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HomeMy WebLinkAboutItem 02 Recreational Marijuana Local Option Tax AGENDA ITEM SUMMARY Meeting Date: 6/13/2016 Meeting Type: Work Session Staff Contact/Dept.: Bob Duey/Finance Kristina Kraaz, CAO Staff Phone No: 541.726.3740 Estimated Time: 30 Minutes S P R I N G F I E L D C I T Y C O U N C I L Council Goals: Financially Responsible and Stable Government Services ITEM TITLE: RECREATIONAL MARIJUANA LOCAL OPTION TAX ACTION REQUESTED: Review Ordinance and Resolution regarding election to enact local option tax for recreational marijuana. Provide staff with direction to proceed or not to proceed with a draft ballot title for a November 2016 election. ISSUE STATEMENT: ORS 475B.345 allows the City to adopt a 3% tax on marijuana items sold by retailers who are licensed by OLCC (under ORS475B.110). The tax must be adopted by ordinance that is referred by the City Council to the electors of the City at the next general statewide election, which occurs on November 8, 2016. If Council’s decision is to proceed to the November election on this issue the appropriate timing would be to take such action and approve a final ballot time on July 18th prior to summer recess. ATTACHMENTS: Attachment 1: Council Briefing Memorandum Attachment 2: Resolution Referring Recreation Marijuana Tax to the Electors Attachment 3: Ordinance Imposing a 3% Tax on Recreational Marijuana DISCUSSION/ FINANCIAL IMPACT: See Council Briefing Memorandum Attachment 1 – Page 1 of 3 .M E M O R A N D U M City of Springfield Date: 6/3/2016 To: Gino Grimaldi, City Manager COUNCIL From: Bob Duey, Finance Director BRIEFING Subject: Recreational Marijuana Local Option Tax MEMORANDUM ISSUE: ORS 475B.345 allows the City to adopt a 3% tax on marijuana items sold by retailers who are licensed by OLCC (under ORS475B.110). The tax must be adopted by ordinance that is referred by the City Council to the electors of the City at the next general statewide election, which occurs on November 8, 2016. If Council’s decision is to proceed to the November election on this issue the appropriate timing would be to take such action and approve a final ballot time on July 18th prior to summer recess. COUNCIL GOALS/MANDATE: Financially Responsible and Stable Government Services ______________________________________ BACKGROUND: In the fall of 2014 prior to the passage of the state-wide recreational measure in November, the City Council enacted an ordinance authorizing a gross receipts tax on recreational marijuana. The ordinance left the actual rate to be charged up to a future Council action which was left pending by Council until more was known about the outcome of the November election and subsequent Oregon legislature intent. The State’s program for distributing shared revenue with other governments is currently in place although many of the rules and procedures are still to be developed. Some of the current rules to be followed are: Requirements: To receive a state revenue share, a city may not adopt an ordinance that prohibits the establishment of a premises for which a license is required under state law for a recreational marijuana producer, processor, wholesaler, or retailer. A city may also not adopt an ordinance prohibiting a medical marijuana grow site nor a medical marijuana facility. Restriction on use: Restriction on revenue use is unknown as the rules have not been completed. However the statutory reason provided for distribution to cities was to assist local law enforcement in their duties. Preempted: Partially. Local governments may not impose more than a 3% tax on the production, processing or sale of recreational marijuana by a retail license. State Distribution of Revenues Pre July 2017 distributions will be per capita in a fashion that is similar to the distribution of revenues from the sale of liquor and cigarettes. Cities are slated to received 10% of the distributed revenue during the 2015/16 and the 2016/17 fiscal years. Estimates are changing although the latest State numbers are indicating that the cities share will be $1.44M in the first year and $2.88 M in the second year. Post July1, 2017 the distribution will be based on the number of licenses issued by the OLCC for premises located in each city, after State administrative and enforcement expenses are deducted. The share will be based on the number of licenses located in the city compared to the total issued by the OLCC for all premises in the state. Attachment 1 – Page 2 of 3 There is currently no reliable estimate of the state shared revenue that will be provided to Springfield in either the Pre-July 2017or in the Post July 2017. There also has not been any discussion by Springfield as far as what types of services could or would be funded under the statutory requirement that distribution to cities is to assist local law enforcement in their duties. LOCAL OPTION TAX State Local Option and Local Gross Receipts Tax A legislative enacted ORS allows cities to adopt up to a 3% tax on marijuana items sold by retailers who are licensed by OLCC. The tax may not be assessed against medical marijuana registry identification cardholders or a designated primary caregiver purchasing a marijuana item for the cardholder. The tax must be adopted by ordinance that is referred by the City Council to the electors of the City at the next general statewide election, which occurs on November 8, 2016. Springfield has already taken action on two items that have an impact on the sale and distribution of recreational marijuana within our community and those are ensuring proper zoning and moderate regulation through the requirement of a business