Visalia City Hall wants its share of the cannabis tax revenue. But the city council isn’t ready, at least yet, to consider allowing storefront cannabis sales or, growing sites in the city limits.
Cannabis Tax Could Go to the Voters in November
On Monday, June 3, every member of the Visalia City Council voted to introduce an ordinance that will place a range of taxes and levies on all aspects of cannabis-related business. The tax will include, but not limited to, growing cannabis, selling it, packaging it and delivering cannabis within the city limits. However, city code will continue Visalia’s prohibition on recreational cannabis sales in the city.
It seems the council is just preparing for what they fear – or hope – may come.
“The council feels the state is moving forward with more cannabis options, and they’d like to be in the driver’s seat,” said Leslie Caviglia, Visalia’s city manager.
Late last year, under pressure from Sacramento, the council reworked the city code to allow the operation of medical – but not recreational – cannabis delivery services based in the city. The move, forced by the state, marked an end to the hardline anti-cannabis votes the council made in the past. Visalia-based medical delivery services were reluctantly allowed only when a new state law prevented cities from continuing to exclude them on moral grounds.
The state forced the city’s hand to accommodate users with disabilities, especially those whose conditions limit mobility. Yet, despite the bitter taste left in their mouths, the council apparently saw the light, or at least the dollar signs. A second reading of the cannabis tax ordinance came at the next council meeting, earning nothing more than a spot on the consent calendar list of incidental items approved by a single vote without comment.
The tax measure will appear on the November 5 general election ballot.
Council resents expected state intervention on cannabis
The state legislature forcing cities to open their doors to medical cannabis delivery businesses did not sit well with some on the council. Steve Nelsen, perhaps the most ardent opponent of legal cannabis on the council, called the forced change to city code “Sacramento’s overreach” in December when the vote took place. He did, however, acknowledge the necessity for city policy to evolve with the changing times, both then and now.
“I think people need to understand a lot of the direction we’re taking is from the state mandate and state requirements, i.e. you have to allow warehousing in your city, allowing for delivery within your city, and or delivery from other areas into your city,” Nelsen said during the June 3 meeting.
Nelsen continues to fear the state will force cities to allow the sale of recreational cannabis, he said. Recreational cannabis sales and usage have been legal in California since the passage of Proposition 64 in 2016. The voter-mandated law – which is enshrined in the state constitution, as are all citizen-approved measures – specifically leaves decisions about allowing the sale of recreational cannabis to individual counties and cities.
Yet Nelsen and fellow councilmember Brett Taylor continue to harbor fears the state will usurp that power.
“All we’re doing is setting up a measure (so that) once the state says you’ve got to allow retail sales we’re on the forefront of (being) ready to move,” Nelsen said. “You know in some cases you don’t have a choice, and think this is a prudent way to get it started and protect the city of Visalia. So, I’m in favor of it.”
Still no recreational cannabis sales for Visalia
Councilmember Taylor echoed Nelsen’s sentiments and added his own twist. He believes it’s possible the state may direct how cities spend cannabis tax revenues after they force open the door to sales.
“I’ve been a proponent of this for about four years now, because my biggest concern was the state is going to pass legislation that’s going to in effect tell us we have to legalize marijuana and where that tax revenue goes,” he said before voting in support of the measure.
Councilmember Liz Wynn also sought reassurance the city’s cannabis tax ordinance would not allow the sale of recreational cannabis. Member Emmanuel Hernández Soto expressed his unqualified support for the tax measure and for future recreational sales in Visalia. Mayor Brian Poochigian continues to support the sale of recreational cannabis, having previously voted to approve it.
And the council could change its mind someday. But not now.
“Now, if we decide to go to recreational marijuana in the future, that’s up to this council in the future,” Poochigian said. “But, at this time, it’s strictly to put it on the ballot whether or not we should tax the businesses that are here or are mandated by the state to be here.”
Those citizens in attendance at the June 3 meeting had nothing to say prior to the vote. There were no public comments.
Cannabis tax causes confusion over recreational sales
The mere appearance of a cannabis tax ordinance on the Visalia City Council’s agenda had some people thinking the move also meant recreational sales were being approved at the same time. They’re going to be disappointed.
Cannabis vendors remain eager to do business here.
“I received a phone call from an individual a few days ago who said, ‘You know, well, we’re going to be able to sell marijuana in Visalia,’” Mayor Poochigian said.
He had to burst the caller’s bubble.
“That’s not what this is for,” Poochigian said. “This is (because) the state is now mandating medicinal marijuana sales, and without this being on the ballot, approved by the voters, we cannot tax this.”
City Hall wants its share of out-of-town tax revenue
The city staff estimates an annual revenue of $500,000 from the cannabis tax. Part of that will come from taxing delivery sales of recreational cannabis in Visalia, but coming from businesses with storefronts elsewhere in Tulare County and surrounds.
Visalia city attorney Jim Coons said the tax act contains an apportionment clause that allows Visalia City Hall to claim a portion of the taxes generated by deliveries coming into town from outside sources.
But he also said figuring out Visalia’s cut won’t be a simple task. Some figuring will have to take place, along with auditing businesses coming inside Visalia city limits to make sales.
“There’d have to be some way to track what’s being done in Visalia. It would have to be shared within the bounds of state law,” Coons said. “You can’t tax the whole. You go into apportionment. You have to go into the portion of the business being done in Visalia. You have to figure out that amount, and that’s complicated.”
