about creating jobs in our city, we have a responsibility to keep Long Beach competitive with the region, particularly with this industry. I think reducing the tax rates on non-retail cannabis businesses will create jobs in our community, and that's clear from the analysis provided by staff. And based on staff analysis. I believe a potential revenue loss here in the city is very nominal. But I will say this is somebody who understands the budget sits on the Budget Oversight Committee. We do have a responsibility to to look toward a future in terms of revenue. I do have a question for for staff, since does this Gulfstream, do we charge them any tax are any taxes coming from from manufacturing industries other than cannabis? That's for senior manager.
Speaker 12: We do have business licensing tax for a various number of industries, including manufacturing.
Speaker 10: And what percentage are those?
Speaker 12: Typically, I don't have that in my head. We don't do gross receipts. That's something that most cities do, like L.A. and others do. GROSS receipts, 1%, 2%, 3%. Our business licensing structure is actually significantly lower than that from from a gross receipts perspective. So we can get you to schedule what's normally based on number of employees and a flat fee.
Speaker 10: Okay. With that said, I'm going to support the recommendation and second, the recommendation to 1%. However, I will say. I would like to put our Economic Development Committee to look at business licensing on other manufacturing industries throughout the city and what we are generating there. I think that would help us see a bigger picture here as well. Thank you.
Speaker 2: Thank you, Councilman Price.
Speaker 4: Thank you, Mr. Mayor. I, too, am supportive of this item. I want to go through why in just a moment. First of all, I want to give a shout out to Elliot Lewis, who operates a business in my district, and he spoke earlier. You know, I respect the will of the voters. And when this measure passed by the voters, it was very clear to me that the Long Beach voters. The majority of them want to legitimize this industry in our city. And as a result of that, I think me and my staff have done everything in our power to walk hand in hand with the businesses that are in my district to help ensure their success and to treat them as we would any other legitimate business in this city. And I will say that Eliot mentioned one thing that's critical to me. Some of you know, my husband is a biomedical engineer. And there was a period of time where he was looking at the labs, the cannabis labs, and thinking about that as an investment opportunity. And it is incredibly, incredibly burdensome to start a lab. I've had an opportunity to visit a marijuana testing lab, and I can tell you that the regulations and the startup costs associated with running a lab and doing it right and ensuring that it has consumer protections in place is far beyond what the average resident in the city understands. I mean, it's an incredible undertaking and I support this this aspect of this industry because. But for it, we would not have the consumer protections in place that we do with legitimate businesses. As a prosecutor, I see every single day what happens when substances are sold without proper testing in place, and what happens when substances are mixed together without having gone through consumer protections? It can be deadly. And we're seeing more and more of that with fentanyl being mixed into everything, even marijuana. So I believe very strongly that we need to support businesses that protect consumers with cannabis sales and who do it legally and according to state standards. So anything we can do to help those businesses succeed, I'm happy to do because they are a legitimate partner to us in the city of Long Beach. And the voters have made that so. My fear and my concern. I am hopeful that by reducing the taxes as I think we're going to do tonight, that it does bring in and spur investment of this industry in the city. That's my hope as it is the hope of many who are in the audience. I fear, however, that because I know the costs and the risks associated with running a regulated business of this industry, that we may not have that investment because the amount of money required to make such an investment and start one of these businesses and sustain it is really high. But I hope that lowering the taxes incentivizes people to come here. But I am concerned, and I think we need to be realistic, that all of the slots that we have open may not be taken as a result of the reduction of the taxes. But I hope that they are and we will do everything we can to help support that. But but I do raise that concern and and and behind this, as I have in the past, raised concerns about partnerships and endeavors. And I know sometimes people think perhaps it's too conservative or risk averse of a view, but there have been times where those concerns have come to fruition. And I just want to make sure that we're not setting future policy based on that expectation. But as someone said, 1% of something is better than 6% of nothing. And I agree with that. I think the amount of revenue loss in the big scheme of things is minimal. Having said that, I, I think that while I have deep respect for Councilman Richardson, I think that referencing the amount of revenue loss to the general fund budget. It is a misguided argument because, yes, our budget, our general fund budget is $550 million. However, much of that money rests in our nine enterprise funds, where revenues for those funds can only be used in specific categories. So we don't really have $550 million to put into our general fund. And so I want to make sure that we're clear about that, to say we have a $550 million general fund. And this is a small portion of it. That $550 million is not available for us to use as general fund. So having said that, however, 2 to $300000, I still consider minimal in the big scheme of things. But I caution our council. I caution our council to be mindful of this because the cannabis industry is an industry that we are duty bound through voter initiative to partner with. We have a duty to be business friendly to them and to help them. That is absolutely true. So when we have a loss of revenue in one category, we need to manage our expenditures in other categories.
