HomeMy WebLinkAboutCOW 2024-06-10 Item 5C - Discussion - Cannabis Retail ConsiderationsCOUNCIL AGENDA SYNOPSIS
Initials
Meeting Date
Prepared by
Mayor's review
Council review
6/10/24
LH
ITEM INFORMATION
ITEM NO.
5.C.
STAFF SPONSOR: LAUREL HUMPHREY
ORIGINAL AGENDA DATE: 6/10/24
AGENDA ITEM TITLE Cannabis Retail Considerations
CATEGORY ® Discussion
Mt Date 6/10/24
❑ Motion
Mtg Date
❑ Resolution
Mtg Date
❑ Ordinance
Mtg Date
❑ Bid Award
Mtg Date
❑ Public Hearing
Mtg Date
❑ Other
Mtg Date
SPONSOR ® Council ❑ Mayor ❑ Admin Svcs ❑ DCD
Finance ❑ Fire ❑ P&R ❑ Police ❑ PW
SPONSOR'S
SUMMARY
The City Council requested a discussion on cannabis retail. If a majority of the Council
would like to update zoning for cannabis uses, it could be added to the work plan in 2025.
REVIEWED BY
❑ Trans&Infrastructure Svcs ❑ Community Svcs/Safety ❑ Finance & Governance ® Planning & Community Dev.
❑ LTAC ❑ Arts Comm.
❑ Parks Comm. ❑ Planning Comm.
DATE: 5/13/24 COMMIf`tEE CHAIR: MARTINEZ
RECOMMENDATIONS:
SPONSOR/ADMIN.
COMMITTEE
COST IMPACT / FUND SOURCE
EXPENDITURE REQUIRED
AMOUNT BUDGETED
APPROPRIATION REQUIRED
Fund Source:
Comments: Staff costs associated with ordinance development, Planning Commission, outreach, etc.
MTG. DATE RECORD OF COUNCIL ACTION
6/10/24
MTG. DATE
ATTACHMENTS
6/10/24
Information memo updated 6/4/24
Maps
Comment letters
Minutes from the 5/13 PCD Committee meeting
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City of Tukwila
Thomas McLeod, Mayor
INFORMATIONAL MEMORANDUM
TO: Committee of the Whole
FROM: Laurel Humphrey, Legislative Analyst
CC: Mayor McLeod
DATE: June 4, 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 (see
attachments 1 and 2).
• 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 (see attachment 3).
• 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
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INFORMATIONAL MEMO
Page 2
to be open based on a moratorium, ban, or other zoning restriction, or if the business is temporarily
discontinued while they move locations.
Sales and Excise Tax Revenue
Active cannabis retail stores would generate three separate revenue streams: excise tax, sales tax, and
B&O tax. 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 and B&O tax. For every $1
million in cannabis sales, the City could expect to receive $9,000 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 $72,000 of sales tax and $4,000 in B&O tax in
addition to the increased excise revenue described above. Another hypothetical example comes from
the City of Covington, which has two cannabis retailers and a residential population similar to Tukwila.
In 2023, the two Covington retailers had combined sales of $12.8 million. Using this as a scenario, the
City would receive $115,200 in sales tax and $6,400 in B&O tax.
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 Excise 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
Covington (2)
21,374
$104,942
*State Fiscal Year: July 1 - June 30
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INFORMATIONAL MEMO
Page 3
Crime & Safety around Retail Locations
Cannabis stores are frequent targets for theft, typically in the form of armed robberies or smash and
grab burglaries Cannabis retailers have access to state -chartered credit unions and banks for financial
services, and there are a number of institutions in Washington that provide service to the industry. On
the Federal level 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. The table below demonstrates
the incidents of smash and grab burglaries in the state. It is important to note that in 2021 the State
changed the police pursuit law, limiting the ability of officers to pursue suspects, In 2023 the law was
changed to again allow police to pursue drivers if there is reasonable suspicion that a crime has
occurred. This takes effect on June 6, 2024.
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
26
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
Staff plans to provide service calls for other businesses to provide a frame of reference at the June
10, 2024 C.O.W. meeting.
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
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INFORMATIONAL MEMO
Page 4
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.
The Planning & Community Development Committee discussed this at its May meeting and
recommended the topic return to the full Council for discussion in November 2024. The Committee of
the Whole discussed this at its May 20, 2024 meeting and requested that staff bring forward the full
discussion sooner than that.
