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Council considers hotel, cannabis taxes
Cannabis tax
The Turlock City Council is considering moving from development agreements for cannabis businesses to a tax on gross receipts (Photo contributed).

The Turlock City Council heard presentations from city staff Tuesday night regarding taxes for hotels and cannabis.

Finance director Isaac Moreno first addressed the council about the transient occupancy tax, levied against the people who stay in local hotels and motels. It was suggested that the rate be raised from 9 to 14 percent, which would be the highest in the region.

Later, Moreno, along with Mark Lovelace, a senior policy advisor for HdL companies, addressed the council about the potential switch from development agreements to a tax for cannabis businesses.

Both would need to go before voters on the November ballot.

Councilmember Cassandra Abram suggested putting a 14 percent figure before the voters, but retaining the option as a council to levy a lower TOT rate.

“I think working in some flexibility for the council and the finance director to understand what the market is doing, and maximize the revenue but not hurt the businesses would be a better way to go,” said Abram.

That’s an option, but the ordinance would have to be written accordingly, according to Moreno.

Members of the public raised concern that 14 percent seemed excessive and might drive away business, and questioned Turlock’s capacity to draw overnight guests.

“We’re a regional draw,” said Moreno. “And we need to be acting like a regional draw.”

District 2 Councilmember Rebecka Monez agreed with Moreno.

“People want to come to Turlock for a reason,” said Monez. “People feel safe in Turlock. Turlock is a nice community. Turlock is not Modesto. Turlock is not Ceres. Turlock is not Merced. We are Turlock."

By way of comparison, Merced and Ceres have a 10 percent TOT, while Modesto and Manteca are at 9 percent.

“I’m not sure that 14 percent is a rate that I would set my sights at, but I travel a fair amount,” said Franco. “You don’t see the transient occupancy tax until you get your bill. So, an average hotel room at $200 a night, you’re talking 10 extra dollars. To drive from Ceres to Turlock, or Merced to Turlock, you’re going to waste that in no time.”

The city’s cannabis program, established in 2019 as a rolling five-year pilot program, required businesses to enter into development agreements with the city. Under the DAs, retail stores were required to pay a benefit fee of 5.25 percent of gross receipts or $45,000, whichever was greater.

To date, the cannabis sales have generated nearly $5 million for city coffers.

The city council voted in May to accept the recommendations of the council’s ad hoc cannabis committee — chaired by Abram — to end the pilot-program status and put a proposed cannabis tax on the ballot.

“Where do you feel is the sweet spot for cities like us to not drive people north, south, east or west to buy it?” District 1 councilmember Kevin Bixel asked. “At the same time, not putting such a burden on local business that they can’t afford to stay open.”

Moreno and Lovelace suggested that sweet spot would be a tax of 4 to 6 percent on gross receipts, while cultivators would pay a tax on the square footage of their operation.

“The tax issue? There are lot of similarities with the discussion you were having previously about TOT,” said Lovelace. “For the most part, we don’t anticipate that customers … start by asking about the local tax rate. So, unless the tax rate really starts to be felt by the consumer, we don’t think that from the consumer end, it’s going to have an impact.”