Clearlake council extends cannabis development agreements and cuts production fee to 1% for 2023

The Clearlake City Council on a unanimous vote approved a resolution extending current commercial cannabis development agreements by seven years and temporarily reducing the city’s production (gross‑receipts) fee from 5% to 1% for Jan. 1–Dec. 31, 2023.

City Manager Alan Flora told the council the industry had not developed as expected and that lowering the fee could encourage stalled operators to invest locally. "We're temporarily reducing the fee from 5% to 1% for the next 12 months, January 1 through the end of 2023," Flora said during the item’s staff presentation.

Council members stressed the need to balance enforcement and flexibility. Councilwoman Overton said she had heard from operators that the 5% fee was placing projects at risk. "I do agree with this," she said, adding that the council should revisit the approach as state law evolves.

Several industry representatives urged the change and explained the economics. Chris Jennings, who identified himself as an operator, described taxation and cost pressures and said changes at the state level had reduced cultivation taxes and altered excise‑tax treatment. "The excise tax will be 15% of the gross sales," Jennings said while summarizing how state policy affects price and margins. He said lower local fees and available equity grants could help some small operators reach viability.

Speakers in the public record proposed alternatives such as a facilities fee (a per‑square‑foot minimum) for projects that are not yet producing but occupy permitted space, noting that some neighboring jurisdictions use similar approaches.

City staff said the extension does not eliminate enforcement tools: permits may be revoked if a holder makes no progress for 12 months. Councilmember discussion emphasized staff review and the ability to pull permits for noncompliance rather than requiring individual extensions for each permit holder.

Councilman Kramer moved adoption of resolution 2022‑68; Councilwoman Overton seconded. The motion passed with a unanimous vote.

What happens next: staff said they will work with permit holders during the temporary fee period and bring policy options (including equity program applications) back for further discussion before any longer‑term change.