Agenda Packet_2024-07-16 (Revised)

Home Browse Search

DocuSign Envelope ID:9822D5D4-600B-4A67-B07F-02E780760E1B EXHIBIT C BUSINESS LICENSE TAX FOR CANNABIS BUSINESS SECTION I: SCOPE OF SERVICES 1. PREPARE BIANNUAL MARKET ANALYSIS AND REVENUE ESTIMATES 1.1 Hinderliter, de Llamas and Associates ("HdL") shall prepare a brief market analysis of the cannabis industry in the City of Santa Ana including information and updates regarding pending legislation or regulatory changes that may impact the City's cannabis program/revenues. HdL will also prepare biannual revenue estimates to inform City budgeting decisions. The analysis shall focus primarily on the cannabis retail sector and shall consider factors including the population of the City and the surrounding service area, average sales, leakage to licensed retailers in other nearby jurisdictions and the presence of unlicensed cannabis delivery services. 1.2 To inform this analysis, HdL shall work with the City to develop a questionnaire that will be provided to licensed cannabis businesses to help identify trends in pricing, sales and consumer preferences, along with other relevant information or observations the businesses may want to share. HdL shall engage with cannabis businesses on the City's behalf as may be requested to discuss the information requests and to glean additional information or understanding where possible. Responses from this questionnaire will be used in conjunction with empirical data derived from other sources to provide the City with forward-looking projections for gross receipts and resulting City revenues. 1.3 HdL's analysis shall also include a comparison of the City's cannabis tax rates and revenues with those from other nearby or comparable jurisdictions. This analysis may be used by the City to inform budgeting decisions as well as discussions about possible changes to current cannabis business tax rates or related regulatory requirements. 1.4 It is anticipated that HdL's analysis shall be provided in the form of a biannual 4 to 6-page memo for internal use by City staff. The actual length, format, content and use of the analysis shall be determined in consultation with City staff and may vary as needed or requested by the City.HdL will provide one initial draft report for staff to review and critique plus one iterative draft that will incorporate any requested revisions prior to providing the final report. Any additional drafts, iterations or documentation that may be requested by the City would be in addition to the costs shown in HdL's Cost Proposal.HdL's subject matter expert shall be available to meet with City staff biannually to review and discuss the analysis and revenue projections as well as any observations or recommended actions. This proposal assumes that such meetings would be conducted remotely. 2. ANNUAL BUSINESS LICENSE TAX AUDIT SERVICES 2.1 HdL will conduct an annual revenue audit of at least three(3)cannabis businesses to verify the accuracy of the revenue reported and remitted to the City during the review period and will recommend a tax adjustment should the audit reveal any variances in reported revenue. Such audit services shall be conducted in accordance with the City's Municipal Code (Chapter 21, Articles XII and XIII, and Sec.40-106).As part of the audit process,HdL will conduct a risk- based review of each business using our proprietary methodology, which was developed to specifically address the unique challenges associated with auditing the cannabis industry. Our methodology allows audit staff to cross-analyze multiple business records to identify reporting City Council 23 —22 7/16/2024