Speaker 2: I just want to note that the time's up as well. Just trying to keep the keep the rules going.
Speaker 4: So with entities with whom we do not have a legally binding relationship or duty to engage in a relationship, we should be careful about spending money in those industries and focus on the partnerships that we're duty bound to maintain. So thank you.
Speaker 2: Thank you, Councilman Mongo.
Speaker 13: I'm going to give a couple of quick questions first before I go into my rationale for why I am leaning towards supporting this this evening. Did I read recently that the state of California again increased taxes on this industry? I asked the city manager in advance to make sure that we'd have an answer on this.
Speaker 0: So the city state of California recently announced two changes that will take effect January 1st, 2020. The first is to the cultivation tax. They adjust that annually for the CPI, so it could be characterized as a tax increase. It could also just be characterized as a change to maintain current revenue streams with the state that's that's mandated by Proposition 64. The second change that the state made is to the method that it uses to applying the state excise tax. The excise tax is 15% for retail sales, but the state charges that earlier in the supply chain, they charge it at the point of distribution. And then they estimate what the ultimate sale price will be based on a markup. Previously, they were using a 60% markup, but they're required per Proposition 64 to revisit that every six months. And they discovered that the markup is actually higher on average at dispensaries, that they're adjusting it from 60% to 80%. That will have an impact on effective tax rates to to retailers and consumers.
Speaker 13: And then what percentage of the industrial property in our city is currently vacant?
Speaker 0: Uh, percentage I may not have. At the time that we produced this report, we had identified the number of vacant parcels in eligible green zones. Um, and we identified 72 parcels in cannabis green zones and green zones are where cannabis businesses can locate. And we, we worked with a firm to contact those property owners to determine how many were willing to rent cannabis businesses. And a total of 52, um, were. But I think we also may have as one of our attachments the percentage of vacancy and industrial areas as of the time that we first started preparing this report. And for industrial areas it was around two and a half percent.
Speaker 13: Which is very low. And I think that it's important to note a couple of things. There's risk when any one industry has greater than a certain percentage share of any type of property in your city. Because should that industry have issues you want to make sure to keep that that the impact is limited to the number of layoffs, the number of jobs, the number of things across the board like that. Also in the number of 72 that might be willing of the 52 I'm sorry, that might be willing of the 72 to rent. There are still many of those properties that have loans on them and some of those FDIC insured loans and certain banks have stated that they won't allow the landlord to rent to them. And they don't usually always know that until the point at which they start going down that path. So I agree with Councilman Price that while lowering this rate will not likely result in more investment. For those of you who don't know and I don't know if anyone else at the dais has I know Councilman Austin has, but I've worked in a factory. I've actually worked in a start up factory where the lease was signed. And I was one of the first employees hired to start a manufacturing facility. And there's a lot that goes into it and a lot of investment. And that goes to the point that what we're really talking about here is protecting and supporting those that are already here. There are people making decisions about where to go, but that doesn't necessarily mean that any of the remaining 52 properties would meet their needs and or a lot of other complicated decisions that investors have to make. 1%, 2%, 3%. I would like us to. Think about a longer range strategy on how we select the percent similar to the way that the state law is established, because it's never popular to be the council that increases taxes and we're all limited with the exception of Mary, who has the most time available to her because she just joined us in our way out. And we don't want to set up future counsels to be in a position where they're unable to respond to the needs of the constituents. So what I would ask is on one of the slides, it looked to me like we're really talking about a $350,000 impact to the general fund. I'm going to phrase the comment, I think the way Councilwoman Pryce intended to say it, we might have a huge $400,000 general fund, but the lion's share of that is on salary and employee benefits. And we don't plan to lay anyone off to reduce the tax rate. And so what I would like to see and and again, two of the previous speakers are the ones who were working back and forth because we only had $60,000 available for Sunday library hours.
Speaker 2: And we want to just time's up also. Yep.
Speaker 13: And so with that, I would like someone to bring back if we're projecting to reduce this rate in this tax year, what that impact would be if it's $350,000. Someone bring back a list of cuts if that's cuts to vacant positions in the cannabis staffing model, if it's cuts to the city manager staff, the financial management staff . But it's going to be difficult for me if you bring back cuts to our libraries.
Speaker 6: To our parks.
Speaker 13: To those core services included and not limited to staff. So thank you.
Speaker 2: Thank you very much, Councilman Ranga.
