Page 469 - 2020-21 Budget Summary

Revenue Forecast Report
Discussion

Spotlight On: Cannabis-Related Revenues

Beginning with the statewide passage of Proposition 64 in November 2016,
the City worked to establish a regulatory and taxation framework around
legal adult-use cannabis businesses, including retail storefronts and delivery
services as well as cultivation and processing parts of the supply chain. In
2017 the Department of Cannabis Regulation (DCR) was created, and permit
fees were established.

Cannabis business activity provides three direct sources of revenue to the
City: business tax, sales tax, and permit fees. Business and sales tax
receipts are deposited as General Fund revenue, while permit fees are
deposited into the City’s Cannabis Regulation Trust Fund to pay for DCR
operations.

The graph below shows the progression of actual City revenues relating to
legal cannabis business activity for fiscal years 2018 and 2019, along with
projected receipts for 2020 and 2021.

Cannabis Revenues Cannabis-Related Revenues (in millions)
Business TaSales Tax Permit Fees
160 2018 5 9 4

140 2019 44 18 11
120 2020 85 30 14
2021 87 30 19
100
80

60
40
20
0
2018 2019 2020 2021
Business Tax Sales Tax Permit Fees

The current year estimate is based largely on the significant increase in
cannabis business tax receipts which began in the second half of the prior
fiscal year but has accelerated in fiscal year 2020. 2021 revenues are harder
to project, due largely to uncertainty about DCR’s Social Equity program,
which is the next available venue for significant expansion of these
revenues. For purposes of projection, we have assumed only natural
economic growth over the 2020 estimate, not an expansion of permitted
businesses.

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