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CC 2018-08-14_09f Adopt Ordinance_Cannabis Delivery ServicesMEMORANDUM TO: CITY COUNCIL FROM: TERESA MCCLISH, COMMUNITY DEVELOPMENT DIRECTOR SUBJECT: CONSIDERATION OF ADOPTION OF ORDINANCE - DEVELOPMENT CODE AMENDMENT CASE NO. 18-002; AMENDMENTS TO CHAPTER 16.62 OF TITLE 16 AND REPEALING CHAPTER 5.95 OF TITLE 5 OF THE ARROYO GRANDE MUNICIPAL CODE RELATING TO CANNABIS DELIVERY SERVICES; LOCATION – CITYWIDE; APPLICANT – CITY OF ARROYO GRANDE: AND OPPOSITION LETTER TO THE BUREAU OF CANNABIS CONTROL DATE: AUGUST 14, 2018 SUMMARY OF ACTION: 1)The proposed Ordinance will modify the Municipal Code to remove local permit requirements for cannabis delivery services. All other prohibitions regarding commercial cannabis activities will remain unaffected. 2) The letter to the California Bureau of Cannabis Control will reflect the City’s position to maintain local control of commercial cannabis activity inside the City. IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: Removal of local permitting requirements will reduce impacts and cost to Police Department staff assigned to review applications for cannabis delivery permits. RECOMMENDATION: It is recommended that the City Council: 1)Adopt the Ordinance amending Chapter 16.62 of Title 16 and repealing Chapter 5.95 of Title 5 of the Arroyo Grande Municipal Code relating to cannabis delivery services; and 2) Authorize the City Manager to send a letter to the Bureau of Cannabis Control opposing new cannabis regulations as they relate to delivery and the time for cities to verify if a licensee has obtained the necessary local approvals. BACKGROUND: On July 24, 2018, the City Council introduced an Ordinance repealing Chapter 5.95 of the Arroyo Grande Municipal Code relating to the local regulation of cannabis delivery services and modifying Chapter 16.62 to remove references to the City’s permitting requirements, specify deliveries require State permitting, and clarify that deliveries must originate from outside of the City. Item 9.f. - Page 1 CITY COUNCIL CONSIDERATION OF DEVELOPMENT CODE AMENDMENT CASE NO. 18-002 AND OPPOSITION LETTER TO THE BUREAU OF CANNABIS CONTROL AUGUST 14, 2018 PAGE 2 ANALYSIS OF ISSUES: Ordinance: The Ordinance is now ready for adoption. The Ordinance will become effective thirty days after final passage of the Ordinance. Position letter: On July 13, 2018, California’s three cannabis licensing authorities (Bureau of Cannabis Control (BCC), Department of Food & Agriculture, and Department of Public Health) announced the publication of proposed regulations in the California Regulatory Notice Register, the first step toward adopting non-emergency regulations. This publication is the start of the formal rulemaking process and marks the opening of the 45-day public comment period (ends August 27th). The current emergency regulations will remain in effect until the non-emergency rulemaking process is complete. While many of the proposed regulations simply clarify the existing laws contained in the emergency regulations, there is a significant modification to the rules regarding delivery and the amount of time cities have to determine the validity of a cannabis business license. Under Proposition 64, its implementing legislation, and its related emergency regulations, cities had local control over deliveries into their city. Under the new proposed regulations, delivery employees will be able to deliver to any jurisdiction within the State. While the City’s proposed Ordinance complies with the proposed regulations in that it allows cannabis businesses with physical premises located outside of the City of Arroyo Grande that are licensed by the BCC to deliver into the City, the proposed regulation is a departure from the language of the State legislation and the emergency regulations. The proposed regulations also create a ten-day period for cities to respond to the BBC’s inquiry of the validity of either an annual or a temporary cannabis license. City staff has already experienced that this ten-day period does not afford sufficient time to review license applications and respond to the BCC, particularly with limited staff resources. It is unknown at this time if this loss of local control will be challenged and/or remain a component of the final regulations once adopted. The City’s measured approach regarding cannabis regulation relies upon local control assured by Proposition 64. Although the