City Council
MEETING DATE: 10/25/2017
TITLE:
Title
Medicinal and Adult-Use Cannabis Businesses and Cannabis Public Nuisance Ordinances
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FROM:
Charlie McClendon, City Manager
Eric S. Vail, City Attorney
RECOMMENDATION:
Recommendation
Staff recommends that the City Council conduct the second reading of and adopt: an ordinance amending Chapter 5.88 of the code related to cannabis business licensing; an ordinance amending Chapter 9.108 and portions of Chapters 9.08, 9.30, 9.36, 9.40, and 9.42 of the code related to land use regulation of cannabis businesses; and an ordinance amending Section 13.80.240 of the code related to cannabis-related public nuisances.
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BACKGROUND:
In light of the passage of Proposition 64, legalizing "adult-use" of cannabis, and the recent passage of SB 94, integrating medicinal and adult-use cannabis business licensing and regulation at the state level into the “Medicinal and Adult-Use of Cannabis Regulation and Safety Act” (MAUCRSA), the City Attorney’s office was asked to draft updates to the Cathedral City Municipal Code to allow adult-use cannabis businesses, ensure consistency with the current state laws, and to address certain public nuisances that may arise from cannabis use and cannabis businesses. In addition, the draft ordinances propose revisions to address concerns that have arisen with the current ordinances.
MAUCRSA establishes the cannabis business license types that will be issued by the State. Cannabis business licenses will be designated as either an "M-license" for medicinal cannabis businesses or an "A-license" for adult-use cannabis businesses. Licenses will be issued for retailers (aka dispensaries), cultivators, manufacturers, distributors, testing laboratories, and microbusinesses. There are two types of manufacturing licenses and multiple types of cultivation licenses. Microbusinesses are cannabis businesses that may engage in retailing, cultivation, manufacturing and/or distribution activities but fall under certain thresholds set by the State. Both Proposition 64 and MAUCRSA require the State to begin issuing licenses by January 1, 2018. MAUCRSA includes a provision that allows for temporary licenses to be issued by the State for the first year.
The proposed ordinances were reviewed by the Medical Cannabis Task Force on August 21, 2017. The Task Force concurs with the changes proposed by these ordinances. The ordinance amending Title 9 was reviewed by the Planning Commission on September 20, 2017, and the Planning Commission recommended approval of the Ordinance. On October 11, 2017, the City Council held a public hearing and conducted the first reading of the ordinances. Direction was given by the Council to incorporate the following changes to the ordinances:
- Require persons with a 10% or higher ownership stake in a cannabis business to be considered "owners" and be subject to a background check.
- Require existing operational businesses to submit an application for a State license (either temporary or permanent) within 45 days of the date the State begins accepting license applications.
- Clarify in the public nuisance ordinance that cannabis odors may be actionable as a public nuisance even if the City does not receive three verified complaints within a one month period.
DISCUSSION:
All three of the proposed ordinances completely repeal and replace the existing code sections affected by the ordinances due to the volume of changes proposed. The ordinances include substantive changes, as discussed in this staff report, and numerous non-substantive changes to improve the organization, flow and clarity of the regulations, and to eliminate duplication and unnecessary provisions. For example, Chapter 9.108 of the code includes procedures for the modification, suspension or revocation of a cannabis business conditional use permit that are different than the procedures that apply to the modification, suspension or revocation of any other type of conditional use permit. Staff is proposing that the procedures and remedies specific to cannabis businesses be eliminated and the standard procedures be followed. Below is a summary of the major substantive changes proposed in each ordinance.
1. Cannabis Business Licensing Ordinance - Chapter 5.88
(a) License Types. Consistent with existing practice, the City’s license types generally mirror the license types at the state level, except the City does not distinguish between different types of cultivation and manufacturing. However, the state allows for a microbusiness license that is not included in the proposed ordinance. Microbusinesses would be allowed in the City, but would get licenses for each type of commercial cannabis activities the business will engage in. Also, MAUCRSA eliminated the transporter license type and that change has been carried over to the draft ordinances. Distributors will be allowed to engage in the activities that currently fall within the transporter license type. Finally, the ordinances do not distinguish between medicinal and adult-use commercial cannabis activities. From staff's perspective, there is no reason to distinguish between businesses based on their customers.
(b) Tribal Land. The Agua Caliente tribe has requested that the City incorporate provisions into its ordinances that would prohibit cannabis businesses on tribal trust lands or allotted trust lands. These lands are owned by the federal government and held in trust for either the tribe or individual members of the tribe. To date, no cannabis businesses have been approved on such land in the City and adding this provision would not impact the ability for existing cannabis businesses to renew their licenses. The Tribe has requested this be incorporated into the City's ordinances because MAUCRSA contains a provision that requires the State to confirm with the City that a cannabis business is permitted prior to the issuance of a State license for the business, but the State is not similarly required to check with the Tribe.
(c) Good Moral Character. The definition of "good moral character" is revised to improve the clarity of the definition and make it easier to understand. In addition, staff is proposing to eliminate the requirement in the definition that a hearing be held prior to denying a license based on an applicant's lack of good moral character. Instead, applicants would be allowed to appeal the denial. Staff is also proposing that the provision that prohibits the City from relying solely on a “controlled substance” conviction as evidence of a lack of moral character be changed to a cannabis-related conviction. This would make it easier for the City to deny a license to someone with a history of dealing controlled substances other than cannabis.
