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8.B. - Page 17 of 122 Development Fees Development -related fees are used to recover the cost of staff and consultant time to process development applications. The City Council updated these fees in 2017. Budgeted revenue for development fees will increase moderately by approximately $1.0 million, which is a 10 percent increase over original estimates. This is primarily due to the permitting activity associated with the Stanford in Redwood City Campus, in addition to slightly higher construction valuations which affects fee revenue. Additionally, engineering staff revised their process for administering encroachment permits for utilities from one that was deposit -based to one that is fee-based, which has led to an increase in fee revenue. While downtown development applications have slowed due to development cap limitations, overall development demand remains stable. Areas outside of downtown continue to see development interest, including projects such as Harbor View (at Seaport/Blomquist), Sobrato (at Broadway/Woodside), GreyStar V (south of Downtown), and Syufy (former Century Theater site on East Bayshore). City review of these projects could extend for the next 24 months. Due to the relative stability of development demand in the past four years, large development projects under review, and no clear signs of a significantly declining economy, staff estimates development fee revenues to be steady for FY 2019-20. However, within the ten-year forecast period, the total number of development projects (small, medium, and large) may decline, which could negatively affect revenues, especially if the local and regional economy transitions to a recessionary phase, or if development project financing becomes more restrictive. Cannabis On January 1, 2018, the state began issuing licenses allowing businesses from which adults, 21 years of age or older, could purchase cannabis. The City Council approved a phased approach to implement local medical and adult use cannabis regulations. The City is currently in Phase 3, which allows cannabis delivery from non -storefront retail delivery facilities located within the City. The application period to submit all required information for a Cannabis Business Permit closed December 3, 2018. The City received 6 applications and collected approximately $182,000 in Cannabis Business Permit and related fee revenue. The City Council placed a cannabis business tax, Measure DD, on the November 6, 2018 ballot. Measure DD was passed by voters with a 79 percent voter approval rate. Measure DD laid out the framework for taxing cannabis business activities in Redwood City. The Cannabis Business Tax ordinance became effective on January 1, 2019. The ordinance imposes a gross receipt tax on cannabis businesses that operate or provide services within the City of Redwood City. Each business is required to remit monthly the full amount of taxes owed based on the previous month's activity. Staff will have a better idea of the amount of potential revenue that will be generated as taxes are remitted to the City over the next year. The City implemented a stricter ordinance than recently enacted State regulations to protect the public health, safety, and general welfare of the community; as a result, the amount of revenue generated could be lower than expected, as retail delivery businesses could decide to locate in other municipalities with less strict regulations. City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore 243