proposed Ordinance is consistent with proposed state regulation of deliveries, the proposed legislation provides no option should the City wish to revisit the issue in the future. The proposed regulations undermine the fundamental pillar of Proposition 64’s safeguard that local jurisdictions can regulate cannabis in their communities and sets a detrimental precedent. As a result, the League of California Cities has reached out to all cities to oppose the proposed regulations prior to the August 27, 2018 deadline. Based upon Council concerns expressed at the July 24, 2018 public hearing during introduction of the proposed Ordinance, a letter in opposition to the proposed regulations to the BCC has Item 9.f. - Page 2 CITY COUNCIL CONSIDERATION OF DEVELOPMENT CODE AMENDMENT CASE NO. 18-002 AND OPPOSITION LETTER TO THE BUREAU OF CANNABIS CONTROL AUGUST 14, 2018 PAGE 3 been prepared for consideration by the Council. The letter is consistent with the League’s sample opposition letter included in Attachment 1. ALTERNATIVES: The following alternatives are provided for the Council’s consideration: 1. Adopt the Ordinance modifying the Municipal Code regarding cannabis delivery services; and send the opposition letter to the BCC; 2. Adopt the Ordinance modifying the Municipal Code regarding cannabis delivery services; and do not send the opposition letter to the BCC; 3. Modify and re-introduce the Ordinance modifying the Municipal Code regarding cannabis delivery services; modify and send the opposition letter to the BCC; or 4. Provide direction to staff. ADVANTAGES: Amending the City’s cannabis ordinance as directed by Council will remove a duplicative local delivery permitting requirement, will continue to be consistent with State law, reduces impacts and cost to Police Department staff, increases the opportunities for cannabis delivery within the City, and maintains a measured approach to cannabis regulation that may best protect the public health, safety, and welfare while leaving options to reconsider the industry in the future. Sending the opposition letter to the BCC supports the City’s position to maintain local control. DISADVANTAGES: Repealing the City’s local cannabis delivery licensing scheme will give up some local control; however, the City’s concerns are adequately addressed by the State regulations. Sending the opposition letter to the BCC may be considered irrelevant as it asserts the need for local control at the same time the City takes action to leave control of deliveries to the State. ENVIRONMENTAL REVIEW: The project has been reviewed in compliance with the California Environmental Quality Act (CEQA) and determined to be exempt pursuant to Sections 15061(b)(3) (general rule) and 15308 (actions by regulatory agencies for the protection of the environment) of the CEQA Guidelines. PUBLIC NOTIFICATION: The Agenda was posted at City Hall and on the City’s website in accordance with Government Code Section 54954.2. At the time of report publication, no comments have been received. Item 9.f. - Page 3 CITY COUNCIL CONSIDERATION OF DEVELOPMENT CODE AMENDMENT CASE NO. 18-002 AND OPPOSITION LETTER TO THE BUREAU OF CANNABIS CONTROL AUGUST 14, 2018 PAGE 4 ATTACHMENTS: 1. Correspondence from League of California Cities regarding Bureau of Cannabis Control Project Regulations – July 2018 Item 9.f. - Page 4 ORDINANCE NO. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE AMENDING CHAPTER 16.62 OF TITLE 16 AND REPEALING CHAPTER 5.95 OF TITLE 5 OF THE ARROYO GRANDE MUNICIPAL CODE RELATING TO CANNABIS DELIVERY SERVICES WHEREAS, on January 26, 2016 the City Council of the City of Arroyo Grande adopted Ordinance No. 675 which added Chapter 16.62 to Title 16 of the Arroyo Grande Municipal Code (AGMC), prohibiting medical marijuana dispensaries, cooperatives and collectives, deliveries of medical marijuana, and the cultivation of marijuana within the City; and WHEREAS, the City Council subsequently determined that it was appropriate to allow limited cultivation and strictly regulated deliveries of medical marijuana and on June 28, 2016, adopted Ordinance 678, amending AGMC Chapter 16.62 to allow limited indoor cultivation of medical marijuana and adding Chapter 5.95 relating to delivery services; and WHEREAS, on November 9, 2016, the Adult Use of Marijuana Act (AUMA), also known as Proposition 64, became effective, authorizing certain personal use and cultivation of marijuana at a private residence and creating