license. The consideration of a local tax as allowed by the State is a third option available to the Council for addressing whatever the long-term changes may be from the state-wide voter approval of the legalization of recreational marijuana. If the Council were to consider a tax on the sales of recreational marijuana, staff, with a review by the City Attorney’s Office, would recommend that the City follow the program as developed by the State’s local option tax rather than the 2014 local ordinance for the gross receipts tax. Some aspects of the current gross receipts tax ordinance are now out of date It is likely that the enactment of the gross receipts tax at this time would face legal challenge The collection method for the local gross receipts tax is yet undetermined The City would be able to enter into an intergovernmental agreement with the State for the collection, enforcement, administration, and distribution for the local option tax A rate for the % of receipts has not yet been discussed by Council Unlike the State’s revenue sharing distribution, at this time there have not been any restrictions placed upon allowable uses for revenues received There are some potential drawbacks from proceeding with State’s local option tax over the local enacted gross receipts tax. They are: The tax must be taken to a vote in the general election in November 2016 The rate is capped by the State The State could develop its own guidelines for acceptable uses that contradicts Springfield’s decisions If the Council should decide to proceed with the enactment of a local ordinance for participation in the State’s local option tax program a future discussion topic would be the ongoing status of the current local gross receipts tax ordinance. State Local Option Tax The League of Oregon Cities is a great resource for this topic and has been helping to inform cities throughout the State on the facts about the local taxing of recreational marijuana. In a far from formal poll, the League indicates that this topic is being discussed in many cities and indicators are that there will Attachment 1 – Page 3 of 3 be quite a few local option tax issues on the ballots November 8th. Individual reasons by Councils vary, but some of the more prominent ones are: Interested in revenue that may be used to offer additional law enforcement services similar to those allowed under the state revenue sharing program Interested in revenue that may be used to pay for current or enhance services across all aspects of a city’s operation To replace a current local ordinance for the taxing of marijuana Want local citizens to have a vote in whether to proceed with a local tax Have not yet decided to levy local tax at this time but with the limited opportunities offered for future voter authorization, they want to establish legal authority to do so at a later time For Springfield to proceed towards placing this option on the November ballot the timeline would need to be similar to what is adopted for other November elections. With the Council on recess during the month of August there is a need to complete all necessary Council action prior to your last meeting on July 18th. The City Attorney’s Office has prepared two documents for your consideration. The first is a sample resolution referring the tax ordinance to the voters. If the Council elects to proceed, a future attachment to the resolution will be the actual ballot title. The second document is the drafted tax ordinance. This is the ordinance that would be referred to the voters in November. Ballot Title Preparation Council’s direction to staff at the June 13th work session could be either to not continue with the resolution and ordinance at this time or ask staff to bring back the ordinance and resolution with ballot title to the Council regular session on July 18th. If the decision is to not proceed at this time it is believed that the next time it could be taken for a vote would be in November of 2018. If the Council would like to proceed with the preparation of the ballot title for submittal to the County Elections Office, staff would ask Council for additional direction for preparing the Explanation section for the ballot submission. The Explanation could be very brief in nature or offer a full commitment for programs that would be funded from the local tax resources. Examples of the options could be: state only that the City is accepting of the recent trend to utilize the legalization of recreation marijuana to increase revenue to help in providing services to entire community state that the City is fully committed to providing additional services to those most likely impacted by drug use and all proceeds from the local option tax would be dedicated to either social service or law enforcement programs. Either of these two options at the opposite ends of the spectrum is completely in line with any rules about the use of the local option tax revenue and it is entirely up to each city to offer an explanation to their citizens. RECOMMENDATION Staff has no recommendation for Council on proceeding with the adoption of the local ordinance and the placing of the ballot on the November election. Attachment 2, Page 1 of 2 RESOLUTION NO. _______ A RESOLUTION REFERRING TO THE ELECTORS OF THE CITY OF SPRINGFIELD THE MEASURE OF ORDINANCE NO. _______ IMPOSING A 3% TAX ON MARIJUANA RETAILERS’ RECREATIONAL SALES IN SPRINGFIELD As the preamble to this Resolution, the Common Council of the City of Springfield, Oregon (the “City”) hereby recites the matters set forth below. To the extent any of the following recitals relates to a finding or determination which must be made by the