PLANNING AND BUILDING DEPARTMENT - A. PRADO
1. Receive the presentation regarding the cannabis business activities tax framework, including voter-approved provisions and rate-setting authority, and staff-proposed amendments and clarifications to the County’s cannabis regulations; and
2. Provide direction regarding the cannabis cultivation business activities rate to be established within the voter-approved range of $1,000 to $10,000 per acre; and
3. Approve the resolution with directed rate and authorize the chair to sign; and
4. Provide policy direction to prepare amendments to the County's cannabis regulations, including but not limited to Titles 25.03 (Zoning Map and Zoning Districts), 19.43 (Cannabis Business Land Use Regulations), 7.02 (Cannabis Business), 7.04 (Hemp Entities), and 1.04 (Administrative Citations).
SBC FILE NUMBER: 790
RESOLUTION NO.: 2026-112
REGULAR AGENDA
Tax History
On June 5, 2018, the voters of the unincorporated area of San Benito County approved Measure C, enacting Article V of Chapter 5.03 of Title 5 of the San Benito County Code and authorizing the County to impose a cannabis business activities tax on cannabis businesses operating in the unincorporated area.
Following voter approval of Measure C, the Board adopted resolutions in 2019 setting initial cannabis business activities tax rates within the voter-approved ranges, including cultivation rates of $3 to $5 per square foot of canopy depending on cultivation type. On February 25, 2025, the Board adopted Ordinance No. 1077, temporarily exempting cannabis cultivation businesses from the cannabis business activities tax through December 31, 2026. During the exemption period, cultivation businesses remain subject to fees associated with the actual cost of providing related services and enforcing applicable regulations, as established in the County’s Master Fee Schedule (§ 5.01.000).
On February 24, 2026, the Board adopted Resolution No. 2026-28 submitting to the voters an amendment to the cannabis cultivation tax structure, proposing a rate range of $1,000 to $10,000 per acre for all cultivation categories. The resolution identified the measure as a general tax, confirmed quarterly collection by the Treasurer-Tax Collector would remain unchanged, and set forth the following ballot question:
“With cannabis cultivation allowed in San Benito County but not generating tax revenue, shall an ordinance be adopted to amend Article V of Chapter 5.03 of the Code to adjust the County’s cannabis business tax rate in the unincorporated area by adjusting the current rate to a $1,000 to $10,000 per-acre rate with revenue for general fund services like law enforcement, fire protection, road improvements, and other essential community needs without raising taxes on residents?”
The measure was approved by majority vote at the June 2, 2026 Statewide Direct Primary Election. On August 25, 2026, the Board adopted Ordinance No. 1098 (4-0 vote), implementing the voter-approved amendment by conforming the County Code to the approved rate range. Ordinance No. 1098 becomes effective September 24, 2026. The ordinance does not impose a new tax or alter any non-cultivation tax rates.
Consistent with Government Code section 53739 and the voter-approved measure, Ordinance No. 1098 authorizes the Board to establish the specific cultivation tax rate by resolution within the $1,000 to $10,000 per acre range. The Board did not establish a specific rate at the time of adoption and is now requested to provide direction on the rate and adopt the accompanying resolution. The resolution should become effective concurrently with the implementing ordinance.
Ordinance History:
The County’s cannabis regulations are established through multiple titles and ordinances within the San Benito County Code, including Title 25.03 (Zoning Map and Zoning Districts), Title 19.43 (Cannabis Business Land Use Regulations), Title 11.15 (Personal Cultivation of Cannabis), Title 7.02 (Cannabis Business), Title 7.04 (Hemp Entities), and Title 1.04 (Administrative Citations).
Title 7.02 – Cannabis Business was added to the County Code through Ordinance No. 964 on December 12, 2017. Title 7.02 was subsequently amended in 2018 through Ordinance No. 974, in 2021 through Ordinance No. 1036, and in 2024 through Ordinance No. 1074.
Title 19.43 – Cannabis Business Land Use Regulations was added to the County Code through Ordinance No. 975 on December 11, 2018. Title 19.43 was subsequently amended in 2019 through Ordinance No. 984, in 2021 through Ordinance No. 1036, and in 2024 through Ordinance No. 1074.
While other titles of the County Code contain provisions that apply to cannabis activities, Titles 19.43 and 7.02 contain the primary regulatory requirements governing commercial cannabis land use and cannabis business operations within San Benito County. These provisions address, among other matters, land use and zoning requirements, cannabis business permits, operating requirements, application procedures, enforcement, and other regulatory standards.
The County’s cannabis regulatory program was initially administered by the Agricultural Department and was subsequently transitioned to the Planning and Building Department in February of 2022. The transition consolidated the primary land-use and permitting functions associated with commercial cannabis activities within the County’s Planning and Building Department.
