City will remove community impact agreement clause which requires local payments based on pot sales

SPOTLIGHT FILE PHOTO - The St. Helens City Council is considering changes to its city code by eliminating a fee that marijuana retail shops are required to pay to the city based on gross sales each quarter. The policy was approved by the council in 2015 to offset any negative effect due to recreational marijuana sales within city limits, but is now being changed. After a St. Helens pot shop owner pointed out a legal "gray area" in the city's municipal code dealing with marijuana business regulation, the city is considering repeal of one of its policies.

The St. Helens City Council is contemplating eliminating a community impact agreement clause from city code requiring businesses to pay a 7 percent fee based on gross sales of marijuana products to the city. The fee was imposed as an effort to mitigate any negative community impact from the recreational sale of marijuana within city limits.

The policy, implemented in December 2015, came at a time when the St. Helens City Council was considering several applications from recreational marijuana retailers hoping to set up shop in town in the wake of recreational marijuana legalization earlier in the year. At the time, city officials held lengthy discussions to determine how to proceed with amending city code to allow the establishment of pot shops but also reduce any negative community consequences.

After months of back-and-forth discussions, the City Council developed several marijuana business-related policies, including the community impact fee. The money was intended to go to a dedicated fund to help pay for public education and mitigation costs, although a specific spending plan for the money was never developed.

In the 2016-17 fiscal year, the fee generated $29,620. In 2017-18, it raised $163,007 in city revenue.

Two recreational marijuana shops operate within city limits. The money collected through the community impact agreements was put into the city's general fund and then directed toward the St. Helens Police Department to use at its discretion.

Oregon law makes it clear, however, that municipalities may only pass a 3 percent fee on marijuana sales if the tax or fee is voter-approved. In 2016, 64 percent of St. Helens voters approved a 3 percent tax in the city. Scappoose, Rainier and Columbia County approved similar taxes.

In June 2017, the Mail Tribune reported the city of Grants Pass repealed its 10 percent tax after "conceding that the tax is on shaky legal standing."

St. Helens Finance Director Matt Brown described the issue as a "legal gray area" and explained that while St. Helens isn't facing any legal challenges presently, they want to get ahead of potential issues. City Administrator John Walsh added similar sentiments.

"It's risk management. The longer it goes on, the more of a risk it is," Walsh said of the community impact fee.

Walsh added that he is not expecting the city to refund retailers for previously collected money.

The state imposes a 17 percent tax on recreational marijuana sales. Those funds, which totaled more than $80 million between 2016 and June 2017, were principally allocated for education, mental health and law enforcement funding, based on a specifically outlined formula approved in the state legislature. Between 2016 and now, $127,000 of state-collected revenue has trickled down to the city, Brown explained.

Managers at the two marijuana retail shops in St. Helens did not respond to requests for comment on the policy change by press time. The St. Helens City Council will hold a second reading and adoption of the ordinance next month.

Brown added that the change in city code has been on the "to-do" list for some time and adjustments in potential revenue are already reflected in the budget.

Brown also explained that the City Council is now considering elimination of the fee in favor of higher marijuana business application fees. Currently the city implements a $2,500 fee and is considering increasing it to $5,000 — a change that is likely to come across the city council's agenda next month.

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