a state licensing and regulatory scheme for various commercial marijuana activities; and WHEREAS, On October 10, 2017, City Council adopted Ordinance 687 to amend and clarify the provisions in the AGMC relating to marijuana (cannabis) in order to continue to prohibit all commercial cannabis activity within the City of Arroyo Grande, except for limited delivery as permitted by Chapter 5.95, to ban outdoor cannabis cultivation and reasonably regulate indoor cannabis cultivation; and WHEREAS, the State has implemented a new comprehensive licensing and regulatory system for cannabis based upon emergency regulations adopted in December 2017, and June 2018, including the adoption of regulations requiring background checks of licensees, requirements related to premises, testing and quality control of cannabis, a “track and trace” system for all commercial cannabis activity, and procedures relating to delivery; and WHEREAS, the City Council of the City of Arroyo Grande desires to amend the provisions in the AGMC relating to cannabis in order to delete the City’s Cannabis Delivery Services local licensing regulations and instead allow deliveries by State licensed cannabis retailers. Item 9.f. - Page 5 ORDINANCE NO. PAGE 2 NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE DOES ORDAIN AS FOLLOWS: SECTION 1. The above recitals and findings are true and correct and are incorporated herein by this reference. SECTION 2. Section 16.62.010 of the Arroyo Grande Municipal Code is hereby amended to read in its entirety as follows: 16.62.010 - Purpose and findings A. By adoption of this Chapter, with the exception of deliveries into the City of Arroyo Grande by State licensed cannabis retailers, it is the City Council’s purpose and intent to: prohibit commercial cannabis activity, including but not limited to medical cannabis dispensaries, cooperatives and collectives; outdoor cultivation of cannabis; and manufacture, distribution, processing, storing, laboratory testing, packaging, labeling, transportation, or sale of cannabis and cannabis products, and the location of premises for retail or non-storefront retail cannabis businesses; and to reasonably regulate the ability of individuals to cultivate not more than six (6) cannabis plants indoors for personal noncommercial use, as permitted by the Adult Use of Marijuana Act (AUMA, Proposition 64), and Health and Safety Code Sections 11362.1 and 11362.2. These regulations are adopted pursuant to the AUMA and the City of Arroyo Grande’s authority under Article XI, Section 7 of the California Constitution, in order to promote the health, safety, and general welfare of the residents and businesses within the City of Arroyo Grande and prevent adverse impacts which such activities may have on nearby properties and residents. B. Pursuant to the City of Arroyo Grande’s police powers authorized in Article XI, Section 7 of the California Constitution, the City has the power to regulate permissible land uses within its boundaries and to enact regulations for the preservation of public health, safety and general welfare of its residents and community. Further, pursuant to Government Code Sections 38771 through 38775, the City also has the power through the City Council to declare actions and activities that constitute a public nuisance. SECTION 3. Subsection A of Section 16.62.060 is hereby amended to read as follows: A. Except as provided in Section 16.62.070 related to deliveries into the City of Arroyo Grande, all commercial cannabis activity, including but not limited to medical cannabis collectives, cooperatives and dispensaries (including mobile dispensaries), cultivation, manufacture, distribution, processing, storing, laboratory testing, packaging, labeling, transportation, or sale of cannabis and cannabis products, and the location of premises for any retail or non-storefront retail cannabis businesses, are not permitted in or upon any premises in the City of Arroyo Grande. Item 9.f. - Page 6 ORDINANCE NO. PAGE 3 SECTION 4. Section 16.62.070 of the Arroyo Grande Municipal Code is hereby amended to read as follows: 16.62.070 - Deliveries It shall be unlawful for any person to deliver cannabis or cannabis products or engage in activities that constitute delivery of cannabis or cannabis products anywhere within the boundaries of in the City of Arroyo Grande, except for cannabis retail businesses with physical premises located outside of the City of Arroyo Grande that