ATTACHMENTS
1. Map showing current cannabis zoning in Tukwila per Ordinance 2407
2. Map showing cannabis buffer originally required by Washington State
3. Map showing cannabis buffers now allowed by Washington State
4.Comment letters
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S Director Sti
King
County
NIMMIN
Lake
Washin • ton
King County
Zoning Districts
where Marijuana
Businesses are
Allowed
(with WA State Liquor
Control Board buffer
areas shown)
Legend
▪ HI Heavy Industrial
▪ TVS Tukwila Valley South
White Areas = Locations restricted by
WSLCB and zones where marijuana
businesses are not permitted
Path: H:1Maps\Stacyll-502 Zoning Districts_WSLCBBuffers.mxd
Date Saved: 08/14/2015 1:49:41 PM
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Previous
Restrictions
Imposed
(1 000ft)
School/Playground
Transit Center/
Library
Child Care Center
Public Park
Arcade/Recreation
Center
N
0 0.5 1 Mi
I I I
Current
Minimum
Restrictions
(100ft) per
WAC
314-55-050
School/Playground
Public Park
Child Care Center
Transit Center/
Library
Arcade/Recreation
Center
Schools and
playgrounds
maintain a 1000ft
buffer in accordance
with RCW
69.50.331(8)(b).
0 0.5 1
I
yy
N
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Andy Youn
From: Laurel Humphrey
Sent: Wednesday, June 5, 2024 9:04 AM
To: Andy Youn
Subject: FW: Tukwila Cannabis Stores
From: zachary fleet <zach@fleetlaw.com>
Sent: Monday, May 13, 2024 1:27 PM
To: Dennis Martinez<Dennis.Martinez@TukwilaWA.gov>; Tosh Sharp <Tosh.Sharp@TukwilaWA.gov>;
armenpapyan@tukwilawa.gov
Cc: Mayor <Mayor@TukwilaWA.gov>; Laurel Humphrey <Laurel.Humphrey@TukwilaWA.gov>
Subject: Tukwila Cannabis Stores
Hello Councilmembers,
My name is Zach Fleet and I'm part of Mount Baker Retail Partners, LLC, one
of the two LCB license holders to operate retail cannabis stores in Tukwila.
I have spent the last seven years operating retail cannabis stores in the Yakima area. We
opened our first Yakima Weed Co location in July of 2017 and our second in May of 2021.
Prior to becoming a retail cannabis license holder, I worked as a lawyer. First, as Deputy
Prosecutor in Snohomish County's Criminal Division and then as a Criminal Defense
Attorney in our region. I am writing once again to urge council to consider zoning changes to
allow businesses like ours to find a suitable place to operate in Tukwila.
My partner and I have held the Tukwila Retail License for about 7 years at a location that is
compliant with LCB's buffers but not compliant with Tukwila's zoning ordinance. We are
eager to be a part of the city's robust and diverse business community. As you know, it is
already legal for us to open a store in Tukwila. However, the current Tukwila zoning and
buffer requirements, which have not changed since 2013, make it very challenging to find
a compliant storefront.
We are committed to opening a store in Tukwila. We feel Tukwila residents are currently
underserved, and that this market would generate meaningful revenue for the city,
particularly given how many visitors the city sees each day to engage in commerce or go
to work.
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Lastly, I'm disappointed at the inclusion of the smash and grab graph in the staff report
which does not provide proper context and background. First, the Washington Sate cannabis
stores absolutely have access to banking services. Mount Baker Retail Partners banks
with OBEE Credit Union and pays all vendors and employees through our checking
accounts. We accept electronic payments from customers using Aero Pay (kind of
like Paypal).
Second, while property crime, theft, and burglary have increased at all types of retail stores,
we do everything we can to prevent these incidences, I take great pride in the time an effort
we have invested in making sure that our stores are designed and laid our with security in
mind. As a result of these efforts, we have never been robbed at either location and the lone
burglary attempt resulted in the on scene arrest of the suspects and all of theproduct being
recovered.
As the data in the committee report suggests, smash and grab incidences were very
infrequent in the state prior to 2021. In 2021, the state changed its police pursuit law,
something I'm sure you are all familiar with. This has made our businesses, but many other
types of businesses across the state targets for burglaries. This is not isolated to our
industry or endemic to retail cannabis stores. Thankfully, the legislature recently repealed
this law, which will help law enforcement (who we partner with closely) to do their jobs.
I'm available at any time to meet with you, answer questions about the industry, and talk
about ways in which Tukwila could move forward that would work both for license holders,
but also for the community, such as development and operating standards that help mitigate
any public safety concerns that may exist.
Thank you for your consideration and time on this item, we look forward to partnering with
you to bring a proposal forward later on that works for Tukwila.
Zach Fleet on behalf of Mount Baker Retail Partners LLC.
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Tukwila Retail Cannabis FAQs:
• Aren't retail cannabis stores currently illegal in Tukwila?
o Retail cannabis stores are already legal in Tukwila (and have been since the
city council adopted ordinance 2407 in September of 2013). Retail cannabis
stores are permitted uses in Tukwila Valley South and Heavy Industrial
zones. Due to challenges with finding suitable storefronts in these zones as
well as the existing buffer requirements, license holders and residents have
expressed support for council to look at changing the zoning code to allow
stores in additional areas of the city and/or lower buffer requirements.
