Is cannabis operator seeking reduced taxes in the city of Carson

The city of Bellflower city council voted 4-0 on a resolution temporarily reducing cannabis tax rates for manufacturing and distribution, and suspending annual increases for all other cannabis tax rates, pursuant to the city’s Municipal Code.  The motion was supported by Harris and Associates and initiated by EEL Holdings, LLC, whose affiliates have placed several billboards around the city of Carson for certain candidates on the November ballot.

The council adopted the resolution on September 28 temporarily reducing cannabis tax rates for manufacturing to 2%, down from 7.5%; and distribution to 1%, down from 7.5%.  The city prepares its operating budgets, on a biennial basis, and hasn’t accounted for any revenue shortfalls as a result of the COVID-19 global pandemic.

Officials will consider at mid-year whether to go ahead with plans to hike raise the tax on sales and other operations, City Clerk Mayra Ochiqui said.

In a report to the council, Tae Rhee, director of finance, said city staff recommended a “resolution temporarily reducing cannabis tax rates for manufacturing and distribution and suspending annual increases for all other cannabis tax rates, pursuant to the city’s Municipal Code

According to Rhee, one of the city’s cannabis license holders, EEL Holdings, requested that the city’s cannabis tax rates be reduced for manufacturing and distribution and to freeze the tax rate for retail sales (at 7.5%) citing tax rates in Long Beach, Costa Mesa, and Santa Ana and the lost business opportunities in Bellflower because of the current rates.

Rhee said the city retained Harris & Associates to study the city’s overall cannabis business tax rate structure and, if warranted, provide estimated revenue impacts of its recommended tax rate reductions and freeze.

Based on its research and analysis, Harris & Associates recommended that the cannabis business tax rates for manufacturing and distribution be temporarily reduced and that scheduled increases for all other cannabis tax rates be temporarily suspended.

“Harris & Associates determined that even with the tax rate reductions, similar and somewhat higher tax revenues are anticipated for the city due to much greater volume of business activities forecasted with the lower tax rates,” Rhee told the council.

For the estimated impact on City’s cannabis tax revenues, Harris & Associates provided the following:

For the fiscal year ending June 30, 2021, the consultant said the current tax would bring in about $1.3 million to $2.9 million in revenue to the city while revenue from the proposed tax reduction would bring in about $1.4 million to approximately $3.2 million.

In March 2017, Bellflower voters approved Measure B, which imposed a general tax on cannabis businesses operating within the city including commercial cultivation, manufacturing, distribution, and retail sales.

Mayor Juan Garza abstained from voting.