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Home My WebLink AboutCC 2026-01-27_09e Potential Cannabis Tax MeasureItem 9.e. MEMORANDUM TO: City Council FROM: Matthew Downing, City Manager BY: Aleah Bergam, Management Analyst SUBJECT: Public Outreach and Education Related to a Potential Cannabis Tax Ballot Measure DATE: January 27, 2026 RECOMMENDATION: 1) Adopt a Resolution appropriating $50,000 from the General Fund unassigned fund balance to support public outreach and education related to a potential cannabis tax ballot measure; and 2) Find that appropriating funds from the General Fund Unassigned Fund Balance is not a project subject to the California Environmental Quality Act (“CEQA”) because it has no potential to result in either a direct, or reasonably foreseeable indirect, physical change in the environment. (State CEQA Guidelines, §§ 15060, subd. (c)(2)-(3), 15378). IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: The fiscal impact of the recommended action is a one-time expenditure of $50,000. Funds would be appropriated from the General Fund unassigned fund balance. There is no ongoing fiscal impact associated with this request of $50,000. BACKGROUND: Council Goals Workplan In the current Council Goals workplan for Fiscal Year 2025 -27, under the Council Goal of “Pursue New Revenue Sources,” Council directed staff to Consider Cannabis as a Means of Economic Development, with the subtasks as listed below: 1.2a Evaluate cannabis operations that bring in revenue 1.2b Conduct study session with the City Council regarding potential cannabis ordinance 1.2c Conduct study session with the City Council regarding potential cannabis development agreement 1.2d Prepare and adopt cannabis ordinance, if directed by the City Council 1.2e Evaluate feasibility of Cannabis Tax, if directed Page 43 of 175 Item 9.e. City Council Public Outreach and Education Related to a Potential Cannabis Tax Ballot Measure January 27, 2026 Page 2 Prior Council Direction At the December 9, 2025 Council Meeting1, staff presented a Study Session on Cannabis Policy Regulation. At that meeting, City Council directed staff to continue moving forward with the potential of placing a cannabis-related tax measure before voters to generate discretionary revenue for City services and infrastructure. AN ALYSIS OF ISSUES: Public outreach and education are important components of the process for placing a ballot measure before voters. State law permits cities to use public funds to provide neutral and factual information to educate voters about ballot measures, provided such activities do not advocate for or against voter approval. Staff proposes a structured outreach effort designed to inform the community in advance of formal Council action placing a cannabis-related tax measure on the November 2026 ballot. The proposed $50,000 appropriation would fund a comprehensive outreach and education effort that may include, but is not limited to:  Development of informational materials explaining cannabis taxation, including rate options, potential revenue uses, and state preemption of some cannabis related industries  Website content, FAQs, and digital outreach materials  Translation and accessibility services to ensure broad community participation These efforts would focus on providing objective, non-advocacy information to the public and supporting informed community dialogue. The proposed funding source is the General Fund unassigned fund balance. The City’s fund balance remains sufficient to absorb this one-time expenditure without affecting ongoing operations or reserve policies. ALTERNATIVES: The following alternatives are provided for the Council’s consideration: 1. Adopt the attached Resolution (Attachment 1) appropriating $50,000 from the General Fund unassigned fund balance to fund a public outreach and education effort related to a potential cannabis tax ballot measure; and 2. Find that appropriating $50,000 from the General Fund Unassigned Fund Balance is not a project subject to the California Environmental Quality Act (“CEQA”) because it has no potential to result in either a direct, or reasonably foreseeable indirect, physical change in the environment. (State CEQA Guidelines, §§ 15060, subd. (c)(2)-(3), 15378); or 3. Provide other direction to staff. 1https://pub-arroyogrande.escribemeetings.com/Meeting.aspx?Id=45cb77a4-833c-41fa-af53- 4fa9cb457dd2&lang=English&Agenda=Agenda&Item=54&Tab=attachments Page 44 of 175 Item 9.e. City Council Public Outreach and Education Related to a Potential Cannabis Tax Ballot Measure January 27, 2026 Page 3 ADVANTAGES: Funding the public outreach and education effort would provide residents with clear, neutral and factual information about a potential cannabis tax ballot measure and support transparency and meaningful community engagement before any Council action. The use of fund balance would be a one-time expenditure and would not create an ongoing fiscal obligation for the City. DISADVANTAGES: Appropriating funds from fund balance would reduce available reserves that could otherwise be used for unforeseen future needs. ENVIRONMENTAL REVIEW: Appropriating funds to fund an education effort for a potential cannabis tax ballot measure is not a project subject to the California Environmental Quality Act (“CEQA”) because it has no potential to result in either a direct, or reasonably foreseeable indirect, physical change in the environment. (State CEQA Guidelines, §§ 15060, subd. (c)(2)-(3), 15378.) PUBLIC NOTIFICATION AND COMMENTS: The Agenda was posted at City Hall and on the City’s website in accordance with Government Code Section 54954.2. ATTACHMENTS: 1. Resolution Page 45 of 175 ATTACHMENT 1 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE APPROPRIATING $50,000 FROM THE GENERAL FUND UNASSIGNED FUND BALANCE TO SUPPORT PUBLIC OUTREACH AND EDUCATION RELATED TO A POTENTIAL CANNABIS TAX BALLOT MEASURE WHEREAS, the City Council of the City of Arroyo Grande has discussed the potential of placing a cannabis tax measure before the voters at a future election in the current FY 2025-27 Council Goals Workplan; and WHEREAS, the City Council has expressed the importance of providing clear, factual, and neutral information to the public regarding potential ballot measures to support transparency and informed community engagement; and WHEREAS, state law permits the use of public funds for informational activities related to ballot measures, provided such activities do not advocate for or against voter approval; and WHEREAS, staff has identified the importance for funding to support public outreach and education efforts related to a potential cannabis tax ballot measure, including community engagement, informational materials, and related activities; WHEREAS, the General Fund unassigned fund balance is sufficient to support a one - time appropriation of $50,000 without impacting ongoing operations or the City’s reserve policies; and WHEREAS, appropriating funds to fund an education effort for a potential cannabis tax ballot measure is not a project subject to the California Environmental Quality Act (“CEQA”) because it has no potential to result in either a direct, or reasonably foreseeable indirect, physical change in the environment. (State CEQA Guidelines, §§ 15060, subd. (c)(2)-(3), 15378.) NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Arroyo Grande does hereby appropriate $50,000 from the General Fund unassigned fund balance for the purpose of funding public outreach and education related to a potential cannabis tax ballot measure. On motion of Council Member , seconded by Council Member , and on the following roll call vote, to wit: AYES: NOES: ABSENT: Page 46 of 175 RESOLUTION NO. PAGE 2 the foregoing Resolution was passed and adopted this th day of , 2026. Page 47 of 175 RESOLUTION NO. PAGE 3 CAREN RAY RUSSOM, MAYOR ATTEST: JESSICA MATSON, CITY CLERK APPROVED AS TO CONTENT: MATTHEW DOWNING, CITY MANAGER APPROVED AS TO FORM: ISAAC ROSEN, CITY ATTORNEY Page 48 of 175