Common Council in connection with the subject matter of this Resolution or any aspect thereof, the Common Council declares that by setting forth such recital such finding or determination is thereby made by the Common Council. The recitals, findings and determinations set forth herein constitute a part of this Resolution. (1) POLITICAL SUBDIVISION. The City is a municipality and political subdivision organized and existing under and pursuant to the laws of the State of Oregon and the 2001 Springfield Charter City (the “Charter”). (2) ORDINANCE IMPOSING 3% TAX ADOPTED BY COUNCIL. The Common Council of the City of Springfield has adopted Ordinance No. ____, imposing a 3% tax on the recreational sale of marijuana and marijuana items by a marijuana retailer. (3) REFERRAL TO VOTERS. ORS 475B.110 requires that an ordinance imposing a 3% tax on the sale of recreational marijuana be referred to the voters of the City at a statewide general election, the next of which will be held November 8 2016. NOW THEREFORE BE IT RESOLVED as follows: SECTION 1. APPROVAL OF BALLOT MEASURE IMPOSING A 3% TAX ON MARIJUANA RETAILERS’ RECREATIONAL SALES. The Common Council of the City hereby directs that at the General Election held November 8, 2016, there shall be submitted to the qualified electors of the City of Springfield the measure of Ordinance No. ______, imposing a 3% tax on the recreational sale of marijuana and marijuana items by a marijuana retailer. The Ballot Title is attached hereto as Attachment 1 (“the Ballot Title”), incorporated herein by reference. SECTION 2. SUBMISSTION TO ELECTIONS OFFICER. Not later than the 61st day before November 8, 2016, the City Recorder, as the Chief Elections Officer of the City, shall submit to the County Clerk for Lane County, Oregon, a statement of the ballot measure together with a certified copy of this Resolution and the Ballot Title, all in order that the measure may appear on the ballot for the General Election held on November 8, 2016. The City Recorder shall submit to the County Clerk all necessary Attachment 2, Page 2 of 2 information, and shall do and perform all other acts and things necessary or appropriate, so that the measure shall appear on the ballot for such General Election. SECTION 3. ADDITIONAL AUTHORIZATIONS. The City Manager, the City Recorder, the City Finance Director, and the City Attorney, and each of them acting individually, are hereby authorized, empowered and directed, for and on behalf of the City, to do and perform all acts and things necessary or appropriate to cause the ballot measure set forth in Attachment 1 to appear on the ballot of the November 8, 2016, General Election and to otherwise carry out the purposes and intent of this Resolution. SECTION 4. EFFECTIVENESS OF RESOLUTION. This Resolution shall take effect immediately upon its adoption by the Common Council of the City and approval by the Mayor. BE IT FURTHER RESOLVED that this Resolution shall take effect upon adoption by the Council and approval by the Mayor. Adopted by the Common Council of the City of Springfield, Oregon, by a vote of ____ for and ____ against, this _____ day of July, 2016. _______________________________ Mayor ATTEST: _____________________________ City Recorder N:City/Resolution/General/TemplateforCity.doc Attachment 3, Page 1 of 2 ORDINANCE NO. _______________ AN ORDINANCE ADDING SECTION 7.1002(3) TO CHAPTER 7 OF THE SPRINGFIELD MUNICIPAL CODE AND IMPOSING A 3% TAX ON MARIJUANA RETAILERS’ RECREATIONAL SALES IN SPRINGFIELD The Common Council of the City of Springfield finds that: WHEREAS, in 2014, Oregon voters passed Ballot Measure 91, which allowed adults 21 and older to use, grow, process, and sell limited amounts of marijuana for recreational purposes; WHEREAS, in 2014, the City Council adopted a gross receipts tax on the sale of marijuana in the City of Springfield, the amount of tax to be set by Council Resolution; WHEREAS, in 2015, the Oregon Legislature passed House Bill 3400, under which the City of Springfield may impose a tax of up to 3% on the recreational sale of marijuana and marijuana items by marijuana retailers within the City of Springfield; WHEREAS, House Bill 3400 requires a municipal tax on the sale of recreational marijuana to be adopted by ordinance and referred to the electors of the City at a general statewide election; and WHEREAS, the City Council desires to impose a 3% tax on the recreational sale of marijuana and marijuana items by a marijuana retailer within the jurisdiction of the City of Springfield; NOW THEREFORE THE CITY OF SPRINGFIELD ORDAINS AS FOLLOWS: Section 1. Chapter 7 BUSINESS of the Springfield Municipal Code, Section 7.1002, is hereby amended add the following subsection (3): “(3) The amount of tax levied for recreational marijuana shall be 3% of the gross taxable sales of marijuana and marijuana items by a marijuana retailer.” Section 2. Except as specifically amended herein, Chapter 7 shall continue in full force and effect. Section 3. Severability Clause. If any section, subsection, sentence, clause, phrase or portion of this Ordinance is, for any reason, held invalid or unconstitutional by a court of competent jurisdiction, such portion shall be deemed a separate, distinct and individual provision and such holding shall not affect the validity of the remaining portion hereof. ADOPTED by the Common Council of the City of Springfield this ______ day of July, 2016, by a vote of ______ for and ______ against. APPROVED by the Mayor of the City of Springfield this ______ day of July, 2016. Attachment 3, Page 2 of 2 _______________________________ Mayor ATTEST: _______________________________ City Recorder