are licensed by the State Bureau of Cannabis Control. Notwithstanding any provision of this chapter, nothing herein is intended to prohibit the transportation of cannabis or cannabis products on public roads by a licensee duly licensed and acting in compliance with Division 10 of the Business and Professions Code (Business and Professions Code Sections 26000 et seq.). SECTION 5. Chapter 5.95 of Title 5 of the Arroyo Grande Municipal Code is hereby repealed. SECTION 6. Notwithstanding anything in this Ordinance or in the Arroyo Grande Municipal Code to the contrary, any cannabis delivery service that has been licensed by the City in accordance with the provisions of Chapter 5.95 as they previously existed prior to the repeal provided in Section 5 herein, may continue to deliver medical cannabis or medical cannabis products in the City of Arroyo Grande in accordance with the laws governing medical cannabis collectives and cooperatives (reference Health and Safety Code Section 11362.775), until the expiration of the term of the license as provided in AGMC Section 5.95.040(D). Such licensees shall continue to comply with the provisions of Chapter 5.95 as they existed at the time the license was granted and any applicable provisions of Title 16 California Code of Regulations, Sections 5000 et. Seq. relating to delivery. SECTION 7. In accordance with the requirements of Business and Professions Code Section 26055(f), a copy of this Ordinance shall be provided to the Bureau of Cannabis Control within the California Department of Consumer Affairs. SECTION 8. This Ordinance is exempt from CEQA pursuant to CEQA Guidelines Section15061(b)(3) which is the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment and CEQA does not apply where it can be seen with certainty that there is no possibility that the activity may have a significant effect on the environment. SECTION 9. A summary of this Ordinance shall be published in a newspaper published and circulated in the City of Arroyo Grande at least five (5) days prior to the City Council meeting at which the proposed Ordinance is to be adopted. A certified copy of the full text of the proposed Ordinance shall be posted in the office of the City Clerk. Within fifteen (15) days after adoption of the Ordinance, the summary with the names of those City Council members voting for and against the Ordinance shall be published again, and the Item 9.f. - Page 7 ORDINANCE NO. PAGE 4 City Clerk shall post a certified copy of the full text of such adopted Ordinance. This Ordinance shall take effect and be in full force and effect thirty (30) days after its passage. SECTION 10. This Ordinance shall take effect and be in full force and effect thirty (30) days after its passage. SECTION 11. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the ordinance would be subsequently declared invalid or unconstitutional. On motion by Council Member ______, seconded by Council Member _______, and by the following roll call vote to wit: AYES: NOES: ABSENT: the foregoing Ordinance was adopted this ____ day of _______, 2018. Item 9.f. - Page 8 ORDINANCE NO. PAGE 5 ___________________________________ JIM HILL, MAYOR ATTEST: ___________________________________ KELLY WETMORE, CITY CLERK APPROVED AS TO CONTENT: ________________________________ JAMES A. BERGMAN, CITY MANAGER APPROVED AS TO FORM: ___________________________________ HEATHER K. WHITHAM, CITY ATTORNEY Item 9.f. - Page 9 August 15,2018 Lori Ajax, Chief Bureau of Cannabis Control P.O. Box 419106 Rancho Cordova, CA 9p7 41 CITY OF ARROYO GRAN E CALIFORNIA Submitted via Email: bcc.comments@dca.ca.gov RE: Bureau of Cannabis Control Proposed Regulations -July 2018 Dear Chief Ajax: The City of Arroyo Grande appreciates the opportunity to comment on the proposed regulations released in July 2018, which seek to codify the emergency regulations implemented in December 2017. On August 14, 2018, the City Council directed me to submit this letter. The City strongly objects to two proposed changes that we view are in fundamental conflict with both the language and intent of Ptoposition 64 and will undermine our city's ability to effectively regulate cannabis at the local level: •Section 5416(d), would drastically preempt local control and regulatory authority by authorizing cannabis delivery anywhere in the state regardless of conflicting local regulations or bans, and •Sections 5001 (c) (11) and 5002(c) (28) would undermine the ability of local