Agenda Memo

City of Boulder City Council Agenda Item Meeting Date: September 17, 2026 Agenda Title Second reading and consideration of a motion to adopt Ordinance 8770 amending Chapter 14, “Medical Marijuana,” and Chapter 16, “Recreational Marijuana,” B.R.C. 1981, repealing Energy Offset Requirements; and setting forth related details

Staff Contact • •

Carolyn Elam, Sustainability Senior Manager, Climate Initiatives Jonathan Koehn, Director, Climate Initiatives

Draft Motion Language Staff requests council consideration of this matter and action in the form of the following motion: Motion to adopt Ordinance 8770 repealing energy offset requirements by amending Chapter 14, “Medical Marijuana,” and Chapter 16, “Recreational Marijuana,” B.R.C. 1981; and setting forth related details.

Executive Summary The purpose of this item is to adopt an ordinance repealing the energy offset requirements that apply to licensed medical and recreational marijuana cultivators, including the associated energy reporting requirements. The energy offset requirement was adopted in 2013 when marijuana cultivation was a rapidly growing and energyintensive industry that represented a meaningful share of Boulder’s electricity use. Since that time, the local cultivation industry has contracted substantially, the carbon intensity of grid-supplied electricity has declined, and the administrative challenges associated with collecting and enforcing the requirement have increased. As a result,

staff believe the environmental benefit of continuing this industry-specific requirement is now limited relative to the resources required to administer it. Repeal would also address increasingly inequitable compliance outcomes, as businesses that have remained financially viable and complied with the requirement continue to incur costs while the city has been unable to collect comparable obligations from businesses that have become insolvent. The proposed repeal would allow staff resources to be redirected toward broader, industry-neutral strategies that can achieve greater energy and greenhouse gas emissions reductions across the community. In staff’s assessment, the requirement has served its intended purpose, but the conditions that justified it have changed sufficiently that continued administration is no longer warranted.

Council Action Options Option

Outcome

Approve motion language as drafted

If the motion is approved the ordinance will take effect.

Define and adopt a modified motion

Council would need to define any modifications or amendments to the draft motion language. This will likely require staff to bring back an amended version for a third reading.

Deny the motion or take no action

If this motion is denied the energy offset requirements will remain in place and the city will continue to allocate resources for compliance and enforcement.

Refer back to staff

If council refers this item back to staff, staff can return with the item at a later date.

Alignment with City Plans and City Council History Sustainability, Equity and Resilience (SER) Framework and Citywide Strategic Plan Alignment SER Framework Goal Area This effort supports the goal of Responsibly Governed by ensuring staffing resources can be prioritized to deliver the greatest benefits to the community. Citywide Strategic Plan N/A

Staff Notes N/A

Alignment with Additional City Plans N/A

City Council History This item was passed on first reading on September 3, 2026.

Analysis In 2013, Boulder became one of the first municipalities in the nation to enact renewable energy offset requirements for licensed marijuana businesses. This requirement stemmed from community member and council concerns that this emerging, energyintensive industry could jeopardize achieving the community’s adopted climate goals absent intervention. As originally adopted, the requirement applied to all licensed business types – cultivators, retailers, and product manufacturers. In February 2019, council adopted ordinance 8307 narrowing the offset requirements to just cultivation facilities. Under the ordinance, licensed businesses were provided multiple pathways to meet the offset requirement, including onsite solar, solar garden subscriptions, and participation in Xcel Energy’s Windsource Program. In 2017, Council replaced Windsource as the primary compliance mechanism with the Energy Impact Offset Fee (EIOF) Program, allowing the city to administer the offset locally and direct funds toward energy conservation and renewable energy investments with community benefits. This shift was motivated by the realization that most businesses were unable to take advantage of on-site solar due to reliance on leased space and were also unable to subscribe to solar gardens due to their lack of federal standing. Thus, businesses were exclusively relying on Windsource for compliance. As a locally administered program, EIOF allowed the city to ensure meaningful offset was achieved. Such fund was intended to support businesses in lowering their impact through adoption of energy conservation measures, such as lighting, and to create local offsets through investment in energy efficiency and renewable energy projects. The EIOF has generated meaningful community benefits, including: 

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Ponderosa Solar Garden: As the first municipally owned and operated solar garden in the country, this garden provides no-cost subscriptions to residents of Ponderosa Mobile Home Park. Boulder Housing Partners (BHP) Solar Garden: The grant from the city helped lower the cost of construction for BHP and extended the solar garden subscriptions to more BHP residents.

