2018
CANNABIS
The City of Santa Rosa Cannabis Report 2018
Data ending December 31, 2018
4 Overview, History & Goals 5 Allowable Zone Uses
Licenscing Requirements
6 Permit Activity
Overview Permit Applications
8 Real Estate Activity
Industrial Retail Activity Map Vacancy Rates
12 Code Violations 13 Taxation
Tax Rate Chart Taxes Revenue by Fiscal Year
15 Contact
TABLE OF CONTENTS
Overview, History & Goals On December 19, 2017, the Santa Rosa City Council passed the city’s Comprehensive Cannabis Ordinance. The regulations address the locational and operational requirements for personal cannabis cultivation and commercial cannabis businesses, covering allowances for both medical and adult use. The ordinance went into effect on January 19, 2018. Prior to the ordinance passing, it was recognized that the industry had an active presence in the city. With its legalization, cannabis is now a legal land-use issue. The role of the City is to provide a path to compliance from application to occupancy by directing the use in appropriate areas and providing standards to minimize impacts while deferring to state law where appropriate. Through land use and taxation, the City has opted to address the entire industry chain: cultivation, manufacturing, distribution, testing and retail. This document is meant to serve as source and method of understanding as to the state of the cannabis industry within the city limits of Santa Rosa within a given period of time. The main purpose is to illustrate the performance and trends of this industry using the data points of permitting, square footage, fees and taxes collected.
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Allowable Land Use Zones For details on allowable and conditionally permitted uses, go to:
srcity.org/cannabis
Under the City of Santa Rosa’s cannabis policy, commercial cannabis operators may locate in the following zoning districts, subject to approvals of required land use permits and depending on activity type. COMMERCIAL DISTRICTS - retail only unless noted • • • •
Office Commercial (testing also allowed) Neighborhood Commercial General Commercial Community Shopping Center
INDUSTRIAL DISTRICTS - retail and non-retail allowed • Light Industrial • General Industrial • Business Park Note: Cannabis retail is not allowed in the Downtown or Transvit Village zoning districts.
Licensing Requirements Prior to occupancy and operation, permit applicants must obtain a California state license, in addition to land-use, building, fire and health permits. State licenses are issued by three agencies, depending on the activity type: cultivation, manufacturing/distribution and retail.
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Permit Activity Overview As of December 31, 2018, a total of 170 land-use permits by 116 applications on 116 commercial and industrial sites have been submitted for planning review, with 36 sites representing multiple land-use permit types. Depending on the scope of a project, the review process for cannabis can vary from a simple approval for use once a final building inspection is met to mandatory meetings with neighborhoods and City commissions and sub-committees. For the sake of clarity and brevity in this report, City staff has opted to list businesses in the review process as being in one of three categories: 1) Applied (for land-use permit) 2) Land-Use Approved 3) Building Occupancy Approved (open for business) As illustrated in chart 1 (next page), by the end of 2018 of the 116 businesses that have applied for cannabis businesses 42 (or 36.2%) were in the initial application phase for approval of land use, 62 (53.5%) had received land-use approval and 12 (10.3%) had been approved for buildling occupancy. With building occupancy approval, the City recognizes these businesses as functionally open for business. In additon, this chart highlights progress in the industry as it evolves passed the land-use phase to the occupancy phase.
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Permit Applications Chart 1
LEGEND Cultivation Manufacturing Distribution Retail Testing
The below chart recognizes that 116 permit applications represent 170 land-use requests. In presenting the information in the manner below, the goal is to paint a clearer picturer of both the real number of cannabis operations and the permeation of each cannabis category in the City. This is an important delineation as each cannabis category may be--and currently is--taxed at a different rate.
Totals by apps:
Applied
Land-Use Approved
Building Occupancy Approved
42
62
12
4
7
4
3
19
1
3
11
2
19
3
3
0
1
0
0
2
0
2
3
0
2
13
2
1
2
0
2
1
0
5
0
0
1
0
0
Totals by land use: 15 12 16 26
1
15 36 30
4
1
4
3
4
3
0 7
Real Estate Activity (Industrial) Santa Rosa has 10,365,011 square feet of industrially zoned land. As of Q3 2018, 5.4% of it has been approved for cannabis use. Furthermore, an additional 2.66% of the total industrial space has the potential to be approved for use by those business that have applications currently in some phase of the review pipeline.
Chart 2
All Industrial space in Santa Rosa: 10,365,011 Square Feet
Overall the Q3 2018 industrial real estate vacancy rate in Santa Rosa was 5.2%, equaling 538,593 square feet, with no new industrial space planned for development. Contributing to compression in available space the cannabis industry finds itself in a market of price increases for both leases and sales of industrial property: LEASE RATES • 2017: $0.90 - $1.10 per square foot • 2018: $1.50 - $2.00 per square foot PROPERTY FOR SALE • 2014: $80 per square foot • 2018: $180 - $200 per square foot Additionally, while investment into older, long vacant industrial space is a positive for the sector, marketing of properties with entitlements for cannabis-use continues to forebode speculative activity and rising prices. Given the region-wide shortage of industrial space, there is potential this could spur new industrial development. For comparison, Santa Rosa experienced a mere 391 square feet of net industrial absorption in Q3 2018 compared to the same period in 2017.
