Cannabis business tax of up to 10% of gross receipts (approx. $500,000 annually)
City of Arroyo Grande · San Luis Obispo County · November 3, 2026
The question on your ballot
Shall the measure to maintain Arroyo Grande City services, including public safety, road maintenance, infrastructure repair, recreational programs, and other general City services by enacting a tax of up to 10% of gross receipts on cannabis businesses operating in the city if such businesses are permitted, estimated to generate approximately $500,000 annually, with spending oversight and until ended by voters, be adopted?
In plain language
Measure C-26 would let the City of Arroyo Grande tax cannabis businesses up to 10% of their gross receipts. Gross receipts means the total money a business takes in. Cannabis businesses are not allowed in the city now, and this measure does not allow them. The tax would apply only if the City Council later passes a law to allow them. The council could set a lower rate and change it, but never above 10%. It is a general tax, so the money can pay for any lawful city service. Examples named include public safety, roads, public works, and recreation. The money would stay in the city. The tax would last until voters end it. A YES vote allows the tax. A NO vote does not allow it.
Fiscal impact
Up to 10% of gross receipts on cannabis businesses, if they are ever permitted. City staff estimate about $500,000 a year if the tax were set at 6%. It lasts until ended by voters.
Impartial analysis
On June 9, 2026 the City Council unanimously voted to place Measure "C-26" on the November 3, 2026 general municipal election ballot. By placing Measure "C-26" on the ballot, the City complies with Article XIII C of the California Constitution (Proposition 218), which requires a majority of the voters to approve an ordinance that establishes a local general tax. If approved by a majority of Arroyo Grande voters, this Measure would authorize a maximum ten percent (10%) Cannabis Business Tax on gross receipts received by any commercial cannabis businesses engaging in business in the City, lawfully or unlawfully, excluding industrial hemp businesses. The measure is not a sales tax, income tax or tax upon real property. The 10% rate would be a voter-approved maximum rate that may be charged to commercial cannabis businesses. However, the measure allows the City Council to set a lower tax rate and adjust the rate up or down, provided the maximum 10% rate is not exceeded. City staff has estimated that Measure "C-26" could provide an additional $500,000 in annual local funding if the tax were levied at a 6% rate. This tax would be a "general tax," meaning that revenues raised from the tax would go into the City's general fund to pay for any lawful City program, improvement, or service, which could include public safety, road maintenance, public works projects, and recreational programs. This tax has no sunset, and would remain in effect until ended by the voters. This measure only enacts a tax on commercial cannabis businesses should they be permitted by the City in the future. Commercial cannabis sales are currently prohibited in Arroyo Grande, and this measure would not directly permit or regulate local commercial retail cannabis use. The City Council would have to adopt a regulatory ordinance in the future to permit cannabis businesses to legally operate in the City. All revenues raised by the tax would remain in the City and would not be shared with the State, County or any other agency. A "yes" vote on Measure "C-26" will authorize the City to impose a maximum 10% Cannabis Business Tax. A "no" vote on Measure "C-26" will not authorize the City to impose a maximum 10% Cannabis Business Tax. The above statement is an impartial analysis of Measure "C-26". If you desire a copy of the Measure, please call the City's elections official at (805) 473-5418 and a copy will be mailed at no cost to you.
Official ballot arguments
Filed for the official voter guide by each side, printed as submitted.
Argument in favor
A YES vote on Measure C keeps local tax dollars working for Arroyo Grande. Arroyo Grande does not allow cannabis stores or other cannabis businesses. But people can still buy cannabis in nearby cities or have it delivered to their homes. Right now, the tax money from those sales goes to other communities. Measure C helps keep those tax dollars here to support Arroyo Grande. Measure C does not allow cannabis businesses to open in Arroyo Grande. It only creates a local tax if the City Council ever decides to allow cannabis businesses in the future. If that happens, those businesses would be required to pay their fair share for their impacts to the city. If cannabis businesses are allowed in the future, Measure C is expected to raise about $500,000 each year. That money could help pay for important City services like police and emergency response, road repairs, parks and recreation programs, and other local needs. We only have to look at our neighbor, Grover Beach, who nets over $1,000,000 annually with negligible effects on the community. Arroyo Grande has a strong record of managing taxpayer dollars responsibly. But the cost of providing City services keeps going up. Without new local revenue, future City Councils may have to delay road repairs, put off other projects, or reduce some City services. This tax only applies to cannabis purchases. If you do not buy cannabis, you will not pay this tax. Every dollar collected stays in Arroyo Grande to support our community instead of going to neighboring cities. Vote YES on Measure C. Keep local tax dollars working for Arroyo Grande. — Caren Ray Russom, Mayor / Principal officer, on behalf of the Arroyo Grande City Council
Argument against
Your "NO" vote keeps the city from establishing a cannabis sales tax. This measure's language emphasizes maintaining City services and to potentially generate "$500,000 annually". No source of revenue can be guaranteed. While other municipalities with cannabis sales taxes and activity have recognized revenue - often the cost of enforcement and regulation exceeds the revenue. The city's ballot measure and FAQ's fail to address compliance costs - or cost impact to current services. The County began permitting and taxing cannabis sales in 2016. The Board of Supervisors report on September 26, 2023 reflected annual 2022-23 County cannabis revenues of $1,126,229 and expenditures of $1,527,171 - an unfunded $400,492 cost increase to the County – and a 2023-24 budget with a forecasted $1,008,727 shortfall. Increased city costs must be evaluated before a new tax. Your "NO" vote avoids a path to approve "pot shops" and "cannabis hoop houses". Currently, commercial cannabis activity is prohibited in the city. If passed, the city council (not voters) will decide whether to allow cannabis businesses. Mention has been made about permitting a dispensary near the old K-Mart site on West Branch - and that it's visibility from the freeway are part of what would be attractive. Is this what we want our city to attract? When future city revenues fall short, other segments of commercial cannabis will be considered. First delivery, then dispensary, then cultivation, then processing and manufacturing, and then lounges. Speak to our neighbors who live near Megan's Organic Market in SLO about the impact of armed security guards on their neighborhood character - and our neighbors in Carpinteria about the odor control issues that cultivation has brought. The City's budget is structurally balanced and this tax is unnecessary. Let's keep commercial pot from coming to our city - and preserve our small town and family friendly culture. — Wes Drysdale, Registered Voter
The question before voters is simple: If cannabis businesses are ever permitted in the future, should they pay their fair share to support police, roads, parks, and other City services—or should those costs fall on taxpayers instead? Instead of answering that question, the opposition asks voters to reject Measure C based largely on speculation about what might happen someday—not on what Measure C actually does. Measure C does not approve any cannabis business. It simply establishes a local tax if a future City Council ever decides to allow cannabis businesses in the future. Any future proposal would still require its own public hearings, careful review, and City Council approval. Rather than addressing the measure itself, the opposition relies on a classic "slippery slope" argument—suggesting that one future decision will inevitably lead to every possible type of cannabis business and every potential negative consequence. There is no factual basis for those predictions. Every future proposal would be evaluated independently through a transparent public process under Arroyo Grande's own standards and regulations. Don't vote based on hypothetical fears. Vote on the measure before you. If cannabis businesses are ever allowed, they should pay their fair share. Protect Arroyo Grande taxpayers. Vote YES on Measure C. — Mayor Cara Ray Russom, on behalf of the Arroyo Grande City Council
What supporters and opponents say — outside sources (not official ballot arguments)
Statements by campaigns, officials and news coverage, quoted with attribution and linked to the original. VoterDecoder did not write them and does not endorse either side.
Supporters say
No public statements in favor were found.
Opponents say
No public statements against were found.