The Guadalupe City Council has approved a temporary reduction in fees for a local cannabis retailer, and says it may ask voters to consider a cannabis tax measure in November.
In a unanimous vote Tuesday, council members agreed to lower the public benefit fee paid by Root One—one of the city’s two licensed cannabis dispensaries—from 6% of gross sales to 4% for one year. The reduction could end earlier if voters approve a future cannabis tax measure.
The decision follows a request from Root One, which argued the current fee structure is cutting into their profits.
“It really hits our bottom line especially hard because we’re already being taxed under a system that denies the deductions most businesses depend on,” said Austen Connella, a managing member of the dispensary, during the meeting.
Under its agreement with the city, Root One pays a 6% public benefit fee on gross sales, in addition to contributing 1.5% to local nonprofits and providing other community benefits. The fee was part of a competitive permitting process.
City Attorney Philip Sinco told council members that Root One’s higher fee was likely a key factor in its selection.
“Staff believes that was an important contributor to the city council selection of this entity, and to basically reduce that fee now—the city’s not getting the benefit of its bargain,” Sinco said.
City staff ultimately recommended against lowering the fee. A third-party analysis found that the business is operating on a very slim profit margin, but also noted its financial challenges are largely driven by operating costs beyond the city’s fee.
Staff also warned of a looming city budget deficit, and underscored that similar cannabis taxes or fees in nearby jurisdictions are generally around 6%.
“All of the local jurisdictions with the exception of Grover Beach have a 6% fee already. Grover Beach does have a 5% fee, but no one has a 4%,” Sinco said. “So, why should Guadalupe have a lower rate [than Grover Beach]?”
Still, several council members expressed concern about the potential loss of one of the city’s few operating cannabis retailers if financial pressures persist.
The two percent temporary fee reduction will expire in April 2027, unless voters pass a cannabis tax measure in November.
City staff indicated a decision on whether to pursue a tax would need to be made soon to meet election deadlines.
If adopted, a cannabis tax could replace the current fee structure and align Guadalupe with other cities in the region, most of which impose local cannabis taxes of about 6%.
