City Council
MEETING DATE: 5/10/2017
TITLE:
Title
Second Reading of an Ordinance Amending Chapter 5.88 of the Code Regulating Medical Cannabis Transportation, Distribution and Testing Laboratories
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FROM:
Charles P. McClendon, City Manager
RECOMMENDATION:
Recommendation
Staff recommends the City Council approve an Ordinance amending Chapter 5.88 of the Code regulating medical cannabis transportation, distribution and testing laboratories.
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BACKGROUND:
On February 8, 2017, the City Council adopted Ordinance 798 amending Chapter 9.108 of the Municipal Code to establish land use regulations for medical cannabis testing laboratories, distribution sites, and transportation sites. That ordinance allowed these uses in the following locations:
Testing laboratories: permitted by right in PLC, PPO, NBP
Transportation: conditionally permitted in I-1, OS, CBP-2, PCC
Distribution: conditionally permitted in I-1, OS, CBP-2, PCC
On April 26, 2017, the City Council introduced the first reading of an Ordinance which included regulations specific to the operation of medical cannabis testing laboratories, distributors, and transporters. These were added to Section 5.88.065, paragraphs E and F.
Distributors and transporters would be subject to the following regulations:
• Quality assurance inspections of product
• Maintain transaction records and shipping manifests
• Only receive and hold edible cannabis products that are packaged for sale
• Only conduct business with licensed medical cannabis businesses
• Prohibited from holding a cultivation, manufacturing, dispensing or testing license
Proposed regulations on testing laboratories include:
• Prohibited from holding any other type of medical cannabis license or a financial interest in any other medical cannabis businesses
• Must obtain a Certificate of Accreditation from a body that is a signatory to the International Laboratory Accreditation Cooperation Mutual Recognition Arrangement
• Adhere to standard operating procedures consistent with those established by the International Organization for Standardization
Similar to Ordinance 798, the Ordinance included numerous non-substantive "clean up" type revisions to Chapter 5.88, including changing references to the MMRSA to the MCRSA, and updating citations to reflect changes to the MCRSA.
In addition, three substantive changes were proposed to existing regulations. First, a provision was added stating that it is unlawful for any medical cannabis business to make claims that a product is safe just because it has been tested. Second, the regulations on manufacturers were updated to specifically state that only solvents permissible under the MCRSA may be used in extraction processes. Third, the ordinance proposed to permanently delete the provision that requires a bond to be posted by medical cannabis licensees. This bond requirement is waivable and the City has been waiving it consistently for the past year with no issues.
DISCUSSION:
At the April 26, 2017 City Council Meeting, the Council directed that the Ordinance amending Chapter 5.88 be revised to eliminate the prohibition on distributors holding any other license type other than a transporter’s license, and also wanted to ensure that there were no other similar existing restrictions on holding multiple license types in Chapter 5.88. After review of the Chapter, there were no other existing restrictions.
Attached is the revised version of the Ordinance eliminating the text in Section 5.88.065(E)(6) prohibiting distributors from holding other licenses. However, it should be noted that the text of this subsection as originally drafted reflected the limitations in the MCRSA on distributors. Business and Professions Code section 19334(a)(2) requires anyone who holds a distributor’s license to also hold a transporter’s license, and states: “A distributor licensee shall not hold a license in a cultivation, manufacturing, dispensing, or testing license category and shall not own, or have an ownership interest in, premises licensed in those categories other than a security interest, lien, or encumbrance on property that is used by a licensee.”
It was staff’s understanding that the Council was supportive of the prohibition on a testing laboratory holding any other license type, so that remains the same, which is the same as the MCRSA in Section 193463(a) of the Business and Professions Code.
FISCAL IMPACT:
None.
ATTACHMENTS:
Proposed Revised Ordinance