Submitted By
Cara Pavlicek, Village Manager
Reviewed By
CLP
Agenda Item Title
Title
First Reading of an Ordinance Amending Chapter 23A (“Taxes”) of the Oak Park Village Code by adding a New Article 10 (“Cannabis Privilege Tax”).
End
Overview
Overview
An Ordinance has been prepared to impose and levy a tax upon a cultivation center engaged in the privilege of the sale of cannabis as permitted by the State of Illinois, including medical infused product to a dispensing organization located within the Village of Oak Park at the rate of six percent (6%) of the sales price per ounce. This tax shall be in addition to any and all other taxes imposed upon such sales and distribution.
Body
Staff Recommendation
Conduct first reading and subject to the Village Board consensus waive second reading and adopt the ordinance for an effective date of January 1, 2019.
Fiscal Impact
The adopted FY19 General Fund budget does not include revenues from the recommended privilege tax. Staff projects that a 6% privilege tax could conservatively generate new revenue of $40,000 in FY19 due to the fact that the Village of Oak Park current has a licensed dispensing facility. This assumes gross sales or annual revenues of more than $600,000 and is supported by models from other states. In the event, additional sales of cannabis are legalized by the State of Illinois; the fiscal impact would be recalculated and reported to the Village Board.
Background
In August 2013, Illinois Governor Pat Quinn signed Public Act 098-0122, “The Compassionate Use of Medical Cannabis Pilot Program Act,” into law with an effective date of January 1, 2014. The Act allows for the establishment of medical cannabis dispensaries and cultivation centers for the prescribing of medical cannabis to qualifying patients throughout Illinois. The Act permits 2.5 ounces of marijuana to be prescribed every two weeks to patients suffering from a list of identified illnesses and ailments. The doctor that prescribes the medication must have a prior and ongoing care relationship with the patient. The statute identifies specific areas were dispensaries cannot be located. Dispensaries are limited to a total of 60 centers throughout the state. The statute identifies the total number of dispensaries permissible in designated geographic areas within the state.
Beyond the quantity of dispensaries, the Act also identifies specific requirements where dispensaries may not locate. The geographic areas that are excluded from consideration by the state statute are areas within 1,000 feet of feet of the property line of a pre-existing public or private preschool or elementary or secondary school or day care center, day care home, group day care home, or part day child care facility. Additionally, no dispensary shall be located in any dwelling unit, rooming unit, or residential district. In 2015, the State issued a license for a dispensary in Oak Park.
The State of Illinois imposes a tax upon the “privilege of cultivating medical cannabis” at a rate of seven percent (7%). This is a tax that will be responsibility of the cultivation centers and not the dispensary or the qualifying patient. The Act does also state that this tax on cultivation centers shall be in addition to all other occupation or privilege taxes imposed by the State of Illinois or any other municipal corporation or political subdivision. Therefore, the Village of Oak Park may establish a tax upon cannabis if desired.
In 2015, in advance of the opening of a dispensing facility in Oak Park, staff communicated with the City of Evanston who at that time adopted an ordinance with a 6% privilege tax.
Tax rates currently vary state by state and vary in application to medical, retail, wholesale as well as rates that are optionally established by local municipalities.
Alternatives
The Board may defer action in order to seek additional information.
Previous Board Action
N/A.
Citizen Advisory Commission Action
N/A.
Anticipated Future Actions/Commitments
A second reading could be held as soon as January 21, 2019.
Intergovernmental Cooperation Opportunities
N/A.
Performance Management (MAP) Alignment
N/A.