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