The Canyon Lake City Council has established a community benefit contribution rate of 6% percent of gross revenues for all commercial cannabis businesses operating within the city. This decision comes as part of the city’s ongoing effort to regulate commercial cannabis businesses and ensure they contribute to the community.
As part of these regulations, qualified applicants for commercial cannabis business permits are required to negotiate and execute Community Benefit Agreements (CBAs). These agreements aim to balance the private benefits received by cannabis businesses with public benefits to the community, including financial contributions.
The approved rate of 6% will support public services, address community impacts, and help ensure compatibility with surrounding neighborhoods while maintaining an equitable framework for businesses. Additionally, this rate provides a clear and consistent standard for future Community Benefit Agreements. It will also serve as an ongoing revenue source to support city services, fostering a sustainable and balanced approach to commercial cannabis operations in Canyon Lake.
In October 2021, the city established one commercial cannabis retail permit, application and fees for cannabis retail permit, and review criteria for cannabis retail permit. In April 2024, the city modified the commercial cannabis retail permit from one to two.
Five applicants applied for the city’s lone commercial cannabis retail permit in 2022. Culture Cannabis Club (CCC) was selected, offering the city 15% of gross revenues or $1.22 million annually, whichever is greater. CCC officially opened its doors on September 28, 2023. However, after failing to meet full quarterly payment obligations to the city, CCC closed its doors on August 6, 2024.
CCC’s permit was administratively suspended by the city manager as they were no longer providing service in the city. The permit was originally suspended until December 31, 2024, but was extended until January 31, 2025, while continued discussions take place between Culture Cannabis Club and the city manager and city attorney.
According to the city manager, CCC has made two partial quarterly payments: $205,000 on May 31, 2023, and 205,542.55 on November 13, 2024. Additionally, CCC made two negotiated back payments of $65,142.83 each. The back payments were partial payments owned on the quarterly payments.
In response to the challenges faced, the city council revised the community benefit contribution rate, lowering it to 6%. This does not change the permit holder’s obligations for annual civic and nonprofit contributions.
According to the city manager, if CCC pays all outstanding debt it owes to the city, the city manager will remove the suspension of CCC’s cannabis permit, allowing CCC to operate at the new 6% rate moving forward.
Furthermore, the council’s decision also benefits Syndicate, the second cannabis retailer set to operate in Canyon Lake. Initially proposing a 13.5% rate during the 2022 application/selection process, Syndicate would be allowed to start its business at the reduced rate of 6%, if the city issues Syndicate a commercial cannabis retail permit.
The council’s decision to revise the rate reflects a strategic move to attract and retain cannabis businesses while ensuring compliance with community benefit agreements.
If Measure Z, a Public Safety Fund initiative on the November 5 Presidential General Election ballot, had passed, the city would have been required to allocate 100% of these revenues to a public safety fund. However, with the measure’s failure, the city council retains the flexibility to direct these funds to the general fund, supporting a broader range of city services and priorities.