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BoulderMOD: EIOF funds helped fund the solar system for the factory, resulting in a lower first cost of construction and providing ongoing operational cost savings. Xcel Valmont Solar Garden: Through the city’s partnership with Energy Outreach Colorado (EOC), the city was able to increase the bill savings for income qualified subscribers to Xcel’s solar garden. Cultivator Energy Efficiency: Several cultivators were able to invest in energy efficiency lighting upgrades, lowering the ongoing operational costs. Energy Efficiency Programs for Low-Income Households: Through programs administered by EOC, the city has been able to expand the number of households receiving energy efficiency upgrades and heat pump installations.

Figure 1 - Rooftop solar system at the BoulderMod Factory. EIOF funds were used to reduce the cost of the system. (Photo courtesy of Namaste Solar)

Figure 2 - Ponderosa Solar Garden located adjacent to the Boulder Fire Training Center. No-cost subscriptions provide bill relief to residents of Ponderosa Mobile Home Park.

At its peak, Boulder’s marijuana cultivation industry included 44 licensed businesses and represented approximately 3% of the community’s energy use. As of June 1, 2026, only nine cultivators remain. The industry’s substantial contraction, combined with the declining greenhouse gas intensity of grid-supplied electricity, means that the energy use and emissions associated with the remaining cultivation industry are now relatively small compared with other sources of energy use and emissions in the community. The city was successful in enforcing the offset requirement for many years; however, enforcement has become increasingly challenging as the industry has contracted and businesses have become insolvent. The city has been unable to collect fees owed by some businesses, while businesses that have remained in compliance continue to incur the associated costs. This has created increasingly inequitable compliance outcomes while providing diminishing environmental benefit. Under the most favorable scenario, if all nine remaining licensed businesses remained solvent and continued to comply with the offset requirements, the program would generate an estimated $50,000 in annual fee revenue, compared with approximately $400,000 – $500,000 when the EIOF was established. Given current industry conditions and enforcement challenges, actual annual revenue is likely to be substantially lower. Given the current size and energy intensity of the cultivation industry, the declining emissions intensity of grid electricity, the limited revenue generated by the requirement, and the administrative resources required for enforcement, staff believe continued administration of the marijuana-specific energy offset requirement is no longer in the public interest.

Ordinance Enforcement EIOF reporting and billing occur in arrears for a six-month billing period that lags by one year. As of September 2026, the most recent completed reporting and billing period is January 1 through June 30, 2025. If Ordinance 8770 is adopted, staff would notify remaining licensed businesses that requirements after June 30, 2025, will not be enforced.

Equity Analysis EIOF funds have provided meaningful benefits to low-income households across the community. Elimination of the offset requirement will reduce the ongoing revenue available for these types of investments. However, the revenue potential of the program has declined substantially. Under a best-case scenario, if all nine remaining licensed businesses remained solvent and continued to comply with their offset requirements and EIOF payments, the program would generate an estimated $50,000 in annual fee revenue, compared with approximately $400,000 – $500,000 when the EIOF was established. Given the financial condition of the cultivation industry and ongoing enforcement challenges, actual future revenue is likely to be substantially lower. The existing requirement also creates an equity concern among regulated businesses. Businesses that have remained viable and complied with the requirement continue to bear the associated costs, while the city has been unable to collect comparable obligations from businesses that have become insolvent. As a result, the requirement is no longer being applied consistently across the regulated industry. $919,165 of EIOF fund balance was appropriated for 2026 during the first adjustment to base. $500,000 has been directed towards the city’s contract with EOC to provide energy conservation projects for income-qualifying households and multifamily properties. This includes projects underway with Boulder Housing Partners and San Juan Del Centro. Remaining funds will be reserved for future projects and to support rooftop solar installations for the modular homes produced at the Mod factory. An additional $185,770 in revenues are forecasted to be collected based on prior billing and ongoing payment plans. The city’s cultivation industry is continuing to struggle and contract. Repealing the requirement would allow already constrained city resources to be redirected toward climate and energy initiatives with greater potential community-wide impact. Elimination of this regulatory requirement would reduce the ongoing administrative burden on licensing, legal, and climate staff and allow those resources to be redirected toward higher-impact community priorities.

