HomeMy WebLinkAboutPCD 2024-05-13 Item 1C - Discussion - Cannabis Retail ConsiderationsCity of Tukwila
Thomas McLeod, Mayor
INFORMATIONAL MEMORANDUM
TO: Planning & Community Development Committee
FROM: Laurel Humphrey, Legislative Analyst
CC: Mayor McLeod
DATE: May 1, 2024
SUBJECT: Cannabis Retail Zoning Considerations
ISSUE
The City Council requested a briefing on considerations regarding expanding zoning for cannabis
retail establishments.
BACKGROUND
Initiative 502 passed in November 2012 and created a comprehensive regulatory approach on
cannabis with state -licensed producers, processors and retailers. Initiative 502 received a yes vote in
all but one Tukwila precinct. HB 2870 created a Marijuana Social Equity Program in 2020 to address
historic racial inequity in enforcement of marijuana laws. In 2022 2SHB 1210 replaced all references to
"marijuana" in state statutes and regulations with the word "cannabis."
• On September 3, 2013, the City Council adopted Ordinance 2407 to implement Initiative 502,
determining that cannabis retailers, producers and processors are permitted uses in Tukwila
Valley South and Heavy Industrial Zones, subject to the 1,000-foot exclusion rule.
• In 2015, 2SSB 5052 and HB 2136 allowed cities to reduce buffers from 1000 to 100 feet around all
entities except elementary and secondary schools and public playgrounds.
• In 2017, the City Council received two separate requests to expand permitted cannabis retail
zones but denied both on February 13, 2017.
• In September 2019, the Finance Committee discussed revenue and zoning considerations and
decided against recommending any changes to the City Council at that time.
• In June 2021, the Finance & Governance Committee discussed revenue potential and decided
against recommending any changes to the City Council.
DISCUSSION
Zoning
Currently, cannabis retail, production and processing are only permitted in the Tukwila Valley South
and Heavy Industrial Zones. (Read more in the 8/26/13 staff report).
Current Licenses
Through the 1-502 rulemaking process, the Liquor and Cannabis Board adopted regulations on the
number of retail store licenses for jurisdictions, determining a maximum of two for Tukwila. All
cannabis licensing is regulated and enforced by the Washington State Liquor and Cannabis Board.
There are currently active licenses for Tukwila's two retail allotments: Mount Baker Retail Partnership,
LLC (12539 E Marginal way S) and Dash & Wrigley LLC (13003 Tukwila International Boulevard).
Neither of these are operating. Licensed retailers are required to be open and operational, but
licenses can be held without opening if they obtain a title certificate relieving them of the requirement
to be open based on a moratorium, ban, or other zoning restriction, or if the business is temporarily
discontinued while they move locations.
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INFORMATIONAL MEMO
Page 2
Sales and Excise Tax Revenue
The state cannabis excise tax and its distribution has changed over time and can be altered in any
future legislative session. The State currently taxes cannabis through a single excise tax of 37% at the
time of retail sale, in addition to the regular state and local sales tax, and $30M of that revenue is
shared with cities, towns and counties. There are two components to the distributions: 1) per capita
share to all jurisdictions that allow the siting of producers, processors and retailers; 2) retail share to
all jurisdictions where licensed retailers are physically located and in proportion to total statewide
retail sales. Tukwila does not have any cannabis businesses and therefore does not receive sales -
based revenue. Tukwila's per capita distribution has been:
Year*
Revenues
2023
36,302
2022
32,334
2021
24,013
2020
23,479
2019
23,123
2018
23,364
*State Fiscal Year: July 1 - June 30
Beyond the excise tax, cannabis retail operations would generate sales tax. For every $1 million in
cannabis sales, the City could expect to receive $8,585 in sales tax revenue. Staff looked up average
retail sales within 5-miles of a cannabis retailer in the Ikea District of Renton, and for Jan -December
2023 the average per store was $4.1 million. Hypothetically, if two retailers in Tukwila had combined
yearly sales of $8M, the City would receive $68,680 of sales tax in addition to the increased excise
revenue described above.
It is difficult to estimate what Tukwila would receive for its tax share if the two state -issued licenses
were active businesses. The excise tax formula depends not only on population but also on cannabis
retail sales as a proportion of total retail sales, as well as the number/total population of cities and
counties that prohibit marijuana. MRSC used to offer an estimate calculator but discontinued it due
to complexity of the formula. While the revenue potential is difficult to predict, we can look to
neighboring jurisdictions for insight, while recognizing that their larger residential populations result
in greater shares than Tukwila would receive in similar circumstances. The chart below shows the
2023 cannabis excise revenue for neighboring cities with open retailers:
City (number of locations)
Population
2023 Cannabis Revenue*
Burien (2)
50,216
$163,047
Auburn (4)
83, 757
$246,135
Des Moines (2)
32, 177
$123,131
Renton (4)
102,716
$295,597
*State Fiscal Year: July 1 - June 30
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INFORMATIONAL MEMO
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Crime & Safety around Retail Locations
Cannabis stores are frequent targets for theft, typically in the form of armed robberies or smash and
grab burglaries, due to federal banking restrictions that require them to do business primarily in cash.
Congress has been working on the SAFER (Secure and Fair Enforcement Regulation) Banking Act
which would address this issue, and has shown bipartisan support. In Washington State, a bill that
would have added a 12-month sentence enhancement for smash and grab convictions was
introduced but not passed in the most recent state legislative session.