agencies to ensure community standards are met by reducing from 60 to 10 days the period to verify if a licensee has obtained necessary local approvals. The City believes the two proposed regulations go beyond the BCC's regulatory authority and instead create a new cannabis policy outside of the legislative process. California's voters were assured that "Proposition 64 preserves local control"1 and these regulations chip away at the very foundation of local control by allowing cannabis deliveries to every jurisdiction in California. The City has enacted an ordinance that prohibits all commercial cannabis activity except for deliveries. However, the City previously strictly regulated deliveries and only yesterday approved modifications to the ordinance to allow the State to regulate deliveries after much public input and consideration and firmly advocates the right to reconsider anytime in the future. Additionally, the City has already experienced difficulties with the 10-day local review period in reviewing deliveries, it is much too short particularly for smaller cities with limited staff resources. The City strongly recommends a local review period of 60 days. CITY MANAGER'S OFFICE • 300 E. Branch Street • Arroyo Grande, California 93420 Phone: (805) 473-5400 • FAX: (805) 473-0386 • E-mail: agcitv@arrovoerande.ore • Website: www.arrovoerande.om: DRAFT Item 9.f. - Page 10 D Item 9.f. - Page 11 Bureau of Cannabis Control Lori Ajax, Chief August 15, 2018 Page2 For these reasons, the City of Arroyo Grande respectfully opposes these regulations until such time as they are amended to address the concerns listed above. We look forward to continued opportunities to comment on specific regulatory proposals. Sincerely, James A. Bergman City Manager cc: David Mullinax, League of California Cities, dmullinax@cacities.org Meg Desmond, League of California Cities, cityletters@cacities.org July 26, 2018 Lori Ajax, Chief Bureau of Cannabis Control P.O. Box 419106 Rancho Cordova, CA 95741 Submitted via Email: bcc.comments@dca.ca.gov RE: Bureau of Cannabis Control Proposed Regulations – July 2018 Dear Chief Ajax, The League of California Cities® appreciates the opportunity to comment on the proposed regulations released in July 2018, which seek to codify the emergency regulations implemented in December 2017. The League is committed to ensuring that California has a reliable, safe, and smart regulatory system for cannabis that upholds the ability of local jurisdictions to control and regulate business entities participating in their local area, which was central to the passage of both the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) and the Control, Regulate and Tax adult Use of Marijuana Act (Proposition 64). We understand the challenge that the Bureau of Cannabis Control (BCC) faces in developing a comprehensive regulatory structure for the now largest legal cannabis market in the country. However, cities remain concerned about critical aspects of these regulations that would undermine their ability to decide if and how cannabis is right for their communities. Our key concerns are as follows: §5416(d). Cannabis Deliveries to a Physical Address. Section 5416(d) subverts the intent of the voters who passed Proposition 64 by removing a local government’s ability to prohibit cannabis deliveries within its jurisdiction. Recognizing the value of local control in regulating commercial cannabis activity, Proposition 64’s purpose and intent provisions expressly provided that “[i]t is the intent of the People in enacting this Act to…[a]llow local governments to ban nonmedical marijuana businesses….” Thus, under existing law—as articulated in Proposition 64 and, now, MAUCRSA—local governments can adopt and enforce local ordinances to ban or regulate all commercial cannabis activity, including deliveries, within their borders. Section 5416(d), as proposed, fundamentally alters this pillar of Proposition 64 by forcing local governments to allow cannabis deliveries. By authorizing cannabis delivery employees to deliver cannabis to any jurisdiction within California, section 5416(d) removes a critical component of the local enforcement model established by Proposition 64.The influx of cannabis deliveries that will result from such a regulation will increase public safety costs for local law enforcement agencies. These increased costs cannot be easily absorbed by local governments. Therefore, if section 5416(d) is