Fiscal Note Estimated Fiscal Impact Narrative EIOF reporting and billing occur in arrears for a six-month billing period that lags by one year. As of September 2026, the most recent completed reporting and billing period is January 1 through June 30, 2025. If Ordinance 8770 is adopted, staff would notify remaining licensed businesses that requirements after June 30, 2025, will not be enforced and the billing will not be collected in 2027. The assumption is $50,000 of revenue will not be collected but as stated above, this is a conservative scenario given current industry conditions and enforcement challenges. Actual annual revenue opportunities are likely to be substantially lower. Current Year Estimated Fiscal Impact Fund(s): Climate Tax Fund (2400FD) Department(s): Climate Initiatives Program(s): Energy Impact Offset CTF (1879PG)

FY 2026 Budget

FY 2026 Estimated Impact

FY 2026 Net Change

Beginning Fund Balance

$1.85M

$0

$1.85M

Total Forecasted Revenue

$9.62M

$0

$9.62M

Total Estimated Expenses

$10.41M

$0

$10.41M

Ending Fund Balance(s) After Reserves

$98.7K

$0

$98.7K

FTE

0

0

0

Item

Three-Year Estimated Fiscal Impact

Item

FY 2026

FY 2027

FY 2028

Total Forecasted Revenue

$0

($50,000)

($50,000)

Total Estimated Expenses

$0

$0

$0

Net Estimated Impact

$0

($50,000)

($50,000)

Proposed Ordinance 8770 does not impact 2026 revenues or expenses, only 2027 and beyond.

Climate, Resilience, and Sustainability Considerations When marijuana licensing first began in Boulder, the industry grew rapidly and indoor cultivation was highly energy intensive due to lighting, temperature, and humidity requirements. At its peak, marijuana cultivation represented approximately 3% of the community’s energy use. Council recognized the potential climate impact of this emerging industry and adopted requirements that electricity use be offset with renewable energy. Conditions have changed substantially since the requirement was adopted. The local cultivation industry has contracted significantly, with only nine licensed cultivators remaining as of June 1, 2026. As a result, the energy use and emissions associated with the remaining cultivation industry are now relatively small compared with other sources of community energy use and emissions. At the same time, grid electricity has become increasingly supplied by emissions-free resources; in 2025, nearly half of Xcel’s grid mix was from emissions-free resources. Repealing the marijuana-specific energy offset requirement does not change the city’s broader commitment to reducing energy use and greenhouse gas emissions. Rather, it reflects a shift toward climate strategies that are proportional to their potential impact and can be applied more broadly across the community. Staff believes future energy reduction and climate action efforts are more appropriately addressed through industryneutral building performance, energy efficiency, renewable energy, and incentive programs that can achieve greater community-wide benefits.

Community Engagement Given the narrow focus of this ordinance change, staff did not conduct broad community engagement.

Boards and Commissions Staff presented the proposed change to the Cannabis Licensing Advisory Board (CLAB) at their July 7, 2026, meeting. CLAB emphasized the importance of environmental stewardship but was supportive of proceeding with the proposed ordinance change, understanding ongoing staffing constraints and the need to prioritize resources towards higher impact initiatives. Staff presented the proposed change to the Environmental Advisory Board (EAB) on August 5, 2026. EAB supported removing the marijuana-specific energy offset requirements, recognizing that the original program was effective when implemented but is no longer aligned with current industry conditions or the city’s climate priorities. EAB noted the decline in the number of cultivators, the financial challenges facing the industry, the resource-intensive nature of enforcement, and equity concerns arising from inconsistent compliance. EAB also encouraged staff to frame the change within a forward-looking context in which future energy reduction and climate action efforts are industry-neutral and integrated into broader building-performance and incentive programs.

Workplan Considerations This item was initiated by staff to reduce the ongoing administrative burden on licensing, legal, and climate staff associated with administering and enforcing the existing energy offset requirements and to allow those resources to be redirected toward higher-impact priorities.

Next Steps for City Council If council approves the ordinance, this will conclude council’s actions related to this item. If council desires modifications to the ordinance, staff would return to council for a third read.

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Attachments A – Proposed Ordinance 8770