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Sources: “Total Existing Industrial Vacancy Estimates, 3rd Quarter 2018.” Keegan & Coppin Company, Inc. keeganandcoppin.com “Industrial Absorption Rates Sonoma County, 3rd Quarter 2017-2018.” Keegan & Coppin Company, Inc. keeganandcoppin.com “2018 Commercial Real Estate Forecast, Northbay Overview.” Keegan & Coppin Company, Inc. keeganandcoppin.com
Pending Approved -
275,607 sq. ft. (2.06%) 559,512 sq. ft. (5.4%)
Chart 3
Real Estate Activity (Retail) All Retail space in Santa Rosa: 8,022,542 Square Feet
Santa Rosa has 8,022,542 square feet of retail-zoned land. Of that, 0.2% has been approved for cannabis use. An additional 0.9% of the total retail space could be occupied with those businesses that have cannabis retail applications currently in the review pipeline. As of Q3 2018, commercial retail real estate vacancy rate in Santa Rosa is 3.0%, equal to approximately 244,568 square feet of vacant space, with another 320,000 square feet of potential new development. A total of three (3) cannabis retail businesses currently operate within city limits, while an additional 30 retail applications are in the review-submission phases.
Pending 74,688 sq. ft. (0.9%) Approved 16,411 sq. ft. (0.2%)
Sources: “Total Existing Retail Vacancy Estimates, 3rd Quarter 2018.� Keegan & Coppin Company, Inc. keeganandcoppin.com
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Real Estate Activity Map Chart 4
LEGEND Open - 12 Under Review - 104
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Vacancy Rates
Chart 5
LEGEND County of Sonoma City of Santa Rosa
Feb 23, 2016 City adopts Chapter 20-46 (interim cannabis measures)
Industrial Office Retail
Nov. 6, 2016 Prop 64 passes
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Jan. 19, 2018 Comprehensive June 6, 2017 Cannabis Ordinace Measure D approved in effect
17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 2014 Source: keegancoppin.com
2015
2016
2017
2018 Q3
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Code Violations Chart 6
Consistent and in compliance with state laws and local regulations, the City allows for the personal cultivation of cannabis. Commercial cannabis activity in residential neighborhoods is prohibited. The City Code Enforcement Division is responsible for assuring the adopted zoning and building codes are implemented and adhered to on private property to address general health, life, fire and safety issues. Complaints may be filed with Code Enforement via email, fax or hand delivery. All information received is confidential.
LEGEND
As cannabis was legalized in 2017, at least part of enforcement activity moved from the police department to code enforcement, resulting in an increase in inspections of code violations.
Commercial - Closed Cases Commercial - Open Cases Residential - Closed Cases
On the chart below, closed cases are instances where the officer found the case to be resolved to a satisfactory level.
Residential - Open Cases
40 36 19 30
30
25
20 17 13 6
10 7 5
0
12
2 2
1 1
2014
1 1
2015
2 1 1
1 1
2016
2017
2018
Taxation On June 6, 2017, Santa Rosa voters approved Measure D implementing a Cannabis Business Tax for the City of Santa Rosa. The tax ordinance adopoted by the City authorizes a maximum cannabis business tax on cultivation up to $25 per square foot (annually adjusted by Consumer Price Index) or 8% of gross receipts. All other cannabis businesses have been authorized to be taxed at a maximum of 8% of gross receipts. These taxes maintain financial stability for city services, such as addressing cannabis industry impacts, public safety, affordable housing and youth programs. Current rates, by sector: Cultivation
2% of gross receipts or $5 per sq ft
Manufacturing
1% of gross receipts
Distribution
0% of gross receipts
Adult-Use Retail
3% of gross receipts
Medical Dispensary
0% of gross receipts
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Tax Revenue by Fiscal Year Chart 7
The City of Santa Rosa operates on a fiscal year that runs from July 1 to June 30 (unlike a calendar year, which runs from January 1 to December 31). This offset aids in budget planning. The chart on this page is displayed by the City’s fiscal years of 2017/2018 and 2018/2019. Due to how taxes are collected, the chart below shows the first 5 quarters since Measure D went into effect.
LEGEND
FY17/18 - $468,605 FY18/19 - $462,280
$267,701 $19,691
$250,000
$136,022
$195,209
$200,000
$7,788 $47,210
$1,027
$178,672 $76,326
$150,000 $140,211 $118,736 $55,929
$111,358
$100,000
$599
$84,667
$86,531
$84,431
$86,331
$61,099
$50,000
$118 $118
FY Quarter
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17/18 18/19 Jul - Sep
$1,007
$100,720
$700
$200
17/18 18/19 Oct - Dec
17/18 18/19 Jan - Mar
17/18 18/19 Apr - Jun
Note: Collected taxes may include non-operational and un-permitted businesses.
Cannabis Report 2018 The City of Santa Rosa Cannabis Report 2018 is prepared by the Planning & Economic Development Department. Data used to populate the report came from a variety of sources, including but not limited to: • City of Santa Rosa Finance Department • City of Santa Rosa Housing & Community Services Department • City of Santa Rosa Planning & Economic Development Department • Keegan & Coppin Company, Inc. For assistance regarding the content and make-up of this report, or general questions about permitting for a cannabis business within the city limits, please contact the Planning & Economic Development Department at: 100 Santa Rosa Avenue, Room 3 Santa Rosa, CA 95404 srcity.org/cannabis economicdevelopment@srcity.org (707) 543-3200
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