adopted, local governments will be forced to make difficult decisions about how best to allocate their limited resources to ensure the safety of the public—decisions that they are not required to make under Proposition 64 or MAUCRSA. That section 5416(d) contradicts existing law is further illustrated by the failure of SB 1302 by Senator Lara, which would have similarly preempted a local government from adopting or enforcing an ordinance that would ban cannabis deliveries within its jurisdiction. Not only did SB 1302 fail to attain the required 2/3 majority vote required by Proposition 64 for the enactment of amendments that contradict Proposition 64’s express terms, it failed to pass out of its house of origin. 1400 K Street, Suite 400  Sacramento, California 95814 Phone: 916.658.8200 Fax: 916.658.8240 www.cacities.org Item 9.f. - Page 12 LEAGUE ® OF CALIFORN I A CITIES Because section 5416(d) goes beyond the statutory provisions of Proposition 64 and MAUCRSA, adoption of 5416(d) would exceed the BCC’s regulatory authority. California Business and Professions Code section 26013 limits the regulatory authority of the BCC to enacting rules and regulations that are “consistent with the purposes and intent of [Proposition 64].” By allowing deliveries in every jurisdiction in California, the BCC is fundamentally changing Proposition 64, not simply clarifying existing law. For these reasons, the League strongly urges that section 5416(d) be removed from the regulations. §5001(c)(11). Temporary License Application Requirements and §5002(c)(28). Annual License Application Requirements. Both sections 5001(c)(11) and 5002(c)(28) create a 10-day “shot clock” for cities to respond to the BCC’s inquiry of the validity of a license before that license is deemed valid. This 10 day “shot clock” does not afford cities sufficient time to review license applications and respond to the BCC. The League advocated in 2017 in SB 94 for a 90-day “shot clock” that was ultimately reduced to 60 days. This proposed 10-day “shot clock” effectively makes cities obsolete in approving or verifying the authenticity of licenses. This will undermine a fundamental pillar of Proposition 64 that ensures local jurisdictions can regulate cannabis in their communities. Current law, Business and Professions Code Section 26055(g)(2)(D), states that cities have 60 days to provide notification of compliance or noncompliance with local ordinances or regulations before a license application is deemed in compliance. The League strongly believes that the 60-day standard set in existing law should also be applied to these regulations, because it will allow cities the time they need to verify that a license submitted to the BCC is, in fact, valid. If this 10-day shot clock were to be adopted, cities would be susceptible to a cannabis company sending multiple purported local licenses to the BCC claiming that they are all valid, knowing that a city may not have the time and resources to check each license’s validity before the 10-day verification period ends. Ensuring that a local jurisdiction has approved either a temporary or annual license is key to promoting public safety and should not be reduced to an over-the-counter approval process. For these reasons, the League strongly urges that these regulations be amended from a 10-day to a 60-day period in both sections 5001(c)(11) and 5002(c)(28), in order to both reflect current law and ensure cities an appropriate amount of time to verify whether local licenses are indeed valid. Furthermore, some patience with this newly-minted law is essential. As California’s experiment in decriminalizing commercial cannabis activity unfolds, many jurisdictions that opted not to allow sales and distribution within their jurisdiction are observing the experience in other jurisdictions. In time, as successful examples of local implementation emerge, more jurisdictions can be expected to alter their policies and permit the sale and delivery of cannabis. For these reasons, the League strongly requests the outlined amendments to these proposed regulations. The League appreciates the stakeholder engagement process the BCC is undertaking. We look forward to continued opportunities to comment on specific regulatory proposals. If you have any questions, please feel free to contact me at (916) 658-8252. Sincerely, Charles W.R. Harvey Legislative Representative Item 9.f. - Page 13 THIS PAGE INTENTIONALLY LEFT BLANK Item 9.f. - Page 14