Palm Springs will phase in an increase in cannabis business license fees over the next three years to fund additional code enforcement for the growing industry, the city council decided Thursday.
The application fee for cannabis businesses will increase from $4,092 to $10,984 over the three-year span, while the annual renewal fee would increase from $1,000 to $10,984. The increase would be divided equally over three years.
The city will use the additional fee revenue to fund two code compliance officers focused solely on cannabis regulatory compliance, and one new vehicle for the two staff members. Currently, the city has eight code compliance officers and one code compliance supervisor who cover all types of code enforcement throughout the city, including vacation rentals and cannabis compliance, with no officers dedicated solely to cannabis.
The Palm Springs City Council approved the new fees Thursday night after considering an initial proposal that would have implemented the fee increase all at once, effective 30 days after the council meeting. But the proposed increase of nearly $10,000 for renewals and $6,892 for applications sparked pushback from some in the cannabis industry.
„This is a 168% increase for initial applications and a 1,000% increase for renewals. … Existing operators, like the rest of the world, have been impacted by COVID and have limited resources to afford 1,000% increases for permitting fees,” said Simone Sandoval, board member with the Coachella Valley Cannabis Alliance Network.
Sandoval argued the city’s cannabis tax revenue, estimated at $2.2 million for fiscal 2020-21, would provide more than enough money for the estimated $289,697 cost of two code compliance officers and a vehicle.
67 businesses have permits
The city’s Office of Special Programs was initially created for the city’s vacation rental permitting and enforcement, and regulatory compliance and permitting for cannabis operations were added to the office in 2019. The funding for the department „is intended to be recovered through the permit fees for each respective program, based on the direct costs to administer permitting and enforcement activities,” according to the city staff report.
In fiscal 2019-20, Palm Springs received $137,014 in cannabis permit fees, according to the city’s budget. Based on the city’s 67 existing operational cannabis permits, the city expected $735,902 in fiscal 2021-22 if the fee increase was implemented all at once. This is the equivalent of the total estimated program budget for cannabis regulatory operations, which includes existing Office of Special Programs staff and code compliance staff.
The two dedicated compliance officers are needed to respond to calls for odor complaints in a timely manner and conduct proactive enforcement of cannabis businesses, city staff said.
„If you don’t add staff to address growing cannabis operations, you’ll be pulling code officers from other duties, which reduces our ability to address city-wide issues, which has been a problem, and makes us more and more reactive to those issues,” said Assistant City Manager Marcus Fuller.
The city still plans on adding two compliance officers in the upcoming fiscal year. Fuller explained that by phasing in the increase, the city would be subsidizing the cost of cannabis enforcement activities over the next three years.
Desert Hot Springs charges $6,450 for cannabis dispensaries and manufacturing facilities, with a $9,250 fee for cannabis cultivation facilities. Cathedral City charges $7,500 for a new permit and $4,500 for each renewal, according to the Palm Springs city staff report.
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Concern over 'dramatic’ proposed hike
The proposed fee increase received three public comments and several letters in opposition, as well as a letter of support from the Lighthouse dispensary.
„Lighthouse Palm Springs would like to express support for the proposed modified user fees for Cannabis dispensaries in the city of Palm Springs. We feel the increase is reasonable and the need for increased compliance enforcement is necessary, as our cannabis marketplace continues to grow,” wrote Lighthouse Chief Operating Officer Brad Davis in a letter to the council.
The council voted unanimously to phase in the fees over the next three years, with Councilmember Grace Garner calling the decision a „goodwill gesture.”
„I’m concerned about the cannabis fee increase and just how dramatic it is. … I am concerned that we are moving forward a bit too drastically,” she said.
Other councilmembers agreed that phasing in the fees would reduce the immediate impact on businesses.
„The cannabis industry definitely needs enforcement, but a fee increase that is on the order of magnitude of more than double and in some cases maybe even tripling may argue for phasing in some of those fees,” said Mayor Pro Tem Lisa Middleton.
The cannabis fee increase was one of several changes to the city’s user fees passed on Thursday. Other changes included a new annual animal breeding permit fee of $100 and a reduction of existing sewer facility fees.
Erin Rode covers the western Coachella Valley cities of Palm Springs, Cathedral City and Desert Hot Springs. Reach her at erin.rode@desertsun.com.