2024 Cannabis Ordinance Update Review:
On May 7, 2024, the Board of Supervisors established the Cannabis Ordinance Ad-Hoc Committee, consisting of Supervisors Kosmicki and Gonzales, to review and recommend updates to the County’s cannabis ordinance and to discuss issues related to cannabis sales tax. The Ad-Hoc Committee met several times with local cannabis industry stakeholders and County departmental staff to discuss implementation of the County’s cannabis regulations and potential amendments to the existing ordinance.
Based on these discussions, the Cannabis Ordinance Ad-Hoc Committee developed several proposed amendments to the County’s cannabis regulations. The proposed amendments were subsequently presented to the Planning Commission and Board of Supervisors for consideration.
On September 18, 2024, staff presented the proposed cannabis ordinance updates and considerations developed through the Cannabis Ordinance Ad-Hoc Committee process to the Planning Commission as a regular agenda item. The Planning Commission discussed the proposed amendments, including issues related to cannabis fees and taxation.
On November 6, 2024, staff presented the proposed ordinance amendments to the Planning Commission during a duly noticed public hearing. The Planning Commission considered a number of proposed changes to the County’s cannabis regulations, including outdoor cultivation in agricultural zoning districts, water offset requirements, annual monitoring requirements, and the cannabis tax structure. The Planning Commission also discussed provisions related to criminal history and permit denial.
Following discussion, the Planning Commission voted 4-0 to recommend that the Board of Supervisors approve the proposed ordinance amendments, with modifications including removal of misdemeanor offenses from certain permit denial provisions and clarification of the provisions applicable to felony offenses.
On November 26, 2024, staff presented the Planning Commission’s recommendations to the Board of Supervisors. The Board discussed several aspects of the proposed amendments, including the allowance of cannabis retail activities in agricultural zoning districts and the administration of background checks. The Board considered whether background checks should be conducted by the Sheriff’s Office and ultimately directed staff to retain the existing background-check requirements.
The Board of Supervisors voted 5-0 to approve the first reading of the ordinance amendments, including direction to exclude retail cannabis activities from agricultural land parcels. The ordinance was subsequently brought back to the Board for second reading and adoption on December 10, 2024, where it was adopted on the Consent Agenda. The ordinance became effective 30-days later on January 9th, 2025.
Following adoption, staff identified that the final ordinance documents presented for the December 10, 2024 Consent Agenda did not incorporate the Board’s direction regarding the removal of retail cannabis activities from agricultural zoning districts. As a result, the current County Code continues to include provisions that allow certain cannabis retail activities in agricultural districts, notwithstanding the Board’s prior policy direction.
Current Review and Proposed Amendments:
The accompanying presentation includes both: (a) an overview of the cannabis business activities tax framework, including voter-approved provisions, the Board’s rate-setting authority, revenue forecast scenarios, and comparable county data to inform the Board’s rate-setting decision; and (b) staff’s proposed amendments and clarifications to the County’s cannabis regulations for Board policy direction.
Following direction from the Board on both the tax rate and the proposed code amendments, staff would complete the necessary legal, GIS, fiscal, environmental, and operational analysis and return with specific ordinance amendments for consideration.
Adoption of the accompanying resolution will establish the specific cannabis cultivation business activities tax rate within the voter-approved range of $1,000 to $10,000 per acre, as directed by the Board.
The amount of revenue generated will depend on the rate established by the Board, the number and type of cannabis cultivation businesses operating in the unincorporated area, the acreage or taxable canopy subject to the tax, and compliance and collection activity. The voter-approved measure identified potential uses of the revenue for general fund services, including law enforcement, fire protection, road improvements, and other essential community needs. Once the rate-setting resolution becomes effective, revenues will be deposited into the County General Fund and may be used for general governmental purposes.
Additional fiscal impacts associated with the proposed code amendments include Public Hearing Notice costs and CEQA Notice of Exemption (NOE) filing fee of $50.
1. Receive the presentation regarding the cannabis business activities tax framework, including voter-approved provisions and rate-setting authority, and staff-proposed amendments and clarifications to the County’s cannabis regulations; and
2. Provide direction regarding the cannabis cultivation business activities rate to be established within the voter-approved range of $1,000 to $10,000 per acre; and
3. Approve the resolution with directed rate and authorize the chair to sign; and
4. Provide policy direction to prepare amendments to the County's cannabis regulations, including but not limited to Titles 25.03 (Zoning Map and Zoning Districts), 19.43 (Cannabis Business Land Use Regulations), 7.02 (Cannabis Business), 7.04 (Hemp Entities), and 1.04 (Administrative Citations).