(d) Owners. Under MAUCRSA, an “owner” is a person who holds a 20% stake in the company, the CEO/Board Members of a nonprofit, or “[a]n individual who will be participating in the direction, control, or management” of the cannabis business. The City’s current regulations (which reflected the definition of owner under the law prior to MAUCRSA) consider anyone with an ownership stake to be an “owner.” The new ordinance mirrors the MAUCRSA definition of "owner" but reduces the percentage ownership stake to 10%.
(e) Continuing Operations without State License. MAUCRSA is silent as to whether an existing locally-licensed business may continue to operate after 1/1/18 in the gap of time between 1/1/18 and when the State approves a temporary license for the business. The draft ordinance proposes to allow such businesses to continue in operation provided that the business applies for a temporary or permanent license within forty-five of when the State begins accepting license applications.
2. Cannabis Land Use and Zoning (Title 9)
(a) Testing Laboratories. Testing labs are currently allowed by right in certain zones. Per previous Council direction, the proposed ordinance also allows them with a conditional use permit in zones where cultivation and manufacturing are allowed with a conditional use permit - PCC, CBP-2 and I-1.
(b) Open Space Zone. Currently, cultivation, distribution and transportation are allowed in the Open Space zone. As these uses are more industrial in nature, both the Task Force and the Planning Commission support removing these uses as conditionally permitted uses in the Open Space zone.
(c) Excessive/Undue Concentration. The City currently allows an application for a dispensary to be denied if the City finds there would be an "undue concentration" of dispensaries. The term undue concentration is not defined. For the purposes of state licensing, MAUCRSA allows a State retailer license to be denied if there is an "excessive concentration." MAUCRSA defines an “excessive concentration” of retailers in a manner similar to undue concentration in the context of alcoholic beverage licensing. The ratio of dispensaries to population in the census tract where the proposed dispensary will be located is compared to the countywide ratio of dispensaries to population, and if the ratio for the census tract is higher than the countywide ratio there is an "excessive concentration." MAUCRSA expressly allows local agencies to supercede the State’s definition for the purposes of issuing State licenses within the local agency's jurisdiction. Since the City currently prohibits new dispensaries south of Interstate 10, the ordinance proposes a definition of excessive concentration that says anything more than 20 dispensaries south of the 10 is an excessive concentration. For areas north of Interstate 10, an excessive concentration would occur if dispensaries are located closer than 500 feet apart. With the prohibition on new dispensaries south of Interstate 10 that was first adopted in November of 2016, the maximum number of dispensaries that could possibly open south of Interstate 10 is 20 dispensaries. An amendment to the North City Specific Plan and North City Extended Specific Plan is being processed to allow cannabis businesses in these areas and includes a 500 foot separation requirement between dispensaries.
3. Cannabis Nuisances (Section 13.80.240)
(a) Personal Use and Cultivation. Paragraphs C through I of the proposed amended Section 13.80.240 duplicate the limitations in Proposition 64 and MAUCRSA regarding personal use and cultivation of cannabis. The purpose for this repetition is so that when a person violates one of these statutes it is also a violation of the code, and may be addressed through code enforcement remedies.
(c) Odor. Paragraph J of the proposed amended Section 13.80.240 would make "persistent cannabis odors that are offensive to individuals of normal sensitivity and which adversely impact or unreasonably interfere with the use and enjoyment of property" a public nuisance, whether stemming from a cannabis business or otherwise. If three verified complaints are received in a one month period from three separate residences or businesses, then a public nuisance is presumed to exist. However, an odor-related nuisance may be found to exist even if less than three complaints are received.
Under Proposition 64 and MAUCRSA, on-site consumption of cannabis and cannabis products may occur at a dispensary/retailer if the local agency adopts an ordinance permitting such on-site consumption. The only limitations MAUCRSA places on on-site consumption are:
(1) Access to the area where cannabis consumption is allowed is restricted to persons 21 years of age and older.
(2) Cannabis consumption is not visible from any public place or nonage-restricted area.
(3) Sale or consumption of alcohol or tobacco is not allowed on the premises.
The Task Force discussed whether provisions permitting on-site consumption at dispensaries should be included in the proposed ordinances. After discussing the issue at length, the Task Force indicated that it supports allowing on-site consumption at dispensaries but that such provisions should not be included in the current ordinances. The Task Force agreed that regulations permitting on-site consumption should proceed on a separate track so that there is adequate time to develop and consider what regulations the City should place on such uses beyond the limited regulations in MAUCRSA.
The Task Force also discussed the issues presented by out-of-town dispensaries that deliver into Cathedral City. Enforcing regulations against delivery services with no physical presence in the City presents logistical challenges, and thus the Task Force agreed not to address this topic at this time.
FISCAL IMPACT:
Allowing adult-use cannabis businesses in the City is expected to increase the tax revenues to the City over what would be generated if only medicinal cannabis businesses are allowed. However, it is too speculative at this time to estimate the impact to tax receipts.
ATTACHMENTS:
Adult Use Cannabis Licensing Ordinance
Adult Use Cannabis Zoning Ordinance
Cannabis Nuisance Ordinance