He offered the example of milk delivery businesses. They, too, make deliveries from out-of-town locations to Visalia. Such businesses, Coons said, are required to hold a Visalia business license. He’s unsure if existing recreational cannabis delivery services are in compliance, but says they will be in the future.
“When businesses are doing business in Visalia, they have to get a business license,” Coons said. “That’s where we’d try to figure this out.”
Business people, public want more info on Visalia’s cannabis stance
The proposed cannabis tax put forward for voter approval is broad. It taxes all aspects of growing, processing, storing, delivering and selling cannabis and related products. The measure sets the maximum tax rate at 10% in most cases, with additional levies based on operational square-footage for some enterprises.
All other cities in Tulare County that allow recreational cannabis businesses have adopted 5% taxes for most transactions. City manager Caviglia said it’s likely Visalia will follow suit. The 10% rate is merely the most the city could ask, and it was included in the measure on the notion it is simpler to set a high but variable rate to avoid returning to voters for approval of increases in the future.
“I don’t think it would be set at that level, if it were here today,” Caviglia said. “It could also be set for different amounts depending on what’s being done.”
Cannabis business owners immediately sought more information. Jennifer Mendonca, owner of Token Farms in Tulare and Farmersville, said the action by the city and the discussion that went before it left many questions unanswered.
“Visalia’s last council meeting didn’t really classify the taxation, so we will be asking for a meeting with the city manager for more clarification in the coming weeks,” she said. “We are excited that Visalia has begun exploring the process of allowing recreational cannabis storefronts and we will see how the votes shake out in November.”
Cannabis tax measure has wide voter support
Mendonca and Caviglia have talked the tax over, Caviglia said, but there was little information she could add, as the details remain unsettled. How cannabis is taxed locally, Caviglia said, is governed by how its recreational use is perceived in various municipalities.
“It’s probably a little different (regarding cannabis) in related communities with the impacts,” she said. “That’s why everybody is taxing it differently in every community.”
As for voters, the city has polled them regarding their support for the cannabis tax, and the majority of them overwhelmingly approve the measure as written. The poll was conducted by HDL Companies, a municipal consultation firm with a specialty in California cannabis law. Their contract with the city is valued at up to $40,000, depending on how much work City Hall wants done to prepare for possible future recreational sales.
The ordinance presented to the council was also crafted by HDL, and its wording is found in similar documents enacted into law around the state.
“We actually worked with a consultant who has done this in a number of cities, including Hanford,” Caviglia said. “We’re not reinventing the wheel here.”
Visalia’s city manager agrees with the votes. This is the right move, she said. And she’d like an edge against future mandates from Sacramento.
“It makes sense not to be at the whim of the state,” Caviglia said. “It makes sense to have our own measures in place. If it becomes mandatory, we’ll have these measures in place.”
Citizens support cannabis for many reasons
Voters aren’t just in favor of gathering revenue from recreational cannabis. They also think it’s beneficial for an array of other reasons, and some of them were expressed at the Tulare County Voices forum on cannabis held June 11 in Visalia’s Cafe 210.
Before the talk got underway, though, the audience got a brief history of its prohibition from former Visalia Times-Delta editor Paul Hurley, who served as the event’s master of ceremonies.
“It has really been relatively recently that marijuana has been considered an illegal substance, an illegal drug,” he said. “Most of the history of the United States it was not only legal, it was a valued cash crop. It was used to make rope, it was used well for its obvious medicinal benefits, and in other ways, it was a valuable commodity.”
And it has become a “valuable commodity” once again.
“In fact, according to what I see now and as reported on CBS News, the number one cash crop in the state of California is, yes, you guessed it, marijuana,” Hurley said. “It’s an $11 billion a year crop.”
But he bemoaned Tulare County missing out on that income.
“Of course, that’s not raised around here much,” Hurley said. “It’s mostly in Northern California.”
Cannabis tax remains a boon for Woodlake
That’s only partially true. One of the largest indoor cannabis growers – 7 Points – operates in a former citrus packing house at the edge of the Woodlake city limits. Other growers, like Valley Pure, also call the area around Woodlake home.
Woodlake mayor Rudy Mendoza was on the panel at the June 11 forum, where he touted the benefits cannabis has brought to his city of 7,600 people. Cannabis commerce, he said, still brings in about $700,000 in revenue annually for Woodlake.
With nearly 20 times as many residents, Visalia might expect a vastly larger income.
His city, which was on the forefront of recreational sales, has seen a big drop in cannabis tax income.
“The first year we saw, I believe it was about $1.2 million in revenue,” Mendoza said. “One of the things that we recognized right away is that this wasn’t a cash cow. Eventually this market would drop, and it would just bottom out.”
But six years later, the money still hasn’t dried up. According to the city’s website, Woodlake’s entire 2024 municipal budget is $385,100, all of which is covered by non-cannabis tax income. Because of the way the city’s cannabis tax law was written – cannabis tax revenue can only be spent for a few specific categories – that means tiny Woodlake has $700,000 this year to spend on infrastructure, public safety and recreation.
Part of that income is from the country’s largest cannabis distributor, Nabis, which relocated to Woodlake from Oakland in 2023. Mendoza compared the company to the behemoth Amazon.
“Phase one is complete, and they have hired over 100 employees,” he said.
Visalia, with its proximity to Highway 99, might have been a more desirable location, but city code simply doesn’t allow it. Meanwhile, Visalia’s cannabis tax income is not earmarked. It will be funneled into the general fund to cover anything the city council thinks it needs or wants.
According to Caviglia, Visalia currently has no plans in the works to open the city to recreational cannabis sales.