• How many stores could open if the zoning changed?
o 2 stores. The number of licensed stores within a given jurisdiction is
regulated by the state. The state allows for a maximum of 2 stores to operate
within Tukwila city limits.
• What action could council take today/in the near term?
o Council could direct staff to allocate resources to develop legislation for
council consideration that could update the city's zoning code/buffer
requirements for retail cannabis operations. This would result in legislation
being brought before council with additional community engagement later
this year or sometime in 2025.
• How would retail cannabis stores in our community impact Tukwila?
o Tukwila residents are already purchasing marijuana. The only legal way to
purchase cannabis as a Tukwila resident is to drive to another jurisdiction
and spend money there instead of Tukwila, causing tax revenue to flow out
from Tukwila into other jurisdictions.
o The only marijuana currently sold in Tukwila are illegal sales by unregulated
people in the black market. Black market marijuana is sold to all ages, is not
tested, is not labeled for potency, and can contain harmful chemicals. The
existence of a black market creates a fundamental public health & safety
issue for Tukwila residents, particularly minors.
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o Regulation of cannabis through state licensed stores helps drive out black
markets and ensures that product is safe, regulated, tested, and sold only to
those over 21.
• What kind of impact would this have to the city's revenue?
o The city would see additional revenue in two forms. First, the city would
receive an increased share of state excise tax distributions by having a store
(or two stores) operating in the city. This is an additional distribution that
would be larger than what the city currently receives from the state.
o The city would also collect sales tax on cannabis sold within the city limits.
Between the state excise tax (37%) and sales tax (10%), cannabis is taxed at
47%. That creates a tremendous amount of revenue that is reinvested in
communities across the state, at the state and local levels.
• How would a store in Tukwila do?
o For a variety of reasons, license holders are optimistic about the Tukwila
market. The city grows vastly during the day as people come to Tukwila to
engage in commerce or work. There are also many Tukwila residents who are
buying cannabis at stores in neighboring jurisdictions, granting the tax
benefit associated with those sales to jurisdictions other than Tukwila.
• How do the stores access financial services?
o There's a common misconception that retail cannabis stores don't have
access to financial services. However, these stores do have access to credit
unions and banks that operate only in Washington State such as Salal
(includes a Tukwila location), Timberland Bank, Sound Credit Union,
Numerica, Sound Community Bank, OBEE, etc.
• How could the city address concerns associated with smash and grabs?
o The city could work with existing license holders to implement development
standards and operating requirements based on industry best practices to
help curb potential concerns related to public safety.
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o Smash and grabs are not solely associated with retail cannabis stores. Mini -
marts and other stores with ATMs that don't have bollards have also been
targets of smash and grabs in recent years. The city could require bollards
and other deterrents as a development standard for a store to open in
Tukwila.
• Will this have an impact on traffic safety?
o The City of Everett conducted a study before increasing the number of
stores they could have. The study showed no noticeable increase in crime
related to marijuana, no increase in DUI stops or arrests, and no concerns
based on public safety.
• How does the news of the Biden Administration moving marijuana from a schedule I
to schedule III drug affect the industry?
o It isn't expected to have a substantial impact on the operations of stores in
Washington State. It will move the industry closer to additional banking
options and tax deductibility at the federal level. However, aside from
recognizing the relatively lower risk of cannabis and health benefits, it isn't
likely to impact store operations in the near term in Washington.
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City of Tukwila
City Council Planning & Community Development Committee
Meeting Minutes
May 13, 2024, 5:30 p.m. - Hybrid Meeting; Hazelnut Conference Room & MS Teams
Councilmembers Present: Dennis Martinez, Chair; Tosh Sharp, Armen Papyan
Staff Present: Marty Wine, Laurel Humphrey, Nora Gierloff, Max Baker, Isaac Gloor, Eric
Dreyer
Chair Martinez called the meeting to order at 5:30 p.m.
BUSINESS AGENDA
A. Amendments to Accessory Dwelling Unit Standards
Staff briefed the committee on proposed changes to Title 18 to update ADU development
standards.
Committee Recommendation
Forward to Planning Commission.
B. Resolution: 2025 South King Housing & Homelessness Partners Work Plan
Staff is seeking Council approval of a resolution to adopt the 2025 SKHHP work plan and
budget in accordance with the Interlocal Agreement.
Committee Recommendation
Unanimous approval. Forward to May 20, 2024 Regular Meeting Consent Agenda.
C. Cannabis Retail Considerations
Committee members discussed potential impacts of expanding zoning opportunities for
*cannabis retail, including revenue and public safety.
Committee Recommendation
Forward to Committee of the Whole in November 2024.
MISCELLANEOUS
The meeting adjourned at 6:44 p.m.
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