Speaker 0: Thank you, Mayor. And I really do appreciate all the comments that have been made by my colleagues. And I think we're heading in a very positive direction here. In the five years that I've been a council member. We've been dealing with this issue every year. Seems like every year we've always had some kind of controversy in regards to whether we should establishment establish in the industry itself in the city of Long Beach and where I think we're at a point now where we have to as a city concern, as a city move forward, decide if we are going to be a cannabis supporting city or not, because we're we're looking at a current rate of 6%. We know that that has been somewhat of a struggle for the industry to flourish. When we're looking at 1%, we know that our partners across the borders of L.A. and other cities are doing much better and and or are having a greater growth in the industry because of their fair or more reasonable tax rates. So all that to say is that if we are not competitive ourselves, we're going to lose out. And if we lose out, we're going to lose out our revenue. We're going to lose out that that amount of revenue that we need further on down the line, because we know that that there is a storm coming or Long Beach, if you want to call it that, where revenue is going to be very important and we're going to be looking at other means of being able to generate revenue so we don't take this risk. And it's a business as it is like anybody else. You know, you you open up a shop and you put that $1, first dollar, you're on the wall and you hope that that grows into multiple, multiple, multiple. Those that you'll be able to put on a wall and build your house and build your company further. So I'm going I'm supporting the 1%. It's I think in the sense of a industry that is growing, that is new, that is different. I think we need to take that risk to grow it. I've also toured a few of the growth manufacturing companies, not only here in Long Beach, one in my district, but the biggest in Long Beach is in my district. But I've also toured other companies and manufacturers up and down the state as as they apply for their. Hurwitz to develop and flourish. So all that to say is that I'm with you guys. I hope you I wish you well. I certainly wish the city like me a whole lot better to.
Speaker 2: Thank you, Vice Mayor Andrews.
Speaker 9: Thank you, Mayor. I've been around for quite a while to understand. I was here when they had the lot of lottery and everything that these individuals said when it actually came to the cannabis industry the first place. I remember when you guys you were here from the beginning and you were here from the and everything that the city asked you to do, you did. And this is why it's so important to me as a council person to be able to sit here and let you individuals know I'm not excited about the 1% tax. I 1.5. The the reason. The reason I say that I think we need a new kick start so we can get this thing on the way and start it. And so everybody can make some money. Because if we don't make money, we create crime. The money causes jobs and jobs create. Like I said, it will stop a bullet. Let's get this thing on the way and quit playing around and let's. What is the problem? Get us started. Let's get it going. Thank you.
Speaker 2: Thank you, Councilman Richardson.
Speaker 8: Thank you. Just wanted to. So, first of all, there are a number of good things, good conversations came out. Just wanted to refocus on a couple of things. So it sounds like there is consensus around the 1%. You know, there was one person that called out point five and think there's consensus that consensus that 1%. Vice mayor. Councilwoman Mongo, you mentioned that. You mentioned that, you know, it seemed like 350,000 need to be made up and you didn't want to see those offset. Well, I'll talk to the public. You didn't want to.
Speaker 13: I'm sorry. If we could pause for a quick moment.
Speaker 2: 1/2.
Speaker 8: Okay. Everybody's Thanksgiving. Good.
Speaker 6: Thank you for asking. And it was great.
Speaker 8: Let's start chanting for Dino.
Speaker 0: Having fun, Mary?
Speaker 8: These are a lot of fun. Okay. Sorry.
Speaker 2: You do. Actually, we're going to wait for 1/2. Okay. Thank you.
Speaker 8: Thank you, Mr. Mayor. Okay. So just quickly, Councilman Mongo, I noticed you mentioned the 350 was a part of that range. I did want to make sure we consider they said business activity would bring that number down to like 100,000. So even if it's 100,000, I totally understand and would agree that we shouldn't offset or cut library or other services. And I think through the budget.
Speaker 6: I appreciate.
Speaker 8: That. Certainly engage in that. I mean, it's a lot of things that I think we should do that. And then secondly, I wanted to just clarify, you know, my statement and put it in context that the general fund is to put things in context in terms of how big of a challenge we have every year to manage our budget. And to be clear, Mr. City Manager, what is the size of our general fund? I said 450. I asked you how much and was the number? You said.
Speaker 12: 550 million. Okay.
Speaker 8: And does our special our special funds included in that? No, our special interpose funds.
Speaker 12: Our total budget is about $2.8 billion. 8 billion. That's divided up into a number of different segments. And the general fund of that is 500 and to be accurate, 554 million.
Speaker 8: Okay. So two point, give me the number. The whole budget.
Speaker 12: 2.8 billion.
Speaker 8: 2.8 billion is the whole budget with enterprise funds, the general fund of which our services come from, police, fire. All our general services come from the general fund, which is 550 million. That's typically the money that we have to make adjustments to within that. Yeah, there's salaries and pensions, but all of that is subject to city council. That's our discretionary ability to balance the budget. So I wasn't incorrect in stating that our general fund is 550 billion. If I was misleading, I would say million 350,000 in comparison to 2.8 billion. That would be incorrect. But to compare it to the general fund, I think that was fair. But but without, you know, sort of focusing too much on that. I think the goal here, the idea we have consensus that the job impact, the positive benefits in comparison to the impact to our budget is very nominal and that's what we should really be focused on. Thanks.
