Will municipal tax rate imperil future of cannabis industry here?

May 4, 2019

NEEDLES — Could Needles’ municipal tax rate dampen the future of its current cannabis business boom?

Jerry Telles of Ice House Road LLC appeared before city council during their second April meeting to make that point and ask for a motion to initiate discussion on lowering the rate.

He didn’t get it; with two members absent and a third recusing himself due to his career in cannabis, the city attorney forbid any discussion, deliberation or action due to lack of a quorum.

Telles, in an April 15 letter requesting the opportunity to address the council, referred to a city cannabis tax of 10 percent on gross receipts for cultivators and distributors and promised to provide data on tax rates of other locations in the state where a local cannabis industry has developed.

He cited desires to keep that industry in Needles competitive with those located elsewhere in the state; to provide an incentive for local cannabis owners to expand operations in Needles rather than somewhere else in California; and to “Put Needles back on the map with a competitive advantage that Needles once offered to investors looking for a place to start a cannabis business in the state of California.”

“I’m here to sound an alarm; a wake up call to those banking on the local cannabis industry,” Telles told the council; saying that a city tax of 10 percent was excessive, made it challenging to turn a profit and forced cultivators to rethink their business plans.

Telles came armed with a stack of newspaper clippings describing tax rates in other California cities and efforts, in several cases, to lower them.

Some locations, he said, make it a simple decision in competition for investment dollars of all sorts due to their proximity to markets, raw materials or education centers. “Needles doesn’t have any of that,” he said, “but because we have lower electric rates and a progressive council we now have an industry. We have to make it work.”

Telles brought articles from cities including Sacramento, Oakland, Long Beach, Richmond, Berkeley and Adelanto.