40
35
30
25
20
15
10
5
0
Smash and Grab Burglaries, WA State
Cannabis Stores
2017 2018 2019 2020 2021 2022 2023
Source: Uncle Ike's i502 Robbery Tracker
The below table shows calls for service at certain retailers in nearby cities from 2019-2023.
Auburn
Burien
Des Moines
Renton
Evergreen Market
Lucid
The Stash Box
The Joint
Kush 21
Greenside
Buddy's
Emerald Haze
Evergreen Market North
Evergreen Market South
2019
47
22
16
17
33
83
20
35
38
33
2020
36
39
20
19
44
78
13
40
17
36
2021
48
15
21
18
34
69
17
30
13
39
2022
56
14
16
21
36
52
20
28
12
30
2023
55
18
14
16
20
64
17
33
14
35
Through the code update process the City Council could consider establishing permitting
requirements designed to address theft and crime concerns.
RECOMMENDATION
This is intended to provide a discussion opportunity for the Committee. If a majority of the City
Council wishes to update the zoning for cannabis -related business, it is a significant work item that
would require ordinance development, Planning Commission review, and a public outreach and
hearing process. This could be added to the Department of Community Development work plan for
the second half of 2025, following the adoption of the Comprehensive Plan and updated middle
housing regulations.
ATTACHMENTS
Cannabis Excise Tax Excerpt from Revenue Guide for Washington Cities & Towns
Map (distributed separately)
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CANNABIS (MARIJUANA) EXCISE TAX
Quick Summary
• A portion of the state's cannabis excise tax is distributed to cities and counties depending on their
cannabis policies.
• Two separate components:
Per capita share distributed to all cities and counties that do not prohibit cannabis businesses.
Retail share distributed to cities and counties where cannabis retailers are located, in proportion
to statewide cannabis revenues.
• No clear guidance on use of revenues, but stated intent of 1-502 is that cannabis legalization will
"[allow] law enforcement resources to be focused on violent and property crimes [and generate] new
state and local tax revenue for education, health care, research, and substance abuse prevention."
RCW: 69.50.540(2)(g)
Initiative 502 (1-502), which was approved by voters in 2012, legalized recreational cannabis and authorized
cannabis excise taxes. Cannabis excise taxes are imposed and collected by the State of Washington; as of
2022, the state imposes a 37% cannabis excise tax on the retail sale of cannabis, cannabis concentrates, and
cannabis -infused products (RCW 69.50.535 and WAC 314-55-089).
Cities and counties may not impose additional local excise taxes upon the sale of cannabis. However, the
state shares some of the excise tax revenues with cities and counties, as mandated by 1-502.44 Beginning
in 2022, counties receive a percentage of the excise tax revenues (after various deductions), which means
these revenues will fluctuate with cannabis sales activity. Previously, the excise tax distributions were fixed by
legislative appropriation.
Cannabis excise tax distributions depend in significant part upon local cannabis policies and regulations. The
regulatory approach that each county adopts, as well as the number of cannabis retailers located within each
county's unincorporated areas, will determine whether the county receives any cannabis excise tax revenue
(and how much).
Eligibility and Distribution Formula
There are two separate components to cannabis excise tax distributions:
• Per capita share: Distributed on a strictly per capita (population) basis to all cities, towns, and counties that
allow the siting of cannabis producers, processors, AND retailers. Any jurisdiction that prohibits cannabis
producers, processors, OR retailers is not eligible.
• Retail share: Distributed to all cities, towns, and counties where licensed cannabis retailers are physically
located, and in proportional share to total statewide cannabis retail sales. For counties, the retail share only
includes unincorporated areas only and does not include any retailers physically located in any city located
within the county.
44 The intent of 1-502 states, among other things, that it will "[generate] new state and local tax revenue" [emphasis added],
although it does not specify how the revenue will be shared with local governments or how much will be shared.
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The different distribution formulas mean that some jurisdictions will receive both the per capita and retail
distributions, while others may receive only one or the other, and some jurisdictions will receive neither. The
chart below shows a few hypothetical scenarios to illustrate the differences.
Hypothetical Cannabis Excise Tax Distribution Scenarios
County allows cannabis production, processing, and retail and has at
least one retailer located within the unincorporated area.
County prohibits cannabis entirely and has no retailers located within
the unincorporated area.
County took no action to prohibit cannabis, but no cannabis retailers
are located within the unincorporated area.
County prohibits cannabis producers and processors but allows retailers
and has at least one retailer located within the unincorporated area.
County currently prohibits new cannabis businesses but has existing
retailers within unincorporated areas that are grandfathered in.
County prohibits cannabis retail and has no retailers within the
unincorporated area but allows cannabis production and processing.
Eligible for per
capita share?
Yes
No
Yes
No
No
No
Eligible for
retail share?
Yes
No
No
Yes
Yes
No
Each year by September 15, the LCB must provide the state treasurer with the annual distribution amount for
each county and city. For the most recent legislative appropriations and distribution estimates, refer to our
annual Budget Suggestions publication, released every year at the end of July.
Use of Revenues
The restrictions on the use of cannabis excise tax revenues are somewhat murky, as there is no clear statute
stating how the funds must be used. However, the notes in RCW 69.50.540 reference RCW 69.50.101 and the
stated intent of 1-502, which states that cannabis legalization will "[allow] law enforcement resources to be
focused on violent and property crimes [and generate] new state and local tax revenue for education, health
care, research, and substance abuse prevention."
Timing of Receipts
Payments are distributed quarterly on the last business day of March, June, September, and December. The
State Treasurer's Office distributes both the "per capita" and "retail" shares together in one payment using
the same BARS code.
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