Speaker 2: Thank you. And council when asked.
Speaker 10: Okay. I'll just try to lastly put a word on this. I know there's been some considerable conversation regarding the budget. I know during the this this year's budget process, we talked a little bit about cannabis operations and revenues for the city and what it requires to administer that. And that does require actual positions here in the city, in financial management and PD, various departments, analysts to help process the licensing. And so. So that number was somewhere around $4 million. If I'm correct. Is that right? Now, at.
Speaker 12: The top of our head, that sounds about.
Speaker 0: Right.
Speaker 10: And so the the the project the revenues for F1 19 and FY 20. I'm very comfortable moving forward with this because we clearly will have enough revenues to to administer the the programs that we have. I think some of the reservations from some of my council council colleagues are looking toward the future in terms of what we look at, in terms of revenues and in expenditures for the council in the city. There's some tough decisions in front of us, but I think like any large business or any industry that we really want to succeed. I came out of the aircraft manufacturing industry and I know I was there in the. Nineties, early nineties, when the red teams were put together in the the city of Long Beach worked and bent over backwards to incentivize and cut taxes and put together all kinds of packages to to keep those great, great paying jobs here in our city. And it was a valiant effort. Unfortunately, those jobs left. I think we owe that to the workers and we owe that to the industry here as well, too, to incentivize jobs and creation of jobs. And so I agree with Councilmember Andrews. Jobs stop a bullet. Jobs create opportunities. Jobs will also generate sales tax revenues for the city as well. And so I'm happy to support this at 1%. And thank you.
Speaker 2: Thank you. And finally, Councilman Mango.
Speaker 13: So if this passes tonight, which it sounds like there's a lot of support, what is the timeline and how does this work? Is that a question for a city attorney or Mr. Richardson.
Speaker 14: A mayor? Members of the city council. The initiative that was passed by the voters now memorialized in the municipal code would require us to bring back an ordinance to make this change to lower the rate. So if we get that direction tonight, we'll work as expeditiously as we.
Speaker 6: Can to get that back to the.
Speaker 0: Council as soon as possible. And then it would require another vote to pass the ordinance.
Speaker 14: Minimum of five would have to vote for it. And then, like any other ordinance, it would go into effect either at a time certain, but no sooner.
Speaker 6: Than 30 days after it's passed.
Speaker 13: Wonderful. So we have a budget oversight committee meeting scheduled in the next 30 days. Would it be appropriate to ask for a friendly that the staff bring forward an item to the Budget Oversight Committee that impacts this fiscal year? Where would there be the room for this opportunity and then potentially proposals in the next year's budget, this one? Perfect. Thank you.
Speaker 2: Q Councilman Austin.
Speaker 10: I had a one more friendly to ask as well. I think that's responsible, but I also think it would be good to direct staff to to come back and review this overall policy and impacts in 18 months as it sets forward. I don't believe in anything being permanent. Obviously, this is a tax rate that that, you know, we're looking at to make our our local businesses competitive and to create jobs. But at the same time, we need to be able to understand the fluctuations in the market. And I'd like to have that option to at least review this in 18 months.
Speaker 8: Yeah, I think reporting we should certainly have reporting as we monitor this. So every 18 months we should get a report on how this is going in case we make positive I.
Speaker 2: Councilman Mongo.
Speaker 13: My friendly to Mr. Austin's friendly would be that it would be in the budget cycle. That's two from now. So not next August, but the one after. So it will start coinciding with our budget annually.
Speaker 3: Yep.
Speaker 2: Thank you. That concludes all the comments. We have a motion any second on the floor right now, which is the motion made by Councilmember Richardson and second by Councilmember Austin to go to 1%. Please cast your votes.
Speaker 11: Motion carries.
Speaker 0: Thank you.
Speaker 2: Okay. Now. Now we are. Thank you. I know there's a lot of motions over here, and a lot of folks are going to start exiting as people exit. I just want to remind everybody that this is an unusually long meeting. And for those that are here, either for public comment or the regular agenda, we have not even finished the hearing portion of the agenda. There are still two more hearings. And as as the regular order moves forward, we have to do two more hearings and then we will begin general public comment and the regular agenda. So we're still a ways away from that. Okay. So we are going back and now we're going to hearing item number 20. And if I can ask people to exit quietly, just out of respect to the rest of the meeting, please exit quietly.
Recommendation to receive and file a report on the fiscal and jobs impact of reducing cannabis business license tax rates for Manufacturers, Distributors and Testing Laboratories to 1 percent, 2 percent, or 3 percent of gross receipts; and, provide further input and policy direction to staff on cannabis business license tax rates.  (Citywide)