DIXON, CA (MPG) - The Dixon City Council held a special meeting April 7 to discuss the city’s Cannabis Business Pilot Program, which has been in effect since 2017. City attorney Douglas White said it was time to revisit the program and determine if the existing policies need any changes or updates.

White asked council to consider whether the pilot program should now be made permanent. He went over the various application, verification and licensing requirements that the businesses must meet, as well as the Development Agreements and Conditional Use Permits that council must approve. 

In addition to local sales taxes and state-imposed taxes, Dixon also requires cannabis businesses to pay a monthly public benefit fee to the city’s General Fund for public safety costs. They pay either 5% of their gross monthly revenue or a set amount up to $30,000 based on their years in operation, whichever is the greater amount. 

Dixon voters approved Measure K in 2016, which allows up to a 15% tax on cannabis businesses. City attorney White said that he would like council to consider imposing that maximum tax so the city would have the ability to tax businesses from outside the city attempting to operate in Dixon without the proper permissions. The local businesses would maintain whatever tax rates are specified in their particular development agreements, White said.  

White also noted that the cannabis industry has decreased 20% statewide, mostly due to over taxation, which can drive operators out of business as well as contribute to the increase in black market cannabis sales. 

“On a whole, the pilot program has been a success for the city, particularly in light of the revenues that are being produced through the retail component,” said Dixon City Manager Jim Lindley.

Four cannabis businesses are operating in the city, one in manufacturing, one in cultivation and two in retail. In the last fiscal year, Lindley said, the city received more than $1 million in public benefit revenues from the cannabis industry, with approximately $900,000 coming from the retail division. 

Lindley acknowledged that there have been some “missteps” along the way, particularly on the accounting side but the security measures have been very successful. 

Dixon Police Chief Robert Thompson said that cannabis businesses are often targets for robberies but the businesses in Dixon have worked well with the department to meet security requirements.

“I think we have an exceptionally stringent security protocols,” said Thompson, and while they are not at 100% compliance, they are working toward it. Thompson said there have been no major incidents at or near the businesses. 

During public comment, Dixon Wellness Collective owner Haley Andrew said that her business is not generating enough to pay the $30,000 fee per month. It operates as a smaller cannabis business, catering more to medicinal clients. She added that her business has worked well with Dixon Police Department to meet all security requirements. However, Andrew said, she was unable to launch a delivery program because she could only afford to start with one secured vehicle but the Police Department required three, which was “not feasible” for her business. 

Club 420 Founder and CEO Rob Read also spoke to the council, stating that the business has served 55,000 residents, roughly 40% of the adult constituents in Dixon. Read said that he is “happy to pay the benefit fee” to support the city but any tax increase requires the business to lower its prices to avoid impacting the consumer. So a tax increase results in less profits for the business and lower revenues paid to the city. Read asked for an end to the pilot program so the operators will have security about their future in Dixon, allowing them to proceed with developing permanent structures for their businesses. 

A Dixon resident said he was concerned that it wasn’t a free market with the number of regulations on these businesses. He said restaurants are a frequent robbery target and yet the Dixon Police Department does not mandate any security measures for that industry. He said the taxes are too high and “it’s driving people out of business.” 

Councilmember Jim Ernest suggested that the monthly public benefit fee be reduced so it isn’t such a burden on these struggling businesses. 

Vice-Mayor Thom Bogue agreed that the benefit fee tax should only be imposed as a percentage of profits, so as businesses’ revenues go up, their taxes would increase. But if sales are down, they shouldn’t have to struggle to pay a monthly minimum. 

Because the council has imposed a limit on the number of cannabis businesses allowed in Dixon, city attorney White said, it might be best for the city if existing businesses that can’t meet the required benefit amount close to make room for more successful operations. 

Vice-Mayor Bogue wondered whether these minimum amounts are based on the practices of larger cities with greater populations. He said unreasonable tax rates will push out small businesses and then only the big conglomerates will be able to meet the financial obligations for operating in Dixon. 

Councilmember Kevin Johnson said he would support ending the pilot program and giving the businesses permanent status. He agreed “our minimum is too high,” and asked to see reduced payment options when this issue comes back as an action item. He recommended more frequent financial audits as well as a requirement for supporting documentation with the monthly financial accounting form. Johnson also requested that council revisit the allowable signage. 

Councilmember Don Hendershot said the pilot program has gone more smoothly than he expected and he would support a discussion on reducing the fees. 

Mayor Steven Bird cautioned that they don’t want to be overly restrictive on signage because businesses need effective ways to advertise and attract customers to succeed. 

Staff will take council recommendations into consideration and bring back action items for approval at a future meeting.